M. Unfair Trade Practices Act Violation

• Library: South Carolina Business Torts (SCBar) (2021 Ed.)

M. UNFAIR TRADE PRACTICES ACT VIOLATION

The South Carolina Unfair Trade Practices Act ("SCUTPA") states that any "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" are unlawful.⁵³⁵

The Act provides for a private right of action that allows "[a]ny person who suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by [the Act] [to] bring an action individually."⁵³⁶ Modeled after the Federal Trade Commission Act,⁵³⁷ the SCUTPA, enacted in 1971, created a new claim by "making unlawful certain conduct which was not actionable under the common law of torts actionable under the statute."⁵³⁸ "Since 1986, South Carolina courts have required that a plaintiff bringing a private cause of action under UTPA allege and prove the defendant's actions adversely affected the public interest."⁵³⁹

Thus, damages can be recovered when the plaintiff shows that "(1) the defendant engaged in an unfair or deceptive act in the conduct or trade or commerce; (2) the unfair or deceptive act affected public interest; and (3) the plaintiff suffered monetary or property loss as a result of the defendant's unfair or deceptive acts(s)."⁵⁴⁰

The South Carolina Supreme Court has held that "[t]he provision of any service constitutes commerce within the meaning of the UTPA."⁵⁴¹ Thus, the SCUTPA is not limited to instances of consumer protection and antitrust actions.⁵⁴² In the corporate realm, "[i]t is well settled that corporate officers and directors are not liable for the tortious conduct of the corporation unless they commit, participate in, direct, or authorize the commission of a tort."⁵⁴³ Thus, the Supreme Court of South Carolina has held that "directors and officers are not liable for the corporation's unfair trade practices unless they personally commit, participate in, direct, or authorize the commission of a violation of the UTPA."⁵⁴⁴

1. Elements

a. An Unfair or Deceptive Act. The SCUTPA lays out specific acts that constitute unfair trade practices.⁵⁴⁵ In addition, South Carolina courts have explicitly held that certain acts are considered unfair trade practices that impact the public interest, including but not limited to: yo-yo vehicle sales,⁵⁴⁶ pyramid schemes,⁵⁴⁷ trademark infringement,⁵⁴⁸ misrepresentation,⁵⁴⁹ breach of warranty,⁵⁵⁰ breach of a duty,⁵⁵¹ and failure to disclose.⁵⁵²

For acts and practices not specifically listed, South Carolina courts have defined an "unfair" trade practice by holding that a practice is unfair "when it is offensive to public policy or when it is immoral, unethical, or oppressive." A deceptive practice, which constitutes a violation of SCUTPA, is any practice which has a tendency to deceive.⁵⁵³ In addition to this seemingly amorphous definition, the practitioner should be aware that

a plaintiff need not prove the elements of common law deceit in order to establish a violation of the South Carolina Unfair Trade Practices Act since, under the statute, there is no need to show that a claim or representation was intended to deceive but only that it had the capacity, effect, or tendency to deceive.⁵⁵⁴

To determine whether an act or practice is unfair or deceptive, courts must analyze "the surrounding facts and the impact of the transaction on the marketplace."⁵⁵⁵ South Carolina courts have held that "'[e]ven a truthful statement may be deceptive if it has a capacity or tendency to deceive."⁵⁵⁶

Not every alleged violation, however, necessarily constitutes an unfair or deceptive practice. For example, the South Carolina Court of Appeals held in Miller v. Fairfield Communities, Inc. that employer-employee relations matters are not covered by the SCUTPA.⁵⁵⁷

Additionally, in Bessinger, the court of appeals held that the defendants terminating their business relationships with the plaintiffs solely because the plaintiff had flown the Confederate battle flag at his restaurant did not amount to an unfair trade practice that violated the Act.⁵⁵⁸ The court based its decision on the principle that the defendants had the right to choose who they conducted their business with.⁵⁵⁹

b. Proximate Cause and Adverse Effect on the Public Interest. "To be actionable under the UTPA, the unfair or deceptive act or practice must have an impact upon the public interest."⁵⁶⁰ This has been referenced as the "make it or break it" element; it has even been referred to as the "phantom menace"⁵⁶¹ and the "stumbling block"⁵⁶² of a SCUTPA claim.

But all is not lost, at least yet, for plaintiffs seeking to use SCUTPA to recover in a business dispute. "An impact on the public interest may be shown if the acts or practices have the potential for repetition."⁵⁶³ Repetition may be shown either "(1) by showing the same kind of actions occurred in the past, thus making it likely they will continue to occur absent deterrence; or (2) by showing the company's procedures created a potential for repetition of the unfair and deceptive acts."⁵⁶⁴

Proof of repetition, without more, is sufficient evidence of an adverse effect on public impact.⁵⁶⁵ Thus, if a plaintiff alleges and proves facts demonstrating the potential for repetition of the defendant's actions, he may have sufficiently proved an adverse effect on the public interest and need not allege or prove anything further to satisfy this element.⁵⁶⁶ Importantly, however, these are not the only ways to establish the potential for repetition, thus each case must be evaluated individually on the merits to determine whether the conduct has the potential for repetition or adversely affects the public interest in another way.⁵⁶⁷

For instance, in Dowd, the court held that the defendant had participated in a deceptive practice that had the potential for repetition.⁵⁶⁸ In that case, a car salesman for the defendant had represented to the plaintiff that the car he was selling to her had been leased as a part of a fleet, when in reality it had been available for daily rental by the public.⁵⁶⁹ After the plaintiff purchased the car, she experienced a range of difficulties that allegedly arose out of the car's misrepresented history.⁵⁷⁰ The salesman had been trained by the defendant to make the exact kind of misrepresentations that he made to the plaintiff.⁵⁷¹ The court held that the potential for repetition of the practice was apparent, and thus the practice had sufficient impact upon the public interest.⁵⁷²

Similarly, in Daisy, the court held that the defendant offered sufficient evidence of the potential for repetition.⁵⁷³ In that case, the plaintiff had twice built billboards that intentionally blocked the defendant's billboards.⁵⁷⁴ The court stated that the defendant sufficiently proved the public-interest element because the owner of the blocked billboard was affected by these actions.⁵⁷⁵ As the owner was a commercial member of the public who was affected, the plaintiff's actions could have been seen to have the potential for repetition and thus adversely affected the public interest.⁵⁷⁶

Importantly, a plaintiff who merely alleges that a contract has been breached and may be breached again in the future has not adequately alleged potential for repetition. South Carolina courts have consistently held that the South Carolina UTPA does not reach alleged breaches of contract because such transgressions do not affect the public interest.⁵⁷⁷

It could be said that the best way "to prove public impact is not by showing a potential for repetition; rather, prove public impact by showing actual repetition."⁵⁷⁸ Sometimes, the potential for repetition or adverse impact on the public interest will be obvious, but sometimes the same could be said when there is no real potential.⁵⁷⁹ On the contrary, the public may not always be impacted by unfair or deceptive acts in the sale of business.⁵⁸⁰ Thus, courts will examine this element on a case-by-case basis to determine whether the plaintiff has sufficiently alleged a cause of action under the SCUTPA.

c. Damages. The SCUTPA allows for the recovery of actual damages by a "person" damaged by the unfair or deceptive act.⁵⁸¹ Under the Act, a "person" includes "natural persons, corporations, trusts, partnerships, incorporated, or unincorporated association and any other legal entity."⁵⁸² However, that Act specifically prohibits a plaintiff from bringing an action in a representative capacity, which prevents plaintiffs from filing class action suits based on alleged SCUTPA violations.⁵⁸³

Actual damages include "special or consequential damages that are a natural and proximate result of [the] deceptive conduct."⁵⁸⁴ The Act, however, is limited to plaintiffs who suffer an ascertainable loss to their money or property.⁵⁸⁵ If the plaintiff's damages do not relate to his money or property, or the alleged damages were not proximately caused as a result of the unfair act, the ascertainable loss element will not be satisfied.⁵⁸⁶ On the other hand, if a plaintiff can present evidence establishing that the defendants unfair act proximately caused the plaintiff to suffer harm to his money or property, the ascertainable loss element may be met.

For example, in Wright, the court held that there was evidence that could establish a finding of damages related to the alleged violation of the Act.⁵⁸⁷ There, the plaintiff alleged that the defendant did not inform him that the truck he was buying had previously been wrecked and repaired.⁵⁸⁸ The plaintiff claimed that the truck was valueless in its condition, that he sustained repair costs that equaled one half of the balance on his car loan, and that he had lost equity on the car he had traded in for the truck.⁵⁸⁹ The court held that this was sufficient evidence for a jury to find that the damages arose from the failure to disclose that the truck had been wrecked and repaired.⁵⁹⁰

d. Treble Damages/Attorneys' Fees. Treble damages and...