Little FTC Acts and Statutory Treble Damages-Traps for the Unwary

Treble damages provisions are often designed to make prosecuting a private right of action more economically feasible,[2] to encourage private enforcement,[3] or to deter wrongdoers from violating the law.[4] However, some states impose “automatic” treble damages. While trebling a nominal damages award will still yield only nominal damages, there is some incentive for bringing an action where substantial actual damages are guaranteed to be trebled. Among those states with automatic treble damages, some require a showing of intent or willfulness on the defendant’s part, while others require only a statutory violation. Still other states have a mechanism for treble or multiple damages but leave the trebling of damages to the court’s discretion (albeit sometimes constrained by specific criteria).

Because most, if not all, states liberally construe their consumer protection statutes, the potential for treble damages and the related requisites should command the attention of practitioners who prosecute or defend unfair trade practices claims. This article is an overview of some of the state statutory treble damages provisions. It is not an exhaustive examination of all states’ statutes and related remedies, and does not address the award of costs and attorney fees under little FTC acts.

Discretionary Treble Damages
Alabama’s FTC act, the Deceptive Trade Practices Act, provides for both public and private causes of action. The district attorney or attorney general can prosecute a public cause of action to enjoin and recover civil penalties, but the public cause of action does not contemplate treble damages. The private right of action affords actual damages or $100, whichever is greater, and the court has the discretion to award up to three times any actual damages awarded. In determining whether a treble damages award is appropriate, “the court shall consider, among other relevant factors, the amount of actual damages awarded, the frequency of the unlawful acts or practices, the number of persons adversely affected thereby and the extent to which the unlawful acts or practices were committed intentionally.”[5]

The Tennessee Consumer Protection Act (TCPA) provides that actual damages may be trebled only when the defendant’s conduct is a “willful or knowing violation” of the act, and then only after the trial court has considered the following factors:

the competence of the consumer; 
the nature of the deception;
the damage to the consumer; and
the good faith of the person who violated the act.[6]

The TCPA’s punitive treble damages are intended to deter similar future conduct.[7]

In Smith Corona Corp. v. Pelikan, Inc., the court trebled the jury award of $41,000 to $123,000, where it found the defendant had not acted in good faith when it engaged in deceptive advertising, causing actual damage to the plaintiff. “Unlike other treble damages statutes, Tenn. Code Ann. §47-18-109(a)(3) provides that actual damages will be trebled only when the defendant’s conduct is a ‘willful or knowing violation’ of the Act and then only after the trial court has considered the factors enumerated in Tenn. Code Ann. §47-18-109(a)(4).”[8]

In most states, consumers cannot recover damages for the same conduct under multiple legal theories. For example, a plaintiff usually is not entitled to punitive damages under common-law breach of contract and treble damages for violation of the state unfair trade practices act, when the conduct giving rise to the causes of action is the same. Tennessee consumer plaintiffs, however, may elect their remedies. In Concrete Spaces v. Sender, the Tennessee Supreme Court held that a successful plaintiff could elect to recover either punitive damages under a common-law theory or treble damages under the TCPA. Sendereven allows a plaintiff to elect his or her remedy after the trier of fact determines the amounts available under both theories of recovery.[9]

The District of Columbia’s Consumer Protection Act (CPPA) protects consumers not only from actions that violate enumerated unlawful trade practices but also from actions that violate D.C. common law. In addition, the CPPA permits the recovery of treble or statutory damages, attorney fees, punitive damages, injunctive relief, and any other relief deemed proper.[10] Under D.C. law, a plaintiff must prove egregious conduct—that defendant acted with evil motive, actual malice, or willful disregard for plaintiff’s rights—by clear and convincing evidence in order to recover punitive damages.[11] While some states view the recovery of punitive and treble damages as mutually exclusive, the District of Columbia Court of Appeals has held that the award of treble damages under the CPPA serves a remedial rather than punitive purpose, rendering inapplicable the heightened proof requirements for punitive damages: “Once it is established that a “consumer [has] suffer[ed] any damage,” the CPPA authorizes courts to treble damages without further findings.”[12]

Because the purposes of the two awards differ in the District of Columbia, a court can impose both punitive and treble damages. For example, in Byrd v. Jackson, the defendant was found liable for violation of the CPPA where he represented himself to an elderly homeowner as a foreclosure specialist and then “orchestrat[ed] . . . the sale of [her] property worth $200,000” to the partnership he controlled for $33,000, then “flip[ped] the property to [a third person] for $150,000 from which Byrd would take substantial money.”[13] The trial court found that Byrd’s false advertising of his services was alone sufficient to treble the plaintiff’s actual damages. In addition to upholding the award of treble damages, the appellate court affirmed the award of punitive damages, because Byrd’s actions in taking advantage of an elderly, bedridden woman were “particularly malicious.”[14]

Mandatory Treble Damages
South Carolina has an election of remedies doctrine similar to Tennessee’s but imposes mandatory treble damages for a willful and knowing violation of the South Carolina Unfair Trade Practices Act (SCUTPA). A violation of the act is willful when the defendant “should have known” that his actions would violate the SCUTPA.[15]

In GTR Rental, LLC v. Dalcanton, a jury found Dalcanton, Gillion, and Capital City Trailer LLC liable to GTR Rental LLC for breach of fiduciary duty, conversion, fraud, violation of the SCUTPA, and breach of contract. The jury assessed monetary damages for each individual cause of action, trebled the SCUTPA damages for defendants’ willful and knowing violations, and awarded in globo punitive damages against each defendant. Defendants argued on appeal that the plaintiff should be required to elect either treble damages under the SCUTPA or recovery under the jury award of punitive damages. The appellate court, however, upheld both the punitive and treble damages awards, observing that the evidence supported findings of separate and distinct wrongs for fraud and violation of the SCUTPA. The court had no trouble finding that the defendants’ creation of a company to divert money and resources from their employer was “reprehensible conduct” and a willful and knowing violation of the SCUTPA, mandating a trebling of those damages.[16]

Monetary damages under the Delaware Uniform Deceptive Trade Practices Act are also automatically trebled: “If damages are awarded to the aggrieved party under the common law or other statutes of this State, such damages awarded shall be treble the amount of the actual damages proved.”[17]

New Jersey mandates the automatic imposition of treble damages when a plaintiff demonstrates ascertainable loss as a result of an unlawful practice under the act.[18] New Jersey courts have recognized that automatic statutory treble damages are intended to act as a deterrent for wrongdoers and go a step further than allowing recovery only of actual damages, such as in a breach of contract case.[19] The standard of proof for private consumer plaintiffs, however, is higher than the standard of proof for an action brought by the attorney general under the New Jersey Consumer Fraud Act. The attorney general does not have to prove actual damages, while the private plaintiff has the burden of proving not only damages, but an “ascertainable loss.”[20] The “ascertainable loss” must be a direct result of the defendant’s consumer fraud, in order to be trebled. In Cox v. Sears Roebuck & Co., the Supreme Court of New Jersey held that the plaintiff was entitled to the trebling of damages that were directly caused by Sears’ consumer fraud but was not entitled to damages that were an indirect result of Sears’ actions.[21]

Under North Carolina’s Unfair Trade Practices Act, a consumer injured by a violation of the act is entitled to treble damages.[22] The treble damages calculation is automatic, and there is no requirement that the plaintiff show the defendant acted intentionally or willfully in violating the statute. In Shepard v. Bonita Vista Properties, L.L.C.,[23] the North Carolina Court of Appeals held that the plaintiffs were entitled to treble damages, totaling over $46,000, where the plaintiffs proved that the defendants’ acts were unfair business practices that proximately damaged the plaintiffs. The defendants were recreational vehicle campground owners who interfered with and disconnected electricity to tenants’ vehicles, thereby causing damage to the tenants’ recreational vehicles.

In Vermont, damages are automatically trebled if “[defendant’s] acts were committed with malice, ill will, or wanton disregard for [consumer’s] rights and interests.”[24] Where a landlord rented property to tenants that did not comply with state and local safety and health codes, the trial court granted summary judgment in favor of the plaintiffs and submitted the claim to a jury for determination of damages under the Consumer Fraud Act. The plaintiffs’ evidence demonstrated that a property inspection showed “serious structural deficiencies, electrical hazards, and other violations of the life safety code.”[25]

By special verdict, the jury awarded $1,200 in compensatory damages for violation of the Consumer Fraud Act and awarded three times that amount in exemplary damages totaling $3,600. “Malice is shown through ‘conduct manifesting personal ill will, evidencing insult or oppression, or showing a reckless or wanton disregard of plaintiffs’ rights,’ and it may be inferred from the surrounding circumstances and the nature of the defendant’s conduct.”[26] The plaintiffs’ proof of malice included two separate Department of Labor and Industry inspection reports ordering the landlord to address significant electrical and fire code violations before the property could be inhabited. Based on this and other evidence, the court agreed with the jury’s finding of a “reckless and wanton disregard for plaintiffs’ safety and rights as tenants” and affirmed the jury’s award of treble damages.[27]

Preconditions to Recovery of Treble Damages
Practitioners handling unfair or deceptive trade practices claims should be aware of state-specific preconditions to treble damages recovery. For example, although Louisiana’s Unfair Trade Practices and Consumer Protection Law (LUTPCPL) provides for recovery of treble damages, such recovery is not allowed unless the plaintiff shows that the proscribed act “was knowingly used, after [the defendant was] put on notice by the attorney general.”[28] While the statute does not define “notice,” at least one court has held that the notice given by the attorney general must be specific notice that continued willful action may result in defendant’s liability for treble damages.

In B&G Crane Service, L.L.C. v. Duvic, the court held that notice by the attorney general, through a criminal warrant, was not the type of notice required by the civil unfair trade practices act. Turner Brothers was a direct competitor of B&G. When sworn affidavits were executed by former Turner employees detailing misappropriation of confidential files by Turner to bid competitively against B&G, the Louisiana attorney general executed a criminal search warrant and seized some of the alleged misappropriated information. Shortly afterward, B&G filed suit against Turner seeking monetary damages under the LUTPCPL. Despite a finding that Turner acted intentionally and willfully,[29] the trial court granted Turner’s motion to strike the treble damages claim. The court held that the notice given pursuant to a search warrant was insufficient notice under section 51:1409(A) of the Louisiana Revised Statutes, because the search warrant was issued under criminal jurisdiction. The required notice must specify that defendant’s continued violation of the LUTPCPL will subject it to a civil claim for treble damages. Failure to notify the defendant through the attorney general will preclude a treble damages claim but will not affect a claim for actual damages.[30]

The Delaware Uniform Deceptive Trade Practices Act is unique in its requirement that a plaintiff must have standing to seek injunctive relief in order to obtain mandatory treble damages for a violation of the act.[31] Although the statute has generated significant debate among Delaware courts, the resulting interpretation is that a plaintiff cannot seek treble damages unless he first seeks injunctive relief against the defendant.[32] The Delaware law connection between injunctive relief and treble damages emphasizes that the act is “directed at patterns of deceptive conduct, not isolated incidents of consumer fraud.”[33]

Georgia’s Fair Business Practices Act also imposes certain preconditions for treble damages. The act requires written demand on the putative defendant at least 30 days prior to instituting an action, and the written demand must identify the claimant and reasonably describe the unfair or deceptive act or practice and the injury suffered.[34] Once the written demand is received, the recipient then has 30 days to respond with a written tender offer of settlement. If the statutory violation was intentional and there has been compliance with the statutory requirements, the trebling of actual damages is mandatory under Georgia law. Johnson v. GAPVT Motors Inc. held that an automobile purchaser’s written complaint to the seller-dealership was sufficient notice under the act, where the purchaser’s letter was sent by certified mail more than 30 days before suit was filed.[35]

Massachusetts is another state that requires a written demand for relief to be delivered to the respondent at least 30 days prior to the filing of an action. The act sets a statutory minimum for damages at $25 per violation, or actual damages, whichever is greater, and a willful or knowing violation of the act imposes “up to three, but not less than two times such amount.”[36] In Porcaro v. O’Rourke, treble damages were affirmed where the court found that a contractor willfully failed to obtain a building permit and ordered his subcontractor to install windows that he knew were too small. The damages calculated were equal to the cost to replace the windows, but because the court found that the contractor acted intentionally (the trial court stated the contractor’s actions were “as egregious a violation of consumer protection laws as there can be”), the trebling of damages was justified.[37] The failure to comply with the act’s written demand requirements, however, prevents a plaintiff from recovering treble damages, regardless of the defendant’s intentional acts.[39]

Under Alabama’s similar precondition requirement, written demand must be communicated to the respondent 15 days prior to the filing of any action.[40] The respondent then has 15 days to respond to the demand with a written offer of settlement. The Alabama requirement is a baseline requisite, though, and is imposed for any recovery, including treble damages.

Conclusion
Although every state has an interest in protecting its consumers from unfair and deceptive trade practices, it is apparent that not all states go about protecting those interests in the same way. The differences in the statutory schemes can drastically affect the available remedies, particularly as they relate to treble damages. A careful review of the applicable state statutes and 
corresponding case law, however, offers guidance to parties on both sides of the unfair trade practices field.

_{Copyright © 2011, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).}