Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

The Arkansas Court of Appeals compelled arbitration of claims that sounded in contract in CEI Engineering Associates, Inc. v. Elder Construction Co., No. 08-601 (4/8/09).

 

Elder hired CEI to provide engineering services on two projects, and the contract contained an arbitration clause. After both projects encountered significant problems, Elder filed suit alleging 8 counts, including violation of the Arkansas Deceptive Trade Practices Act ("ADTPA"). The trial court held the ADTPA claims sounded in tort and denied the request to compel arbitration.

 

On appeal, the court held that the ADTPA claims were complaints about how CEI performed the contract. These claims sounded in contract, not tort, and the court reversed to compel arbitration on the ADTPA claims.

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The Arkansas Supreme Court affirmed dismissal in Preston v. Stoops, No. 07-805 (6/5/08). Stoops filed a lawsuit on behalf of Preston in Pulaski County. The case was dismissed because Stoops, an Oklahoma attorney, was not licensed to practice in Arkansas. Preston filed this action, claiming violation of the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101, et seq. Preston also included a count for breach of the covenant of good faith as a tort. The trial court dismissed both claims.

 

Addressing the ADTPA claim, the supreme court held that oversight and control of the practice of law is the exclusive authority of the judiciary. Any action by the General Assembly to control the practice of law would violate the separation-of-powers doctrine. The court did not go so far as to say parties cannot use the ADTPA to circumvent traditional causes of action, a position advocated in 29 U. Ark. Little Rock L. Rev. 283 (2007).

 

The supreme court dodged the good faith issue. In Country Corner Food & Drug, Inc. v. First State Bank, 332 Ark. 645 (1998), the court held that breach of duty of good faith could not be a separate tort. There has been a dispute over whether Country Corner precludes a separate cause of action for breach of contract. The supreme court did not decide this issue because Preston pled his claim as a tort.

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The Western District of Arkansas dismissed a case based on the Arkansas Deceptive Trade Practices Act ("ADTPA") in Shimoda-Atlantic, Inc. v. Financial Industry Regulatory Authority, Inc., 2008 WL 2003160 (W.D. Ark. 5/8/08).

 

Shimoda-Atlantic brought this case against FINRA (formerly NASD) claiming violations of the ADTPA for fraudulent securities registrations. However, securities registrations are governed by the Securities Exchange Act of 1934 (15 U.S.C. § 78a). This act does not provide a private cause of action. In other words, FINRA cannot be sued for a violation of its own rules. The court refused to circumvent the Exchange Act through the ADTPA and dismissed the case.

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The Western District of Arkansas dismissed some of the counts in the counterclaim in Cook v. Illumination Station, Inc., 2007 WL 4166215 (W.D. Ark. 11/20/07) (most recently posted 8/1/07).

 

Cook based her claim for fraud and deceptive trade practices on an employment contract which turned up during the litigation. Cook claimed her signature on this contract was forged. The court held the fraud claim must fail because Cook could not establish detrimental reliance if she did not know about the signature. The deceptive trade practices claim failed because that law protects consumers; it does not regulate the conduct of litigants.

 

Both sides have now dismissed some of the other side's claims. (Cook's dismissal of various claims previously posted 6/15/07)

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The Arkansas Attorney General is investigating 5 software providers regarding ticket sales to the Hannah Montana concert in Little Rock (coverage here by Arkansas Business). Ticketmaster recently won a preliminary injunction against one such software provider in Ticketmaster, LLC v. RMG Technologies, Inc. (posted here 10/18/07). How will this injunction affect the Arkansas investigation?

 

The Ticketmaster case should not have any effect, because consumers do not have standing to bring a cause of action. First, there is no direct communication between the software provider and the consumer.  Without a direct communication, there can be no fraud or deceptive trade practice or contract between the parties to breach. Second, the software provider never accesses the consumer's computer or any property of the consumer. The software at issue manipulates Ticketmaster's website and computer system; the consumer cannot have a claim for an interference with Ticketmaster's property.

 

The most important hurdle is damages. Consumers have no damages against the software provider because they were never guaranteed a ticket, much less guaranteed a ticket at the face value. The only possible claim would be the loss of, or interference with, a fair opportunity to obtain a ticket. This is too speculative to be compensable. More importantly, this type of injury would fail to state a claim under the Arkansas Deceptive Trade Practices Act. See Wallis v. Ford Motor Co., 362 Ark. 317, 208 S.W.3d 153 (2005). An attempt to bring an ADTPA claim here would be an overextension of the ADTPA, something I cautioned against in a recent article. See 29 Univ. Ark. Little Rock Law Rev. 283 (2007).

 

As to the individuals reselling the tickets at a premium, they are violating the anti-scalping law. See A.C.A. § 5-63-201. However, this statute does not create a private cause of action, and a violation is only a misdemeanor punishable by a maximum fine of $500 per offense. Prosecuting attorneys are not about to drop everything to focus on misdemeanor arrests, nor should they. Consumers who purchased tickets from scalpers could have a claim for breach of contract as far as the contract was for illegal subject matter. Of course, damages would be limited to the amount paid in excess of the face value. It would not be worth the costs associated with bringing a lawsuit.

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The District Court of Minnesota granted summary judgment on a number of claims in Gregerson v. Vilana Financial, Inc., 2007 WL 2509718 (D. Minn. 8/31/07) (previously posted 1/31/07).

 

Vilana copied two of Gregerson's photographs in various advertisements. Gregerson created websites where he discussed Vilana's copying of the photographs and made unflattering statements about Vilana. Gregerson filed suit for copyright infringement, while Vilana filed a counterclaim for trademark infringement, cybersquatting, deceptive trade practices, and other claims.

 

The court easily granted summary judgment on the copyright claim. A comparison of the photographs showed they were identical. The court also granted summary judgment against the trademark and cybersquatting counterclaims, finding that Gregerson just made a descriptive use of Vilana's trademarks in his metatags.

 

However, the court refused to grant summary judgment on the deceptive trade practices and related claims. There was evidence in the record that Gregerson made statements that Vilana is a thief, actively engaged in predatory lending, and a member of the Russian mafia. These issues and the damages on the copyright claim must be resolved at trial.

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An award of punitive damages was affirmed but remitted in Jim Ray, Inc. v. Duane Williams, No. 06-789 (6/27/07).

The case is another gem of an opinion from Court of Appeals Judge Price Marshall. It applies the federal due-process limitations on punitive damages derived from BMW of America v. Gore, 517 U.S. 559 (1994), among other cases, in the context of a relatively small-value sale of a pickup truck.

The opinion also contains the well-written judicial turn of phrase:

"As tempered by our common law and statutes, the salutary principle of caveat emptor is not a license for deceit." 

In 2005, Mr. Williams purchased a 2004 Nissan truck from Jim Ray Nissan. The sticker price was $29,700. However, the total invoice price was $34,125.87. When Mr. Williams pointed this out to Austin Cauthron, the finance manager, Cauthron told him that figure reflected points or credits rather than dollars. Cauthron also told Mr. Williams he was required to buy an extended warranty.

Mr. Williams filed suit for violation of the Arkansas Deceptive Trade Practices Act. A.C.A. § 4-88-101, et seq.The jury awarded him $4,425.87 in compensatory damages and $75,000 in punitive damages. After a thorough discussion of punitive damages, the court of appeals remitted the punitive damages award to $30,000.

Judges Griffen and Baker both dissented, in separate, well-written opinions that would have affirmed the entire punitive damages award.

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