Protecting Your Business From the Florida Deceptive and Unfair Trade Practices Act or Other Consumer Class Action Claims

An agreement to arbitrate, which contains a class action waiver, can be an effective tool to help prevent small or moderate consumer claims from becoming class action lawsuits.  Class consumer litigation, particularly that utilizing the Florida Deceptive and Unfair Trade Practices Act (hereinafter “FDUTPA”), has become en vogue over the last several years.  As these types of class claims become more popular, it is more important to properly protect your business with well drafted agreements.  It is also important to ensure that none of your agreements, if multiple agreements are necessary to complete a transaction, have conflicting terms.

FDUTPA is found in Chapter 501 of the Florida Statutes.  In general, FDUTPA makes “[u]nfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce…” actionable.  Fla. Stat. 501.204(1).  FDUTPA claims are often used by Plaintiff’s attorneys as the basis for class action lawsuits.

Plaintiff’s attorneys often utilize FDUTPA to target small charges they deem to be deceptive or deceptively ambiguous.  When these small charges makeup part of a regular consumer transaction a small FDUTPA claim can morph itself into a large class action lawsuit.  By way of example, Plaintiff’s counsel often target add on charges by automobile dealers, environmental fees by automobile repair shops, shipping fees on internet orders and various fees in the airline industry.  If any of these fees, or other fees, are mislabeled or deceptively labeled your business is at risk for a FDUTPA claim.  A FDUTPA claim from a customer can be distracting and costly because even a small successful FDUTPA claim entitles Plaintiff’s counsel to her attorney’s fees.  However, a class action claim seeking a refund for every customer charged the allegedly deceptive fee over a period of several years can be devastating for any size business.

The good news is that a properly drafted sales contract, which contains a valid arbitration clause and a valid class action waiver can be a significant deterrent for both individual and class FDUTPA claims.  McKenzie Check Advance of Florida, LLC v. Betts, 112 So.3d 1176 (Fla. 2013).  In McKenzie, the allegations included, but were not limited, to claims that the check cashing services were really loans which resulted in usurious and exorbitant rates. The Plaintiffs brought claims under FDUTPA, the Florida Consumers Finance Act and Florida Civil Remedies for Criminal Practices Act (FCRCPA).  Here, the Plaintiffs signed an arbitration agreement with a class action waiver each time they cashed a check.  Still, Plaintiffs’ counsel argued that the class action waiver within the arbitration clause was void because it effectively prohibited these Plaintiffs from obtaining competent counsel, which allegedly violated public policy. The trial judge agreed with this argument and a series of appeals followed.  Ultimately, the case made its way to the Florida Supreme Court.  The Florida Supreme Court held the class action waiver was enforceable because any argument that the class action waiver violated state law was preempted by the Federal Arbitration Act.  Id. at 1183 (“We do not reach the merits of this argument [void against public policy], because to the extent that Florida law would invalidate the class action waiver on this basis, the FAA preempts Florida law under the facts presented here.”) citing AT&T Mobility, LLC v. Conception, 131 S. Ct. 1740 (2011).

An agreement to arbitrate can be an effective tool in deterring individual small consumer claims because the agreements to arbitrate often require the consumer to fund expensive filing fees.  As demonstrated above, including an express class action waiver in the agreement to arbitrate can prevent class litigation of small consumer claims.  However, a business should periodically review their contracts to determine whether they effectively, particularly when multiple agreements are involved in one transaction, act to require arbitration and waive class action claims.  Recently, the First District Court of Appeal affirmed a lower Court’s decision finding there was no agreement to arbitrate a FDUTPA claim involving charges relating to tag and registration from the purchase of a vehicle.  HHH Motors, LLP v. Holt, 152 So.3d 745 (Fla. 1^st DCA 2014).  The Court came to this decision even though the purchaser signed a Retail Purchase Agreement (the “RPA”) that contained a valid arbitration clause with a class action waiver.  Unfortunately for the dealership, the purchaser, moments after signing the RPA, signed a Retail Installment Sales Contract (hereinafter the “RISC”) to finance the purchase of the vehicle.  The RISC contained a merger clause which stated: “This contract contains the entire agreement between you and us relating to this contract.  Any change to this contract must be in writing and we must sign it.”  The RISC did not contain an arbitration clause.  Ultimately, the First DCA held that whether a contract is entirely superseded by a subsequent contract is a matter of state law which is not preempted by the FAA.  It further held the merger clause was sufficient enough to render the arbitration agreement nugatory.

Protecting your business from these types of claims is a complex matter that requires specific advice from an experienced attorney.  It also requires a detailed analysis of the business.  However, often a provision in the agreement requiring arbitration that waives class action or collective claims will act to prevent costly class action litigation.  These types of agreements should be drafted by an experienced attorney after review of your business specific needs.  Having all customers sign an arbitration agreement with a class action waiver is one of the most cost effective tools to help prevent individual claims from becoming class action claims.