Construction Law Watch

Oregon courts struggle with the scope of consumer protection under the Unlawful Trade Practices Act

Posted in Condominium, Construction Claims, Consumer Protection, Unlawful Trade Practices Act, UTPA

It is an all too familiar scenario: A condominium association (“COA”) sues a manufacturer of allegedly defective products used in the construction of the condominium. The COA alleges, among other claims, an Unlawful Trade Practices Act (“UTPA”) claim. The manufacturer–defendant seeks to dismiss the UTPA claim, arguing the UTPA, as a consumer protection statute, does not apply because neither the COA nor its members are “consumers” of the defective product, which was manufactured by the defendant, distributed by a third–party, and installed by a contractor. According to the manufacturer–defendant, this is a commercial transaction outside the UTPA. The COA argues its members are “consumers” because they purchased their units containing the defective product. Whether the UTPA requires plaintiffs to have some transactional relationship with the defendant to qualify as a “consumer” is currently unsettled in Oregon.

In the federal district courts, the judges are nearly uniform in their opinion that the UTPA requires plaintiff to have some transactional relationship with the defendant to qualify as “consumers” under the UTPA. See, e.g., Avenue Lofts Condominiums Owners’ Association v. Victaulic Company, No. 3:13–CV–01066–BR, __ F.Supp.2d __, 2014 WL 2567179 (D. Or. June 6, 2014) (ruling that “Plaintiff here has not established it is a consumer of Defendant’s products under the UTPA” in part because “neither Plaintiff nor the Owners contracted with Defendant for the plumbing parts at issue” concluding “the purchase of Defendant’s components by [the subcontractor] was a commercial transaction rather than a consumer transaction and the UTPA, therefore, does not apply to Plaintiff’s claim”).

State courts appear to take a more expansive view, ruling that foreseeable downstream users of products may be “consumers” protected by the UTPA, regardless of any transactional relationship with the defendant. Elizabeth Lofts Condominiums Owners’ Association v. Victaulic Company, Case No. 1206-07826, Order Denying Victaulic’s Motions for Partial Summary Judgment (Mult. Co. Cir. Ct., Sept. 14, 2012) (denying defendant’s argument that the UTPA does not apply to the components at issue because the plaintiff did not purchase the defective component directly from the defendant).

There are no Oregon appellate court decisions directly on point that decide this question.

Oregon’s UTPA is widely regarded as one of the most innovative consumer protection programs in the country. It provides a person with a remedy for unconscionable, deceptive, or unfair acts committed by another. The law applies whenever a person acquires real estate, goods or services for personal or household use from a seller who regularly engages in that business or occupation. The law itself is silent as to whether it protects only consumers. Rather, it provides that “any person who suffers any ascertainable loss of money or property, real or personal, as a result of willful use or employment by another person of a method, act or practice declared unlawful * * * may bring an individual action.” ORS 646.638 (emphasis added). While courts have uniformly applied the UTPA to protect “consumers” only, the plaintiff’s bar would argue that an expansive definition of “consumer” to include foreseeable downstream users of a defective product – particularly those actually harmed by the unlawful act regarding that product – furthers the purpose of the UTPA: to protect the people of Oregon from deceptive trade practices. Accord, Raudebaugh v. Action Pest Control, Inc., 59 Or. App. 166, 171 (1982) (concluding “[t]here is no requirement that the representations which constitute a willful violation of the [UTPA] be made to the injured consumer”), Wright v. Kia Motors America Inc., Case No. Civ. 06-6212-AA, 2007 WL 316351, *3 (D. Or. Jan. 29, 2007) (rejecting argument that the plaintiff’s UTPA claim failed because defendant “was not ‘contemporaneously’ involved in plaintiff’s car purchase, did not sell the car directly to plaintiff, and therefore did not make any representations directly to plaintiff”).

And an expansive definition of “consumer” benefits condominium developers, frequently caught in the middle of the dispute between the COA and the manufacturer. A developer faced with the full brunt of liability to the COA for the manufacturer’s defective product may try to recover some of its losses against the manufacturer. But it will never recoup the full expense of the manufacturer’s defective product. Permitting a COA to assert UTPA claims against the manufacturer directly (including the related exposure to the COA’s attorneys’ fees) transfers the full risk of the defective product onto the entity in the best position to correct the defect, the manufacturer. While the COA may have viable negligence claims against the manufacturer, exposure to attorneys’ fees under the UTPA incentivizes the manufacturer to correct the defect.

Until the Oregon appellate courts decide this issue, the answer to whether a COA and its members are “consumers” of the products used in their units – and therefore protected by the UTPA – may depend on whether the question is presented in state or federal court. If you believe you may have a potential UTPA claim, or are facing a potential UTPA issue, you should consult with experienced counsel.

Oregon Policyholders Get Big Win in Decision Today

Posted in Construction Claims, Construction Defect, Construction Defect Repairs, Construction Dispute, Insurance Coverage, Oregon Construction Cases, Oregon Court of Appeals

Today the Oregon Court of Appeals handed down a lengthy opinion upholding a money judgment awarded in favor of a judgment creditor in its garnishment action against American Family Insurance Company.  Read about it and get the decision on Ball Janik’s Policyholder Report.

3 Open Questions About Construction Claims and Oregon Law

Posted in Construction Dispute, Contract Clause, Oregon Construction Cases, Oregon Court of Appeals, Oregon Supreme Court, Statute of Limitations, Statute of Repose

Leave it to Oregon. We proudly possess some of the most confusing statutes of limitation and repose anywhere, especially as they relate to construction claims. We always have interesting questions that linger unanswered for years or even decades before finding resolution by case law or statute. Even when we get answers, those answers always seem to raise more questions. Three current questions warrant brief discussion.

1.      What is the statute of limitations for negligent injury to real property?  Continue Reading

Before you build, know your restrictions!

Posted in CC&Rs, Homeowners Association

Oregon subdivisions often have Declarations of Covenants, Conditions, and Restrictions (“CC&Rs”) with varying degrees of restrictions on the characteristics of homes to be built there. For example, some CC&Rs restrict how tall homes can be to protect views of all of the homes in the neighborhood, or may specify certain materials for roofing or siding, to keep a consistent aesthetic in the community. Other CC&Rs require levels of upkeep on homes and give the HOA the power to fine owners that do not comply. It is important that prospective purchasers and owners in communities governed by CC&Rs know the restrictions in order to avoid potentially costly disputes. Continue Reading

LEED v4: Contracts must integrate ongoing performance requirements

Posted in Construction Contracts, LEED v4, Living Building Challenge

Construction contracts must address ongoing building performance under LEED v4 and The Living Building Challenge.

For new, progressive green building development, owners, designers and contractors ought to consider making sure that their contracts accurately reflect the demands of LEED v4, which is already available for projects and will become mandatory next year by the U.S. Green Building Council. The standard, developed by the U.S. Green Building Council, continues to evolve toward the more aggressive Living Building Challenge, administered by the Cascadia Green Building Council. In two important respects, LEED v4 adopts concepts which will require careful coordination among project participants. Continue Reading

Choice of Law in an Oregon project? Not in THIS House!

Posted in Choice of law, Construction Claims, Construction Defect, Construction Dispute, Contract Clause, Uncategorized

If you look through the general conditions (or back page provisions) of your standard construction contract, you might be surprised to see a “choice of law” provision.  This provision is a term in the contract that states that the law of another jurisdiction applies to disputes arising from the work performed or obligations incurred under the construction contract.  For example, a construction contract for a house being built in Portland, Oregon could contain a provision that in the event of a dispute between the owner and builder, Washington law will apply.  A choice of law provision may be included for a variety reasons such as an out-of-state contractor, or an out-of-state  developer, the parties’ use of an unreviewed, standard form contract, or more favorable laws for the drafting partyin other jurisdictions.  Whatever the reason, for projects built in Oregon, cherry-picking Continue Reading

Oregon’s Construction Contractor Board Changes Dispute Resolution Process

Posted in Arbitration, Construction Claims, Construction Contractors Board, Construction Defect, Construction Dispute, Oregon Construction Cases, Uncategorized

The Bulletin in Bend, Oregon, reports on the benefits and limitations of the Construction Contractors Board’s dispute resolution process in the article, “More construction disputes could go to court.  State no longer resolves complaints through arbitration” by  Joseph Ditzler / The Bulletin, published June 27, 2014.  Read it online at the Bend Bulletin here.

 

Learning to Let Go: How Adverse Domination Tolls the Statute of Limitations for Construction Defect Cases

Posted in Construction Defect, Homeowners Association, Oregon Construction Cases
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Developers often maintain control of homeowners associations for years after construction is complete, partly in order to ensure that the warranty process runs smoothly.  However, it can also unintentionally create long-term problems for the association and the developer. For example, in a recent Washington Court of Appeals decision, a developer’s continued control of the association concealed construction problems from the owners and ultimately ended up exposing the developer/general contractor to liability years after the statute of limitations would have otherwise run.  A copy of the Alexander v. Sanford opinion is here: http://www.courts.wa.gov/opinions/pdf/696378.pdf. Continue Reading