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.