Trial Lawyers Cringe at Changes in Deceptive Trade Practices Act

Trial lawyers say the Legislature’s changes to the Arkansas Deceptive Trade Practices Act will hurt consumers. 

The biggest change in the act now prevents attorneys from filing class-action lawsuits against companies for violations of the act. Class-action lawsuits still are allowed for other violations, such as fraud or breach of contract.

A class-action lawsuit is considered a strong legal weapon because most people aren’t going to file a lawsuit for a loss of a few dollars. But if several consumers suffer the same loss, a class-action lawsuit can be filed and class members can benefit from a settlement or judgment. 

However, an attorney who represents businesses in class actions praised the changes to the legislation and said they would help businesses while still protecting consumers.

“These changes to the Deceptive Trade Practices Act are reasonable and balanced in the need to make sure consumers have avenues to redress wrongs and make sure that we have a business-friendly environment in Arkansas,” said Megan Hargraves, a member at the Little Rock law firm of Mitchell Williams Selig Gates & Woodyard PLLC. She said consumers who think they’ve been harmed by a company still have remedies. They can contact the Better Business Bureau or bring a lawsuit as an individual plaintiff.

In addition, the state attorney general has the ability to bring a class-action lawsuit for violations of the act. The AG could seek civil penalties and even revoke a company’s permission to do business in Arkansas. 

Matthew Hass, the chief executive officer of the Arkansas Trial Lawyers Association, said he believes the legislation protects companies that cheat individual customers out of small amounts that add up to a windfall.

“There are very few attorneys that handle class-action cases,” Hass said. “But they’re all concerned about the consumers and the long-term effect of this.”

State Rep. Laurie Rushing told Arkansas Business in an email last week that she wanted to stop the practice of filing lawsuits that purportedly are brought on behalf of consumers but that mainly benefit attorneys. 

A Republican whose district covers parts of Garland and Hot Springs counties, Rushing sponsored legislation that changed the ADTPA. “Unfortunately, some plaintiffs’ lawyers have been bringing class actions that end in paydays for the attorneys but nothing of value for the consumers,” Rushing said. 

The ADTPA allows for the recovery of attorney’s fees, which is contrary to the general rule, where each side pays its own fees.

Rushing highlighted class-action cases against Subway for selling a “footlong” sandwich that was allegedly only 11 inches long.

One of the cases was filed in Arkansas under the Arkansas Deceptive Trade Practices Act. The lawsuit was transferred and consolidated with the other cases against Subway in federal court in Wisconsin, where it was settled in 2016.

“Under the settlement, the lawyers who brought the case share over a half-million dollars in fees, the named plaintiffs get $500 each, and the other consumers get nothing,” Rushing said.

The settlement, though, does require Subway franchisees to measure bread to make sure that it is either 6 or 12 inches long. The settlement also increases penalties if Subway restaurants don’t comply with those terms.

Hargraves, the Mitchell Williams attorney who supports the law as amended, says that a consumer had to rely on the alleged misrepresentation in order to have a claim. For example, if a customer bought juice that said it was 100 percent organic and the statement turned out to be false, the consumer would have a claim under the ADTPA only if the organic advertisement was the only reason the juice was purchased.

“If you buy it because you like the way it tastes, not because you thought it was 100 percent organic, you’re not going to have a claim under the Deceptive Trade Practices Act,” Hargraves said.

Still, the alterations to the ADTPA don’t sit well with trial attorneys.

“The change takes the consumer protection out of what was a consumer protection statute,” said attorney Scott Poynter of Little Rock. 

Attorney Todd Turner of Arkadelphia said he, too, is concerned about the changes to the act. 

“It’s a tool to stop misconduct, and that’s the way I look at class actions — not as a vehicle for attorneys to make a big fee, but to stop some practice,” he said. “Nobody has to worry about this unless they’re engaged in deceptive practices.”