Enforcement of FDUTPA by Competitors: Did the Florida Legislature Create a Right Without A Remedy?

• Author: Jaensch, Tracey K.
• Position: Florida Deceptive and Unfair Trade Practices Act

Since the 2001 amendment to the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), (1) which gave the green light to competitors' claims for "actual damages" for unfair competition, employers have attempted to use the statute to seek relief against former employees who form competing businesses. Prior to the 2001 amendment, FDUTPA had long been used by consumers to "get their money back" from unscrupulous sellers. This makes sense because consumers buy products, so their "actual damage" is the money they spent on the product. To date, however, neither the Florida Supreme Court nor the Florida Legislature has weighed in on what "actual damages" means for recovery of damages in nonconsumer cases. Although the lower courts and federal courts in Florida have begun to look at the issue, they are divided in their statutory interpretation, creating uncertainty as to whether, if at all, business competitors may ever recover anything beyond injunctive relief considering the inapplicable standard for "actual damages" of "return of purchase price" long recognized in consumer cases under FDUTPA.

FDUTPA Purports to Deliver Relief to Business Competitors

Known as FDUTPA, F.S. [section]501.202 purports "[t]o protect the consuming public and legitimate business enterprises from those who engage in unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce." (2) As enacted in 1973, FDUTPA was narrow in scope and intended to protect only "consumers from suppliers who commit deceptive and unfair trade practices." (3) In 1993, [section]501.202(2) expanded protections to "legitimate business enterprises," besides consumers, and further clarified the types of acts and practices from which consumers and business enterprises could receive protection. (4) In 2001, FDUTPA underwent further transformation, this time with respect to [section]501.211, concerning individual remedies. The legislature amended [section]501.211(2), which, prior to 2001, allowed recovery of "actual" damages to consumers only, by replacing references to a "consumer" with the term "person." (5) At least on its face, the amended subsection contemplated the possibility of a business competitor's recovery of its "actual damages" in a FDUTPA suit. What that meant in reality, however, is unclear.

To state a claim for money damages under FDUTPA, a plaintiff must establish that 1) he or she was subjected to a deceptive act or unfair practice; 2) there was causation between such act or practice and the plaintiff's damages; and 3) the plaintiff suffered "actual damages." (6) In consumer cases, courts have historically measured "actual damages" (undefined by the statute) by the difference in the market value between the product or service that a consumer received and the product or service that he or she should have received, although a full purchase price would be appropriate when the product or service has become valueless. (7) The "difference in market value" measure, however, could no longer apply universally following the 2001 amendment because, as a mat ter of commercial reality, a business, unlike an ordinary consumer, does not purchase a defective product or service from a competitor and does not receive something of lower value (or valueless) as a result. (8) Rather than the diminished value, a competitor's damages manifest as decreased sales, lost profits or opportunities, a loss of reputation or customer goodwill, and other similar losses attributable to the defendant's unfair acts.

Some Florida courts have held that such lost profits-type damages are unrecoverable under FDUTPA as "quintessential" consequential damages; others have recognized that so holding controverts the express language of FDUTPA, renders the 2001 amendment useless, and simply ignores the commercial reality.

Substantive Change of a Statute Is Presumed to Achieve a Specific Objective

Clearly, the 2001 amendment to [section]501.211 intended to reach a new class of plaintiffs, business-competitors. Indeed, shortly after the amendment took effect, the Southern District of Florida in Niles Audio Corp. v. OEM Systems Co, 174 F. Supp. 2d 1315 (S.D. Fla. 2001), denied defendants' motion to dismiss a FDUTPA count based on the argument that Niles was the defendants' competitor--not a consumer. (9) Despite that any other interpretation left plaintiffs without a remedy, FDUTPA defendants have continued to rehash the same arguments decided in Niles Audio Corp., based on the plaintiffs' nonconsumer status. (10) Recently, in Bailey v. St. Louis, 196 So. 3d 375 (Fla. 2d DCA 2016), Florida's Second District Court of Appeal seemingly put a stop to that argument, by criticizing the trial court for awarding only injunctive relief (11) against two defendant entities based on the reasoning that the plaintiff "was a competitor and not a consumer." (12) Bailey looked to the post-2001 FDUTPA, concluding that the legislature's decision to replace the word "person" with "consumer" signaled the intent that the remedy of damages expanded beyond consumer-plaintiffs: "When the [l]egislature makes a substantial and material change in the language of a statute, it is presumed to have intended some specific objective or alteration of law, unless a contrary indication is clear." (13) Bailey reversed the final judgment with the instruction that the trial court determine the amount of damages for the multiple FDUTPA violations proven at trial. (14) Although the Second District Court of Appeal in Bailey indicated that competitors can recover damages in a FDUTPA suit, it did not go as far as expressly holding exactly what damages competitors can recover, or how they should go about recovering those damages. Bailey could have resolved, but did not, what has become a serious hurdle for FDUTPA nonconsumer plaintiffs seeking to recover their lost profits in suit.

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