Expanded Standing Under the Louisiana Unfair Trade Practices Act and Possible Employee Actions Under the Act

• Author: Christopher M. Rhymes
• Position: J.D./D.C.L., 2012, Paul M. Hebert Law Center, Louisiana State University.
• Pages: 519-553

Expanded Standing Under the Louisiana Unfair

Trade Practices Act and Possible Employee Actions

Under the Act

INTRODUCTION

The Louisiana Supreme Court’s recent decision in Cheramie

Services v. Shell Deepwater Production1 resolved a split in the

circuits regarding who has standing to bring a private action under

Louisiana’s Unfair Trade Practices and Consumer Protection Law,

commonly referred to as the Louisiana Unfair Trade Practices Act

(LUTPA).2 Standing is no longer limited to consumers and

business competitors but is available to any person who can show

any ascertainable loss of money or movable property as the result

of another’s use of unfair trade practices.3 Because “unfair trade

practices” are not statutorily defined and must be determined by

the courts on a case-by-case basis,4 this expansion in standing

creates an opportunity for any number of new kinds of plaintiffs to

assert claims under the statute. As such, Louisiana courts have now

been tasked with discerning unfair trade practices in unfamiliar and

formerly foreclosed contexts, and practitioners have been left to

Copyright 2012, by CHRISTOPHER M. RHYMES.

1. 35 So. 3d 1053 (La. 2010). It should be mentioned here that the strength

of the Cheramie ruling as a means of influencing lower courts is somewhat

unclear. Chief Justice Kimball did not participate in the deliberation of the

opinion and three justices concurred in the result, indicating that only three

justices subscribed to the opinion announcing the judgment of the court.

However, both of the justices who assigned reasons in their concurrences

referred to the opinion as being that of a “majority.” Id. at 1064–65 (Johnson, J.,

concurring); Id. at 1065 (Guidry, J., concurring). Justice Weimer, in the opinion

referred to as that of the majority, uses the phrase “we hold” in announcing the

rejection of the business competitor/consumer limitation on standing under the

Louisiana Unfair Trade Practices Act. Id. at 1054. He further states that

“contrary holdings are hereby repudiated.” Id. at 1058. At least one Louisiana

appellate court opinion and three U.S. District Court opinions have recognized

Cheramie as abrogating the business competitor/consumer limitation on

standing. See Corley v. Se. Metals Mfg. Co., Inc., 2011 WL 3665015, at *4

(W.D. La. Aug. 19, 2011); Adm’rs of the Tulane Educ. Fund v. Biomeasure,

Inc., 2011 WL 3268108, at *6 (E.D. La. July 28, 2011); Home Builders Ass’n v.

Martin, 2010 WL 5109987, at *1 (W.D. La. Dec. 8, 2010); Bogues v. La.

Energy Consultants, Inc., 2011 WL 3477033, at *3 (La. Ct. App. 3d Aug. 10,

2011). One U.S. District Court has noted in passing that the Louisiana Supreme

Court was “evenly divided” on the issue in Cheramie, and that the argument that

LUTPA actions are limited to business competitors and consumers “may no

longer be sound.” Abene v. Jaybar, LLC, 2011 WL 2847436, at *5 n.5 (E.D. La.

July 14, 2011).

2. LA. REV. STAT. ANN. §§ 51:1401–26 (2003 and Supp. 2011).

3. Cheramie, 35 So. 3d at 1058.

4. See infra Part I.B.1.

520 LOUISIANA LAW REVIEW [Vol. 72

wonder whether, and to what extent, this ruling has “open[ed] the

‘litigation floodgates.’”5

This Comment examines the Cheramie decision with the

purpose of identifying what practical effect the Court’s ruling will

have on the future use of Louisiana’s unfair trade practices law by

private litigants. After analyzing the language of the decision, the

Comment exposes some of the decision’s more important

implications for LUTPA by suggesting some potential avenues by

which employees may exploit the recent expansion in standing

under the statute. While employees are not the only class of

potential plaintiffs to whom private actions under the statute may

now be available, past attempts by employees to use LUTPA6

suggest that they will certainly be among the first to test the

statute’s applicability now that the jurisprudential rule denying

them standing has been abrogated.

Three possible employee actions under LUTPA are of

immediate concern. First, in certain circumstances, Louisiana

employees may now have a new statutory alternative to the tort of

wrongful discharge in violation of public policy.7 Second,

employees might use LUTPA as a vehicle to bring actions for

violations of other statutes that do not themselves provide a private

right of action.8 Finally, a current or former employee who has not

yet become a competitor of his employer may now be able to bring

a LUTPA action in response to the employer’s threatened

enforcement of an overbroad noncompetition agreement.9

I. BACKGROUND

Before delving into a discussion of the Cheramie decision’s

implications for future private actions under the Louisiana Unfair

Trade Practices Act, some background information will be

instructive. This section first provides a brief look at the history

5. James R. Chastain & Linda Perez Clark, Louisiana Supreme Court

Interprets Unfair Trade Practices Act, LOUISIANA LAW BLOG (Sept. 14, 2010),

http://www.louisianalawblog.com/commercial-litigation-louisiana-supreme-

court-interprets-unfair-trade-practices-act.html.

6. See Davis v. Manpower Int’l, Inc., 623 So. 2d 946, 947 (La. Ct. App.

4th 1993), writ denied, 629 So.2d 1173 (La. 1993) (denying LUTPA standing to

an employee terminated by new employer after she helped the new employer

obtain her former employer’s client list); Gil v. Metal Service Corp., 412 So. 2d

706, 707 (La. Ct. App. 4th 1982), writ denied, 414 So. 2d 379 (La. 1982)

(denying LUTPA stand ing to an employee alleging that his termination had been

“in furtherance” of his employer’s unfair trade practices).

7. See infra Part III.B.

8. See infra Part III.C.

9. See infra Part III.D.

2012] COMMENT 521

and development of state unfair trade practices laws. This survey is

important for understanding the context in which the Louisiana

statute was enacted and provides the bulk of the few extant clues as

to the legislature’s intent for the statute. This background

discussion also covers some of the more important aspects of the

Louisiana statute, including what conduct the statute prohibits, the

special role of the courts in interpreting the statute’s broad

prohibition, and the parameters of the private action under the

statute. This section then addresses the development of the circuit

split on the issue of standing to bring a private action under the

statute.

A. State Unfair Trade Practices Acts

By the middle of the 20th century, the increasingly impersonal

modern marketplace had thrown the conventional legal remedies

for consumer controversies into a state of cost-prohibitive

obsolescence.10 That is, advances in production and transportation

created a marketplace where businesses, increasing in size and

distance from the consumer, were less susceptible to the traditional

discipline of “good will.” Thus, consumers were more vulnerable

to minor yet frequent harms whose remedies would not be worth

the expense of litigation.11 Sensing the growing need for a new

approach to consumer protection, the legislatures of the various

states, starting in the late 1950s, began to enact statutes designed to

prohibit unfair and deceptive trade practices.12 These acts, which

came to be termed “Little FTC Acts,” were largely based on

section 5 of the Federal Trade Commission (FTC) Act, which

prohibits “[u]nfair methods of competition . . . and unfair or

deceptive acts or practices,”13 though other model unfair trade

practices acts also provided some guidance.14 The Federal Trade

Commission is said to have encouraged the enactment of these

laws on account of the Commission’s scarce budget resources and

10. See William A. Lovett, State Deceptive Trade Practice Legislation, 46

TUL. L. REV. 724, 725 (1972) (“In most consumer controversies the risks and

expenses of investigation, counsel, and litigation far outweigh the likely

recoveries that could reasonably have been anticipated with traditional actions

for warranty, misrepresentation, or fraud.”).

11. Id.

12. See Jeff Sovern, Private Actions Under the Deceptive Trade Practices

Acts: Reconsidering the FTC Act as Rule Model, 52 OHIO ST. L.J. 437, 446

(1991).

13. 15 U.S.C. § 45(a)(1) (2006).

14. See Sovern, supra note 12, at 446–52; see also Council on State

Governments, Model Unfair Trade Practices and Consumer Protection Act,

1970 Suggested State Legislation 141.