AMI2900Issues—Claim for Damages Based on Deceptive Trade Practices
Ark. Model Jury Instr., Civil AMI 2900
Arkansas Model Jury Instructions-Civil
November 2020 Update
Chapter 29. Deceptive Trade Practices
AMI 2900 Issues—Claim for Damages Based on Deceptive Trade Practices
[Plaintiff] claims damages from [defendant] and has the burden of proving each of three essential propositions:
First, that (he)(she) has sustained actual financial loss;
Second, that [defendant]
[knowingly made a false representation as to (the characteristics, ingredients, uses, benefits, alteration, source, sponsorship, approval, or certification of goods or services) (or) (whether goods are original or new, or of a particular standard, quality, grade, style, or model);] [or]
[disparaged the goods, services, or business of [plaintiff] by a false or misleading representation of fact;] [or] [advertised goods or services with the intent not to sell them as advertised;] [or]
[refused (to provide requested relevant information to [plaintiff] about) (or) (to deliver to [plaintiff]) the record of warranty and statement of service availability included in the original container of an electronic or mechanical product;] [or]
[used bait-and-switch advertising;] [or]
[knowingly failed to inform [plaintiff] that goods were damaged by flood, water, fire, or accident;] [or]
[made a false representation to [plaintiff] that contributions solicited for charitable purposes would be spent in a specific manner or for specific purposes;] [or]
[knowingly took advantage of [plaintiff], who was reasonably unable to protect (his)her interest because of physical infirmity, ignorance, illiteracy, inability to understand the language of an agreement, or a similar reason;] [or]
[offered a trust document for sale, assembly, or drafting;] [or]
[displayed or caused to be displayed a fictitious or misleading name or telephone number on an Arkansas resident's telephone caller identification service;] [or]
[engaged in an unconscionable, false, or deceptive act or practice in business, commerce, or trade;] and
Third, that [his or her] actual financial loss was proximately caused by his or her reliance on the defendant's conduct described above.
[If you find from the evidence in this case that each of these propositions has been provided, then your verdict should be for [plaintiff]; but if, on the other hand, you find from the evidence that any of these propositions has not been proved, then your verdict should be for [defendant].]
NOTE ON USE
Do not use the final bracketed paragraph if the case is submitted on interrogatories.
This instruction is based on the Arkansas Deceptive Trade Practices Act (“ADTPA”), specifically, Ark. Code Ann. § 4-88-107, which sets out prohibited deceptive and unconscionable trade practices, and Ark. Code Ann. § 4-88-113(f), which provides for a private cause of action to recover damages.
The Arkansas Supreme Court, in Air Evac EMS, Inc. v. USAble Mutual Insurance Company d/b/a Arkansas Blue Cross Blue Shield, 2017 Ark. 368, 533 S.W.3d 572, has further interpreted the safe harbor provision of the ADTPA set forth at Ark. Code Ann. § 4-88-101.
Historically courts have taken two different approaches to interpret the safe harbor provision: (1) the majority “specific conduct” rule, which looks to whether state law permits or prohibits the conduct at issue and only exempts permitted conduct from ADTPA claims; or (2) the minority “general activity” rule, which looks to whether a state agency regulates the conduct, in which case a regulated party enjoys a full exemption from the ADTPA.
Prior to Air Evac EMS, Inc., supra, there were conflicting decisions in Arkansas regarding the proper interpretation of the safe harbor provision. In the case, the Arkansas Supreme Court adopted the specific-conduct rule, meaning the safe harbor provision precludes claims only when the actions or transaction at issue have been specifically permitted or authorized under laws administered by a state or federal regulatory body or officer.
Act 986 of 2017 substantively modified the ADTPA. It redefined the ADTPA's private cause of action as available to persons suffering “an actual financial loss proximately caused by his or her reliance on the use of a practice declared unlawful under this chapter.” Ark. Code Ann. § 4-88-113(f)(2) (Supp. 2017). Act 986 defined the term “actual financial loss” as “an ascertainable amount of money that is equal to the difference between the amount paid by a person for goods and services and the actual market value of the goods or services provided.” Ark. Code Ann. § 4-88-102(9) (Supp. 2017). The previous version provided a cause of action for “actual damages” to “any person who suffers actual damage or injury as a result of an offense or violation as defined in this chapter.”
Pre-Act 986 cases addressed two questions concerning the scope of “actual damage or injury” under the ADTPA's previous private-cause-of-action provision, Ark. Code § 4-88-113(f). Those cases are reviewed here to provide background for Act 986's revisions.
First, in FMC Corp., Inc. v. Helton, 360 Ark. 465, 481–84, 202 S.W.3d 490, 502–03 (2005), the court held that, at least in the absence of physical injury or violation of the ADTPA with intent to cause mental distress, the ADTPA term “actual damage or injury” does not include mental anguish. Act 986's substitution of “actual financial loss” for “actual damage or injury” as the basis for a private cause of action appears, if anything, even more clearly to exclude mental anguish.
Second, the Arkansas Supreme Court ruled that “actual damage or injury” does not include diminution in value in the context of so-called “no-injury” product liability cases alleging defective design. In Wallis v. Ford Motor Co., 362 Ark. 317, 208 S.W.3d 153 (2005), plaintiffs brought a class action under common law fraud and the ADTPA on behalf of Ford Explorer owners, alleging not that they had been injured in roll-over accidents but that their vehicles' value was compromised because of an alleged – but as-yet unmanifested—tendency to roll over. They sought “benefit-of-the-bargain” damages—the difference between the value of the product as represented and as actually received. The other common law fraud measure of damages is “out-of-pocket,” which is the difference between the purchase price and the product's fair market value. See Smith v. Walt Bennett Ford, Inc., 314 Ark. 591, 601, 864 S.W.2d 817, 823 (1993) (describing measures of damages for common law fraud). The court first reviewed Arkansas's common law fraud doctrine, concluding that “benefit-of-the-bargain damages are only awarded in fraud cases where a party proves that the product received is not what was bargained for; that is, the product received in fact manifests that it is different from that which was promised.” Wallis, supra, 362 Ark. at 319, 208 S.W.3d at 155. The court discussed and quoted at length Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir. 2001), for the distinction between a no-injury product liability claim such as Wallis's and a benefit-of-the-bargain fraud case in which the plaintiff alleged that “the product delivered was not in fact what was promised.” 362 Ark. at 324, 208 S.W.3d at 159. Wallis received a Ford Explorer as promised, albeit with an alleged design defect that had not yet manifested in injury. Coghlan, by contrast, had bought a boat represented to be of superior, all-fiberglass construction but which instead included inferior, plywood construction. Accordingly, he was allowed to seek recovery under a fraud theory. The Arkansas court in Wallis applied this distinction to deny recovery under both common law fraud and the ADTPA. The court further observed that, while the ADTPA empowers the Attorney General to pursue an action to restore property, moneys, and “other damages sustained” to a “purchaser who has suffered any ascertainable loss” resulting from violation of the chapter, Ark. Code § 4-88-113(a) (emphasis added), private plaintiffs by contrast must prove “actual damage or injury,” Ark. Code § 4-88-113(f). 362 Ark. at 328, 208 S.W.3d at 161. The court specifically noted that those jurisdictions allowing claims like Wallis's to proceed under their respective consumer protection laws provide a private cause of action for “ascertainable loss.” 362 Ark. at 328, 208 S.W.3d at 161–62.
The Eighth Circuit discussed Wallis in Yazdianpour v. Safeblood Technologies, Inc., 779 F.3d 530 (8th Cir. 2015), an ADTPA case arising, not in the no-injury product liability context, but out of a contract dispute involving an exclusive license to market patented technology overseas. Licensees alleged that licensors had misrepresented the status of the patent rights as eligible for legal protection outside the United States. The Eighth Circuit ruled that the district court did not abuse its discretion in instructing the jury that “[p]laintiffs may not recover [under the ADTPA] if the only injury they suffered is the diminution in value of the product.” Id. at 537–38. Citing Wallis, the Eighth Circuit rejected licensees' argument that what they had received (a license not protectable overseas) was not what they had bargained for (a license protectable overseas), reasoning that the only alleged injury was diminution in value. The court did not mention the distinction between no-injury product liability cases such as Wallis, in which mere diminution in value does not amount to “actual damage or injury” and thus is not actionable on a fraud or ADTPA theory, and benefit-of-the-bargain cases Wallis itself distinguished, such as Coghlan, in which it presumably would be.
As mentioned, Act 986 replaced “actual damage or injury” with “actual financial loss.” By expressly casting the definition of that element in diminution-in-value terms—“an ascertainable amount of money that is equal to the amount paid by a person for goods or services and the actual market value of the goods of services provided to a person”—Act 986 may affect the outcome in at least some diminution-in-value cases. Further, to the extent Act 986's revisions do allow diminution-in-value cases to proceed, it apparently dictates that the appropriate measure of damages is out-of-pocket loss.
Act 986 also confirms the right to a jury trial for any action pending or filed on or after its effective date. Ark. Code Ann. § 4-88-116.
Business entities and other non-consumers, as well as individuals, may bring claims under the ADTPA. Ark. Code Ann. § 4-88-102(5); Vanoven v. Chesapeake Energy Corp., No. 4:10CV0158 BSM, 2011 WL 1042251, at *5 (E.D. Ark. Mar. 22, 2011); ElectroCraft Arkansas, Inc. v. Super Electric Motors, Ltd., 70 U.C.C. Rep. Serv. 2d 716, at *20–23 (E.D. Ark. 2009).
There is no private cause of action for injunctive relief under the ADTPA. Baptist Health v. Murphy, 2010 Ark. 358, at 27–29 (citing Wallis).
The ADTPA does not apply to advertising or practices that are subject to and comply with any rule, order, or statute administered by the Federal Trade Commission or actions or transactions “specifically permitted” under laws administered by a regulatory body or officer acting under statutory authority of this state or the United States. Ark. Code Ann. § 4-88-101(1), (3); DePriest v. AstraZeneca Pharmaceuticals, L.P., 2009 Ark. 547, at 13–15.
The prohibitions as to trust documents apply to nonlawyers and exclude the marketing, assembly, and funding of those documents by bank trust departments and trust companies. Ark. Code Ann. § 4-88-107(a)(9). The ADTPA does not apply to the practice of law by licensed attorneys. Born v. Hosto & Buchan, PLLC, 2010 Ark. 292, at 14–15 (citing Preston v. Stoops, 373 Ark. 591, 594, 285 S.W.3d 606, 609 (2008)). This is true even if the attorney is licensed by, and located in, another state and is engaged in the collection of debts inside this state. Boyajian v. State, 2012 Ark. 210, at 3. However, in Campbell v. Asbury Automotive, Inc., the Arkansas Supreme Court held that the ADTPA can apply to a cause of action for the unauthorized practice of law by a nonlawyer. 2011 Ark. 157, at 10–11.
Section 4-88-107(a)(10), which prohibits “any other unconscionable, false, or deceptive act or practice,” is not too vague for enforcement. State ex rel. Bryant v. R & A Inv. Co., 336 Ark. 289, 295, 985 S.W.2d 299, 302 (1999).
Under the Uniform Commercial Code, the determination of unconscionability is a mixed question of fact and law. Associated Press v. S. Ark. Radio Co., 34 Ark. App. 211, 214, 809 S.W.2d 695, 697 (1991). In determining unconscionability in contract cases, the courts should review the totality of the circumstances surrounding the negotiation and execution of the contract. Two important considerations are whether there was a gross inequality of bargaining power between the parties to the contract and whether the aggrieved party was made aware of and comprehended the provision in question. State ex rel. Bryant, 336 Ark. at 296, 985 S.W.2d at 302–03; Ark. Nat. Life Ins. Co. v. Durbin, 3 Ark. App. 170, 174–175, 623 S.W.2d 548, 551 (1981). “An ‘unconscionable’ act is an act that ‘affront[s] the sense of justice, decency, or reasonableness.’” Baptist Health v. Murphy, 365 Ark. 115, 128 n.6, 226 S.W.3d 800, 811 n.6 (2006) (citing Black's Law Dictionary 1561 (8th ed. 2004)).
While the ADTPA “protects consumers from unfair ways of doing business,” the alleged prohibited conduct must be considered in light of trade practices. Independence Cnty. v. Pfizer, Inc., 534 F. Supp. 2d 882, 887–88 (E.D. Ark. 2008), aff'd, 552 F.3d 659 (8th Cir. 2009) (dismissing on the pleadings ADTPA claims against drug manufacturing companies involved in manufacture or distribution of over-the-counter products containing ephedrine or pseudoephedrine based on theory that they knew their products were being used in illegal manufacture of methamphetamine). Nothing in the Act protects consumers against third party criminal conduct. Id.
Act 986's amendment of Ark. Code Ann. § 4-88-102 (definition of “actual financial loss”) and -113(f) (“damages available as the result of an offense or violation of a deceptive trade practice prohibition”) does not appear to reach Subchapter 2 of the ADTPA, which provides “Enhanced Penalties when Elder or Disabled Persons Are Targeted” for violations “of this chapter.” In particular, Act 986 does not expressly amend Ark. Code Ann. § 4-88-201, which provides an additional civil penalty for violations against elder or disabled persons; nor does it expressly amend § 4-88-204, which recognizes a cause of action on behalf of elder or disabled persons who suffer “damage or injury as a result of an offense or violation described in this chapter.” Under this reading of Act 986, use of AMI 2900 from the 2017 edition might be appropriate. In that version, the first element was “First, that (he)(she) has sustained damages”; the second element was the same as in the current version; and the third element was “Third, that [defendant]'s conduct was a proximate cause of [plaintiff]'s damages.”
© 2020 Arkansas Supreme Court Committee on Jury Instructions-Civil
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