How Can You Avoid Being Sued Under The CSPA?
In our last post, we presented the first 2 parts of our series on Ohio’s consumer laws, designed to raise awareness of a part of business owner’s potential pitfalls of these laws and how they can be avoided. You do not want to find yourself on the wrong side of a CSPA lawsuit. Continue reading for parts 3 and 4.
How to reduce your risk of being sued
Your best defense to reduce the risk of being sued under the Consumer Sales Practices Act (CSPA) is to follow every business owners’ mantra: “Don’t do anything stupid.” While this mantra prevents most violations, parts of the CSPA are so technical that this advice only goes so far. The best way to understand how the CSPA impacts your business is to review your contracts, policies, advertisements and warranties and make certain they are in compliance. For businesses that have industry specific rules, special attention must be paid to those operational areas.
Generally, if a Supplier follows the below guidelines, it will greatly reduce the risk of violating the CSPA. These guidelines, developed by the Ohio Attorney General, set out some minimum standards. The various statutes and rules (as well as case law) of the CSPA requires Sellers (or “Suppliers”) to:
- Accurately represent the characteristics of a product or service.
- Honor guarantees and warranties.
- Make no misrepresentations about the nature of their business, their products or services, the prices of their goods, or the terms of a transaction.
- Not mislead consumers.
- Not take advantage of a consumer’s illiteracy, mental disability, physical disability, or inability to understand the terms of a sale.
- Not sell a product or service knowing the consumer cannot afford or substantially benefit from it.
- Disclose important exclusions and limitations in advertisements.
- Not sell used items as new.
- Not use bait-and-switch tactics to trick consumers into paying higher prices.
Most of these guidelines are common sense practices that all good business owners follow. However, sometimes it is not that simple. For example, a contractor is hired to put in a new concrete driveway. As part of that job, the contractor hires a subcontractor to remove the old concrete. If the subcontractor makes a mistake and damages the homeowner’s property, you as the contractor would expect the subcontractor to pay to repair the damages. However, under the CSPA, the homeowner will hold the contractor responsible and if the contactor tells the homeowner to sue the subcontractor, he has just violated the CSPA. The contractor must be responsible for all damages caused by any subcontractor he hires. There are even some courts that imply failure to notify the consumer of the use of subcontractors is a violation of the CSPA.
This is but one example to show how important it is to know the CSPA and make sure you comply with it. Reading the CSPA law and rules is not enough to protect yourself because Ohio consumer laws also involve court interpretations that businesses are expected to comply with. A simple misunderstanding with a customer or a subcontractor can quickly escalate into an ugly, time consuming and expensive situation.
How do you know what violates the CSPA?
This is the biggest question that you must know to make sure your company does not get into trouble. But there is no simple answer. In many areas of the law the axiom “Don’t do anything stupid” will allow you to avoid problems. While this applies to the Consumer Sales Practices Act (CSPA), one must go beyond this simple advice to fully understand the pitfalls of the CSPA.
First, there are three different ways that the state has defined what a CSPA violation is. The first and most straight forward is the Ohio Revised Code. That is the Ohio law passed by the Ohio legislature. This forms the basis of the CSPA. However, under that law, the Ohio attorney general is permitted to draft rules that supplement the CSPA. Those rules have the force and effect of any of the laws passed by the legislature. Finally, courts also create part of the CSPA. When a consumer sues a supplier and wins, that case becomes part of the law of Ohio. That means, if a consumer sues a company for what the consumer claims to be an unfair or deceptive act, if the court agrees with the consumer, that act becomes an unfair and/or deceptive act for all other suppliers. The court is then required to send its decision to the Ohio Attorney General. The Attorney General has a catalogue of all CSPA cases. Those are stored in what is referred to as the Public Inspection Files (PIF). What makes this so important is that by placing them in the PIF, the law considers all consumers and suppliers as having knowledge that those acts are now considered either unfair or deceptive. Any supplier committing that act is now in violation of the CSPA.
As a result, sometimes it is very difficult to understand what violates the CSPA. In some cases, perfectly innocent activities can be found to be in violation. For instance, one court has found that the use of subcontractors, without advanced written notification to the consumer is a violation (Teeters Constr v Dort). While there is a strong argument that not disclosing the use of subcontractors is only a violation when the supplier attempts to blame the subcontractor and does not stand behind his own work, that argument may not stand up in court. To be safe, when using a subcontractor, you should disclose that fact. If you don’t, never try to hide behind the subcontractor. Accept the subcontractor’s work as your own and, if necessary, sue your subcontractor for their failure to do the job in a workmanlike manner. But honor all warranties to your customer. To do otherwise would put you in violation of the CSPA.
Because of the numerous ways CSPA violations are created and can arise, you should review your policies and procedures, as well as your contracts and work practices regularly. The same is true for advertising, giveaways, and the like. It is very easy to make a mistake and find yourself in violation of the CSPA.
Next time, we will cover how someone might violate the CSPA and what is covered by it. Watch this column or visit www.gertsburglaw.com/blogfor the full series and for more legal tips for your business.