“THAT'S NOT FAIR!” How Soto v. Bushmaster Changed the Interpretation of the Connecticut Unfair Trade Practices Act to Permit Claims by Parties Whom the Defendant Has Never Met

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Next year marks 47 years of the Connecticut Unfair Trade Practices Act, or “CUTPA,” codified at Connecticut General Statutes §42-110a, et seq., and originally passed in 1973. They have been an eventful 47 years indeed.  Whereas CUTPA originally was intended to prohibit unfair and deceptive practices in the limited context of everyday consumer transactions, today it is construed to apply to nearly all business conduct, whether or not there is a commercial relationship between the parties. How did we get here? More importantly, what can the business community do to avoid the surprise of a CUTPA claim brought by an individual it has never met?  To answer those questions, an understanding of the ways in which CUTPA has evolved over the decades is necessary.

The Origins of CUTPA

Like other “little FTC Acts” that were passed by States around the same time, CUTPA was initially intended to solidify protection for consumers and tenants.[1]  Perceiving there to be a significant number of unscrupulous businesses stealing customers from their “law abiding”[2] competitors through immoral or deceptive techniques, the Legislature crafted an act it hoped would address the problem.  To do so, it elected to permit “private enforcement by individual consumers who have been injured by prohibited acts,”[3] figuring those persons would be the best-situated to identify when something unfair had happened and do something about it. The Legislature did not stop there.  In order to encourage private litigants to use the new law, the Legislature also offered a carrot: plaintiffs who were successful could obtain punitive damages and a court award ordering the defendant to pay the plaintiff’s attorneys’ fees, something rarely seen in American judicial systems.

At the same time, there was a problem.  How was one to define something as seemingly vague as  “unfair” trade practices?  Do not reasonable people often disagree about whether something is unfair? The answer seemed simple: “enable the courts of this state to use the Federal cases that have been decided under the Federal Trade Commission Act and Regulations as the basis for lawsuits in this state.”[4] Relying upon the existing body of federal precedent regarding unfairness in business transactions, after all, seemed a prudent way to ensure that Connecticut’s new law remain grounded and predictable.  Accordingly, on the day CUTPA was born, it included the  pronouncement: “it is the intent of the legislature that in construing the scope of [CUTPA], the commissioner [of consumer protection] and the courts of this state shall be guided by interpretations given by the Federal Trade Commission and Federal Courts to” the FTC Act.[5] 

CUTPA’s short-lived connection to the narrow scope of the FTC Act

As it would turn out, the belief that federal interpretations of the FTC Act would serve as a guardrail to a law that might otherwise be vague and confusing was short lived.  The Connecticut Legislature would go on to adopt several amendments to CUTPA in rapid succession, each of which was largely designed to address the need to refine which private parties could enforce the law.  The result, however, was to expand the law.

CUTPA’s private right of action thus not only marked its chief initial diversion from the FTC Act, but also subsequently drove an ever-widening wedge between it and CUTPA.  Just two short years after CUTPA hit the books, the law was amended so that any person or business entity, not just consumers, who claimed to suffer “any ascertainable loss of money or property . . . as a result of the use or employment by [a] seller or lessor of” an unfair trade practice could sue.[6]  Four years after that, the statute’s references to sellers and lessors was removed too, eliminating the notion that CUTPA only covered everyday consumer transactions.[7] Then, in 1984 the Act was amended yet again to make clear that no public wrong was required for a person to bring a claim; a wrong unique to the suing party was enough.[8] 

At times the legislature even passed laws designating practices automatically “unfair” in violation of CUTPA.  These range from the obviously important, such as a law prohibiting price gouging during public emergencies,[9] to the seemingly bizarre, such as a law requiring dating websites to notify users in writing of their right to cancel the contract, free of charge, within three days.[10]  To date, there are 89 such laws on the books,[11] although only a handful appear to have ever been used by private litigants.

If the Connecticut state legislature was expanding the reach of CUTPA through the 1970s and 80s, the federal government was making sure that its law remained narrow.  In fact, in 1980 the FTC doubled-down on protecting only consumers in everyday transactions when it issued a policy statement explaining that it would evaluate whether a trade practice was unfair, or not, exclusively upon whether the practice caused a substantial unjustified injury to consumers.[12]  Such an injury, the FTC said, is one which is substantial, not outweighed by any countervailing benefits to consumers or competition, and which a typical consumer could not have reasonably avoided.[13]  Connecticut, despite stating it would follow FTC guidance on unfairness, would never adopt this rule.[14]

Accordingly, within little more than a decade, CUTPA, by its own language, evolved from a law governing everyday consumer transactions to a law governing all business transactions of any type.  It’s expansion, however, was not over.

Connecticut’s Courts weigh in, and generally continue the expansion

Staying the course set by the Legislature, early decisions of the various Connecticut Courts expanded the scope of CUTPA.  For example, in 1983, the Connecticut Supreme Court affirmed in Conaway v. Prestia[15] that a person claiming CUTPA need not show the defendant violated an existing law to make a claim.  Rather, it is enough for the person claiming CUTPA show that the defendant’s conduct fell within “at least the penumbra of some common law, statutory, or other established concept of unfairness[.]”[16]  Thereafter, in 1984, the Connecticut Supreme Court twice expanded CUTPA even further in rapid succession.  First, in McLaughlin v. Paul Revere Life Ins. Co.,[17] the high court confirmed that a competitor or business person could bring a CUTPA action just like any private consumer.  Second, in Sportsmen’s Boating Corp. v. Hensley,[18] the Court agreed that some types of conduct might support a CUTPA claim even though they would not support traditional civil tort liability.  In other words, the bar a plaintiff must leap over to establish a CUTPA claim can be lower than in other state law claims, such as fraud.

If the 1970s and 80s presented a period of rapid change for CUTPA claims, however, the 1990s and early 2000s were relatively calm.  Of course, there were developments during this time.  But they represented movement by inches, not by leaps and bounds.  Thus, beginning in 1990 it seemed as if the rapid expansion of CUTPA had slowed, if not mostly ceased, for the time being. 

The Commercial Relationship Test

Near the end of the early period of expansion of CUTPA, a test appeared which seemed to restrict it.  In 1987, a Connecticut Court concluded that, at the very least, a CUTPA claim could not survive if the parties to the lawsuit did not have some sort of business relationship between them.[19]  For nearly 30 years thereafter, the “commercial relationship” test became a type of salve to the burning expansion of CUTPA, representing one of the chief ways in which CUTPA remained limited, even if it otherwise seemed unbridled. 

In simple terms, the test generally required a direct commercial relationship between the plaintiff and defendant and a nexus between that relationship and the loss the plaintiff claimed as a result of the allegedly unfair trade practice.[20]  Business owners could thus rest assured that, at the very least, they would know the persons who were bringing claims against them and claims would be grounded in a pre-existing relationship.  It would turn out, however, that even the commercial relationship restriction would eventually evaporate after the Connecticut Supreme Court issued its decision in Soto v. Bushmaster Firearms International, LLC.[21]

Soto v. Bushmaster Firearms International, LLC

On March 19, 2019, the Connecticut Supreme Court released its opinion in Soto v. Bushmaster Firearms International, LLC,[22] a decision which eliminated the commercial relationship test and represented a major shift in CUTPA litigation.

Soto arose out of the tragic murder of 26 children and teachers at Sandy Hook Elementary School in Newtown, Connecticut.  The plaintiffs, the families of the victims, brought a CUTPA claim against Bushmaster and other manufacturers of the XM15-E2S rifle (also known as an AR-15 style weapon) used in the massacre, stating that the weapons manufacturers had advertised the AR-15 in an unscrupulous way to encourage dangerous or even illegal conduct, including the massacre. 

The plaintiffs did not allege that they were customers of the manufacturers or had viewed the advertising themselves.  Rather, they claimed the perpetrator did, including an ad which stated that the use of Bushmaster’s weapon would allow a person to force his enemies to “bow down.”[23]  The plaintiffs claimed that this advertising encouraged young men with mental health and self-esteem issues to conclude that using the weapon in a massacre would provide an avenue to regain control over one’s life.  However, the plaintiffs lost that claim before the trial court, which concluded that the plaintiffs did not have a commercial relationship with the Defendants and therefore could not bring a CUTPA claim.

The plaintiffs appealed and the case was taken directly by the Connecticut Supreme Court, which determined that the case was of significant importance and therefore should bypass the Connecticut Appellate Court.[24]  The Supreme Court concluded that no commercial relationship is required between the parties in order for a person claiming CUTPA to be able to bring a case because the current form of the statute says that “any person” who suffers an ascertainable loss of money or property as a result of an allegedly unfair trade practice may bring a lawsuit to redress the same.  On November 12, 2019, the United States Supreme Court refused the Defendant’s petition to take the case, leaving the Connecticut Supreme Court’s decision controlling.

The meaning of Soto is clear: a business can be sued, even if that business never had any business dealings with the plaintiff, so long as some allegedly unfair or deceptive practice of the business caused the plaintiff a measurable harm.

The effect of Soto on Connecticut businesses

So, what is a Connecticut business to do?  Is CUTPA litigation now entirely unpredictable, with claims brought by persons far and wide whom the business never even knew existed?  Should Connecticut businesses pack up and run for the hills? It may surprise you to learn that my answer to these questions is “no.”

First, some solace: There are few, if any, CUTPA cases where the result was surprising.  More often, the surprising case is the one where the court concluded that some allegedly unfair conduct was permissible, not the other way around.  For example, in the recent case of Cadco, Ltd. v. Doctor’s Associates, Inc.,[25] the Court found no unfair trade practice where the defendant hired the plaintiff to design a heating plate for use with a special rapid-cook oven while suggesting it would use the plaintiff to manufacture the plate if a successful design could be produced.  After the plaintiff spent many hours and resources developing a successful design, the defendant turned the design over to a competing manufacturer that had an executive related to the defendant’s president and paid the competitor to produce the plate. Addressing the case, the Connecticut Appellate Court sided with the defendant, concluding the plaintiff should have taken steps to protect itself such as demanding a confidentiality agreement before it commenced its work. 

Meanwhile, recent decisions which have found a trade practice to be unfair have dealt with conduct such as lying in the context of a transaction or violating a specific consumer protection law.[26]  Most would agree that fraud, or violating a specific statute designed to protect consumers, is a prototypical unfair trade practice.[27]  Accordingly, while at first blush it may seem as if CUTPA is out of control, in practice CUTPA claims are usually successful only where most people would agree they should be.

Second, a little used limitation of CUTPA, known as the primary line of business test, may be making a come-back.  The test first appeared a little less than 15 years ago in McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc.[28]  There, the Connecticut Appellate Court concluded that a business cannot be held liable under CUTPA for conduct outside the “primary line” of its business.  The case concerned a claim that the defendant, an automobile dealer, committed an unfair trade practice in failing to disclose soil tests it performed prior to selling land it previously used as a car dealership.  The tests showed the land was contaminated by oil, a fact the buyer learned only after the sale.  Desiring to avoid a rule that would require every business person to become an expert in every type of business, however, the Appellate Court concluded that CUTPA is not actionable outside the primary line of a defendants’ business and found the defendant not liable for CUTPA because the sale of land was incidental to its primary business of selling cars.

The Connecticut Supreme Court has not explicitly adopted the primary line of business test.  But it has viewed it with approval on at least one occasion, suggesting that the proper questions to ask are: (1) whether the conduct is related to the business of the defendant and (2) whether the conduct was of a type such that one in the defendant’s business should be expected to be familiar with it.[29]  This test suggests that defendants need not be worried of limitless and unpredictable claims dealing with things that are merely tangential to what it is the defendant actually does.  Or, to put it differently, a defendant need not be an expert in all types of business deals, only those that make up the bread and butter of its business.

In the time since Soto, the primarily line of business test has already been used to deny a claim that Soto otherwise would have permitted.  Thus, In Caesar, LLC v. Cassarino,[30] a judge of the Superior Court concluded that the absence of a commercial relationship between the parties did not preclude a CUTPA claim, but the fact that the conduct was not in the defendant’s primary line of business did.  Accordingly, business owners should rest assured that there are still limits to CUTPA, even if it may at first blush seem like there are not.

Third, for the proactive out there, another thing that can be done is to ensure that your business is up to date on industry standards and best practices in your field and follow them.  In Johnson Electric Co., Inc. v. Salce Contracting Associates, Inc.,[31] for example, the Connecticut Appellate Court concluded that a general contractor violated CUTPA when it failed to follow industry standards by refusing to extend a subcontract to a subcontractor who it had listed on its bid, which it apparently did in an effort to maximize profit.  Because industry standards provided that a sub who was listed on the bid should receive the subcontract, the Court found that the general contractor violated CUTPA.  It stands to reason that if a violation of industry standards and best practices can provide the basis of a CUTPA claim, then the inverse – adhering to industry standards and best practices to avoid CUTPA liability – is also true. 

The moral of the story is that one can minimize exposure under CUTPA by making honesty and fair dealing central to one’s business culture.  Simple things, such as ensuring that the rules of negotiating a transaction are clear before entering negotiations and following up on conversations in writing to document what was said and when, can help significantly. 

Of course, if there is ever any doubt, a business owner should always contact a CUTPA attorney.

 

[1] 16 H.R. Proc., Pt. 14, 1973 Sess., pp. 7321 to 7324 (remarks of Rep. Howard A. Newman) (remarking that CUPTA “will hopefully put Connecticut in the forefront of state consumer protection . . . .”)

[2] Id.

[3] Id.

[4] Id.

[5] C.G.S. §42-110b(b).

[6] 1975 Public Act 618, §5.

[7] 1979 Public Act 210, §1(a).

[8] See C.G.S. §42-110bg(a).

[9] C.G.S. §42-230.

[10] C.G.S. §§42-320 to 42-322.

[11] For a list of these statutes, see Langer, Morgan & Belt, Vol. 12, Connecticut Practice Series: Connecticut Unfair Trade Practices, Business Torts and Antitrust (2018-2019 Ed.) Appendix E.

[12] FTC Policy Statement on Unfairness (December 17, 1980), available at https://www.ftc.gov/public-statements/1980/12/ftc-policy-statement-unfairness.

[13] Id.

[14] See, e.g., Artie’s Auto Body, Inc. v. Hartford Fire Ins. Co., Inc., 317 Conn. 602, 622 n.13 (2015).

[15] Conaway v. Prestia, 191 Conn. 484 (1983).

[16] Id., at 492.

[17] McLaughlin v. Paul Revere Life Ins. Co., 192 Conn. 558, 567 (1984).

[18] Sportsmen’s Boating Corp. v. Hensley, 192 Conn. 747, 756-57 (1984).

[19] See, e.g., Sivertsen v. Metro-North Commuter Railroad Co., No. B-86-448, 14 Conn. L. Trib. No. 2, pg. 2 (D. Conn. 1987).

[20] See, e.g., Austrian, M.D. v. United Health Group, Inc., 43 Conn. L. Rptr. 852, 2007 WL 2363301, *10 (Conn. Super. Ct. 2007).

[21] Soto v. Bushmaster Firearms International, LLC, 331 Conn. 53 (2019).

[22] Id.

[23] Id., at 74.

[24] Id., at 69 n.13.

[25] Cadco, Ltd. v. Doctor’s Associates, Inc., 188 Conn. App. 122 (2019).

[26] See, e.g., Freeman v. A Better Way Wholesale Autos, Inc., 174 Conn. App. 649, 651, cert. denied, 327 Conn. 927 (2017); Winakor v. Savalle, 67 Conn. L. Rptr. 8, 2018 WL 4391163 (August 21, 2018, Frechette, J.).

[27] See, e.g., In the matter of Figgie International, Inc., 107 F.T.C. 313, 373 n.5 (1986) aff’d 817 F.2d 102 (4th Cir. 1987); Benvenuti Oil Co. v. Foss Consultants, Inc., Superior Court, judicial district of New London, Docket No. KNL-CV01-0485270-S, 2006 WL 328678 (January 25, 2006, Corradino, J.).

[28] McCann Real Equities Series XXII, LLC v. David McDermott Chevrolet, Inc., 93 Conn. App. 486 (2006).

[29] Tzovolos v. Wiseman, 51 Conn. Supp. 532, 580 (2007), judgment aff’d, 300 Conn. 247 (2011).

[30] Caesar, LLC v. Cassarino, Superior Court, judicial district of Tolland at Rockville, Docket No. TTD-CV18-5010735-S, 2019 WL 4015668 (August 2, 2019, Farley, J.).

[31] Johnson Electric Co., Inc. v. Salce Contracting Associates, Inc., 72 Conn. App. 342, 356-58 (2002).

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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