Senate File 178 - Introduced SENATE FILE BY COMMITTEE ON JUDICIARY (SUCCESSOR TO SSB 1037) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to a private cause of action for certain consumer 2 fraud violations. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1307SV 83 5 rh/rj/14 PAG LIN 1 1 Section 1. NEW SECTION. 714H.1 TITLE. 1 2 This chapter shall be known and may be cited as the 1 3 "Private Remedy for Consumer Fraud Act". 1 4 Sec. 2. NEW SECTION. 714H.2 DEFINITIONS. 1 5 1. "Advertisement" means the same as defined in section 1 6 714.16. 1 7 2. "Consumer" means a natural person or the person's legal 1 8 representative. 1 9 3. "Consumer merchandise" means merchandise offered for 1 10 sale or lease, or sold or leased, primarily for personal, 1 11 family, or household purposes. 1 12 4. "Deception" means the same as defined in section 1 13 714.16. 1 14 5. "Merchandise" means the same as defined in section 1 15 714.16 except that, for the purposes of this chapter, 1 16 "merchandise" does not include services offered or provided by 1 17 any of the following pursuant to a profession or business for 1 18 which they are licensed or registered: 1 19 a. Insurance companies subject to Title XIII. 1 20 b. Attorneys licensed to practice law in this state. 1 21 c. Financial institutions as defined in section 423.2, 1 22 subsection 6. 1 23 d. Public utilities as defined in section 476.1 that 1 24 furnish gas by a piped distribution system or electricity to 1 25 the public for compensation, when engaged in activities 1 26 subject to regulation by the utilities board pursuant to 1 27 chapter 476. 1 28 e. Persons or facilities licensed, certified, or 1 29 registered under chapter 135B, 135C, 135J, 148, 148A, 148B, 1 30 148C, 149, 151, 152, 152A, 152B, 153, 154, 154B, 154C, 154D, 1 31 155A, 169, 522B, 542, 542B, 544A, or 544B. 1 32 6. "Person" means the same as defined in section 714.16. 1 33 7. "Sale" means any sale or offer for sale of consumer 1 34 merchandise for cash or credit. 1 35 8. "Unfair practice" means the same as defined in section 2 1 714.16. 2 2 Sec. 3. NEW SECTION. 714H.3 PROHIBITED PRACTICES AND 2 3 ACTS. 2 4 1. A person shall not engage in an unfair practice, 2 5 deception, fraud, false pretense, false promise, or 2 6 misrepresentation, or the concealment, suppression, or 2 7 omission of a material fact with the intent that others rely 2 8 upon the concealment, suppression, or omission, in connection 2 9 with the advertisement, sale, or lease of consumer 2 10 merchandise, or the solicitation of contributions for 2 11 charitable purposes. For the purposes of this chapter, any 2 12 claimant alleging fraud, false promise, false pretense, or 2 13 misrepresentation must prove that the prohibited practice 2 14 related to a material fact or facts. 2 15 2. A person shall not engage in any practice or act that 2 16 is in violation of any of the following: 2 17 a. Section 321.69. 2 18 b. Chapter 516D. 2 19 c. Section 516E.5, 516E.9, or 516E.10. 2 20 d. Chapter 555A. 2 21 e. Section 714.16, subsection 2, paragraphs "b" through 2 22 "n". 2 23 f. Chapter 714A. 2 24 Sec. 4. NEW SECTION. 714H.4 EXCLUSIONS. 2 25 1. This chapter shall not apply to any of the following: 2 26 a. Advertising by a retailer for a product, other than a 2 27 drug or other product claiming to have a health=related 2 28 benefit or use, if the advertising is prepared by a supplier, 2 29 unless the retailer participated in the preparation of the 2 30 advertisement or knew or should have known that the 2 31 advertisement was deceptive, false, or misleading. 2 32 b. In connection with an advertisement that violates this 2 33 chapter, the newspaper, magazine, publication, or other print 2 34 media in which the advertisement appears, or the radio 2 35 station, television station, or other electronic media which 3 1 disseminates the advertisement if the newspaper, magazine, 3 2 publication, radio station, television station, or other print 3 3 or electronic media has no knowledge of the fraudulent intent, 3 4 design, or purpose of the advertiser at the time the 3 5 advertisement is accepted. 3 6 c. Any advertisement that complies with the statutes, 3 7 rules, and regulations of the federal trade commission. 3 8 d. The provision of local exchange carrier telephone 3 9 service pursuant to a certificate issued under section 476.29. 3 10 e. An affirmative act that violates this chapter but is 3 11 specifically required by, and is in strict conformance with, 3 12 other applicable law, to the extent that the actor could not 3 13 reasonably avoid a violation of this chapter. 3 14 2. "Material fact" as used in this chapter does not 3 15 include repairs of damage to or adjustments on or replacements 3 16 of parts with new parts of otherwise new merchandise if the 3 17 repairs, adjustments, or replacements are made to achieve 3 18 compliance with factory specifications and are made before 3 19 sale of the merchandise at retail and the actual cost of any 3 20 labor and parts charged to or performed by a retailer for any 3 21 such repairs, adjustments, and parts does not exceed three 3 22 hundred dollars or ten percent of the actual cost to a 3 23 retailer including freight of the merchandise, whichever is 3 24 less, providing that the seller posts in a conspicuous place 3 25 notice that repairs, adjustments, or replacements will be 3 26 disclosed upon request. The exclusion provided in this 3 27 subsection does not apply to the concealment, suppression, or 3 28 omission of a material fact if the purchaser requests 3 29 disclosure of any repair, adjustment, or replacement. 3 30 Sec. 5. NEW SECTION. 714H.5 PRIVATE CAUSE OF ACTION. 3 31 1. A consumer who suffers damage or injury as the result 3 32 of a prohibited practice or act in violation of this chapter 3 33 may bring an action at law to recover actual damages. The 3 34 court may order such equitable relief as it deems necessary to 3 35 protect the public from further violations, including 4 1 temporary and permanent injunctive relief. 4 2 2. If the court finds that a person has violated this 4 3 chapter, the court shall award to the consumer the costs of 4 4 the action and to the consumer's attorney reasonable fees. 4 5 Reasonable attorney fees shall be determined by the value of 4 6 the time reasonably expended by the attorney including but not 4 7 limited to consideration of the following factors: 4 8 a. The time and labor required. 4 9 b. The novelty and difficulty of the issues in the case. 4 10 c. The skills required to perform the legal services 4 11 properly. 4 12 d. The preclusion of other employment by the attorney due 4 13 to the attorney's acceptance of the case. 4 14 e. The customary fee. 4 15 f. Whether the fee is fixed or contingent. 4 16 g. The time limitations imposed by the client or the 4 17 circumstances of the case. 4 18 h. The amount of money involved in the case and the 4 19 results obtained. 4 20 i. The experience, reputation, and ability of the 4 21 attorney. 4 22 j. The undesirability of the case. 4 23 k. The nature and length of the professional relationship 4 24 between the attorney and the client. 4 25 l. Damage awards in similar cases. 4 26 3. In order to recover damages, a claim under this section 4 27 shall be proved by a preponderance of the evidence. 4 28 4. If the finder of fact finds by a preponderance of 4 29 clear, convincing, and satisfactory evidence that a prohibited 4 30 practice or act in violation of this chapter constitutes 4 31 willful and wanton disregard for the rights or safety of 4 32 another, in addition to an award of actual damages, statutory 4 33 damages up to three times the amount of actual damages may be 4 34 awarded to a prevailing consumer. 4 35 5. An action pursuant to this chapter must be brought 5 1 within five years of the occurrence of the last event giving 5 2 rise to the cause of action under this chapter or within five 5 3 years of the discovery of the violation of this chapter by the 5 4 person bringing the action, whichever is later. 5 5 6. This section shall not affect a consumer's right to 5 6 seek relief under any other theory of law. 5 7 Sec. 6. NEW SECTION. 714H.6 ATTORNEY GENERAL 5 8 NOTIFICATION. 5 9 1. A party filing a petition, counterclaim, 5 10 cross=petition, or pleading in intervention alleging a 5 11 violation under this chapter, within seven days following the 5 12 date of filing such pleading, shall provide a copy to the 5 13 attorney general and, within seven days following entry of any 5 14 final judgment in the action, shall provide a copy of the 5 15 judgment to the attorney general. This subsection shall not 5 16 apply to small claims actions, except as provided in 5 17 subsection 2. 5 18 2. A party appealing to district court a small claims 5 19 order or judgment involving an issue raised under this 5 20 chapter, within seven days of providing notice of the appeal, 5 21 shall notify the attorney general in writing and provide a 5 22 copy of the pleading raising the issue and a copy of the small 5 23 claims court order or judgment. 5 24 3. A party appealing an order or judgment involving an 5 25 issue raised under this chapter, within seven days following 5 26 the date such notice of appeal is filed with the court, shall 5 27 notify the attorney general in writing and provide a copy of 5 28 the pleading raising the issue and a copy of the court order 5 29 or judgment being appealed. 5 30 4. Upon timely application to the court in which an action 5 31 involving an issue raised under this chapter is pending, the 5 32 attorney general may intervene as a party at any time or may 5 33 be heard at any time. The attorney general's failure to 5 34 intervene shall not preclude the attorney general from 5 35 bringing a separate enforcement action. 6 1 5. All copies of pleadings, orders, judgments, and notices 6 2 required by this section to be sent to the attorney general 6 3 shall be sent by certified mail unless the attorney general 6 4 has previously been provided such copies of pleadings, orders, 6 5 judgments, or notices in the same action by certified mail, in 6 6 which case subsequent mailings may be made by regular mail. 6 7 Failure to provide the required mailings to the attorney 6 8 general shall not be grounds for dismissal of an action under 6 9 this chapter, but shall be grounds for a subsequent action by 6 10 the attorney general to vacate or modify the judgment. 6 11 EXPLANATION 6 12 This bill creates a private remedy for certain consumer 6 13 fraud Act violations. 6 14 The bill creates a private cause of action for consumer 6 15 fraud violations. The bill provides that a consumer who 6 16 suffers damage or injury as a result of a prohibited practice 6 17 or act declared to violate the bill may bring an action at law 6 18 to recover actual damages, and may seek court protection from 6 19 further violations, including temporary and permanent 6 20 injunctive relief. In addition, a prevailing consumer in such 6 21 an action shall be awarded costs and reasonable attorney fees 6 22 to be determined by the value of time reasonably expended by 6 23 the attorney including but not limited to certain factors as 6 24 specified in the bill. In addition, if the finder of fact 6 25 finds by a preponderance of clear, convincing, and 6 26 satisfactory evidence, that a prohibited practice or act in 6 27 violation of the bill constitutes willful and wanton disregard 6 28 for the rights or safety of another, in addition to an award 6 29 of actual damages, statutory damages up to three times the 6 30 amount of actual damages may be awarded to a prevailing 6 31 consumer. 6 32 The bill defines a prohibited practice or act to include an 6 33 unfair practice, deception, fraud, false pretense, false 6 34 promise, or misrepresentation, or the concealment, 6 35 suppression, or omission of a material fact with the intent 7 1 that others rely on the concealment, suppression, or omission, 7 2 in connection with the advertisement, sale, or lease of 7 3 consumer merchandise, or the solicitation of contributions for 7 4 charitable purposes. For the purposes of the bill, any 7 5 claimant alleging fraud, false promise, false pretense, or 7 6 misrepresentation must prove that the prohibited practice 7 7 related to a material fact or facts. "Merchandise" does not 7 8 include service offered or provided by certain insurance 7 9 companies, attorneys, financial institutions, public 7 10 utilities, hospitals, health care facilities, hospice 7 11 programs, physicians and surgeons, osteopathic physicians and 7 12 surgeons, physical therapists, occupational therapists, 7 13 physician assistants, podiatrists, chiropractors, nurses, 7 14 dieticians, respiratory care practitioners and therapists, 7 15 dentists, optometrists, psychologists, social workers, 7 16 behavioral therapists, pharmacists, veterinarians, insurance 7 17 producers, public accountants, engineers, architects, and 7 18 landscape architects. 7 19 The bill does not apply to certain advertising by a 7 20 retailer for a product unless the retailer participated in the 7 21 preparation of the advertisement or knew or should have known 7 22 that the advertisement was deceptive or misleading, print 7 23 media in which the advertisement appears or electronic media 7 24 which disseminates the advertisement if the print or 7 25 electronic media has no knowledge of the fraudulent intent, 7 26 design, or purpose of the advertiser at the time the 7 27 advertisement is accepted, any advertisement that complies 7 28 with the statutes, rules, and regulations of the federal trade 7 29 commission, the provision of certain local exchange carrier 7 30 telephone services, and an affirmative act that is in 7 31 violation of the bill but that is specifically required by and 7 32 is in strict conformance with other applicable law, to the 7 33 extent the actor could not reasonably avoid a violation of the 7 34 bill. 7 35 The bill authorizes the attorney general to oversee private 8 1 consumer fraud actions, including small claims court actions, 8 2 by requiring a party filing a petition, counterclaim, 8 3 cross=petition, or pleading in intervention alleging a 8 4 violation under the bill to provide a copy of the relevant 8 5 documents, including judgments and notices of appeal, to the 8 6 attorney general. In addition, the attorney general may 8 7 intervene as a party in a private consumer fraud action at any 8 8 time, or may be heard in such an action at any time. 8 9 The bill provides that failure to provide all mailings of 8 10 petitions, orders, judgments, and notices of appeal to the 8 11 attorney general shall not be grounds for dismissal, but shall 8 12 be grounds for a subsequent action by the attorney general to 8 13 vacate or modify the judgment. 8 14 LSB 1307SV 83 8 15 rh/rj/14