Arkansas has taken a big step toward creating a more business-friendly climate by amending the Arkansas Deceptive Trade Practices Act (ADTPA).
The ADTPA was originally enacted in 1971 to give the state Attorney General a way to sue companies that engaged in false and misleading advertising and other deceptive trade practices. The law did not allow a private citizen to sue under the ADTPA until 1999 when the legislature amended the law to state that “any person who suffers actual damage or injury as a result of” a deceptive trade practice can bring a lawsuit.
Since that time, the ADPTA has become a go-to claim in lawsuits against companies doing business in Arkansas and these claims are often brought as a class action, on behalf of other, unnamed citizens.
On April 7, 2017, Governor Hutchinson signed Act 986 into law, which changes the ADTPA in three important ways. To explain these changes, the following hypothetical example may be useful. All Natural Food Co. markets and sells food products, including pita chips, in Arkansas grocery stores. The packaging states that the chips are “All natural and 100% organic.” Various consumers purchase the pita chips, and later determine that they are not 100% organic.
First, the new law clarifies that you cannot sue a company for an alleged unfair trade practice without proving that you suffered an actual financial loss. “Actual financial loss” means “an ascertainable amount of money that is equal to the difference between the amount paid by a person for goods or services and the actual market value of the goods or services provided to that person.”
Under the old law, a person had to prove an “actual damage or injury.” The new language is important because it makes clear that there must be a difference in the money value of the product as marketed and as it was actually sold. It is not enough for a consumer to argue that the product is not as it was marketed, if its money value is the same.
Using the above example, if the value of 100% organic pita chips was $5.00 per bag, and the value of the chips All Natural Food Co. sold was $4.50, an individual could bring suit under the ADTPA. But the damages would be limited to 50 cents.
Second, it requires a Plaintiff to have relied on the deceptive trade practice to recover any damages. The Arkansas Supreme Court had not yet addressed whether reliance was required under the old law, but now it clearly is. Here’s how this works. A consumer could only sue All Natural Food Co. under the ADTPA if she bought the pita chips because she believed they were 100% organic. If she bought them because she liked the way they tasted better than others, and was unconcerned with whether they were 100% organic, she would not have a claim.
Third, with one exception, private class actions are no longer permitted under the ADPTA. This is a sea change in Arkansas because it means that consumers can only sue under the ADTPA for their own actual financial loss and cannot do so on behalf of a similarly situated class of people. A person with a valid claim against All Natural Food Co. could sue under the ADTPA, but not on behalf of the other Arkansans who purchased the pita chips. However, the Attorney General retains the right to bring a lawsuit on behalf of all Arkansans under the ADTPA.
It remains to be seen how Arkansas courts will interpret this new language, and, if history is any guide, there may be constitutional challenges to the new law. In the meantime, it limits private ADTPA claims to cases in which individuals were financially harmed because they relied on unfair trade practices.
These are reasonable changes that give a remedy to those who have been harmed by deceptive trade practices, while limiting unnecessary and expensive litigation on behalf of large groups of people, many of whom may not have suffered any actual injury.
Editor’s note: Megan Hargraves is an attorney with Little Rock-based Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. The opinions expressed are those of the author.