Articles Posted in Consumer Protection

The Virginia Consumer Protection Act (“VCPA”) has long been thought of as a statute that addressed fraud in consumer transactions. But as the Supreme Court of Virginia clarified in a ruling last month, “the VCPA’s proscription of conduct by suppliers in consumer transactions extends considerably beyond fraud.”

A plain reading of the statute shows this to be the case. The VCPA, by its terms, prohibits broadly not just acts of fraud but the use of “any other deception, …false pretense, false promise, or misrepresentation in connection with a consumer transaction.” (See Va. Code § 59.1-200 (14)).
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Although a plaintiff asserting a fraud claim in federal court may allege malice, intent, knowledge, and other conditions of a person’s mind in general terms, he must plead the circumstances constituting the fraud with particularity, identifying the time, place, content, and maker of each alleged fraudulent circumstance. Failure to plead fraud with sufficient particularity will result in dismissal under Federal Rule of Civil Procedure 12(b)(6), as demonstrated by the recent failed case against Capella University.

Melvin Murphy had a Bachelor of Arts degree and was pursuing an M.B.A. when he received online advertisements for Capella University’s doctoral programs in business management. Capella’s “enrollment counselors” responded aggressively to Murphy’s initial inquiries with calls, emails and marketing materials. Murphy contends that Capella’s promotional materials contained misstatements and misrepresentations upon which he relied when he enrolled in the school’s Ph.D. program in Organization and Management with a specialization in Leadership. For example, one brochure featured testimonials from supposed Capella doctoral students accompanied by photographs and quotes. Murphy asserts that at least one person pictured and quoted was not a graduate of Capella, was not a current student in the Ph.D. program and did not give permission for Capella to use his image. According to Murphy, the promotional materials were false and misleading as Capella did not award doctoral degrees in the field of Organization and Management and had no plans to do so. Capella agents allegedly reemphasized these misrepresentations when speaking with Murphy.

Murphy complains that Capella also failed to tell him that a doctoral candidate in any subject must pass Comprehensive Exams in order to be eligible for a Ph.D. and that most candidates fail these exams. According to Murphy, only 10% of Capella’s degree candidates obtained their desired degree. He asserts that these material omissions happened despite frequent contact with “representatives of Capella, including the Capella ‘enrollment counselors.'”

Is Facebook violating New York privacy laws when it permits children to press the “like” button on the site to endorse advertisements without first receiving approval from their parents? That’s the question posed by a lawsuit filed on May 3, 2011, in federal court in Brooklyn, N.Y., by the father of a teenager there who is a member of the hugely popular social networking site. The case was brought as a class action on behalf of “all minors in New York whose names or likenesses were used by Facebook, Inc., for commercial purposes without the consent of the parents or guardians of said minors.” Anyone over the age of 12 can sign up for a Facebook account.

When any Facebook user, including a teenager, “likes” an advertisement, that preference appears on the Facebook page for that ad, the lawsuit says. This in turn is considered a “click” on that ad and generates revenue for Facebook, since it receives revenue from advertisers based on the number of users that “like” the advertisement. Facebook’s privacy settings don’t permit any users to prevent their names and pictures from appearing on advertising pages that they have “liked.” They can at any time withdraw their “like,” but as long as it is in effect, it will be considered a “click” and thus a “commercial use,” according to the complaint.

In order to sign up for Facebook, users, including those under age, agree to the following statement: “You can use your privacy settings to limit how your name and profile picture may be associated with commercial, sponsored or related content (such as a Like Button.jpgbrand you like) served or enhanced by us. You give us permission to use your name and profile picture in connection with that content, subject to the limits you place.” According to the complaint, however, “at no time does Facebook seek or obtain the consent of any parent or guardian of its minor users to use or sell the name and likeness of the child for commercial use by Facebook or third-party advertisers.”

Lawyers representing Ryerson, Inc., a metal roofing company, were called upon recently to defend the company against the claims of two homeowners who alleged that Ryerson failed to honor the warranty on its roofing system and that such failure violated the Virginia Consumer Protection Act (“VCPA”). The lawyers argued that Ryerson could not be liable under the VCPA because all statements made in its warranty were statements of opinion rather than factual misrepresentations. The Eastern District of Virginia disagreed.

The VCPA was enacted to promote fair and ethical standards of dealings between suppliers and the consuming public. (See Va. Code § 59.1-197). It contains provisions that make it unlawful for a supplier to misrepresent that goods and services are of “a particular standard, quality, grade, style, or model,” and prohibits suppliers from using “any other deception, fraud, false pretense, false promise, or misrepresentation in connection with a consumer transaction.” (See Va. Code § 59.1-200(A)(6), (14)).

In Gottlieb v. Ryerson, the Gottliebs (according to the Complaint) hired a contractor to install a Ryerson steel roof on their gazebo and house. The roof came with a 20-year warranty, which assured the Gottliebs that the warranty was “low-risk, crumpled.jpgno-nonsense, [and] ironclad.” The warranty materials also stated that Ryerson would honor the warranty “at any time and as often as needed within the 20-year period” from the installation date, and that the warranty entitled the homeowners to “complete repair or replacements of any covered problem–freight and labor included.”

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