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Private Claims for Unfair or Deceptive Trade Practices Under the Colorado Consumer Protection Act
The Colorado Consumer Protection Act is a statutory scheme adopted by the Colorado legislature intended to deter and punish businesses that engage in unfair or deceptive trade practices with the public. In particular, the Colorado Consumer Protection Act is codified at Colorado Revised Statutes (“C.R.S.”) § 6-1-101, et seq.
Importantly, the statutory scheme provides for both public and private rights of action. That is, both public entities, such as the Colorado Attorney General’s Office, and private citizens may bring actions to enforce the Colorado Consumer Protection Act.
Public actions are typically oriented more towards stopping deceptive business practices and, if brought by a law enforcement agency, can include criminal punishments as well. In contrast, private rights of actions are typically brought by consumers and focus more on obtaining compensation, also known as damages, that the consumer incurred as a result of the unfair or deceptive acts.
This article primarily discusses private rights of action under the Colorado Consumer Protection Act but is generally applicable to public actions as well.
Elements for Liability Under the Colorado Consumer Protection Act
The elements required to establish liability under the Colorado Consumer Protection Act are well established under Colorado law. In particular, a plaintiff bringing a Colorado Consumer Protection Act claim must show that:
(1) The defendant engaged in a deceptive or unfair trade practice;
(2) The deceptive or unfair trade practice occurred in the course of the defendant’s business, vocation, or occupation;
(3) The deceptive or unfair trade practice significantly impacts the public as actual or potential consumers of the defendant’s goods, services, or property;
(4) The plaintiff suffered an injury in fact to a legally protected interest; and
(5) The deceptive or unfair trade practice caused actual damages or losses to the plaintiff.
See Rees v. Unleaded Software, Inc., 383 P.3d 20 (Colo. App. 2013).
Notably, because Colorado Consumer Protection Act claims inherently require the existence of fraudulent or deceptive practices, there is authority out there indicating that claims brought under the act must be plead with particularity, similar to general fraud claims or claims based on misrepresentation. See e.g., C.R.C.P. 9(b).
That is, specifics of the alleged deceptive or unfair business practice should be plead in the complaint as opposed to generally asserting that deceptive or unfair business practices occurred. While no Colorado state courts have explicitly adopted this requirement, the federal District of Colorado has consistently applied and upheld this requirement. See Pertile v. General Motors, LLC, No. 15-cv-0518-WJM-NYW (D. Colo. Sep. 22, 2017).
Additionally, for statute of limitations purposes, Colorado Consumer Protection Act claims must be brought within 3 years after the consumer discovered or reasonably should have discovered the occurrence of the false, misleading, or deceptive act or practice. See C.R.S. § 6-1-115.
Deceptive and Unfair Trade Practices Under the Colorado Consumer Protection
What qualifies as deceptive and unfair trade practices under the Colorado Consumer Protection Act is discussed in C.R.S. § 6-1-105. Notably, the definition for deceptive and unfair trade practices is relatively broad and provides examples as opposed to explicitly defining what those practices consist of. Under the statute, there are over 50 examples provided. Those examples include circumstances where a business or person:
– Knowingly passes off goods, services, or property as those of another;
– Knowingly makes a false representation as to the source, sponsorship, approval, or certification of goods, services, or property;
– Knowingly makes a false representation as to affiliation, connection, or association with or certification by another;
– Uses deceptive representations or designations of geographic origin in connection with goods or services;
– Knowingly makes a false representation as to the characteristics, ingredients, uses, benefits, alterations, or quantities of goods, food, services, or property or false representation as to the sponsorship, approval, status, affiliation, or connection of a person therewith;
– Represents that goods are original or new if he knows or should know that they are deteriorated, altered, reconditioned, reclaimed, used, or secondhand;
– Represents that goods, food, services, or property are of a particular standard, quality, or grade, or that goods are of a particular style or model, if he knows or should know that they are of another;
– Disparages the goods, services, property, or business of another by false or misleading representation of fact;
– Advertises goods, services, or property with the intent not to sell them as advertised;
– Advertises goods or services with the intent not to supply reasonably expectable public demand, unless the advertisement discloses a limitation of quantity;
– Advertises under the guise of obtaining sales personnel when in fact the purpose is to first sell a product or service to the sales personnel applicant;
– Makes false or misleading statements of fact concerning the price of goods, services, or property or the reasons for, existence of, or amounts of price reductions;
– Fails to deliver to the customer at the time of an installment sale of goods or services a written order, contract, or receipt setting forth the name and address of the seller, the name and address of the organization which he represents, and all of the terms and conditions of the sale, including a description of the goods or services, stated in readable, clear, and unambiguous language;
– Employs “bait and switch” advertising, which is advertising accompanied by an effort to sell goods, services, or property other than those advertised or on terms other than those advertised;
– Knowingly fails to identify flood-damaged or water-damaged goods as to such damages;
– Solicits door-to-door as a seller, unless the seller, within thirty seconds after beginning the conversation, identifies himself or herself, whom he or she represents, and the purpose of the visit;
– Contrives, prepares, sets up, operates, publicizes by means of advertisements, or promotes any pyramid promotional scheme;
– Advertises or otherwise represents that goods or services are guaranteed without clearly and conspicuously disclosing the nature and extent of the guarantee;
– Fails to disclose material information concerning goods, services, or property which information was known at the time of an advertisement or sale if such failure to disclose such information was intended to induce the consumer to enter into a transaction;
– Disburses funds in connection with a real estate transaction in violation of C.R.S. § 38-35-125(2), requiring funds in a real estate transaction to not be disbursed until those funds are actually received and available;
– Violates the provisions of C.R.S. §§ 6-1-203 to 6-1-205, pertaining to requirements for automobile rental contracts;
– Fails, in connection with any solicitation, oral or written, to clearly and prominently disclose immediately adjacent to or after the description of any item or prize to be received by any person the actual retail value of each item or prize to be awarded;
– Refuses or fails to obtain all governmental licenses or permits required to perform the services or to sell the goods, food, services, or property as agreed to or contracted for with a consumer;
– Fails, in connection with the issuing, making, providing, selling, or offering to sell of a motor vehicle service contract, to comply with the provisions of C.R.S. § 42-11-101, et seq.;
– Engages in any commercial telephone solicitation which constitutes an unlawful telemarketing practice as defined in C.R.S. § 6-1-304;
– Intentionally violates any provision of C.R.S. § 5-10-101, et seq., pertaining to rental purchase agreements for personal property;
– Fails to disclose or misrepresents to another person, a secured creditor, or an assignee by whom such person is retained to repossess personal property whether such person is bonded in accordance with C.R.S. § 4-9-629, or fails to file such bond with the attorney general;
– Represents to any person that such person has won or is eligible to win any award, prize, or thing of value as the result of a contest, promotion, sweepstakes, or drawing, or that such person will receive or is eligible to receive free goods, services, or property, unless, at the time of the representation, the person has the present ability to supply such award, prize, or thing of value;
– Violates any provision of C.R.S. § 6-6-101, et seq., pertaining to delivery of unsolicited goods;
– Knowingly makes a false representation as to the results of a radon test or the need for radon mitigation;
– Violates C.R.S. §§ 35-27-113(3)(e), (3)(f), or (3)(i), pertaining to the sale and distribution of seeds;
– Fails to comply with the provisions of C.R.S. §§ 35-80-108(1)(a), (1)(b), or (2)(f), pertaining to the operation and rendering of services at pet animal facilities;
– Violates C.R.S. § 42-9-101, et seq., pertaining to motor vehicle repairs;
– Violates the provisions of C.R.S. § 6-1-801, et seq., pertaining to sweepstakes and contests;
– Violates any provision of C.R.S. § 24-32-3301, et seq., that applies to the installation of manufactured homes;
– Violates C.R.S. § 6-1-901, et seq., pertaining to the Colorado no-call list for telemarketers;
– Violates C.R.S. § 38-40-105, pertaining to prohibited acts in mortgage loan transactions;
– Violates C.R.S. §§ 24-21-523(1)(f) or (1)(i) or 24-21-525(3), (4), or (5), pertaining to public notaries;
– Violates any provision of C.R.S. § 6-1-702, pertaining to unsolicited advertising by fax machine;
– Violates any provision of C.R.S. § 6-1-1101, et seq., pertaining to the Colorado foreclosure protection act;
– Violates any provision of C.R.S. § 6-1-717, pertaining to falsely appraising real estate;
– Violates any provision of C.R.S. §§ 12-61-904.5 and 12-51-905.5, pertaining to mortgage loan originators;
– Violates certain provisions of C.R.S. § 6-1-701, pertaining to the sale of hearing aids;
– Violates certain provisions of C.R.S. § 6-1-722, pertaining to the sale of gift cards;
– Violates certain provisions of C.R.S. § 6-1-724, pertaining to providers of alternative medicine; and
– Knowingly represents that hemp, hemp oil, or any derivative of a hemp plant constitutes retail marijuana or medical marijuana unless it fully satisfies the definition of such products pursuant to Colorado statutes.
Importantly, the Colorado Supreme Court has held that unfair or deceptive trade practices must be intentional in order to establish liability. That is, negligent actions do not amount to unfair or deceptive trade practices under the act. See Crowe v. Tull, 126 P.3d 196 (Colo. 2006).
Public Impact Requirement for Claims Under the Colorado Consumer Protection Act
An important element for establishing liability under the Colorado Consumer Protection Act is the requirement that the unfair or deceptive trade practice has a significant impact on the public. Indeed, this is an element where many claims fail.
In considering whether a particular trade practice has a significant impact on the public, the following are non-exclusive factors used in making that determination:
– The number of consumers that have been directly affected by the trade practice;
– The relative sophistication and bargaining power of the consumers affected by the trade practice;
– The bargaining power of the consumers directly affected by the trade practice;
– Evidence that the trade practice has previously impacted consumers or has significant potential to do so in the future.
The public interest requirement reflects the intention of the Colorado Consumer Protection Act to deter and punish businesses that commit deceptive practices in dealing with the broader public. Accordingly, the Colorado Consumer Protection Act cannot be used to remedy a purely private wrong.
A purely private wrong is one that does not have a significant enough on the public such that only the parties to the transaction are affected by the alleged unfair or deceptive business practice. In such circumstances, while a Colorado Consumer Protection Act claim may not be available, the consumer will usually have a breach of contract claim or other claim that is more specific to the transaction that occurred between the parties. See Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142 (Colo. 2003); Crowe v. Tull, 126 P.3d 196 (Colo. 2006).
Examples of cases specifically dealing with the public impact requirement include:
– One Creative Place, LLC v. Jet Center Partners, LLC, 259 P.3d 1287 (Colo. App. 2011), where the public impact requirement was not met in relation to the selling and refueling of jets based on pilots being sophisticated, having sufficient bargaining power, and where no deception to actual purchasers or consumers had been shown.
– Vista Resorts, Inc. v. Goodyear Tire & Rubber Co., 117 P.3d 60 (Colo. App. 2004), where a verdict under the Colorado Consumer Protection Act was affirmed and, thus, inherently affirming that the public impact requirement had been met, where approximately 950 consumer complaints had been filed in relation to rubber hose used in floor heating systems.
– Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142 (Colo. 2003), where it was found that the public impact requirement was not met in relation to a dealer contract for supplying polyurethane linings where the only dealer contracts affected were 3 out of 550 and the plaintiff had been represented by counsel in negotiating those contracts.
– Hall v. Walter, 969 P.2d 224 (Colo. 1998), where the Colorado Supreme Court affirmed a jury verdict under the Colorado Consumer Protection Act and, thus, inherently affirmed that the public impact element had been met where subdivision developers had advertised and sold subdivision lots to the general public on the basis that a private road provided proper access to the lots when, in fact, it did not.
Notably, whether a particular trade practice has a significant impact on the public is a question of fact as opposed to a question of law and, accordingly, is one reserved to the finder of fact. See One Creative Place, LLC v. Jet Center Partners, LLC, 259 P.3d 1287 (Colo. App. 2011).
While the public impact requirement is the hardest to meet, with many cases having been dismissed for failing to satisfy it, generally the more consumers that are affected by the deceptive or unfair trade practice the more likely a case will survive dismissal.
That is, if the relative number of consumers affected by the alleged deceptive or unfair trade practice is low, then the action looks more like a purely private wrong that is not addressable under the Colorado Consumer Protection. See Coors v. Security Life of Denver Insurance Co., 91 P.3d 393 (Colo. App. 2003), rev’d in part on other grounds, 112 P.3d 59 (Colo. 2005).
Further, actual injury caused by the unfair or deceptive trade practice is also an important consideration. While more than one consumer may have used or purchased a business’s services or product, that does not necessarily mean all of them were adversely affected by the alleged unfair or deceptive business practice. Accordingly, establishing a connection between the unfair or deceptive trade practice and the injuries actually incurred by consumers is also important for surviving dismissal. See Hildebrand v. New Vista Homes II, LLC, 252 P.3d 1159, 1169 (Colo. App. 2010).
Where a person or business prevails in a Colorado Consumer Protection Act claim he or she will be entitled to damages equal to the greater of:
– The actual damages incurred; or
– If the defendant acted in bad faith as established by clear and convincing evidence, then three times the amount of actual damages incurred.
See C.R.S. § 6-1-113(2).
That is, if the plaintiff is successful, the defendant will be liable for a minimum of $500. However, if actual damages are greater than $500, the defendant will be liable for actual damages or three times actual damages if the defendant’s conduct was done in bad faith; that is, the conduct was fraudulent, willful, knowing, or intentional. See also Vista Resorts, Inc. v. Goodyear Tire & Rubber Co. 117 P.3d 60 (Colo. App. 2004).
Since the Colorado Consumer Protection Act provides the opportunity for treble damages, being found liable under the act for engaging in unfair or deceptive trade practices can have significant repercussions. Indeed, many plaintiffs bringing claims under the act push for treble damages as a modest amount of damages can quickly become considerable. Moreover, because unfair or deceptive trade practices are almost inherently done intentionally or fraudulently, often times the facts that support a judgment under the Colorado Consumer Protection Act will also support trebling of damages under the bad faith requirement.
Lastly, in addition to damages as discussed above, a successful plaintiff will also be entitled to costs and attorneys’ fees in litigating the action as determined by the court. See C.R.C. § 6-1-113(2)(b).
© 2017 J.D. Porter, LLC. Author: Jordan Porter. Denver, Colorado.