Dispensing With the Public Interest Requirement in Private Causes of Action Under the Washington Consumer Protection Act

• Publication year: 2005
• Citation: Vol. 29 No. 01

SEATTLE UNIVERSITY LAW REVIEWVolume 29, No. 1FALL 2005

COMMENTS

Dispensing with the Public Interest Requirement in Private Causes of Action under the Washington Consumer Protection Act

Jonathan A. Mark(fn*)

I. Introduction

It has been more than eighteen years since the Washington Supreme Court handed down its landmark decision in Hangman Ridge Training Stables v. Safeco Title Insurance Company (fn1) This was the final decision in a string of cases in which the court attempted to resolve problems arising from the application and interpretation of the right to a private cause of action under Washington's Consumer Protection Act ("CPA").(fn2)Hangman Ridge changed the face of private causes of action under the CPA by establishing a stringent five-part test that a private party must meet in order to establish a CPA violation. In addition, the Hangman Ridge court reaffirmed the requirement that private litigants bringing a CPA claim must show that their action affects the public interest,(fn3) and it established a set of general threshold questions to aid courts in determining whether a particular unfair or deceptive act touches upon the public interest.(fn4) After the Hangman Ridge decision, Washington remained in the minority of states with a judicially-imposed public interest requirement for private causes of action.(fn5)

The Hangman Ridge court's motivating force was to address significant judicial misinterpretation of the CPA's private cause of action statute.(fn6) It was also an opportunity to reevaluate Washington's highly debated and criticized judicially-imposed public interest requirement.(fn7) However, in the years since Hangman Ridge, the legal significance of the public interest requirement has diminished in light of the development of the law of unfair or deceptive acts. Specifically, the manner in which courts interpret what constitutes an unfair or deceptive act has, to a large degree, subsumed the independent legal significance of the public interest requirement, rendering it a duplicative and time-consuming element that should no longer be necessary to bring a private cause of action. In practical terms, the standard for unfair or deceptive acts in Washington largely dispenses with the need for a separate inquiry into whether the public interest element has been satisfied. Ultimately, either the Washington Supreme Court or the Washington Legislature should eliminate the public interest requirement as a threshold condition necessary to bring a private cause of action under the Washington CPA.

This Article explores the application of the public interest requirement since the decision in Hangman Ridge and considers whether the tests devised by the Hangman Ridge court to determine public interest are still necessary in light of current interpretations of what constitutes an unfair or deceptive act. Part II provides general background information regarding the development of consumer protection laws in Washington leading up to the Hangman Ridge decision. Part III discusses the Hangman Ridge decision. Finally, Part IV argues, through representative cases, statutory language, and a comparison with other jurisdictions, that unfair or deceptive acts are misconduct that necessarily touches the public interest, and that the public interest requirement no longer retains any independent legal significance.

II. Evolution of the Private Law of Consumer Rights

The evolution of the private law of consumer rights necessarily begins with a discussion of the rise and fall of the doctrine of caveat emptor as well as a brief recounting of the formation of the Federal Trade Commission ("FTC"). This section will then examine the state of consumer protection law in Washington prior to the Hangman Ridge decision and how this backdrop shaped the court's decision.

A. From the Doctrine of Caveat Emptor to the Federal Trade Commission

Before commissions, statutes, and attorney's fees, the earliest consumer protection for civil wrongs was found in the non-statutory body of commercial tort law.(fn8) An injured party had to show that a merchant had breached some duty owed to the plaintiff, and that this breach of duty proximately caused the plaintiff to suffer injury.(fn9) One of the products of this strict form of commercial law was the doctrine of caveat emptor.(fn10) Originally applied to the transfer of real property, the doctrine of caveat emptor required buyers to "fend for themselves" because it was assumed that sellers and purchasers occupied equal bargaining positions and shared an equal opportunity to inspect the quality of the property and to discover defective conditions before the transfer of title occurred.(fn11)

Caveat emptor was a substantial obstacle to judicial recourse if a consumer discovered defects after the transaction. The combined effect of burdens of proof and sellers' defenses virtually eliminated effective enforcement of a consumer's rights through an action in tort for deceit.(fn12) Buyers faced the high burden of proving that the seller has intentionally misrepresented a material fact, and sellers defended on the grounds that they had engaged in "mere puffery."(fn13) Moreover, an action for breach of a common law warranty was often foreclosed by lack of contractual privity.(fn14)

Caveat emptor survived in this country well into the middle of the twentieth century, but changing market forces and new movements to protect the consumer ultimately spelled its demise.(fn15) The rapid development of a complex, ever-expanding market of goods meant that an unregulated market could no longer deliver economically efficient outcomes.(fn16) Products were no longer the sole factor to consider in evaluating quality; goods could easily be differentiated through advertising, packaging, and other "tricks of contemporary merchandising" that amounted to a deluge of information that consumers could no longer be expected to evaluate reasonably in making optimal decisions.(fn17)

The development of the law of deceptive trade practices is also an important step on the road towards private causes of action for consumers. Perhaps the most widely recognized authority in this area is the Federal Trade Commission ("FTC" or "Commission"), one of the oldest regulatory agencies in the United States, which was established by the Federal Trade Commission Act in 1914.(fn18) Although originally intended to regulate trade and monopolistic business practices, a 1938 amendment to the Act gave the Commission broad authority to prohibit "unfair or deceptive acts or practices" in or affecting commerce, thus cementing the Commission's authority over consumer-related issues.(fn19)

While the Commission's authority appears plenary, there is one important jurisdictional obstacle to a Commission action. The FTC Act states that the Commission shall issue a complaint whenever it has reason to believe that an unfair or deceptive trade practice has been committed, and "if it shall appear to the Commission that a proceeding ... would be to the interest of the public."(fn20) The nature of this limitation was first explored in the Supreme Court decision FTC v. Klesner,(fn21) in which the Court held that the scope of the FTC's authority is "strictly limited" by the public interest requirement, that the public interest must be "specific and substantial," and that the Commission's determination that a proceeding met the public interest prerequisite was subject to judicial review. (fn22) This brief history of the modernization of consumer protection law evinces a unique spirit of empowerment which overrode the doctrine of caveat emptor. In no uncertain terms, the trend has been towards greater consumer protection, and is thus a relevant and necessary backdrop for the discussion of the public interest element in Washington.

B. Consumer Protection Law in Washington before Hangman Ridge

Sharing the concerns of the federal government, many states' authorities also began the process of passing new laws and amending old ones to enhance the position of consumers. In 1961, in direct response to the growing inadequacy of existing state laws and remedies, the Washington Legislature passed an act similar to the FTC Act, which permitted the Attorney General to seek redress for unfair or deceptive trade practices.(fn23) In 1970, the CPA was amended to create a private cause of action for individuals under the Act.(fn24) Under the new language, there were four elements: (1) The defendant must have committed an unfair or deceptive act or practice; (2) the act or practice must have occurred "in the conduct of any trade or commerce"; (3) the plaintiff must have suffered injury to his "business or property"; and (4) a causal relationship must exist between the defendant's act or practice and the plaintiffs injury.(fn25)

The law that developed subsequent to this amendment, however, became incongruous and conflicting. Rather than following the language of the statute, Washington courts devised an entirely different approach to private causes of action.(fn26) Litigants wishing to bring a private cause of action could proceed by one of two alternate methods.

First, a CPA claim could be based on deceptive practices that were unregulated by statute but involved the public interest.(fn27) Such violations for unfair or deceptive acts or practices in trade or commerce were governed by the holding...