A recent opinion from the Eleventh Circuit Court of Appeals threatens to subject Alabama businesses to an increased number of questionable class actions under the Alabama Deceptive Trade Practices Act. These lawsuits are likely to be expensive to defend and difficult to defeat.
In Lisk v. Lumber One Wood Preserving LLC, the Eleventh Circuit ruled that private plaintiffs can bring a class action under the ADTPA in federal court – even though the ADTPA expressly prohibits them from bringing an ADTPA class action in state court.
The Lisk defendant, Lumber One Wood Preserving, supplies treated wood fencing to wholesalers who then sell to consumers. The Lisk plaintiff, Robert Lisk, purchased fencing from one of these wholesalers believing it would last 15 years. When it began to rot after three years, he sued Lumber One, alleging it sold the wood knowing that it was not treated and would not last.
Lumber One disputes this, of course, and has strong arguments that Mr. Lisk’s wood actually came from a different supplier, not Lumber One. Nonetheless, Lumber One was able to defeat Mr. Lisk’s lawsuit at a very early stage (before any discovery had occurred) based on the ADTPA’s class action prohibition.
Following this ruling, Lumber One must engage in costly discovery and briefing to prove that it has done nothing wrong, and there is a good possibility the lawsuit will not be covered by insurance. The facts of Lisk demonstrate the danger this decision poses to Alabama businesses.
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 prohibits private plaintiffs from bringing an ADTPA class action. Instead, it reserves this powerful enforcement tool for the discretion of 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.
In July, the Eleventh Circuit effectively changed Alabama law by ruling that the ADTPA’s class action prohibition was procedural rather than substantive and, therefore, did not apply in federal court.
If Lisk is allowed to stand, Alabama will likely begin seeing a proliferation of ADTPA class actions in its federal courts. While it is unclear at this time whether Lumber One will appeal the 11th Circuit decision to the U.S. Supreme Court, BCA is monitoring these developments carefully. A copy of the ruling is available here.
For more information or to share concerns, please contact BCA staff member Trevor Parrish firstname.lastname@example.org or 334-834-6000.