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Enactment of BCA-supported SB 270 Should Prevent Flood of Class Action Lawsuits Against Alabama Businesses

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Last summer, the Eleventh Circuit held in Lisk v. Lumber One Wood Preserving LLC, 792 F.3d 1331 (11th Cir. 2015) that private plaintiffs could bring a class action under the Alabama Deceptive Trade Practices Act (ADTPA) in federal court even though Alabama law expressly prohibits them from doing so in state court. The BCA recognized that Lisk had opened the door for a flood of class action lawsuits and proposed legislation, SB 270, to return the law to what it was before Lisk. That bill was signed into law as Act No. 2016-407 on May 12, 2016 and should prevent ADTPA class actions from being brought in federal court in the future.

Background on ADTPA. The ADTPA prohibits a broad range of “deceptive” trade practices, including representing that products have characteristics that they do not have, selling products without disclosing known material facts, and any other practice that might mislead consumers. The ADTPA gives any consumer injured by a prohibited trade practice a private right of action and the opportunity to recover statutory damages and attorneys’ fees. However, the ADTPA expressly states that private plaintiffs may not bring an ADTPA claim as a class action; this powerful enforcement tool was reserved for the Alabama Attorney General or district attorneys. Some states (such as Florida and California) have similar deceptive trade practices statutes and also allow private plaintiff class action lawsuits. In those states, plaintiffs often use the statutes to bring questionable class action lawsuits over conduct that has little or no impact on consumers. The Lisk decision effectively changed Alabama law by ruling that the ADTPA’s provision requiring suits to be brought individually was procedural rather than substantive and, therefore, did not apply in federal court.

The Legislative Solution. Working with its members, the BCA supported those sponsoring SB 270. The bill clarified that the ADTPA’s provision requiring private plaintiffs to proceed individually was substantive and should apply in the federal courts, thereby preventing a flood of federal court class actions.

Acknowledgments. The passage of SB 270 would not have occurred without Senator Phil Williams’ tireless work in shepherding it through the Committee process and the full Senate. We are also grateful to House leadership, Representative David Faulkner, and Representative Matt Fridy for their efforts in the House on this Bill – especially for Representative Fridy’s almost six hours at the podium to fight for this Bill on the next to last day of the legislative session. Finally, we are grateful to Governor Bentley for signing SB 270 into law. For more information about SB 270 or the BCA’s other legislative efforts, please contact BCA Staff Members, Mark Colson or Trevor Parrish.

Contributed by the BCA Judicial and Legal Reform Committee

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