Randy Barnhart

Colorado Consumer Protection Act - Update

Know your rights! Two recent cases from the Colorado appellate courts elaborate Colorado's Consumer Protection Act.

The 2 cases are deceptive “advertising” cases, not deceptive “services” cases. Even if an ad is deceptive, consumers are not necessarily deceived by it.  But is a deceptive service deceptive per se?

For example, a deceptive service by a car dealer and/or its associated auto manufacturer? And how is the necessary "public impact" component shown?

In Gen. Steel Domestic Sales, LLC v. Hogan & Hartson, LLP, 230 P.3d 1275, 1279 (Colo. App. 2010), the court addressed the "CCPA’s Public Impact Element":

A claim brought pursuant to the CCPA must allege, inter alia, that the defendant’s actions have a significant impact upon the public. Hall v. Walter, 969 P.2d 224, 234 (Colo.1998). To adequately make this allegation, plaintiffs’ complaint must meet the low burden of setting forth facts that, if proved, could establish a public impact “upon any theory of the law.” Rosenthal v. Dean Witter Reynolds, Inc., 908 P.2d 1095, 1100 (Colo.1995)(quoting Hinsey v. Jones, 159 Colo. 326, 329, 411 P.2d 242, 244 (1966)) (emphasis omitted).

Thus, we must evaluate whether the facts, as presented by plaintiffs and taken in the light most favorable to them, could establish the requisite public impact element. Factors relevant to this evaluation include “the number of consumers directly affected by the challenged practice”; “the relative sophistication and bargaining power of the consumers affected by the challenged practice”; and “evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so.” Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 149 (Colo. 2003)(citing Martinez v. Lewis, 969 P.2d 213, 222 (Colo.1998)).”The Gen. Steel court noted that “Plaintiffs did not allege that they were unsophisticated in relation to Hogan & Hartson, or that they lacked bargaining power when the parties negotiated their representation agreement.”

The following case, citing Walter and reiterating the Rhino factors cited in Gen. Steel, has a better, direct quote from Walter:

“To obtain relief under the CCPA, a claimant must prove, inter alia, that an unfair or deceptive trade practice ‘significantly impact[s] the public as actual or potential consumers.” Hall v. Walter, 969 P.2d 224, 234 (Colo.1998). Three factors must be considered in determining  public  impact:

(1) The number of consumers directly affected by the challenged practice, (2) the relative sophistication and bargaining power of the consumers affected by the challenged practice, and (3) evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so in the future. Rhino Linings, 62 P.3d at 149.”

So, to suggest an answer to the question posed above, the quote from Walter can be used to construe the Rhino factors, especially the first Rhino factor, as follows: allege that the “number of consumers directly affected” by the dealership's deceptive practice are “potential consumers” of the dealership’s deceptive service, that is, the dealership's future customer-owners.

Does that make sense?

Long-arm Jurisdiction and E-mail Contacts

With co-counsel in Colorado and California, a major action against Ford Motor Co, among other defendants, has been filed in Alameda County, for personal injury and death caused by the defective 15-passenger van manufactured by Ford.

Ford's "nerve center" is in Michigan, where it has its headquarters, so the California trial court has to be satisfied that it can exercise jurisdiction over Ford. It can. There is no question that Ford has the required "minimum contacts" with California and its residents. As to other defendants, the jurisdictional issue may be litigated (via motions to dismiss, etc.), and so the recent opinion by the Colorado Supreme Court, The Foundation for Knowledge in Development v. Interactive Design Consultants, may be relevant.

When a plaintiff in one state, say California or Colorado, files suit against a nonresident defendant, she must satisfy both the state's long-arm statute and constitutional due process. "Colorado’s long-arm statute," for example," extends jurisdiction to the maximum extent allowed by the due process requirements of the [US] Constitution."

"With respect to tort claims," the Colorado court has “previously indicated that negligent conduct in a foreign state which causes injury in Colorado may be deemed an act committed within Colorado for purposes of the long-arm statute.”

The Colorado court noted the standard requirement that a defendant have “certain minimum contacts with the forum state such that maintenance of the suit does not offend traditional notions of fair play and substantial justice.” The analysis typically parses the exercise of personal jurisdiction between general or specific jurisdiction.

“A court has general jurisdiction over a defendant if the defendant conducted continuous and systematic activities that are of a general business nature in the forum state.” This is why the California court in Alameda County has jurisdiction over Ford in the suit over the defective 15-passenger van.

"A court has specific jurisdiction over a defendant if the “injuries triggering the litigation arise out of and are related to activities that are significant and purposefully directed by the defendant at the residents of the forum state.” This is why the California court in Alameda County should have jurisdiction over some of the other defendants in the suit.

The usual test is whether "the alleged injury arises out of and is related to 'activities that are significant and purposefully directed by the defendant at residents of the forum.'" This is where the Colorado Supreme Court's opinion covers some new ground, new because the economy is rapidly becoming the internet economy.

The evidence for jurisdiction in the Colorado case included negotiations, which culminated in a contract, "conducted by email ... communications originating in Colorado."

Does that mean that the first email contact with the non-resident defendant originated in Colorado? If the defendant sent the first e-mail, what result? Often, e-mail communications are a long series of emails on account of the parties hitting the "reply" button rather than initiating a new e-mail. After a while, the "origin" of the e-mail communications might be disputed.  What do you think?

The Colorado case involved not only breach of contract, but the tort of misrepresentation. In tort cases, the tort, "in itself, creates a sufficient nexus between a defendant and the forum state that satisfies the due process inquiry and establishes specific jurisdiction." For those cases, "there is no need for further minimum contacts analysis because the defendant is so connected with the forum state that traditional notions of fair play and substantial justice are not offended by the forum state’s exercise of personal jurisdiction over the defendant.”

The plaintiff in the Colorado case alleged that the "misrepresentations occurred by ... email conversations exchanged between Rhode Island and Colorado." But the Colorado court's opinion then noted that the defendant in Rhode Island "certainly understood that his communications with [the plaintiff] would be received in Colorado." So, for the contract claim, the e-mail communications must originate in Colorado while for the tort claim the e-mail communications must be received in Colorado.  Is that right?

Finally, the Colorado Supreme Court addressed the "reasonableness" of hauling the Rhode Island defendant into a Colorado court. The test for that involves: "(1) the burden on the defendant; (2) the forum state’s interest in resolving the controversy; and (3) the plaintiff’s interest in attaining effective and convenient relief."

As for the first factor, the opinion found that "much of the evidence is presumably electronic, thereby mitigating the burden of gathering and presenting this evidence in Colorado." Presumably, producing old-fashioned snail mail--you know, paper, typewriters or printers, envelops and licking stamps--might be too burdensome, but not e-mail.

Funny, isn't it, the plaintiff presumably also has all those e-mails too! If so, there is no burden on the defendant at all, for what plaintiff wouldn't produce the e-mails which could prove her case!

Click here for the court's opinion.