Monday, January 31, 2011

Colorado Senate Bill 11-68 Proposes Unwarranted Changes to the Colorado Consumer Protection Act

Sen. Morgan Carroll (D-Arapahoe) and Rep. Judy Solano (D-Adams) introduced SB 11-68, titled “Concerning an Increase in Consumer Protection under the ‘Colorado Consumer Protection Act ("CCPA").’” However, enacting SB 11-068 would offer no real additional protections to consumers in legitimate deceptive practice cases, cloud existing law, and make defending against baseless CCPA claims more onerous and costly.

The CCPA is found at C.R.S. § 6-1-101, et seq. C.R.S. §6-1-105 (1)(a) through (ccc) offers over forty examples of what may constitute a deceptive trade practice. The list includes deceptive practices that are very general, for example: “(g) represent[ing] 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;” and those that are more specific, for example: “(vv) violat[ion of] section 12-55-110.3, C.R.S.” (regarding posting legal notices required of a notary). Not all of the violations include a “knowing” or intent element. Subsection (3) further provides: “The deceptive trade practices listed in this section are in addition to and do not limit the types of unfair trade practices actionable at common law or under other statutes of this state.”

The CCPA establishes civil penalties (C.R.S. § 6-1-112 provides a penalty of $2,000 for each violation), and criminal penalties (C.R.S. § 6-1-114 makes first violations a class 1 misdemeanor). Most significantly, in private actions C.R.S. § 6-1-113 provides for treble damages plus attorney fees.

To prove a cause of action under the CCPA, a plaintiff must show: (1) that the defendant engaged in an unfair or deceptive trade practice; (2) that the challenged practice occurred in the course of defendant’s business, vocation, or occupation; (3) that it significantly impacts the public as actual or potential consumers of the defendant’s goods, services, or property; (4) that the plaintiff suffered injury in fact to a legally protected interest; and (5) that the challenged practice caused the plaintiff’s injury. Crowe v. Tull, 126 P.3d 196, 201 (Colo. 2006) (citing Rhino Linings USA, Inc. v. Rocky Mountain Rhino Lining, Inc., 62 P.3d 142, 146-47 (Colo. 2003)). In Rhino Linings, the Colorado Supreme Court reviewed the following factors to determine whether the challenged practice significantly impacts the public:
(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.
The CCPA and its treble damages provision is distinct from other contract causes of actions, as well as misrepresentation and fraud actions, because of the harm of a deceptive trade practice to not just a party to a transaction, but to the public at large. Therefore, the CCPA requires a plaintiff to show that a deceptive trade practice significantly impacts the public.

SB 11-68 has two components: 1) to permit the Attorney General to identify additional acts that constitute deceptive trade practices; and 2) to remove a requirement that plaintiffs show that a challenged practice significantly impacts the public. The first component of SB 11-68 unnecessarily provides authority to the Attorney General to amend the extensive list of what constitutes a deceptive trade practice already provided by statute and case law. The second component of SB 11-68 would add the following provision to the CCPA:
The bill summary describes the purpose of the new provision as:
Although not required by statute, case law interpreting the act has resulted in a requirement that plaintiffs separately establish that a defendant's challenged practice caused a significant public impact. In order to eliminate this additional burden on consumers, section 2 creates a rebuttable presumption that a significant public impact has occurred when a plaintiff offers evidence that a defendant engaged in a deceptive trade practice.
The long established requirement for a plaintiff to show a significant public impact is not an “additional burden on consumers” as the bill proponents argue, but one of the elements that differentiates a CCPA cause of action from other available causes of action such as misrepresentation or simply breach of contract. In Rhino Linings, the Colorado Supreme Court provided the following brief history behind the CCPA:
The CCPA was enacted to regulate commercial activities and practices which, “because of their nature, may prove injurious, offensive, or dangerous to the public.” . . . The CCPA deters and punishes businesses which commit deceptive practices in their dealings with the public by providing prompt, economical, and readily available remedies against consumer fraud.
Id. at 146 (citations omitted).

Several reported cases in Colorado arose from disputes where the plaintiff attempted to improperly broaden the litigation to assert CCPA claims, but where the public was not significantly impacted by the disputed transaction. The two cases cited below provide examples of construction disputes where plaintiffs recovered some damages on other grounds, but not CCPA treble damages due to a lack of public impact.

Where a defendant did not disclose that beneath the land sold to plaintiff existed the remains of a concrete swimming pool, the court found that the deceptive act was limited to a single transaction. Anson v. Trujillo, 56 P.3d 114, 118 (Colo. App. 2002). Though the defendant’s conduct was found to have involved misrepresentations or concealment in the deal, the court dismissed the CCPA claim, stating that the misrepresentation itself “was not advertised or otherwise presented to the public in an effort to induce sales.” Id.

In Wheeler v. T.L. Roofing, Inc., 74 P.3d 499 (Colo. App. 2003), a building owner hired the defendant to install a new roof, and thereafter claimed the roof leaked and sued for deceptive trade practices among other causes of action. The Colorado Court of Appeals upheld the trial court’s dismissal of the CCPA claim, which included an award of attorney fees to the defendant, based upon the plaintiff filing a frivolous and groundless claim, holding the plaintiff “did not allege, nor is there any showing in any factual material submitted by the parties that the alleged conduct of [defendant] significantly impacted the public as an actual or potential consumer.” Id. at 506.

This firm has successfully defended general contractors and developers in cases where plaintiffs have brought dubious CCPA claims where an underlying, disputed transaction had no public impact whatsoever. The potential for treble damages was too much for plaintiffs and their counsel to pass up, adding meritless CCPA claims to broaden their contract disputes into punitive actions. SB 11-068 would only increase the frequency of such unsupported claims. Shifting the burden to defendants to prove that a disputed transaction lacks public impact would not increase any protections for consumers with legitimate CCPA claims.

If you would like more information regarding SB 11-68, or the defense of CCPA claims, please contact Bret Cogdill at (303) 653-0046 or by e-mail at

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The information contained in this blog is provided for informational purposes only. It is not legal advice and should not be construed as providing legal advice on any subject matter.