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Electronic copy available at: http://ssrn.

com/abstract=2426381
WRECKING BALL DISGUISED AS REFORM: ALECS
MODEL ACT ON PRIVATE ENFORCEMENT OF
CONSUMER PROTECTION STATUTES

By Dee Pridgen
*




Introduction

State consumer protection statutes, known as state Unfair
and Deceptive Acts and Practices (UDAP) laws or state little
FTC acts, are under attack.
1
Influential conservative think tanks
like the American Legislative Exchange Council (ALEC) and
several like-minded authors have begun a campaign to
effectively abolish the private right of action to enforce these
state consumer protection statutes under the guise of state law
reform. They have done so by proposing a model law that is so
undermining of the viability of the private right of action that if
enacted as a whole in any state, it would in essence eliminate the
private right of action for the state UDAP law. In addition, by
publishing methodologically-flawed research reports that purport
to provide a basis for the proposed reforms, the Searle
Institute furnishes state lawmakers with comforting yet
unreliable data to back the model law. This article will show that
the proposed law reforms are in fact aimed at gutting a
particularly useful and long-standing type of consumer
protection, and protecting businesses from liability for unfair or
deceptive trade practices. While some legitimate issues can be,
and have been, raised by these critics, the proposed solutions

*
Dee Pridgen is the Carl M. Williams Professor of Law and Social
Responsibility at the University of Wyoming College of Law. She was
elected as a member of the American Law Institute in 2003. The author
would like to thank Carolyn Carter, Prentiss Cox and Jeff Sovern for their
excellent and helpful comments on an earlier draft of this article.
1
These statutes are also referred to in this article as state consumer
protection laws or state consumer protection acts.
Electronic copy available at: http://ssrn.com/abstract=2426381
2 Wrecking Ball: ALECs Model Act [17-Apr-14
would turn back the clock to the days of caveat emptor when
individual consumers had no viable legal remedies to protect
themselves from unfair or deceptive marketplace practices. In
short, the ALEC Model law aims a wrecking ball at consumer
protection statutes in the guise of proposing a few modest
repairs.
Part One will address the history and origins of the state
UDAP laws, with a particular emphasis on their provisions for
private enforcement.
2
Part Two of the article will discuss the
goals of the state consumer protection laws, including the goals
of providing access to the courts for small consumer claims and
the establishment of a cadre of private attorneys general to
supplement government enforcement of consumer protection
laws.
3
Part Three contains a detailed analysis and critique of the
provisions of the ALEC Model Act on Private Enforcement of
Consumer Protection Statutes.
4
Part Four discusses the
arguments and studies put forward in support of the ALEC
model, and concludes that they are seriously flawed.
5


I. Origins of State UDAP Laws with Private
Enforcement
State consumer protection statutes banning unfair and
deceptive trade practices originated in the late 1960s and early
1970s as a way to help consumers with relatively small claims
gain access to justice through the court system.
6
While
individuals could in theory sue merchants who defrauded them
under common law tort theory, the standard elements of false
representation of fact (not opinion), intent to deceive, and
justifiable reliance, had proven to be quite burdensome to

2
See text accompanying notes ___, infra.
3
See text accompanying notes ___, infra
4
See text accompanying notes ___, infra
5
See text accompanying notes ___, infra
6
See William A. Lovett, State Deceptive Trade Practice Legislation, 46
TUL. L. REV. 724 (1972).
17-Apr-14] Wrecking Ball: ALECs Model Act 3
consumers.
7
The element of justifiable reliance, as applied by
courts who believed that buyers and sellers were on the same
footing with regard to information and that the buyer had a duty
to question and seek independent verification for any important
statements or opinions of the seller, was especially difficult for
the average consumer to overcome.
8
Consumers also had the
option under the common law of contracts to try to persuade
judges to refuse to enforce contracts based on
misrepresentations,
9
or unconscionability.
10
However, the
common law contract approach was rarely successful in
consumer cases and only provided a way to avoid contract
enforcement, but did not provide damages to the defrauded or
unfairly treated consumer.
In addition to the high burden of proof for individual fraud
claims, consumers were also stymied by the high costs to
damages ratio involved in litigating relatively small claims.
Most consumer goods are not so expensive that the injury to the
consumer of having been misled as to its value (purely
economic loss) would justify the expense of hiring an attorney
and going to court. While the availability of consumer class
actions blossomed since the period when the state UDAP laws
were originally passed
11
, it is still true that for individual

7
The elements of the cause of action for common law fraud (also called
deceit) have been stated by Prosser and Keeton as including: false
representation (not omission) of fact (not opinion) made by the defendant;
knowledge or belief on the part of the defendant that the representation is
false; intention to induce the plaintiff to act; justifiable reliance upon the
representation on the part of the plaintiff; and resulting damage to the
plaintiff from such reliance. Prosser & Keeton on the Law of Torts, 728
(5
th
ed. 1984).
8
See, e.g., Parker v. Arthur Murray, Inc., 295 N.E.2d 487 (Ill. Ct. App.
1973) (false representations of plaintiffs supposedly exceptional dancing
ability were not actionable because mere expression of opinion will not
support an action for fraud).
9
Restatement 2d Contracts 162-164.
10
Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C. Cir.
1965).
11
Consumer class actions have also been under attack in recent years,
4 Wrecking Ball: ALECs Model Act [17-Apr-14
consumer claims that are not necessarily amenable to class
action treatment (such as one-to-one fraudulent transactions or
claims subject to arbitration clauses barring class actions), the
common law approach is financially infeasible.
In contrast to the burden individuals faced in trying to
prove common law fraud, the Federal Trade Commission (FTC)
could pursue consumer fraud without these same strictures. The
FTC had been on the scene since 1914, with a specific mandate
to protect consumers against unfair and deceptive acts or
practices since 1938.
12
The FTC could go after merchants for
deceptive practices that had a tendency or capacity to deceive
the ignorant, the unthinking and the credulous.
13
The FTC
also had the authority to prohibit unfair trade practices.
14

However, the FTC is constrained by a duty to take action only if
it is in the public interest and affects interstate commerce.
15
In
addition, the FTC Act has never featured a private right of
action to enforce this prohibition and the courts have been
unwilling to infer one.
16
Thus, the individual consumer could
not take advantage of the more expansive substantive standards
of the FTC Act in cases that the FTC itself chose not to pursue
for budgetary reasons or because the case was not deemed to be
a national priority.

however, and may have already peaked. Indeed, private class actions appear
to be on the decline in the United States. See Deborah R. Hensler,
Goldilocks and the Class Action, 126 HARV. L. REV. F. 56 (2012).
12
Federal Trade Commission Act, 45 U.S.C. 45(a)(1).
13
Federal Trade Commission v. Sterling Drug, Inc., 317 F.3d 669 (2d
Cir. 1963). In 1983, the FTC issued a policy statement that changed the
definition of deceptive trade practices to material representations,
omissions, or practices that are likely to mislead the consumer acting
reasonably under the circumstances. FTC Policy Statement on Deception,
October 14, 1983, available at www.ftc.gov.
14
This prong of the FTCs jurisdiction was rarely used until the 1970s
and 1980s, however. See In re International Harvester Co., 104 F.T.C. 949
(1984), applying the FTC Unfairness Policy Statement, later codified at 15
U.S.C. 45(n).
15
15 U.S.C. 45(a) & (b).
16
Holloway v. Bristol-Myers Corp., 485 F.2d 986 (D.C. Cir. 1973).
17-Apr-14] Wrecking Ball: ALECs Model Act 5
Thus, it became apparent to federal agencies, such as the
FTC, and to individual state legislatures that consumers needed
a mechanism to have access to justice for their relatively small,
but individually costly, claims against merchants and other
marketplace participants. The FTC originally encouraged the
enactment of state little FTC Acts that incorporated the
unfair and deceptive trade practices language of the federal
law while providing a private right of action for individuals to
enforce. The impetus from the FTCs point of view was that
there was far more consumer fraud and more deceptive trade
practices on the state and local level than the FTCs limited
resources could handle. Thus, the federal agency sought to
enlist the assistance of state law enforcement agencies, typically
state attorneys general, as well as private litigants, sometimes
referred to as private attorneys general.
17

Several model laws were developed. First, the Uniform
Deceptive Trade Practices Act was issued by the National
Conference of Commissioners on Uniform State Laws
(NCCUSL) in 1966.
18
It listed 11 specific deceptive practices,
but this model law proved to be not well suited to consumer
cases. A second model was the Uniform Consumer Sales
Practices Act adopted in 1971 by NCCUSL and the American
Law Institute. This model law has been adopted in a handful of
states, including Kansas, Ohio and Utah.
19
The prevalent model
was developed by the FTC in collaboration with the Council of
State Governments. This was the Uniform Trade Practices and
Consumer Protection Law, issued initially in 1967, and
amended in 1970. Most state consumer protection laws are
based on this model law in one of its three variations. The first

17
See Marshall A. Leaffer & Michael H. Lipson, Consumer Actions
Against Unfair or Deceptive Acts or Practices: The Private Uses of
Federal Trade Commission Jurisprudence, 48 GEO. WASH. L. REV. 521,
553-556 (1980).
18
Available at http://www.inventions.org/wp-content/uploads/2012/10/Revised-
Uniform-Deceptive-Trade-Practices-Act.pdf.
19
See generally Dee Pridgen & Richard M. Alderman, CONSUMER
PROTECTION AND THE LAW 2:10 (West 2013-2014 ed.).
6 Wrecking Ball: ALECs Model Act [17-Apr-14
variation is truly a little FTC Act in that it incorporates the
FTC Acts broad prohibition on unfair methods of competition
and unfair or deceptive acts or practices. A second variation
leaves out the prohibition against unfair practices. The third
alternative, known as the laundry list, enumerates 13
prohibited practices and then has a catch-all prohibition
against any other practice that is unfair or deceptive.
20
Some
states enacted Consumer Fraud Acts, which prohibit deceptive
or unconscionable acts or practices and fraud. Using these
various model laws for guidance, within a few years every state
had passed such a state consumer protection statute, and almost
all of them featured a private right of action.
II. Goals of Existing State Consumer Protection Laws
The state consumer protection laws have two major goals.
The first is to make it economically and substantively feasible for
consumers to sue for legal redress when they have a small but
meritorious claim for an unfair or deceptive practice, usually
against a merchant. Second, these laws, with their private
enforcement feature particularly, were meant to provide a
supplemental cadre of private attorneys general who could by
litigating their individual claims, also help protect the public
interest by deterring future unfair or deceptive practices. Each
of these goals will be discussed below.
One of the main goals of the state consumer protection
laws was to provide access to the courts for consumers to obtain
legal redress for deceptive or unfair trade practices. By
incorporating the elements of the FTC Act, these laws changed
the legal landscape for these consumer suits, putting them on a
par with cases brought by the FTC itself in terms of the
necessary elements for proving a cause of action.
21
Changing the
elements of the cause of action was not sufficient, however, to
get consumer cases through the courtroom door. In addition,
most state statutes that included a private right of action also

20
Id.
21
See, e.g., Marshall v. Miller, 276 S.E.2d 397 (N.C. 1981).
17-Apr-14] Wrecking Ball: ALECs Model Act 7
provided attorneys fees paid by the defendant to the prevailing
consumer plaintiff. This provision, called statutory fee-shifting,
replaces the normal American rule that each party in a lawsuit
must bear its own costs, including attorneys fees.
22
The
rationale for the fee-shifting provisions of the consumer
protection statutes is that the damages in most consumer cases --
e.g., the loss in value on the used car purchased from a dealer
where the car did not live up to the claims made about it -- would
not be enough to cover the average cost of an attorney to
represent the consumer in court. Thus, if the default American
rule applied, consumers would not bring even meritorious cases
to court because the recovery would not cover their costs. There
is some variation in the provisions for attorneys fees under the
state statutes, with some states leaving the award to the
discretion of the court, and others making it mandatory for
prevailing consumer plaintiffs. Some states also provide for fee
awards to prevailing defendants, usually only in cases where the
suit was frivolous, brought in bad faith or harassing.
23

Statutory minimum or multiple damages are also a
common feature of state UDAP statutes. Statutory minimum
damages are meant to provide some type of recovery even in
cases where the injury to the consumer is more difficult to prove,
such as the damage from purchasing an item that is not as
valuable as represented in some unquantifiable way. Statutory
minimum damages range from $50 to $2000.
24
Multiple
damages, either double or triple, are modeled on the treble
damage provisions of the federal Antitrust laws, specifically the
Sherman and Clayton Acts.
25
This type of provision is another

22
See John F. Vargo, The American Rule on Attorney Fee Allocation:
The Injured Persons Access to Justice, 42 AM. U. L. REV. 1567 (1993).
23
See Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION
AND THE LAW Appendix 6A (West 2013-2014 ed.).
24
Id.
25
Section 4 of the Clayton Act reads as follows: [A]ny person who
shall be injured in his business or property by reason of anything forbidden
in the antitrust laws may sue therefor in any district court of the United
States and shall recover threefold the damages by him sustained, and the
8 Wrecking Ball: ALECs Model Act [17-Apr-14
way to make an individual consumer action more economically
feasible even if the amount of actual damages is relatively small.
It also provides a deterrent to equivalent unfair or deceptive
practices if the damages are larger.
Another major goal of the state little FTC Acts was to
supplement the enforcement activities of the FTC by enlisting
the help of a potentially large cohort of consumer victims or
private attorneys general who would be empowered to bring
their own cases by virtue of the private right of action under the
state laws.
26
Indeed, the use of private enforcement mechanisms
as an extension of administrative agency regulation is a hallmark
of the American regulatory system that is by no means unique to
the FTC and its complementary state consumer protection acts.
27

The FTC was and is a federal agency with a limited budget,
whereas the potential for consumer fraud may reach into the
hinterlands and spring up in individual one-to-one transactions.
The FTC cannot and should not attempt to address all such small
and localized consumer injuries, and yet it seemed unjust to
leave such victims without a viable legal remedy. In addition, it
was theorized at the time that when an individual consumer
attains relief in the court, that this will serve as a deterrent
against future consumer fraud not only to that defendant but also
as to others who might be tempted to engage in consumer fraud.
Hence the little FTC Acts use the wording of the federal FTC
Act, and include it in their state laws with a private right of
action. This supplemental private attorney general function of
the state consumer protection laws is bolstered by the fact that
most of the state statutes have specific or judicially implied

cost of suit, including a reasonable attorneys fee. 15 U.S.C. 15.
26
The term private attorney general has a continuum of meanings, but
as used here, it is the concept that private lawsuits can supplement the
enforcement activities of a federal agency, such as the FTC. See William B.
Rubenstein, On What a Private Attorney General IsAnd Why It
Matters, 57 VAND. L. REV. 2129, 2146-2154 (2004).
27
See J. Maria Glover, The Structural Role of Private Enforcement
Mechanisms in Public Law, 53 WM. & MARY L. REV. 1137 (2012).
17-Apr-14] Wrecking Ball: ALECs Model Act 9
provisions that the state courts applying the state consumer
protection statutes will be guided by Federal Trade
Commission jurisprudence.
28
Thus, their function as an arm of
the FTC has been well established.
The state consumer protection statutes, with their lower
burdens of proof, and added remedies, such as statutory fee-
shifting and multiple damages, are often limited to consumer
plaintiffs in the context of consumer transactions.
29
The theory
was that consumers need this additional legal boost because they
are not on the same footing as the businesses with which they
deal. Businesses dealing with other businesses were presumed to
have equal resources to hire attorneys and negotiate at arms
length for favorable contract terms. While some states have
extended coverage under their state UDAP statutes to business
plaintiffs, especially small business plaintiffs,
30
the general rule
remains that these special laws are for the benefit of consumers.
The state consumer protection laws, now on the books for
some 40-50 years, have proven to be a fertile source of legal
redress for wronged consumers. And yet, they were a bit slow to
reach their full potential. In 1980, one commentator noted that
the value of UDAP statutes in private consumer protection
litigation has been severely underestimated.
31
In 1989, another
scholar noted that state UDAP statutes potentially affected some
core contracts doctrines, but had gone largely unnoticed,

28
See Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION
AND THE LAW Appendix 3B (West 2013-1014 ed.).
29
Id, Appendix 4A (West 2013-2014 ed.).
30
See, e.g., Ly v. Nystrom, 615 N.W.2d 302 (Minn. 2000) (Minnesota
Supreme Court viewed individual purchaser of a small business as a
consumer for purposes of applying the state Consumer Fraud Act,
although they did not conclude that he was entitled to attorneys fees under
the states Private Attorney General statute because it was an isolated
transaction).
31
See Marshall A. Leaffer & Michael H. Lipson, Consumer Actions
Against Unfair or Deceptive Acts or Practices: The Private Uses of
Federal Trade Commission Jurisprudence, 48 GEO. WASH. L. REV. 521,
522 (1980).
10 Wrecking Ball: ALECs Model Act [17-Apr-14
especially by contracts scholars.
32
It has only been since around
the year 2000 that the volume of litigation under these state laws
has really surged.
33
And with the rise in litigation has come the
call for cutting back on the impact of these previously unknown
but very valuable pieces of legislation.
III. The ALEC Model Act on Private Enforcement of
Consumer Protection Statutes
As discussed above, the state UDAP statutes originated in
model legislation promulgated by either the NCCUSL and ALI
or the FTC in partnership with the Council of State
Governments. NCCUSL (now known as the Uniform Law
Commission) was established in 1892 to provide states with
non-partisan, well-conceived and well-drafted legislation that
brings clarity and stability to critical areas of state statutory law.
34
It is state-supported and consists of commissioners appointed
from each state. All are members of the bar and are either
practitioners, judges, or law professors. They receive no salaries
or fees for their work. NCCUSL has promulgated many model
and/or uniform laws that have been published and made
available to state legislatures for recommended adoption. The
American Law Institute was founded in 1923 by a group of
prominent American judges, lawyers and teachers with a goal to
promote the clarification and simplification of the law and its
better adaptation to social needs, to secure the better
administration of justice, and to encourage and carry on scholarly
and scientific legal work.
35
The ALI is best known for its work

32
Stewart Macaulay, Bambi Meets Godzilla: Reflections on Contracts
Scholarship and Teaching vs. State Unfair and Deceptive Trade Practices
and Consumer Protection Statutes, 26 HOUSTON L. REV. 575 (1989).
33
Henry N. Butler & Jason S. Johnston, Reforming State Consumer
Protection Liability: An Economic Approach, 2010 COLUM. BUS. L. REV.
1, 6 (2010).
34
Uniform Law Commission website, About Us and Organization,
www.uniformlaws.org.

35
American Law Institute website, ALI Overview, at www.ali.org.
17-Apr-14] Wrecking Ball: ALECs Model Act 11
on the Restatements of the Law. Both these groups, while
private non-profit entities, conduct their work in a relatively open
manner and attempt to maintain a non-partisan and balanced
approach to their work.
36
The NCCUSL has worked with the
American Law Institute on certain projects, such as the Uniform
Commercial Code, perhaps the most successful model or
uniform law in the United States.
In the mid-2000s, a very different kind of organization,
the American Legislative Exchange Council (ALEC), proposed a
new model law for state consumer protection, titled the Model
Act on Private Enforcement of Consumer Protection Statutes.
37

As will be discussed in more detail below, the ALEC model law
is seriously flawed and if enacted, would constitute a major
setback for state consumer protection law. ALEC, formed in the
mid-1970s, is an association for conservative state lawmakers
who share a common belief in limited government, free markets,
federalism, and individual liberty.
38
ALEC has a more political
bent than either the Uniform Law Commission or the American
Law Institute. The membership of ALEC is composed of
interested state legislators (who join for free) and private
sector members who must pay from $7,000 to $25,000 to join.
There is apparently no provision for consumer advocates to be
represented, only corporate sponsors and legislators are
members, and the resulting legislation is, unsurprisingly, rather
skewed toward business interests. ALEC was relatively
unknown until 2011 when the Center for Media and Democracy
obtained copies of 800 of ALECs model bills (now published on

36
The process for amending UCC Article Two on Sales, however, was
marred by accusations that consumer advocates were not given adequate
representation. See Gail Hillebrand, The Uniform Commercial Code
Drafting Process: Will Articles 2, 2B and 9 Be Fair to Consumers?, 75
WASH. U. L. Q. 69 (1997).
37
See Victor E. Schwartz & Cary Silverman, Common-Sense
Construction of Consumer Protection Acts, 54 KAN. L. REV. 1, Appendix
(2005).
38
ALEC website, About Us, www.alec.org.
12 Wrecking Ball: ALECs Model Act [17-Apr-14
the ALEC website).
39
Bill Moyers, a well-known broadcast
journalist, described ALEC as an organization hiding in plain
sight, yet one of the most influential and powerful in American
politics.
40

ALEC has formed various task forces that publish
reports on public policy issues, and also issue model laws on a
wide variety of issues, hundreds of which appear on their public
website.
41
ALEC supplies this model legislation to receptive state
legislators without much, if any, public input, but with a great
deal of corporate input. The legislators are then encouraged to
introduce the model bills in their individual states. The Model
Act on Private Enforcement of Consumer Protection Statutes
(hereafter referred to as The ALEC Model Act or the Model
Act) has apparently been in circulation for over five years, but
has not yet gained a lot of traction. At least one indication of the
growing influence of the general thrust of the Model Act,
however, was the amendment by the Tennessee State Legislature
in 2011 of the state Consumer Protection Act to eliminate the
private right of action for all unfair or deceptive acts or
practices other than those specifically enumerated in the
statute.
42
This will greatly circumscribe the breadth of activities
that will be subject to private suit under the Tennessee law.
The ALEC Model Act is relatively short and is specifically
focused on the private enforcement provisions of the existing
state consumer protection statutes.
43
It does not overtly seek to

39
Ellen Dannin, Privatizing Government Services in the Era of ALEC
and the Great Recession, 43 TOL. L. REV. 503, 506-508 (2012).
40
http://billmoyers.com/episode/full-show-united-states-of-alec, aired
September 29, 2012.
41
ALEC website, About Us, www.alec.org.
42
James M. Davis, Less Protection: Revisions Narrow Scope of
Tennessee Consumer Protection Act, 49-FEB TENN. B.J. 12 (Feb. 2013),
discussing amendments to Tenn. Code Ann. 47-18-104.
43
ALEC Model Act on Private Enforcement of Consumer Protection
Statutes, available at http://www.alec.org/model-legislation/model-act-on-
private-enforcement-of-consumer-protection-statutes. It does not address
government enforcement by state attorneys general.
17-Apr-14] Wrecking Ball: ALECs Model Act 13
eliminate the private right of action to enforce state little FTC
Acts. However, the collection of various requirements and
limitations, if enacted, would have the effect of significantly
reducing the level of private enforcement of the existing
statutes.
44
The Model Act also undermines the original goals of
the statutes as outlined above. Indeed, one might even argue that
the Model Act is intended to cripple the state consumer
protection statutes under the guise of reforming them or
correcting abuses. An analysis of the potential adverse effects on
consumer litigants for each of the various provisions of the
Model Act is set forth below.
Section 1(A) limits the private right of action to a person
who reasonably relies upon an act or practice declared unlawful
by [another section of the state UDAP statute].
45
This language
of reasonable reliance appears to harken back to the common law
requirement that a plaintiff show justifiable reliance on the
sellers misstatement. No state consumer protection statute
currently contains such a requirement, although there have been
a few state court cases requiring this or something like it.
46
This
provision may be defended as simply a reference to the FTC
Deception Policy, which defines a deceptive act or practice as
one which is likely to mislead a consumer acting reasonably
under the circumstances.
47
However, there is a major difference
between a statutory requirement of proof of individual
reasonable reliance as a prerequisite to private suit and the FTC

44
See Victor E. Schwartz & Cary Silverman, Common Sense
Construction of Consumer Protection Acts, 54 KAN. L. REV. 1 (2005),
advocating the adoption of the ALEC Model Act because it would limit
private actions.
45
ALEC Model Act on Private Enforcement of Consumer Protection
Statutes, available at http://www.alec.org/model-legislation/model-act-on-
private-enforcement-of-consumer-protection-statutes.
46
See, e.g., Toy v. Metro. Life Ins., Co., 928 A.2d 186 (Pa. 2007);
Zeeman v. Black, 273 S.E.2d 910 (Ga. Ct. App. 1980).
47
FTC Policy Statement on Deception, October 14, 1983, available at
www.ftc.gov.

14 Wrecking Ball: ALECs Model Act [17-Apr-14
policy which defines a deceptive practice. Neither the FTC Act
itself nor the Deception Policy requires that an individual
consumer must have reasonably relied on a particular deceptive
practice, but rather the standard is couched in terms of whether a
practice is likely to mislead consumers acting reasonably
under the circumstances, which can include irrational actions by
particularly vulnerable consumers.
48
Also, if a standard form
contract contains a clause either contradicting the falsehoods that
had been made orally or contains a statement that the consumer
agrees that he/she is not relying on any prior assertion made by a
salesperson, the consumer may lose their opportunity to get
redress for even a deliberately false statement because it may be
deemed unreasonable to rely on such an oral statement that is
contradicted or denied by the written contract.
49
This approach is
tantamount to resurrecting the common law view that a contrary
contract statement makes reliance on prior sales representations
unreasonable, thus creating immunity for deliberate fraud
through the use of contract language.
50

A prerequisite of reasonable reliance opens up the very
real possibility of factual quagmires and debates about whether
or not a consumer plaintiff was reasonable to rely on a
particular statement or practice. It also increases the consumers
litigation costs because the consumer has to prove additional

48
Id., Text accompanying n. ______.
49
Consumer behavioral studies find that average consumers routinely
disregard contract statements that contradict oral assurances made by a
trusted figure, such as a salesperson. See Debra Pogrund Stark & Jessica
M. Choplin, A License to Deceive: Enforcing Contractual Myths Despite
Consumer Psychological Realities, 5 N.Y.U. J. L. & BUS. 617 (2009); and
Jessica M. Choplin, Debra Pogrund Stark and Jasmine N. Ahmad, A
Psychological Investigation of Consumer Vulnerability to Fraud: Legal
and Policy Implications, 35 LAW& PSYCHOLOGY REV. 61 (2011).
50
See Wiegand v. Walser Automotive Groups, Inc., 683 N.W.2d 807
(Minn. 2004) (in applying the Minnesota consumer protection act, the
Minnesota Supreme Court rejected the argument that reliance on oral
statements was unreasonable because of a contradiction in the written
contract).
17-Apr-14] Wrecking Ball: ALECs Model Act 15
facts. Consumers who are vulnerable to exploitation or are
fooled by a sellers exaggerations or opinions could be precluded
from bringing suit under the guise of not being reasonable
consumers.
51
The approach advocated in the ALEC Model Act
might even lead to the imposition of a duty to investigate sellers
statements by consumers, a throwback to the days of caveat
emptor.
52

The ALEC Model Act, including the section quoted
above, is designed to be incorporated into and to cross-reference
the states existing statute. Thus, in the provision providing for a
private right of action to a person who reasonably relies upon an
act or practice declared unlawful by [another section of the
UDAP statute], it is possible that this could be referring back to
a general prohibition on unfair or deceptive acts or practices,
or it could be referring to an enumerated list of practices, as was
the case in the Tennessee amendment described above.
53
If the
cross-reference provides a private right of action only for
enumerated practices, this would be a significant reduction in the
scope of the private right of action in most states.
54
Also, a
reasonable reliance requirement would be problematic in the
case of unfair practices, as opposed to deceptive practices. An
unfair practice does not necessarily involve a misrepresentation
that can be relied on. For example, state consumer protection
laws have been applied to abusive debt collection, systematic
breach of contract or price gouging
55
but such cases could be

51
See examples cited in Dee Pridgen & Richard M. Alderman,
CONSUMER PROTECTION AND THE LAW 3:5 (West 2013-2014 ed.).
52
See National Consumer Law Center, UNFAIR AND DECEPTIVE ACTS
AND PRACTICES 4.2.20 (8th Ed. 2012).
53
See supra note ___.
54
See Rebecca Eschler Russell, Unlawful Versus Unfair: A
Comparative Analysis of Oregons and Connecticuts Statutes Encouraging
Private Attorneys General to Protect Consumers, 47 WILLAMETTE L. REV.
673, 681-682 (2011).
55
See, e.g., Kett v. Community Credit Plan, Inc., 228 Wis. 2d 1, 596
N.W.2d 786 (1999) (abusive debt collection); Schuchmann v. Air Services
Heating & Air Conditioning, Inc., 199 S.W.3d 228 (Mo. Ct. App. 2006)
16 Wrecking Ball: ALECs Model Act [17-Apr-14
precluded by a reasonable reliance requirement.

Section 1(B) provides for a ten-day prior notice
requirement to give the prospective defendant an opportunity to
confer, and presumably to attempt to settle the case. Currently,
only eleven states have such an advance notice requirement.
56

Advance notice requirements may sound reasonable, but
constitute a special burden on consumer suits that is not present
for other lawsuits. Failure to provide the notice within the
specified time period may result in dismissal of an otherwise
meritorious lawsuit. Also, such prior notice allows businesses
who are engaged in unlawful practices to pick off the plaintiffs
by providing restitution to consumers only in those instances
when they are caught.
57
Query whether a special advance notice
is even necessary given that most parties to lawsuits are willing
to negotiate a settlement once a complaint is served, and that
most lawsuits are indeed settled prior to going to trial.
Section 1(A) of the Model Act also specifies that a person
seeking to pursue a private right of action must have suffered an
ascertainable loss of money or property as a result of their
reasonable reliance on an unlawful act or practice. This
requirement is more common than the advance notice
requirement, being present in the state consumer protection
statutes of 34 states.
58
As a practical matter, most plaintiffs bring
a lawsuit to collect damages, and thus proof of ascertainable loss
is not necessarily an unreasonable requirement for suit. It is
basically a standing issue, and need not be interpreted harshly
against the consumer who suffers a small loss, as long as it is

(systematic contract breach); Perry Homes v. Alwattari, 33 S.W.3d 376
(Tex. App. 2000) (price gouging).
56
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW Appendix 5A (West 2013-2014 ed.).
57
Carolyn L. Carter, Consumer Protection in the States: A 50-State
Report on Unfair and Deceptive Acts and Practices Statutes, National
Consumer Law Center, Feb. 2009, available at www.consumerlaw.org.
58
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW Appendix 5A (West 2013-2014 ed.).
17-Apr-14] Wrecking Ball: ALECs Model Act 17
ascertainable. Even hard-to-quantify injuries have been
sufficient to meet this provision, as applied by state courts under
existing law. For example, a Utah customer who alleged that a
health club had caused unsubstantiated negative information to
be placed in his credit report suffered an ascertainable loss
because it could result in the consumer paying higher interest on
credit cards or other credit transactions.
59
The ALEC version of
ascertainable loss, however, limits it to losses of money or
property, and might not recognize losses suffered by consumers
from invasion of privacy, security breaches, or harassment. The
ascertainable loss requirement, at least in its more common form
that is not limited to loss of money or property, may be
warranted in individual actions but it would be a major obstacle
if applied to class actions.
The ALEC Model Act Section 1(A) would limit consumer
damages to the out-of-pocket loss the person sustained as a
result of such act or practice, thus precluding statutory,
punitive, or other types of damages, such as mental anguish.
60

Out-of-pocket loss is defined as no more than the difference
between what the person paid for the product or service and what
the product or service was actually worth in the absence of the
unlawful act or practice.
61
This provision eliminates the
availability of punitive damages, even in cases of wilful fraud
against the public. It also appears to eliminate the possibility of
consequential damages, which could be quite important in
consumer cases where the actual loss in value of the product or
service is far less than the damage caused by the unfair or
deceptive practice. For instance, if exterior siding is sold and
installed pursuant to a misrepresentation that it is waterproof, but
in fact is leaky, then under the ALEC formulation of damages,

59
Andreason v. Felsted, 137 P.3d 1 (Utah Ct. App. 2006).
60
Section 1(A), ALEC Model Act on Private Enforcement of
Consumer Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.
61
Id.
18 Wrecking Ball: ALECs Model Act [17-Apr-14
the consumer would get only the loss in value of the price of the
siding, and would not be compensated for having to remove and
replace the siding and repair the damage caused by the leaks.
62

An alternative section in the ALEC model act provides an
option for treble damages, but is limited to cases where the
unlawful act or practice was willful with the purpose of
deceiving the public, and would have a ceiling of $500 per
person.
63
These provisions, which have the effect of eliminating
or severely limiting statutory damages, will undermine the
original statutory goal of providing an incentive to consumers to
bring meritorious suits for small claims where actual damages do
not cover the cost of going to court. This approach to damages
also eliminates the possibility of compensation for mental
anguish, or pain and suffering, as well as consequential damages.
If enacted, this provision would cause the law to revert to the
situation prior to the original passage of the state UDAPs, where
the potential payout was so low that any attempt by consumers to
obtain legal redress for unfair or deceptive trade practices would
have been futile and/or financially irrational.
It is true that, like the ALEC Model Act, existing
provisions for certain types of statutory damages under state
consumer protection statutes are sometimes tied to a showing of
a willful violation, or a particularly vulnerable class of victims.
64

However, they are not capped at such a low level as the ALEC
provision. Indeed, in addition to compensating consumers for

62
See, e.g., Robinson Machinery Co. v. Davis, 689 S.W.2d 286 (Tex.
App. 1985) (faulty car repair caused continuing damage, consumer received
consequential damages). See also examples cited in National Consumer
Law Center, UNFAIR AND DECEPTIVE ACTS AND PRACTICES 12.3.3 (8th
Ed. 2012).
63
Section 1(C), ALEC Model Act on Private Enforcement of
Consumer Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.

64
Cal. Civ. Code 1780(b) provides a $5,000 minimum damage remedy
to elderly or handicapped consumers.
17-Apr-14] Wrecking Ball: ALECs Model Act 19
the cost of bringing their cases, the statutory damage provisions
(and punitive damages in some states) can also be used for
punishment or deterrence of wrongdoers.
65
A limit to actual
damages and/or a cap of $500 would mean that there would be
little or no possibility of fulfilling the goal of making it possible
for consumers to bring meritorious cases to court. Indeed, in the
unlikely event that a wrongdoer were even sued under a statute
based on the ALEC Model Act, the limitations on damages are
such that any damage award would be only a slap on the wrist
that would not be effective at all to deter future unfair or
deceptive practices.
Section 1(F) provides for class actions under the state
consumer protection act, but limits such actions to persons who
show both reasonable reliance on the challenged act or practices,
as well as ascertainable loss.
66
Also, statutory damages are
eliminated, with damages limited to actual out-of-pocket loss.
As discussed above, a major reason for the passage of state
UDAP statutes with their favorable provisions for consumer
plaintiffs was to provide access to justice for consumers who had
only small claims to litigate, which made court cases too costly
for most. Class actions for consumers provide another avenue
for consumers with small claims to be heard, because the
aggregation of numerous small claims can make it worthwhile
for attorneys to take such cases.
67
Class actions, however, have

65
Nine consumer protection statutes specifically authorize the award of
punitive damages, including California, Connecticut, District of Columbia,
Georgia, Idaho, Kentucky, Missouri, Oregon and Rhode Island. See Dee
Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND THE LAW
Section 6:16 (West 2013-2014 ed.).
66
The reasonable reliance and ascertainable loss requirements are
incorporated into the class action by language stating that persons bringing
a class action have to be entitled to bring an action under Subsection A,
which requires those elements. Section 1(F), ALEC Model Act on Private
Enforcement of Consumer Protection Statutes, available at
http://www.alec.org/model-legislation/model-act-on-private-enforcement-
of-consumer-protection-statutes.
67
Amchem Prods., Inc. v. Windson, 521 U.S. 591, 617 (1997).
20 Wrecking Ball: ALECs Model Act [17-Apr-14
to comply with basic rules of civil procedure, such as presenting
common questions of law and fact.
68
By requiring a showing of
individual reasonable reliance and ascertainable loss for class
actions under the ALEC model law, the law virtually guarantees
that no class actions will be viable because these elements will
vary from individual to individual and the class may not be able
to satisfy the requirement of the predominance of common
questions of law and fact. This aspect of the model law, as well
as the larger constellation of anti-consumer plaintiff restrictions
discussed in this article, raises the question of whether the real
agenda of the model law is not law reform, but rather the
effective elimination of private enforcement of consumer
protection laws.
Critics of class actions, especially those filed under the
state UDAP laws, have argued that requiring a showing of
individualized reliance is necessary to curb abuses, such as
overcompensation of uninjured plaintiffs.
69
By definition, it may
appear, compensating a consumer who cannot prove reliance on
a false claim or cannot prove they have suffered direct harm
from an unfair practice, is a case of over compensation. Also,
if advertisers can be answerable for misrepresentations that were
not actually relied on by all consumers in the plaintiff class, it is
feared that commercial speech may be chilled.
70
It is also argued
that deterrence of deceptive or unfair trade practices can be best
achieved by relying on government agencies, such as the FTC
and the state attorneys general, such that the private attorney
general function of consumer class actions is no longer

68
Federal Rules of Civil Procedure, Rule 23(b)(3).
69
Sheila B. Scheuerman, The Consumer Fraud Class Action: Reining in
Abuse by Requiring Plaintiffs to Allege Reliance As an Essential Element,
43 HARV. J. ON LEGIS. 1 (2006). But see Samuel Issacharoff, The Vexing
Problem of Reliance in Consumer Class Actions, 74 TUL. L. REV. 1633
(2000) (arguing that in some situations reliance can be inferred in consumer
class actions rather than having to be proved for each individual plaintiff).
70
Henry N. Butler & Jason S. Johnston, Reforming State Consumer
Protection Liability: An Economic Approach, 2010 COLUMBIA BUS. L.
REV. 1 (2010).
17-Apr-14] Wrecking Ball: ALECs Model Act 21
warranted.
71

Yet the original philosophical underpinning of the
movement toward consumer class actions was not only to
provide a more efficient and less burdensome gateway to the
court system for injured consumers, but also to harness the
resources of private attorneys general to represent not only
themselves but also the public in general and to deter
corporations from engaging in unfair and deceptive trade
practices.
72
The move toward putting more restrictions on
private class actions to enforce consumer laws is basically an
attempt to restrict class actions solely to address individual
injury. These reforms are a rejection of the view that class
actions, especially in the consumer protection area, can be a
vehicle for the public good in deterring and punishing bad
actions and requiring the disgorgement of ill-gotten gains.
73

Under FTC jurisprudence, on which state UDAP statutes were
based, there is no requirement for showing individual reasonable
reliance on deceptive practices, but rather the standard is a
showing of tendency or capacity to deceive or likely to
mislead consumers acting reasonably under the circumstances.
74

Actual consumer injury is not required for FTC actions and thus
proof of actual injury, reliance and ascertainable loss for
consumer class actions under little FTC Acts should also not
be required. Using an objective standard such as likely to

71
Scheuerman, supra n. ___.
72
Mark E. Budnitz, The Federalization and Privatization of Public
Consumer Protection Law in the United States: Their Effect on Litigation
and Enforcement, 24 GA. ST. U. L. REV. 663 (2008).
73
Myriam Gilles, Class Dismissed: Contemporary Judicial Hostility to
Small-Claims Consumer Class Actions, 59 DEPAUL L. REV. 305 (2010).
74
See Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION
AND THE LAW 10:3 and Appendix 10A, FTC Policy Statement on
Deception (West 2013-2014 ed.).Twenty-two states use the tendency or
capacity to deceive standard in their state UDAP statues. Dee Pridgen &
Richard M. Alderman, CONSUMER PROTECTION AND THE LAW Appendix 3B
(West 2013-2014 ed.).

22 Wrecking Ball: ALECs Model Act [17-Apr-14
mislead consumers acting reasonably, the courts in consumer
class actions under state law can determine whether a practice is
indeed subject to remediation, without the need to burden class
actions unnecessarily.
Statutory minimum or multiple damages in most state
UDAP laws, as previously discussed, provide some minimum
quantity of relief for smaller or less tangible consumer injuries.
Such provisions make it economically feasible for consumers to
attain redress for relatively small injuries. In the ALEC model
provision on class actions, statutory damages are eliminated for
both individual and class actions. While it is true that the
combination of statutory damages and a very large consumer
plaintiff class can in some situations result in huge recoveries
that may be financially disastrous for the defendant, there are
other ways to deal with this than simply prohibiting the award of
statutory damages in all class actions under the state consumer
statute. For instance, the federal Truth in Lending Act (TILA)
provides for statutory damages, but also limits liability in TILA
class actions to the lesser of $1,000,000 or 1% of the
creditor/defendants net worth.
75
If the possibility of excessive
awards based on the multiplication of statutory damages is a
concern with regard to class actions under state consumer
protection acts, a similar type of cap on statutory damages would
be a reasonable compromise to allow the class litigation of small
claims while not being overly burdensome to the defendants.
Section 2(A) of the ALEC Model Act allows for
attorneys fees to a prevailing consumer plaintiff, but only if
there is a finding by the court or trier of fact [e.g., arbitrator]
that the defendants use or employment of the unlawful act or
practice was willful with the purpose of deceiving the public.
76

This provision alone is likely to greatly reduce the utility of the

75
15 U.S.C. 1640(a)(2)(B).
76
Section 2(A), ALEC Model Act on Private Enforcement of Consumer
Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.
17-Apr-14] Wrecking Ball: ALECs Model Act 23
state consumer protection laws to consumer plaintiffs, especially
individual plaintiffs. Presently, forty-five state consumer
protection statutes provide for attorneys fees to the prevailing
consumer plaintiff.
77
Twenty-one of these statutes actually
mandate that the court award attorneys fees to a prevailing
plaintiff, while twenty-three provide that the court award
attorneys fees to the prevailing plaintiff in the courts
discretion.
78
A 2008 study asked groups of both consumers and
attorneys whether they would be discouraged from bringing what
they viewed as strong meritorious claims if the attorney fee
award was discretionary rather than mandatory. The results
showed that both groups would be less willing to bring such
claims if the attorneys fee provision was discretionary rather
than mandatory.
79
The requirement of showing a willful act
intended to deceive the public as a prerequisite for recovering
attorneys fees will likely place an even higher barrier to the
filing of meritorious suits than merely having the fee award at
the discretion of the court.
Private consumer UDAP suits are not likely to be filed at
all without a provision for an attorney fee award.
80
A fee award
that is contingent on a showing of willfulness and intent to
deceive the public may be tantamount to no fee at all. The
requirement of a willful act increases the burden of proof.
81
It

77
Carolyn L. Carter, Consumer Protection in the States: A 50-State
Report on Unfair and Deceptive Acts and Practices Statutes, National
Consumer Law Center, Feb. 2009, available at www.consumerlaw.org.

78
Debra Pogrund Stark & Jessica M. Choplin, Does Fraud Pay? An
Empirical Analysis of Attorneys Fees Provisions in Consumer Fraud
Statutes, 56 CLEV. ST. L. REV. 483 (2008).
79
Id. at 514-515.
80
For instance, the Wyoming state UDAP statute provides for attorneys
fees to the prevailing plaintiff only in class actions, not for individual suits.
Wyo Stat. Ann. 40-12-108. Although the statute has been on the books
since 1973, there has not been a single reported case of a private suit under
this statute.
81
North Carolina is the only state that has deemed it necessary to limit
consumer plaintiff attorney fee provisions to cases of willful unlawful acts.
24 Wrecking Ball: ALECs Model Act [17-Apr-14
would be very difficult to prove a willful act because the
consumer would have no access to a merchants intent without
costly discovery. This requirement also increases the risk to the
attorney who takes on a consumer plaintiffs case. Such
attorneys will have to weigh the possibility that they could win
the suit and yet still not get paid if they cannot prove the
requisite willfulness with intent to deceive the public. Also this
element is like the old scienter or intent to deceive
requirement for common law fraud, a requirement that most of
the state UDAP statutes intended to eliminate. It also appears to
be a back door method of incorporating a public interest
requirement into the statute, since a plaintiff who wants
attorneys fees would have to show a purpose of deceiving the
public and not just an individual.
82
Such a requirement,
imposed by the court in some states, has been shown to reduce
the number of individual cases.
83
The requirement of a finding
of intent to deceive the public may also eliminate attorneys
fees for cases that involve unfair, but not necessarily deceptive
practices.
The ALEC Model Act also provides for attorneys fees to
be paid by the consumer to the prevailing defendant upon a
finding by the court that the action was groundless in fact or law
or brought in bad faith, or brought for the purpose of
harassment.
84
Some type of provision for awarding attorneys

N.C. Gen. Stat. 75-16.1, as discussed in Marshall v. Miller, 276 S.E.2d 397
(N.C. 1981).
82
See Prentiss Cox, Goliath Has the Slingshot: Public Benefit and
Private Enforcement of Minnesota Consumer Protection Laws, 33 WM.
MITCHELL L. REV. 163, 210-211 (2006). See also Prentiss Cox, CONSUMER
FRAUD AND DECEPTIVE TRADE REGULATION IN MINNESOTA 4.1C2(a)
M.S.B.A. (2009).
83
See Prentiss Cox, CONSUMER FRAUD AND DECEPTIVE TRADE
REGULATION IN MINNESOTA 4.1C2(a) M.S.B.A. (2009).
84
Section 2(B), ALEC Model Act on Private Enforcement of Consumer
Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.
17-Apr-14] Wrecking Ball: ALECs Model Act 25
fees to a prevailing defendant is present in many states.
85
The
limitation of defendants attorneys fees to groundless, bad faith
or harassment suits is probably a necessary safeguard against the
abuse of these statutes and should not prove to be a major
obstacle to meritorious suits.
The ALEC Model Act has a limitation of actions (statute
of limitations) of one year from the date of discovery by the
person bringing the action.
86
The existing state consumer
protection statutes have statutes of limitation ranging from one
year (6 states) to two years (10 states) to 3 or 4 years (15
states).
87
While using a discovery rule rather than a time limit
that starts with the violation is somewhat favorable to consumers,
the one year from discovery limit is on the harsh end of the
spectrum and does not reflect the purpose of these laws to open
the courthouse doors to victims of unfair or deceptive trade
practices, rather than shutting them unnecessarily. The ALEC
statute of limitations section contains an additional restriction,
however, that states in no event may any action be brought
under this chapter more than four years after the first instance of
the act or practice giving rise to the cause of action.
88
This
seems to be saying that the statute of limitations does not start to
run from the last action that is the subject of the suit, but from
the first instance of a similar act, when the seller first instituted

85
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW 6:21-22(West 2013-2014 ed.).
86
Section 3, ALEC Model Act on Private Enforcement of Consumer
Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.

87
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW Appendix 6A (West 2013-2014 ed.).

88
Section 3, ALEC Model Act on Private Enforcement of Consumer
Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.

26 Wrecking Ball: ALECs Model Act [17-Apr-14
the practice, even though it may not have affected the individual
bringing suit until much later, possibly later than four years.
This unusual way of applying a statute of limitations could be
applied to immunize potentially illegal actions simply because
they have been going on without being subject to suit for more
than four years.
Finally, The ALEC model law provides for some
exemptions to the scope of the act, as do most existing state
consumer protection laws. While these may appear to be
innocuous, the exemption for regulated practices is so sweeping
that it comes close to providing immunity for almost any
business practice. Many state laws currently exempt acts or
practices specifically required or permitted by state or federal
law.
89
The ALEC model law, however, would exempt [a]cts or
practices required or permitted by or in accord with state or
federal law, rule or regulation, judicial or administrative
decision, or formal or informal agency action.
90
This could be
interpreted to exempt any activity that is not addressed by current
law, since by definition, such a practice would be permitted. The
reference to judicial or administrative decisions would also
provide legal cover for any practice that has been permitted, even
indirectly, by some court or agency decision involving similar
practices by different entities. Finally, the exemption based on
informal agency action opens the door to claims that unfair or
deceptive actions were blessed by a statement of low-level
agency staff, and are thus exempt.
In sum, while there may be room for some reforms or
limitations on private UDAP suits, such as the ascertainable loss

89
See, e.g., N.M. Stat. Ann. 57-12-7, as applied in Quynh Truong v.
Allstate Ins. Co., 227 P.3d 73 (N.M. 2010). See generally Dee Pridgen &
Richard M. Alderman, CONSUMER PROTECTION AND THE LAW 4:32-33
and Appendix 4A (West 2013-2014 ed.).
90
Section 4(A)(1), ALEC Model Act on Private Enforcement of
Consumer Protection Statutes, available at http://www.alec.org/model-
legislation/model-act-on-private-enforcement-of-consumer-protection-
statutes.
17-Apr-14] Wrecking Ball: ALECs Model Act 27
requirement in individual suits, the thrust of the ALEC Model
Act is to advocate a wide array of every plausible limitation to
private suits, and to always advocate the most anti-consumer
plaintiff version of any limitation. Thus, if adopted in its
entirety, the ALEC Model Act would effectively eliminate
private UDAP suits. The ascertainable loss/reasonable reliance
requirement would in effect wipe out class actions, and the limits
on attorneys fees and damages will greatly diminish the
feasibility of bringing individual cases. Putting all these
provisions together, the private right of action under state
consumer protection laws will be eliminated. This
sledgehammer approach is both uncalled for and unnecessary.
Indeed, as will be shown in the next section, the reports and
studies purporting to show the need for restrictions on private
UDAP suits are flawed and should not be viewed by state
policymakers as conclusive evidence of the need for statutory
reform.


IV. Studies Provide Fig Leaf for Move to Abolish
Private Right of Action
The criticism of state UDAP private enforcement began to
mount in the past decade or so, at a time when private UDAP
litigation began to increase. Whether the upsurge in cases is a
sign that the statutes are finally being used to consumers benefit,
or whether it is a sign that the statutes are in need of reform is a
matter of debate. In this section, the arguments raised against the
private enforcement of state UDAP statutes will be examined.
First, critics of these consumer protection actions argue that
decisions by state courts in private consumer cases are
unpredictable and go beyond what the FTC would do. Second, it
has been asserted that increasing consumer protection litigation
will increase the prices of unrelated products, such as automobile
insurance. The calls for legislative reform based on these studies
amount to an attempt to use flawed empirical studies to
28 Wrecking Ball: ALECs Model Act [17-Apr-14
support an agenda aimed at slashing the continued viability of
the state consumer protection statues as they currently exist.
They give an aura of a scientific or empirical basis for policy
changes while hiding the actual effect of eliminating important
consumer rights. Each of these arguments will be discussed
below.
In 2009, the Searle Civil Justice Institute, a conservative
think tank based at Northwestern University School of Law,
published a report entitled State Consumer Protection Acts, An
Empirical Investigation of Private Litigation.
91
This report
assembled a random sample of state appellate court consumer
protection decisions from a database encompassing thousands of
such decisions from all fifty states and the District of Columbia
decided between 2000 and 2007.
92
These decisions were then
summarized and presented to a Shadow FTC composed of five
still unnamed individuals said to include persons with substantial
experience at or with the FTC Bureau of Consumer Protection.
93

None of these materials have been released, however. The case
summaries were presented to the shadow FTC who concluded
that 78% of the sample state UDAP claims would not be
considered unfair or deceptive under FTC policy statements, and
that 38% of the successful claims at trial would not constitute
illegal conduct under the FTC standards.
94
From this data, the
authors concluded that the state consumer protection decisions
go beyond filling the gap of cases that the FTC would have
enforced had they had the resources to do so. They also
concluded that the statutory standards for defining unfair and
deceptive practices under the state laws are too vague, and that

91
Joshua D. Wright, State Consumer Protection Acts: An Empirical
Investigation of Private Litigation, http://www.ssrn.com/abstract=1708175
(2010), based on Searle Civil Justice Institute Preliminary Report (2009).
[Hereafter Searle Shadow FTC Report]. The study is also summarized
and analyzed in Henry N. Butler and Joshua D. Wright, Are State Consumer
Protection Act Really Little-FTC Acts?, 63 FLA. L. REV. 163 (2011).
92
Id.
93
Id.
94
Id.
17-Apr-14] Wrecking Ball: ALECs Model Act 29
the litigation provisions are too consumer-friendly, leading to an
increase in private consumer protection litigation over the study
period of 2000-2007.
95

The use of empirical research to support calls for public
policy reform is usually helpful and should be welcomed by
policy-makers.
96
In this case, however, some questions can be
raised about the research methods and the resulting report. For
instance, the shadow FTC members, whose decisions form the
basis for the claim that most of the cases brought in state courts
under state UDAP statutes would not have been brought by the
FTC, are never identified and no reason is given for this secrecy.
Thus, it is impossible for scholars to determine whether or not
those individuals were qualified and/or were perhaps biased in
their decisions. Also, the opinions of the shadow FTC
members are just that, opinions. This is at best subjective
evidence, and not objective fact, since the FTC did not actually
review or decide any of the cases that were involved in the study.
Second, the data base of cases, i.e., the random sample of cases
chosen and the summaries used were also never released. Only
two examples were given and even these are not specifically
identified as to the specific cases on which they were based.
Thus, it is impossible for others to try to replicate or critique the
results. It is a basic tenet of scientific research that the
researchers should make their data available to others to confirm
their analysis and results.
97
Thus, the assertion that state UDAP
decisions go beyond what the FTC would do is questionable, or
at least cannot be tested by others using the same data. It is also
a disservice to policy makers to put forward research based on a
subjective opinion survey, and present it as empirical findings.

95
Id.
96
At least one author, however, has questioned the ability of judges and
lawyers to use empirical research to inform policy judgments due to their
lack of training in or knowledge of scientific methods. See David L.
Faigman, Judges as Amateur Scientists, 86 B.U. L. REV. 1207 (2006).
97
Publication Manual of the American Psychological Association,
Section 1.08 (Data Retention and Sharing) (2010).
30 Wrecking Ball: ALECs Model Act [17-Apr-14
What can be objectively verified is that most state laws
already refer to FTC jurisprudence for guidance, and that the
state courts applying these laws have adhered to this statutory
directive as best they can.
98
Because this principle of reference
to FTC jurisprudence is embedded in most state laws, the
defendants in state UDAP cases could (and have) used FTC
precedent in their own defense.
99
Also, while these statutes were
indeed modeled on and sanctioned by the FTC when they were
originally passed, they are state laws and concern legal doctrines
such as fraud and contract that are inherently state law matters.
The fact that some states may choose to be guided by but not
bound by FTC precedent is not necessarily a fault, but may be a
virtue in allowing the states to address consumer issues that are
unique to their state.
100
Thus, it is not clear that there is a need to
cut back on consumers access to the courts under the state
UDAP laws based on an alleged straying from FTC
jurisprudence, since adherence to FTC law is already
incorporated into most state laws and is enforced by the state
judiciary applying those laws.
Another study by the Searle Civil Justice Institute, released in
2012, purports to show that the proliferation of private
enforcement under state consumer protection acts has led to an
increase in automobile insurance premiums.
101
This is another

98
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW Appendix 3B (West 2013-2014 ed.).
99
See, e.g., State v. American TV and Appliance of Madison, Inc., 430
N.W.2d 709 (1988) (Wisconsin Supreme Court majority used FTC bait
and switch guidelines to buttress its conclusion that the practices cited in
the states complaint did not violate Wisconsin law).
100
See, e.g., ASRC Energy Services Power and Communications, LLC
v. Golden Valley Elec. Assn, Inc., 267 P.3d 1151, 1161 (2009) (Alaska
Supreme Court chose to apply traditional FTC standard for unfairness,
rather than an updated one, to avoid overturning state court precedents and
because they did not want to use a standard that might result in less
protection for Alaska consumers and business people).
101
Searle Civil Justice Institute, George Mason University School of
Law, Law & Economics Center, State Consumer Protection Acts and Costs
17-Apr-14] Wrecking Ball: ALECs Model Act 31
example of a flawed empirical study that is being used to
influence public policy. First, the study looks only at the costs of
litigation under state consumer protection acts. It does not even
purport to look at the benefits to the consumers who brought the
cases, and other consumers who may benefit from the deterrent
effect on unfair and deceptive practices. Also, the study is said
to measure the impact of state consumer protection liability on
the costs of automobile insurance. This is rather striking in that
many state consumer protection statutes specifically exempt
insurance matters from their coverage on the basis that insurance
is already a state-regulated industry.
102
In some states, insurance
has been exempted not specifically in the state consumer
protection act, but by state court interpretation under a general
statutory exemption for regulated industries.
103
Also, litigation
involving automobile insurance providers is just one small part
of the overall litigation under consumer protection statutes, and
litigation costs may represent only a small part of the costs of
providing insurance.
The Searle automobile insurance cost study was done by
analyzing the provisions of the state laws, identifying statutory
amendments promulgated over a period of time that would
encourage or discourage potential plaintiffs from filing suit, and
then constructing an index (the Consumer Protection Acts or
CPA Index) that would supposedly track a plaintiffs willingness
or ability to file suit over time.
104
Changes in the CPA Index

to Consumers: The Impact of State Consumer Acts on Automobile
Insurance Premiums (2011), available at http://www.masonlec.org.
[Hereafter Searle Auto Insurance Study]
102
Dee Pridgen & Richard M. Alderman, CONSUMER PROTECTION AND
THE LAW 4:28 & 4:29 (West 2013-2014 ed.).

103
See, e.g., Wilder v. Aetna Life & Cas. Ins. Co., 433 A.2d 309 (Vt.
1981); Taylor v. Southern Farm Bureau Cas. Co., 954 So. 2d 1045 (Miss.
Ct. App. 2007); Ferguson v. United Ins. Co. of America, 293 S.E.2d 736
(Ga. Ct. App. 1982); Britton v. Farmers Ins. Group, 721 P.2d 303 (Mont.
1986).
104
Searle Auto Insurance Study, supra n. __.
32 Wrecking Ball: ALECs Model Act [17-Apr-14
for each state were then correlated to changes in automobile
insurance premiums in the state to determine the impact of
different CPA provisions on automobile insurance premiums by
state over time.
105
While the state statutes themselves are public
information, the studys analysis and scoring of the various
provisions of each state law was presented in summary form,
making it difficult to evaluate the soundness of the analysis. For
instance, one of the attributes that made up the index was
whether or not the statute required a public interest impact for
a private cause of action.
106
Yet this aspect or something like it
may be read into the law by court decision, and might not be
apparent on the face of the statute.
107
It appears from the
description of the Searle Auto Insurance Study that the Index
was compiled by looking only at the language of the statutes, and
did not examine state court interpretations.
The expressed concern that state consumer protection acts are
being unreasonably expanded is unwarranted, at least as this is
evidenced by the studies done by the Searle Institute. As
discussed above, the methodology used in these studies was
flawed, and the studies have been used to make policy
recommendations, such as the proposed ALEC Model Act, that
are not necessarily supported by the research. Meanwhile, state
court judges can and do interpret and apply their own state laws
in such a way as to avoid expansions if the courts conclude that
such expansion was not authorized by the state legislature. As
mentioned above, courts have inferred a public interest
requirement to rein in overzealous litigation.
108
Some courts
have also read a reasonable reliance standard into the
applicable state consumer protection act even if it is not actually

105
Id.
106
Id.
107
See, e.g., Oswego Laborers Local 214 Pension Fund v. Marine
Midland Bank, 647 N.E.2d 741 (N.Y. 1995) (requiring that cases be
consumer oriented, i.e., affecting consumers at large) and Hall v. Walter,
969 P.2d 224 (Colo. 1998).
108
See supra n. ___.
17-Apr-14] Wrecking Ball: ALECs Model Act 33
written into the statute.
109
Thus there is no need for explicit
legislation that would expand the limits already being imposed
by the judges.
It is undisputed that private litigation has increased (and
possibly peaked) over the past decade under the state consumer
protection laws.
110
However, this is not in itself a negative trend.
It may be that more consumers were realizing the potential of
these state laws to fight deceptive or unfair practices for which
there would otherwise be no legal remedy. What the ALEC
Model Act seeks to do is to put the squeeze on the private right
of action under state UDAP statues by a proposed reform
statute that in fact eviscerates the use of these laws by private
attorneys general. This approach goes hand in hand with the
move to eliminate or greatly restrict the use of class actions for
consumer cases, as well as the unprecedented rise in the use of
arbitration clauses in consumer contracts.
In tandem with the move to limit private enforcement of
consumer protection statutes, as exemplified in the ALEC model
statute, there has also been a movement, fueled by recent United
States Supreme Court decisions, to force most consumer disputes
out of the court system altogether and into private arbitration.
111

This has been done through the strict enforcement of arbitration
clauses that have become prevalent in all types of standard
consumer contracts. What this means is that many consumer
disputes that formerly might have been litigated in state courts
under the state UDAP statutes are now either forced into
arbitration or are not resolved in any forum.
112
Even class

109
See, e.g., Zeeman v. Black, 273 S.E. 2d 910 (1980).
110
See Henry N. Butler & Jason S. Johnston, Reforming State Consumer
Protection Liability: An Economic Approach, 2010 COLUM. BUS. L. REV.
1, 6 (2010).
111
Mark E. Budnitz, The Federalization and Privatization of Public
Consumer Protection Law in the United States: Their Effect on Litigation
and Enforcement, 24 GA. ST. U. L. REV. 663 (2008).

112
See David S. Schwartz, Claim-Suppressing Arbitration: The New
Rules, 87 Ind. L.J. 239 (2012).
34 Wrecking Ball: ALECs Model Act [17-Apr-14
arbitrations can be eliminated by the inclusion of class arbitration
or class action waivers in standard form contracts that are then
enforced against any and all objections, including
unconscionability.
113
While the issue of arbitration of consumer
claims is not addressed by the ALEC model statute, and is
beyond the scope of this article, it is clear that the proposals for
severe limits on private enforcement of consumer protection laws
should be viewed as part of an overall slide away from idea of
improving consumer access to justice that was at the heart of the
original state consumer protection laws. Thus, the need for a
viable private enforcement vehicle to protect both individual
consumers and the public at large is ever more important.

V. Conclusion
This article has argued that the Model Act on Private
Enforcement of Consumer Protection Statutes put forth by the
conservative, industry-funded think tank, the American
Legislative Exchange Council, is both unnecessary to correct
perceived abuses, and in fact would undermine over forty years
of consumer protection embodied in the state unfair and
deceptive trade practices acts. The state UDAP statutes
originated in the late 1960s and were passed by most states in
the early 1970s as a vehicle to provide consumers who had
relatively small claims with access to the courts for redress
against unfair and deceptive trade practices. The key features of
these statutes, such as private enforcement, special damages,
lower burdens of proof and attorneys fees for prevailing
consumer plaintiffs, would be seriously limited by the ALEC
Model Act. In addition, there is no credible evidence to date
proving that the rise in consumer lawsuits under the existing laws
is contrary to public policy. Thus, state legislators should take a
moment to contemplate whether sweeping changes in their

113
AT&T Mobility LLC v. Concepcion, 563 U.S. ___, 131 S. Ct. 1740,
179 L. Ed. 2d 742 (2011). See Jean R. Sternlight, Tsunami: AT&T Mobility
LLC v. Concepcion Impedes Access to Justice, 90 OR. L. REV. 703 (2012).
17-Apr-14] Wrecking Ball: ALECs Model Act 35
existing consumer protection statutes are in the public interest
before taking any drastic actions. They should not be fooled into
thinking the ALEC Model Act is merely a law reform measure,
when it is in fact a wrecking ball that will demolish a critical
aspect of consumer protection in the United States.

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