Corporate & Securities Law

Searle Center Preliminary Report on State Consumer Protection Acts

The Searle Center Civil Justice Institute has announced the release of its preliminary report on State Consumer Protection Acts: An Empirical Investigation of Private Litigation.   You can read the Executive Summary here.  As the Searle Center State Consumer Protection Acts Task Force Chair, I’ve been involved in the data collection, analysis, and drafting of this project over the last couple of years along with the rest of the Task Force  (the Searle Center’s Executive Director Henry Butler, Jason Johnston (Penn), Jeffrey Jarosh, and Samantha Zyontz) and really is the product of a team effort including the Task Force, Searle Center research assistants (Micah Hughes, Jonathan Hillel, Matthew Sibery, Hayley Smith, and Judd Stone) and Research Coordinator Elise Nelson.   I’m incredibly grateful to have worked with such a skilled group.  This preliminary report is the first research project released growing out of a larger research agenda on state consumer protection regulation.  Some exciting projects are to follow.   Stay tuned.  For now, here are a few of the report’s key findings (consult the report for greater detail):

• Litigation under CPAs has increased dramatically since 2000: Between 2000 and 2007 the number of CPA decisions reported in federal district and state appellate courts increased by 119%. This large increase in CPA litigation far exceeds increases in tort litigation as well as overall litigation during the same period.

• Vague statutory definitions of prohibited conduct are a major driver of CPA litigation: Whether a CPA statute has vague language prohibiting some general type of conduct rather than a specific list of illegal actions is an important potential contributor to the level of CPA litigation in the state. States with vague definitions of prohibited conduct have more CPA litigation.

• CPAs are becoming more favorable and generous to consumer litigants: Between 1995 and 2007, the expected value of recovery for potential plaintiffs increased dramatically as measured by CPA requirements to bring a cause of action and available remedies. In 2004, the state CPAs that were the most favorable to plaintiffs were New Hampshire, Massachusetts, and Connecticut. The states with CPAs that were the least favorable to plaintiffs were Colorado, Maryland, and Georgia.

• States with CPAs that are more favorable to consumers have more CPA litigation: The expected value of recovery under a given state?s CPA appears to contribute to the amount of litigation that makes use of the act. States that allow more generous remedies and make it easier for consumers to win in court see more CPA litigation.

• Most CPA claims would not constitute illegal conduct under FTC consumer protection standards. The Searle Shadow FTC found that 78% of a sample of CPA claims would not constitute legally unfair or deceptive conduct under FTC policy statements. While relatively few CPA claims would constitute illegal conduct under the FTC standard (22%), even fewer (12%) would result in FTC enforcement.

• Almost 40% of CPA claims where the consumer plaintiff prevailed at trial would not constitute illegal conduct under FTC consumer protection standards: In a sample of CPA claims where the consumer plaintiff prevailed in court, the Searle Shadow FTC found that 38% of these successful claims would not constitute illegal conduct under the FTC standard. Although most of these successful cases would meet the FTC illegality standards, only 23% would likely be enforced by the FTC.

Full post as published by Truth on the Market on December 11, 2009 (boomark / email).