Opinion ID: 2561867
Heading Depth: 3
Heading Rank: 1

Heading: Plaintiffs are Consumers.

Text: In order to bring a private cause of action based on unfair or deceptive act[s] or practice[s] forbidden or declared unlawful by section 480-2, such as violations of HRS § 443B-3, one must be a consumer within the meaning of HRS chapter 480. Rawlings claims that the circuit court erred in holding that the Plaintiffs were consumers, because they neither purchased nor attempted to purchase, nor were they solicited to purchase anything from Rawlings or HMSA, as required by the definition of consumer. Rather than consumers, Rawlings contends that Plaintiffs were third-party beneficiaries of employer health care contracts with HMSA, and as such may not bring suit as consumers under our caselaw. Plaintiffs maintain, on the other hand, that one may qualify as a consumer in the context of a violation of HRS chapter 443B by showing that the debt collected upon arose in a consumer context. Because consumers do not typically purchase services from collection agencies, Plaintiffs contend that requiring such a purchase would lead to an absurd result.
Consumer is defined by statute to mean: a natural person who, primarily for personal, family, or household purposes, purchases, attempts to purchase, or is solicited to purchase goods or services or who commits money, property, or services in a personal investment. HRS § 480-1 (1993). Rawlings argues that neither of the Plaintiffs meet this definition because neither Flores nor Rapoza purchased, attempted to purchase, or was solicited to purchase goods or services from Rawlings. Rather, both are participants in employer health benefit plans: Flores directly as an employee of Theo Davies, and Rapoza as a dependent on his wife's plan through her employer, the federal government. Rawlings points out that the contracts between the employers and HMSA are exclusively between the named parties. Rawlings further argues that rather than consumers, Plaintiffs are third-party beneficiaries of their employer's contracts with HMSA, and as such, cannot bring suit under HRS § 480-13. In support, Rawlings points to this court's decision in Hough v. Pacific Insurance Co., 83 Hawai`i 457, 927 P.2d 858 (1996), and the Intermediate Court of Appeal's (ICA) decision in Hunt v. First Insurance Co. of Hawaii, Ltd., 82 Hawai`i 363, 922 P.2d 976 (App.1996). In Hough, this court considered whether an injured employee, who had brought multiple tort claims against the insurer based on its conduct in handling his attempt to obtain workers' compensation benefits, could also bring a separate claim for damages against the insurer based on HRS chapter 480. 83 Hawai`i at 462, 927 P.2d at 863. This court held that, the plaintiff could not bring an unfair or deceptive practice claim, because Hough is not a consumer within the meaning of this statute. He did not purchase workers' compensation insurance from Pacific. He is a third party beneficiary of the contracts of insurance purchased by his employers. Id. at 470, 927 P.2d at 871. The court further held that Hough could also not bring a derivative third-party claim under HRS chapter 480, because the insurer, as a corporation, was not a consumer. Id. at 471, 927 P.2d at 872. See also Hunt, 82 Hawai`i 363, 922 P.2d 976 (holding that customer of grocery store, who was injured by slip and fall at store, could not bring HRS chapter 480 claim against store's insurance company which had refused payment of medical claims, because customer, not having made any purchase from the insurance company, was not a consumer who could bring suit). [17]
Plaintiffs do not claim to have made or attempted any purchase from Rawlings, nor do they claim that Rawlings solicited any. Rather, Plaintiffs argue that in the context of debt collection, the proper focus should be on whether the underlying obligation or debt is a consumer debt, as opposed to a commercial or business one. In other words, if the alleged debt arises in a consumer context, then the debt holder is a consumer who may bring suit under HRS § 480-13(b). Under Plaintiffs' theory, they would qualify as consumers because Rawlings was collecting on the loan agreement from HMSA purporting to advance Plaintiffs the expenses for their medical treatment, which is akin to a service for personal purposes. See HRS § 480-1. Plaintiffs contend that the opposite result would lead to an absurd result and controvert the clear intent of HRS chapter 443B to protect debtors from abusive collection agencies. Sen. Comm. Rep. No. 541, in 1987 House Journal, at 1355. In support of their argument, Plaintiffs cite the definition of debt in HRS § 4431, which they contend shows that in the context of debt collection, the focus is on the nature of the alleged debt. HRS § 443B-1 defines debt to mean any obligation or alleged obligation of a consumer to pay money or other forms of payment arising out of a transaction in which the money, property, insurance, or services, which are the subject of the transaction, are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment. HRS § 443B-1 (emphases added). Based on this definition, Plaintiffs assert that the loan agreement from HMSA to pay for their personal medical treatments amounts to, a transaction within the meaning of debt. In the context of collection agency abuses actionable under HRS § 480-13, it is unlikely that the legislature intended to limit the ability to sue to those who had made, attempted to make, or were solicited to make a purchase by a collection agency. This would be an inconsistent, if not absurd, result that the legislature would not have intended. See Beneficial Hawai`i, Inc. v. Kida, 96 Hawai`i 289, 309, 30 P.3d 895, 914-15 (2001) ([T]he legislature is presumed not to intend an absurd result, and legislation will be construed to avoid, if possible, inconsistency, contradiction, and illogicality. (Citations and internal quotation marks omitted.)). HRS § 443B-20 states that any violation of chapter 443B shall constitute . . . unfair or deceptive acts or practices in the conduct of any trade or commerce for the purpose of section 480-2. HRS § 443B-20. HRS § 480-2 in turn specifies that a consumer may bring an action based upon unfair or deceptive acts or practices, HRS § 480-2(d), and the prerequisites for bringing suit are laid out in HRS § 480-13. See HRS § 480-13(b) (Any consumer who is injured by any unfair or deceptive act or practice forbidden or declared unlawful by section 480-2 . . . (1) May sue for damages. . . .; and (2) May bring proceedings to enjoin the unlawful practices. . . . ). By deeming violations of HRS chapter 443B an unfair or deceptive act or practice for the purposes of HRS § 480-2, it is evident that the legislature wished to have chapter 443B be enforceable in the same manner as other unfair trade practices under chapter 480. If enforcement were limited to individuals who had purchased, attempted to purchase, or were solicited for purchase of a service or good from a collection agency, enforcement of HRS chapter 443B would be left entirely in the hands of the state. In view of the expressed purpose of HRS chapter 480 to encourage those who have been victimized by persons engaging in unfair or deceptive acts or practices to prosecute their claim, Hse. Stand. Comm. Rep. No. 541, in 1987 House Journal, at 1355, and the intent of HRS chapter 443B to protect creditors from unscrupulous or dishonest collection agencies, and to protect debtors from abusive collection agencies, this result would not be in keeping with the statutory structure and would appear to be the type of inconsistent, or absurd, result that this court must presume the legislature would not have intended. [18] Rather, in the context of consumer debt, the determination of whether the individual seeking suit is a consumer should rest on whether the underlying transaction which gave rise to the obligation was for a good or service that is primarily for personal, family, or household purposes, HRS § 480-1. This reading is supported by the definition of debt in HRS § 443B-1, as well as the fact that the statutory structure of HRS chapter 480 does not require that one be a consumer of the defendant's goods or services, but merely a consumer. Cf Flenniken v. Longview Bank and Trust Co., 661 S.W.2d 705, 707 (Tex.1983) (Privity between the plaintiff and defendant is not a consideration in deciding the plaintiff's status as a consumer under the [Texas Deceptive Trade Practices Act]. A plaintiff establishes his standing as a consumer in terms of his relationship to a transaction, not by a contractual relationship with the defendant. The only requirement is that the goods or services sought or acquired by the consumer form the basis of his complaint. (Citations omitted.)). [19]
In this case, Plaintiffs assert that they are consumers because after receiving medical services HMSA demanded payment in the form of an interest-free loan should they recover from a third-party. The services received had a personal purpose within the meaning of HRS § 480-1. Cf. Adams v. Law Offices of Stuckert & Yates, 926 F.Supp. 521, 526 (E.D.Pa.1996) (characterizing plaintiffs receipt of medical treatment at a plastic surgery center as personal medical services, and finding that the plaintiffs' obligation to pay for such services was a debt under the FDCPA, which requires that the underlying transaction be primarily for personal, family, or household purposes). Therefore, based on the obligations arising from the loan agreements, which HMSA required Plaintiffs to sign when they received their medical treatment, Plaintiffs appear to be consumers. However, at oral argument, Rawlings asserted that the loan agreement could not be the basis of one's consumer status, arguing that the loan agreement was an inartfully-titled document that did not create any new rights. Rather, Rawlings contended that HMSA had pre-existing subrogation rights, arising as a matter of law, to some portion of the amounts that Plaintiffs recovered from third-party tortfeasors, such that the loan agreement was nothing more than a written formalization giving Plaintiffs notice of these rights. [20] Although the precise status of the loan agreement was neither put at issue below nor discussed extensively in the appellate briefings, if correct, Rawlings's assertion would mean that there was no underlying transaction and that Plaintiffs were therefore not consumers of medical services. Rawlings's theory is not convincing. The loan agreement provided by HMSA and signed by Plaintiffs is also known as a loan receipt. A loan receipt is an agreement which states that the insurance proceeds paid by the insurer to the insured constitute an interest-free loan which must be repaid to the extent that money is recovered in an action brought by the insurer in the name of the insured. 4 Rowland H. Long, The Law of Liability Insurance § 23.03[2][b][ii] (2007). In other contexts, courts have considered whether such loan receipts are true loans. [21] The weight of authority holds that loan receipts are valid, although as in any agreement, the intention of the parties should be considered. See Annotation, Validity and effect of loan receipt or agreement between insured and insurer for a loan repayable to extent of insured's recovery from another, 13 A.L.R.3d 42 (1967). [22] Without specific arguments to the contrary, the plainest conclusion is that the loan agreement in this case constituted a true loan that could have been enforced by HMSA. As such, the loan agreement has created obligations, and could be considered a form of payment for the health care Plaintiffs received. Accordingly, Plaintiffs were consumers who, by virtue of the agreement, engaged in a consumer transaction.