TBA Law Blog

Posted by: James Davis on Feb 1, 2013

Journal Issue Date: Feb 2013

Journal Name: February 2013 - Vol. 49, No. 2

Without a great deal of fanfare, the General Assembly in 2011 significantly scaled back the Tennessee Consumer Protection Act (TCPA). One important set of changes came with Tennessee’s “tort reform” law, known as the Tennessee Civil Justice Act of 2011 (Tort Reform Act).[1] Though the headline provisions of that law — especially its imposition of caps on noneconomic and punitive damages[2] — may have overshadowed the changes made to the TCPA,[3] the TCPA changes were material, including a substantial circumscription of the private right of action under the TCPA.[4] (In addition to a general restriction on the private right of action described in this article, the act also eliminated the private right of action under the TCPA relating to the marketing or sale of a security as defined in the Tennessee Securities Act.)[5] Also of note is a second bill passed in 2011, which effectively removed the insurance industry from the scope of the TCPA.[6] Though many casual observers may have missed these changes to the TCPA, the limitations are real, and they restrict the relief available to both consumers and businesses under a frequently used law. The Tort Reform Act took effect on Oct. 1, 2011, and applies to liability actions that accrue on or after that date.[7] The insurance bill took effect on April 29, 2011, and applies to any cause of action that accrues on or after that date.[8]

Tennessee’s original enactment of the TCPA in 1977 was part of a national wave of state consumer protection laws that began in the 1960s.[9] The laws were designed to address perceived shortcomings in the available legal remedies for unfair or deceptive business practices.[10] Today, every state has some form of consumer protection legislation, though significant variations exist state to state.[11] The TCPA derives from a model developed by the Federal Trade Commission and the Committee on Suggested State Legislation of the Council of State Governments.[12] Often known as “Little FTC Acts,” the laws based on this model, like the Federal Trade Commission Act, make “unfair or deceptive” acts or practices unlawful.[13] The Little FTC Acts and other state consumer protection acts gave state agencies and, in many instances private individuals, the power to enforce the prohibitions on unfair or deceptive acts or practices.[14] Many state consumer protection acts also included provisions intended to facilitate parties’ seeking relief under the laws, such as allowing courts to award attorney’s fees, treble damages, or statutory damages.[15]

The TCPA included each of these enhancements.[16]

The 2011 Tort Reform Act limited the scope of the private right of action under the TCPA. The TCPA’s substantive prohibitions on unfair or deceptive acts are set out in two subsections. The first, subsection (a) of section 47-18-104 of the Tenn. Code Ann., contains a broad proscription against “unfair or deceptive acts or practices,” declaring them unlawful and designating them Class B misdemeanors.[17] The second, subsection (b) of section 47-18-104, contains a lengthy nonexclusive list of acts or practices specifically identified as unfair or deceptive.[18] Prior to the amendments in 2011, the TCPA provided a private right of action under either of these subsections by authorizing action by “[a]ny person who suffers an ascertainable loss … as a result of the use or employment by another person of an unfair or deceptive act or practice.”[19] The 2011 amendments, however, added language limiting the private right of action to actions under subsection (b), for violations of one of the list of identified unfair or deceptive acts or practices.[20] Consistent with this limitation, the act also cut off any private right of action under the most open-ended item from the list of specific acts and practices in subsection (b): “[e]ngaging in any other act or practice which is deceptive to the consumer or to any other person.”[21] The list still includes this item, but the 2011 amendments make it enforceable only by the attorney general.[22] These amendments, by removing the private right of action for the “catch-all” provisions of the TCPA, significantly changed the scope of the law for private litigants.[23]

The thinking behind the restrictions on the private right of action seems to have been that the TCPA created too much uncertainty and provided too much room for abuse when it granted private parties a right of action for offenses as amorphous as engaging in “unfair” or “deceptive” acts or practices. The TCPA, after all, provides powerful tools and, without clear boundaries, private litigants may have had some ability to use the tools extortionately, in furtherance of frivolous or weak claims.[24] Indeed, some critics of consumer protection acts have advocated a limited role for the kinds of statutory protections the laws provide, arguing that market forces already discourage unfair and deceptive practices, and that the common law of contracts — such as warranties — and the common law of fraud offer significant protections and signals to consumers.[25] In their view, broad consumer protection laws unnecessarily increase costs and may chill business communication with consumers.[26] Commentators also criticize the private right of action that exists under most state consumer protection laws for failing to require private litigants to consider the public interest in bringing actions under the laws.[27]

But the amendments to the TCPA also removed a potentially important tool for an individual consumer — or even a business[28] — that has been cheated or deceived. The list of specified unfair or deceptive acts or practices in section 47-18-104(b) is lengthy, but the items are, for the most part, fairly specific, such as “[f]alsely passing off goods or services as those of another”[29] and “[a]dvertising goods or services with intent not to sell them as advertised.”[30] (One consequence of the amendments may be to raise the profile of the broadest remaining violation for which a private individual may sue: “[r]epresenting that a consumer transaction confers or involves rights, remedies or obligations that it does not have or involve or which are prohibited by law.”)[31] The “laundry list” of prohibited acts or practices inevitably leaves gaps.[32] For a victim of an unfair or deceptive act or practice that does not fit into one of the items in the subsection (b) list — either because of its novelty or because of the inherent limitations of this type of list — the amendments to the TCPA may have removed one of the most effective means of redress. And the lower-profile acts and practices that do not make the statutory list of specified violations seem the most likely to fall through the cracks in the enforcement by state and federal agencies.[33]

Further, the catch-all provisions of the TCPA are not without boundaries. The TCPA, like a number of other states’ statutes, instructs courts to interpret and construe its provisions in accordance with interpretations of the relevant provisions of the Federal Trade Commission Act.[34] And the Tennessee Supreme Court has stated definitions of both “unfair”[35] and “deceptive.”[36] The TCPA, moreover, already contained provisions designed to prevent abuse. As a counterweight to the provisions that facilitate plaintiff’s actions, the TCPA provides that a court may “require the person instituting the action to indemnify the defendant for any damages incurred, including reasonable attorney’s fees and costs” if the court finds that the “action is frivolous, without legal or factual merit, or brought for the purpose of harassment.”[37] Further, the law encourages reasonable settlements by permitting courts to limit a plaintiff’s recovery to the terms of any “written, reasonable offer of settlement.”[38]

In addition to restricting the private right of action under the TCPA, the General Assembly in 2011 also essentially removed the insurance industry from the scope of the TCPA. Doing so superseded the Tennessee Supreme Court’s 1998 decision in Myint v. Allstate Insurance Company.[39] In that case, the court had concluded that “the insurance regulations in Title 56, Chapters 7 and 8 of the Tenn. Code Ann. do not foreclose application of the Consumer Protection Act to insurance companies,” even though some of the insurance regulations specifically addressed unfair or deceptive acts or practices and included a provision establishing a penalty for an insurer’s bad faith refusal to pay a claim.[40] The Myint court also held that the TCPA’s catch-all provisions brought insurance companies within the scope of the TCPA, notwithstanding the lack of any specific reference to insurance in the nonexclusive list of unfair or deceptive acts or practices.[41]

The 2011 law overrides these holdings. It makes the statutory insurance regulations the sole remedy against an insurer or related entity “for alleged breach of, or for alleged unfair or deceptive acts or practices in connection with, a contract of insurance.”[42] This change essentially precludes any actions under the TCPA relating to insurance, whether by individual consumers, business entities (such as Opry Mills, which asserted a TCPA claim against its insurers after the May 2010 floods),[43] or the attorney general (the amendment regarding insurance removes the actions from the scope of the TCPA entirely). Of course, the statutory insurance regulations still address unfair or deceptive acts or practices with respect to the insurance business,[44] and they authorize the commissioner of Commerce and Insurance to issue cease and desist orders, impose civil penalties (in limited circumstances), and order suspension or revocation of insurance licenses.[45] The insurance laws also permit an award of up to 25 percent for an insurer’s bad faith refusal to pay a claim.[46] But the insurance laws do not provide a private right of action with respect to unfair or deceptive acts or practices. And the protections under the insurance laws are not identical to the protections that existed under the TCPA. The Myint court, for example, viewed “the Insurance Trade Practices Act, the bad faith statute, and the Consumer Protection Act as complementary legislation that accomplishes different purposes.”[47] The legislature, however, seems to have rejected the purpose served by the TCPA in the insurance area.

The TCPA may not be a high-profile law for the general public, but its applicability can determine the viability of a person’s case against a business.[48] Whether this effect is evidence of the law serving its intended purpose or, instead, evidence that the law fosters weak lawsuits may depend on a person’s perspective. The 2011 amendments to the TCPA did not shift Tennessee into the far fringes of the consumer protection laws — some other states have similar limits on their consumer protection laws[49] — but the changes clearly narrowed the scope of the TCPA, shifting Tennessee consumer protection law in a more defendant-friendly direction.


  1. 2011 Tenn. Public Acts Ch. 510.
  2. The Tort Reform Act also included provisions limiting product liability actions; expanding the notice, pleading, and certificate of good faith requirements in the Medical Malpractice Act; and modifying the law concerning venue. See generally John W. Elder & Joshua R. Walker, “The Tennessee Civil Justice Act of 2011: What a Difference a Day Made,” Tenn. Bar J., Aug. 2011, at 20-26.
  3. See, e.g., Jeff Woods, “Haslam Signs Tort Reform to Cheers from State Republicans,” The City Paper, June 16, 2011, available at http://nashvillecitypaper.com/content/city-news/haslam-signs-tort-reform-cheers-state-republicans; Mike Morrow, “Tort Reform Bill Passes Senate,” TNReport, May 12, 2011, http://tnreport.com/blog/2011/05/12/tort-reform-bill-passes-senate; see also 2011 Tenn. Public Acts Ch. 510 §§ 10, 11.
  4. The act included other provisions affecting the TCPA as well. With respect to damages under the TCPA, the Tort Reform Act specified that a court may not award both punitive damages and treble damages for an unfair or deceptive practice. 2011 Tenn. Public Acts Ch. 510 § 16. The Tort Reform Act also specifically proscribed class actions under the TCPA. 2011 Tenn. Public Acts Ch. 510 § 18. The restriction on class actions is significant, but the Tort Reform Act’s specific prohibition is probably not, as the Tennessee Supreme Court had already held that the law’s original language did not authorize class actions. See Walker v. Sunrise Pontiac-GMC Truck Inc., 249 S.W.3d 301, 309-11 (Tenn. 2008). Interestingly, the Tennessee Supreme Court decision, based on the plain meaning of the statute, probably contravened the legislative intent behind a 1991 amendment that had removed a restriction on actions brought “in a representative capacity.” See Ross Booher et al., “Antitrust & Trade Practices Alert: Tennessee Supreme Court Says No to Class Action Claims Brought Under the Tennessee Consumer Protection Act” 2 (Feb. 20, 2008) (noting that the amendment’s sponsor had stated on the floor of the House of Representatives that the amendment “would allow for, in effect, what’s called a class action”), available at http://www.bassberry.com.
  5. 2011 Tenn. Public Acts Ch. 510 § 14. Until 2006, Tennessee courts had consistently held that the TCPA did not apply to acts or practices related to the marketing or sale of securities. See Johnson v. John Hancock Funds, 217 S.W.3d 414, 421 (Tenn. Ct. App. 2006). But in the Johnson case, the Court of Appeals bucked that trend. Id. at 422. The Tort Reform Act supersedes this decision as to the private right of action, but the act does seem to imply a statutory validation of the conclusion that the TCPA applies to the marketing and sale of securities (meaning that the attorney general would have the power to bring a TCPA action in this area).
  6. 2011 Tenn. Public Acts Ch. 130 § 1.
  7. 2011 Tenn. Public Acts Ch. 510 § 24.
  8. 2011 Tenn. Public Acts Ch. 130 § 2.
  9. See Fayne v. Vincent, 301 S.W.3d 162, 172 (Tenn. 2009) (providing background on consumer protection acts and the TCPA); D. Wes Sullenger, “Only We Can Save You: When and Why Non-Consumer Businesses Have Standing to Sue Business Competitors Under the Tennessee Consumer Protection Act,” 35 U. Mem. L. Rev. 485, 489-95 (2005) (describing the rise of consumer protection laws and placing the TCPA in that context).
  10. See generally Sullender, supra note 9, at 489-94; Henry N. Butler & Joshua D. Wright, “Are State Consumer Protection Acts Really Little-FTC Acts?” 63 Fla. L. Rev. 163, 167-69 (2011).
  11. See generally Carolyn Carter, Consumer Protection in the States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes (Feb. 2009), at 5, http://www.nclc.org/images/ pdf/pr-reports/report-udap-50-states.pdf.
  12. Sullenger, supra note 9, at 492, 494.
  13. See Matthew Evans & John Elder, “An Update on the Tennessee Consumer Protection Act,” Tenn. Bar J., Feb. 2006, at 26.
  14. See Victor E. Schwartz & Cary Silverman, “Common-Sense Construction of Consumer Protection Acts,” 54 Kan. L. Rev. 1, 16 (2005).
  15. Id. at 22-27.
  16. See Tenn. Code Ann. § 47-18-109(e) (authorizing attorney’s fees for private actions); Tenn. Code Ann. § 47-18-109(a)(3) (authorizing treble damages for “willful and knowing” violations); Tenn. Code Ann. § 47-18-108(b)(3) (authorizing courts to “order payment to the state of a civil penalty of not more than one thousand dollars ($1,000) for each violation”); see also Tenn. Code Ann.  § 47-18-109(a)(1) (authorizing a court to award actual damages).
  17. Tenn. Code Ann. § 47-18-104(a).
  18. Tenn. Code Ann. § 47-18-104(b).
  19. Tenn. Code Ann. § 47-18-109(a)(1).
  20. 2011 Tenn. Public Acts Ch. 510 § 20.
  21. Tenn. Code Ann. § 104(b)(27).
  22. Tenn. Code Ann. § 104(b)(27); 2011 Tenn. Public Acts Ch. 510 § 15.
  23. See Thomas F. Barnett and George T. Lewis, “Are Automobile Financing and Other Credit Transactions that Comply with the Federal Truth in Lending Act Subject to Private Rights of Action under the Tennessee Consumer Protection Act?” 71 Tenn. L. Rev. 695, 698 (2004) (noting that, more often than suing on one of the particular designated acts or practices, “plaintiffs suing under the TCPA resort to the Act’s catchall provision”).
  24. Cf. Henry N. Butler & Jason S. Johnston, “Reforming State Consumer Protection Liability: An Economic Approach,” 2010 Colum. Bus. L. Rev. 1, 83 (2010) (“[T]he typical state CPA — with relaxed rules for establishing liability, statutory damages, damage multipliers, attorneys fees and costs, and class actions — solves the basic economic problem that CPAs were intended to address several times over. The effect of this redundancy in solutions is that CPAs can deter the provision of valuable information to consumers and, thus, harm consumers.”); Schwartz & Silverman, supra note 14, at 33 (“[S]ome of these state laws have the potential for substantial damages when a business is found to have run afoul of a highly ambiguous law.”); American Legislative Exchange Council (ALEC), Tort Reform Boot Camp 24 (2011) (“Reforming state consumer protection acts is perhaps one of the more important things state legislators can do to protect small businesses from the feared frivolous lawsuit.”), available at http:// www.alec.org/wp-content/uploads/TortReformBootCampGuideFinal.pdf. But see Jean Braucher, “Deception, Economic Loss and Mass-Market Customers: Consumer Protection States as Persuasive Authority in the Common Law of Fraud,” 48 Ariz. L. Rev. 829, 833 (2006) (describing a contrary view, that, “[i]f there is a problem with consumer protection law … it is that it is seldom enforced, with the poor bearing the brunt of the ease with which con artists and slick operators can get away with their scams”).
  25. See, e.g., Butler & Johnston, supra note 24, at 58-68 [Reforming State Cons] at 40-56; see also Braucher, supra note 24, at 833 (describing the “position that common law fraud and consumer protection statutes should not be used in contractual settings to police even flagrant dishonesty” because “customers should insist on warranties to protect themselves against deceptive practices”). But cf. Braucher, supra note 24, at 837-46 (criticizing the theory that a consumer’s ability to demand warranties suffices to protect against misrepresentation in consumer transactions).
  26. See, e.g., Butler & Johnston, supra note 24, at 35-53. Some empirical data support for this theory. See, e.g., Searle Civil Justice Institute Task Force on State Consumer Protection Acts and Consumer Welfare, State Consumer Protection Acts and Costs to Consumers: The Impact of State Consumer Acts on Automobile Insurance Premiums (Preliminary Report), at 4 (finding that “expansion of CPA liability results in increased cost of automobile insurance to consumers”), http://www.masonlec.org/state-consumer-protection-acts-consumer-welfare. The data are suggestive but not conclusive. Higher prices might reflect a higher value product as a result of consumer protections. See id. at 1 (“As a matter of economics theory, CPA liability could force sellers to internalize social costs associated with deceptive selling or marketing practices and thereby enhance efficiency.”).
  27. Butler & Wright, supra note 10, at 175-76; Schwartz & Silverman, supra note 14, at 3; Butler & Johnston, supra note 24, at 24, 83.
  28. The Tennessee Supreme Court has held that “corporations have standing to bring a private cause of action for treble damages under Tenn. Code Ann. 47-18-109(a).” ATS Southeast v. Carrier Corp., 18 S.W.3d 626, 630 (Tenn. 2000). Some question may exist as to whether businesses have standing to sue competing businesses. See Sullenger, supra note 9, at 496-507 (noting that “some attorneys and judges maintain businesses only have standing to bring Consumer Protection Act claims when they suffer damages as consumers” and making the case that, in fact, businesses have standing to sue competitors).
  29. Tenn. Code Ann.  § 47-18-104(b)(1).
  30. Tenn. Code Ann. § 47-18-104(b)(9).
  31. Tenn. Code Ann. § 47-18-104(b)(12); cf. William G. Hardwick, II, A Brief Overview of the Tennessee Consumer Protection Act for Practitioners, 3 Tenn. J. Prac. & Proc. 67, 70 (2001) (describing this provision as one of the “relatively general provisions that give the practitioner broad grounds to bring his case” under section 47-18-104(b)).
  32. Carter, supra note 11, at 11 (“While prohibitions of specific practices are sometimes helpful to consumers, they inevitably leave the door open for inventive fraud artists who devise new methods of deception and unfairness.”); Sullenger, supra note 9, at 494 (noting that the catch-all provision in subsection (b) “demonstrates the General Assembly did not simply envision its laundry list of bad acts to be legislatively etched in stone” and “intended the definition of unfair or deceptive acts to evolve over time”); cf. Tucker v. Sierra Builders, 180 S.W.3d 109, 116 (Tenn. Ct. App. 2005) (“The broad phrasing of the statute suggests that, at the very least, the terms ‘unfair’ and ‘deceptive’ should not be limited to a set of specific acts that can be readily catalogued in a judicial opinion or otherwise.”).
  33. See Carter, supra note 11, at 18 (“Limited state consumer protection enforcement budgets are not able to police the marketplace fully. Most state agencies lack the resources to obtain redress for consumers unless there are many victims of the same practice …. In addition, many state agencies focus more on stopping future deception and unfairness than on compensating consumers who have already fallen victim.”). But cf. Butler & Johnston, supra note 24, at 16 (“This assertion begs the question of why state legislatures do not provide adequate funding.”).
  34. Tenn. Code Ann. § 47-18-115; see also Tucker, 180 S.W.3d at 116-17 (discussing interpretations of “unfair” and “deceptive” under the Federal Trade Commission Act). But cf. Butler & Wright, supra note 10, at 188 (finding “qualitative differences between state CPA decisions and actions that would likely be found illegal and enforced under relevant FTC standards”).
  35. Davis v. McGuigan, 325 S.W.3d 149, 162 (Tenn. 2010) (“[A] ‘deceptive act or practice’ is a material representation, practice or omission likely to mislead a reasonable consumer.” (quoting Ganzevoort v. Russell, 949 S.W.2d 293, 299 (Tenn. 1997)) (internal quotation marks omitted)).
  36. Id. (“An act is unfair if it ‘causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.’” (quoting Tucker v. Sierra Builders, 180 S.W.3d 109, 116-17 (Tenn. Ct. App. 2005)).
  37. Tenn. Code Ann. § 47-18-109(e)(2).
  38. Tenn. Code Ann. § 47-18-109(c)(4).
  39. Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn.1998).
  40. Id. at 924-25.
  41. Id. at 925.
  42. 2011 Tenn. Public Acts Ch. 130 § 1.
  43. See Complaint at ¶¶ 64-69, Opry Mills L.P. v. Arch Ins. Co., No. 10-1504-IV (Ch. Ct. Davidson Cnty. Sept. 14, 2010), available at http://business.nashvillepost.com/wp-content/uploads/2010/09/simon-property-group-l-p-opry-mills-mall-limited-partnership-complaint.pdf.
  44. See Tenn. Code Ann. §§ 56-8-104 to -105. The statute also gives the commissioner “authority to declare by rule certain acts to be unfair trade practices or unfair methods of competition or unfair or deceptive acts or practices in the business of insurance.” Tenn. Code Ann. § 56-8-108.
  45. See Myint, 970 S.W.2d at 924; Tenn. Code Ann. § 56-2-305.
  46. Tenn. Code Ann. § 56-7-105(a).
  47. Myint, 970 S.W.2d at 926.
  48. See Evans & Elder, supra note 13, at 30 (“The TCPA is an effective tool in consumer cases that otherwise would be cost prohibitive to pursue.”).
  49. See Carter, supra note 11, App. B (providing state-by-state summaries of consumer protection statutes).

JAMES M. DAVIS is a staff attorney in the office of Henry E. Hildebrand III, the standing chapter 13 bankruptcy trustee for the Middle District of Tennessee. Davis received his law degree from the William and Mary School of Law.