Tennessee Business Litigation Law Blog

The Tennessee Consumer Protection Act does not apply in a transaction in which the defendant is acting in a personal capacity and not as a business agent, according to the Tennessee Court of Appeals at Knoxville. In Abouelata v. Davis, the buyers of real estate sued the sellers for, among other things, a violation of the TCPA, alleging that the sellers’ conduct constituted unfair and deceptive acts or practices. The appellate court held that the trial judge properly granted a directed verdict and dismissed the TCPA claim. The buyers claimed that the seller husband’s experience as a real estate developer and his superior knowledge of the real estate trade made the transaction a business one, instead of a personal one, and therefore subject to the TCPA. However, the court focused on the sellers’ role in the particular transaction at issue. The court stated that it is not the extent of the sellers’ knowledge, but whether the sellers were engaged in business and acting in a business capacity when they sold their residence. The court found that the sellers were acting in their personal capacity as individuals in selling their personal residence and were not engaged in business. Therefore, the "casual sale of a person's personal residence" is not subject to the TCPA.

The Tennessee Supreme Court decided on Friday "that a plaintiff who establishes a violation of one or more of the provisions of the Tennessee Consumer Protection Act may be awarded reasonable attorney’s fees generated during appeal(s) of the matter." In Killingsworth v. Ted Russel Ford, Inc., the Court specified that any request for attorneys fees incurred on appeal "must set forth his or her intention to do so in his or her appellate pleadings." The Court held that mention of a request for attorneys' fees in the complaint at the trial court level is not enough.

The Court of Appeals entered a significant opinion yesterday affecting the scope of Tennessee Consumer Protection Act claims.  For more than 15 years, federal and state courts in Tennessee have held that the TCPA does not cover claims related to the marketing and sale of securities.  However, the Court of Appeals addressed this question anew in light of the Tennessee Supreme Court's more recent decision in Myint v. Allstate Ins. Co., 970 S.W.2d at 926 (holding that the TCPA applies to the acts and practices of insurance companies).

The Court agreed with the Appellants that, for the last 15 years, the law on this issue has been "spinning off in the wrong direction."  After a well reasoned analysis of current statutory and case law, the Court held that the TCPA does in fact cover the marketing and sale of securities.  Accordingly, the trial court's dismissal of the Plaintiff's TCPA claims was reversed.

The case is Johnson, et al. v. John Hancock Funds, et al.  Read the opinion here.

The Tennessee Consumer Protection Act was enacted to provide Tennessee consumers with a cumulative remedy when they suffer damages as the result of an unfair or deceptive act or practice.  T.C.A 47-18-109.  However, for a long time following the Act's passage, a question remained as to what exactly constitutes an "unfair" or "deceptive" act or practice.  The Tennessee Court of Appeals addressed this question last year in Tucker v. Sierra Builders, 180 S.W.3d 109, 116 (Tenn. Ct. App. 2005).   In Tucker, the Court reiterated that what constitutes an 'unfair' or 'deceptive' act or practice in a particular case is a question of fact.  Id. at 116.  However, the Court offered definitions of these two terms to be used in evaluating the facts of a TCPA case.  The Court noted that  “a deceptive act or practice is one that causes or tends to cause a consumer to believe what is false or that misleads or tends to mislead a consumer as to a matter of fact.”  Id.   Similarly, an act or practice was defined as  “unfair” if it “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition."  Id.116-17.  The Court went on to offer further definitions for terms such as “substantial injury” and “reasonably avoidable.” 

Again, determining whether conduct is “unfair” or “deceptive” in a particular case will almost always be a question of fact.  However, following Tucker, Tennessee Courts now have a more specific framework in which to apply these otherwise broad terms.

Click here to read John Day's post at Dayontorts about a recent decision of the Tennessee Court of Appeals applying the Tennessee Consumer Protection Act against a financial advisor. The decision also discusses the standards of admissibility of expert testimony in Tennessee courts.

The Middle Division of the Court of Appeals of Tennessee ruled late last week that acts or practices in connection with marketing or sales of securities are covered by the Tennessee Consumer Protection Act. In Johnson v. John Hancock Funds, the Court of Appeals reversed summary judgment for a financial advisor, deciding that the advisor could be liable under the TCPA for the marketing or sales of securities - in this case, mutual fund shares. Following the Supreme Court of Tennessee's former decision in Myint v. Allstate Co., the Court of Appeals applied a two-step test to determine whether a particular act or practice is covered by the TCPA. First, the Court looked to whether the statutes regulating the business indicate that they were intended to provide the exclusive remedy for unfair or deceptive acts or practices. Second, the Court examined the TCPA itself to determine whether the challenged conduct was beyond the scope of the TCPA.