Vol. 11, No. 2, Pg. 42. Public Interest Requirement: Phantom Menace of the Unfair Trade Practices Act.

• Author: By John Harleston

South Carolina Lawyer

1999.

Vol. 11, No. 2, Pg. 42.

Public Interest Requirement: Phantom Menace of the Unfair Trade Practices Act

42Public Interest Requirement: Phantom Menace of the Unfair Trade Practices ActBy John HarlestonIn Star Wars Episode I-The Phantom Menace, the Jedi Knights Obi Wan Kenobi and Qui-Gon Jinn battle the forces of evil directed by the invisible machinations of Sen. Palpatine and his seldom seen apprentice, Darth Maul. Hence the name, Phantom Menace.

The South Carolina Unfair Trade Practices Act is also beset by a phantom menace, an invisible force in the guise of "public interest" that pervades the case law, but in the statute is mostly unseen. Consider the following scenarios.

Scenario One: Mr. Maul sells his 1994 Ford Taurus through an ad in the classifieds to Mr. Kenobi. Unknown to Mr. Kenobi, the car was previously wrecked. Mr. Maul, in response to Mr. Kenobi's direct question, states that the car has never been wrecked. He has never told a lie before. Scenario Two: Mr. Maul sells the same Ford Taurus to the same Mr. Kenobi and tells the same villainous lie. Mr. Maul has sold used vehicles twice before and in both cases, they had been wrecked; in both cases, he denied the fact in response to direct questions from the buyers. Scenario Three: The same as scenario one, except that Mr. Maul is a used car dealer and he sells the Taurus to Mr. Kenobi on his car lot.

In which of these three scenarios does Mr. Kenobi have a cause of action under the South Carolina Unfair Trade Practices Act? If you answered scenario three, you have probably read the book or the statute. If you answered scenario two, you have probably seen the movie or at least the South Carolina Case law.

Since 1986, when the Court of Appeals decided Noack Enterprises Inc. v. Country Corner Interiors of Hilton Head Island, Inc., 290 S.C. 475, 351 S.E.2d 347 (Ct. App. 1986), cert. denied 294 S.C. 235, 363 S.E.2d 688 (1987), courts in South Carolina have consistently followed the rule that a showing of "public interest" is required for a plaintiff bringing a private cause of action under the state's Unfair Trade Practices Act (UTPA).

Unfortunately, in doing so, the courts have enforced an inaccurate formulation of the requirements of the Act that defeats one of its purposes-to provide a remedy for private wrongs. Most often formulated as a "capable of repetition" test, the public interest requirement has resulted in lawyers going through the usually meaningless pleading ritual of reciting in complaints that defendant's unfair or deceptive actions are capable of repetition and sometimes going through the more meaningful, but nonsensical and unfair ritual of attempting to prove that the defendant has done the same thing before and will do it again if not stopped.

The UTPA declares unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce to be unlawful. S.C. Code § 39-5-20(a). The UTPA also authorizes lalny person who suffers any ascertainable loss of money or property, real or personal, as a

44 result of the use or employment by another person of an unfair or deceptive method, act or practice declared unlawful by § 39-5-20 [to] bring an action individually, but not in a representative capacity, to recover actual damages." § 39-5-140(a). Nothing in § 39-5140 mentions public interest.

The Court of Appeals in Noack relied essentially on two factors to infer the public interest requirement: (1) the UTPA's requirement that the clerk of court notify the Attorney General of private UTPA actions, S.C. Code § 39-5140(a), and (2) the UTPA's definition of "trade" and "commerce," as including any trade or commerce "directly or indirectly affecting the people of this State."

Because the Attorney General may only bring an action for injunction when "the proceedings would be in the public interest" § 39-5-50(a), the court reasoned that a private cause of action must be limited in the same way, thus ignoring that it is, after all, a private action. Because the UTPA concerns only trade or commerce affecting the people of this state, the court reasoned that an unfair or deceptive act or practice must affect the public interest to violate the UTPA.

In either case, the court seemed not to notice that § 39-550 requires the Attorney General first to believe that a person has used a method, act or...