Consumer Fraud

“As to relief against fraud, no invariable rules can be established, Fraud is infinite; and were a Court of equity once to lay down rules, how far they would go, and no farther, in extending their relief against it, or to define strictly the species or evidence of it, the jurisdiction would be cramped and perpetually eluded by new schemes, which the fertility of man’s invention would contrive.”

– Letter from Lord Hardwicke to Lord Kaims (1759)

At common law (i.e., the “unwritten law,” laid down by judges as opposed to legislatures), the elements of fraud are: (1) a misrepresentation concerning a material fact, (i.e., a fact that would cause a reasonable person to behave differently with respect to a transaction), or a failure to disclose a material fact which the defendant had a duty to disclose (generally because it was known only to them, or because they owed a fiduciary duty to the plaintiff); (2) reliance by the plaintiff on the misrepresentation; and (3) resulting damage to the plaintiff, usually financial.

In the case of non-disclosure of a material fact which the defendant was under a duty to disclose, the law will generally presume the element of reliance (i.e., that the plaintiff would have acted differently if the information withheld would have been important to a reasonable person).

In addition to common law fraud, all 50 states and the District of Columbia have enacted some kind of general consumer fraud statute. These statutes are generally of two types. Some states have one or the other, and some states, like California, have both.

The first type of statute is a general prohibition on unlawful, unfair, and/or deceptive business practices, such as California’s Unfair Competition Law, and its companion False Advertising Law. The second type of statute, such as California’s Consumer Legal Remedies Act, prohibits a laundry list of specific deceptive practices, such as misrepresenting the quality or source of goods.

The general federal consumer protection statute, the Federal Trade Commission (FTC) Act, can only be enforced by the government, and not by private parties. Originally designed to fight organized crime, the federal Racketeer Influenced Corrupt Organizations Act (RICO) can often be used as a surrogate by private parties.

Many subject-specific federal consumer protection statutes are enforceable by private parties, and are well-suited to class actions, such as the Truth-In-Lending Act, the Real Estate Settlement Procedures Act (which prohibits kickbacks for referrals of most real estate-related services), and the Telephone Consumer Protection Act. Most states, like California, also have subject-specific statutes that often mirror their federal counterparts.

If you have been the victim of a deceptive, unfair, or unlawful business practice, contact Himmelstein Law Network for an evaluation.