How Massachusetts General Law 93A Affects Online Businesses

Massachusetts General Law 93A, titled Regulation of Business Practices for Consumers Protection, is designed to protect those consumers who would otherwise be unaware of their legal rights. Mass. Gen. Law 93A. As it was originally drafted, 93A did not create a private right to sue, an issue which was quickly addressed by the legislature, and now both consumers and businesses can use 93A as a basis for enforcing their rights through private law suit. Unlike some other states, the Massachusetts consumer protection statute provides for an express, rather than an implied, right to sue for businesses who feel they have been victim of a deceptive or unfair act. It is often easy to spot a consumer protection issue with standard businesses, such as: bait and switch advertising, failure to disclose defects, price-fixing, faulty warranty claims and un-bargained for return/refund policies. It becomes much more difficult to determine when a consumer protection claim based upon Mass. Gen. Law 93A exists when the business involved is only involved in electronic commerce, and especially when that business is not located within the state.

When evaluating a potential consumer protection claim, it is necessary to keep in mind that the required elements are different for a business and a consumer. A consumer must follow certain procedural and substantive requirements outlined in section 9 of the act. Among other elements, section 9 requires a 30 day demand letter, a showing that they are in fact a consumer, an unfair or deceptive practice, and a showing of damages.

Businesses, especially online businesses, differ substantially in their required elements. Section 11 sets out the requirements for a business 93A claim, and requires that a business show:

  1. That they are a "business" - [involved in the conduct of any trade or commerce];
  2. That the defendant engaged in an "unfair method of competition" or the defendant's actions were "unfair" or "deceptive;"
  3. That these actions occurred primarily and substantially within Massachusetts (the burden is on the defendant to disprove this presumption as a defense); and
  4. That these actions resulted in a loss to the business plaintiff of money or property, real or personal, for money damages to issue; or
  5. That these actions "may have the effect of causing such loss of money or property."

Mass. Gen. Law 93A
Because of the openness of the internet, and the anonymity involved, it can be extremely difficult to demonstrate that a certain method was either unfair or deceptive. More difficult, especially in the context of an online business, is demonstrating that a certain act has the effect of causing damages or loss. Since online transactions vary in amount and since the market is continually expanding, it can be extremely difficult to demonstrate actual loss, or even potential for loss. Since each element must be present before filing a claim, the prudent advocate will research the facts of the case prior to initiating a 93A claim. Without the properly pled elements, most judges will discard with the case at the first possible opportunity.

In addition, online businesses present unique jurisdictional issues that may confuse the use of 93A for consumer protection purposes. In order for there to be any hope of applying 93A to an online business, the "unfair or deceptive act" must have primarily or substantially occurred within the Commonwealth of Massachusetts. When neither the deceptive/unfair act, nor the harm takes place in MA, a consumer protection claim will be barred based upon 93A, even if the victim is a Massachusetts resident or business. In the recent Massachusetts Superior Court case of Fillmore v. Leasecomm Corp., the judge dismissed a consumer protection claim brought by a Massachusetts company against a California company because the allegedly deceptive sales tactics and the unfair contracts were all consummated in California. Fillmore v. Leasecomm Corp., 18 Mass. L. Rptr. 560, 2004 WL 3091642 (Mass. Super. Ct. Nov. 15, 2004). In Fillmore, the plaintiff's pleadings failed the 'center of gravity' test applied for jurisdictional purposes, and the claim was therefore dismissed. When deciding whether or not to file a consumer protection claim in Massachusetts, it is best first to look at the act, the harm and the jurisdiction. The more that occurred within Massachusetts jurisdiction, the more likely the claim will be allowed to proceed. However, Massachusetts courts do find in favor of Massachusetts companies when all the elements, including the jurisdictional ones are met. If a contract was to be performed in Massachusetts, and the damages took place in Massachusetts, then the jurisdictional element will be met and the court will find for the claimant, as the Massachusetts appeals court did in Auto Shine Car Wash Sys. v. Nice 'n Clean Car Wash, Inc. In Auto Shine, the parties frequently met in Massachusetts, and the misrepresentation originated in Massachusetts. The court held in favor of the plaintiff for double damages, as there was a willful and knowing violation of Mass. Gen. Laws ch. 93A 58 Mass. App. Ct. 685 (Mass. Appeals Ct. 2003).

Filing a consumer protection claim presents a substantially increased level of evidence and jurisdiction requirements when your client is a business. Beware of the consequences and potential wasted time you may use when filing a claim without having every element met. Simply because Massachusetts provides for an express right for businesses to file claims, doe not mean that judges will be willing to overlook even the smallest discrepancies in the pleading requirements.

2 comments:

Sathiaja Sarah said...

dear,
sir/mam
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Sathiaja Sarah said...

dear,
sir/mam
Do you want to start your own business? Are you in need of a website? Choosing a web designer can be a minefield. Read on for the top 7 points you need to check on a web designer's website before handing over any money.
See more at:SEO company Massachusetts

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