Opinion ID: 2071303
Heading Depth: 2
Heading Rank: 2

Heading: The Act May Regulate Conduct Occurring After the Sale

Text: The court of appeals held the Iowa Consumer Fraud Act did not regulate the Club's collection campaign because the campaign was later conduct ... unrelated to the sale. Because the Club's collection campaign may be found to be an unfair practice... in connection with the ... sale ... of ... merchandise, Iowa Code § 714.16(2)( a ), we vacate the court of appeals' decision.
The Act does not define the phrase in connection with. As a threshold matter, however, we point out that nothing in the Act places a bright-line temporal limit upon the Act's purview, as the Club contends. The Act merely requires the activity be in connection with, not prior to or at the time of, the sale of the merchandise. Nothing in the phrase in connection with constrains the Act's scope to only those business practices occurring prior to or at the time of the sale. The legislature did not limit the Act in this way for a good reason: The definitions presented in the Iowa Consumer Fraud Act are broad and comprehensive in order to effect the wide application of the Act.... These broad general definitional guidelines ensure the application of the Act in a wide variety of circumstances. Note, Consumer Protection Under the Iowa Consumer Fraud Act, 54 Iowa L.Rev. 319, 325 (1968) [hereinafter ICFA Article]; cf. Am. Fin. Servs. Ass'n v. FTC, 767 F.2d 957, 980 (D.C.Cir.1985) (It is impossible to frame definitions which embrace all unfair practices. There is no limit to human inventiveness in this field. (Citation omitted.)). While definition is primarily a matter of drawing lines or distinguishing between one kind of thing and another, see H.L.A. Hart, The Concept of Law 13 (2d ed.1994), nothing in the legislature's use of in connection with in the Act enunciates a bright-line temporal rule. We will not judicially superinscribe one. To do so would not only violate well-established canons of statutory interpretation, but also conflict with the liberal interpretation we must give the statute. See Koscot Interplanetary, 191 N.W.2d at 630; ICFA Article at 325. In the absence of a legislative definition, we note that the phrase in connection with is commonly defined as related to, linked to, or associated with. Metro. Prop. & Cas. Ins. Co. v. Fitchburg Mut. Ins. Co., 58 Mass.App.Ct. 818, 793 N.E.2d 1252, 1255 (2003); see also Filetech S.A. v. France Telecom S.A., 157 F.3d 922, 930 (2d Cir.1998) (noting under Foreign Sovereign Immunities Act it is well settled an act is made in connection with commercial activity if there is a substantive connection or causal link between the two). It plainly has a broader reach than the phrases arising out of, see Metro. Prop. & Cas. Ins. Co., 793 N.E.2d at 1255, and contained in. In re Pierce, 95 B.R. 154, 158 (Bankr.N.D.Cal.1988). To show an unfair practice is in connection with the sale of merchandise, then, the attorney general need only show some relation or nexus between the two. See Metro. Prop. & Cas. Ins. Co., 793 N.E.2d at 1255; see also Black's Law Dictionary 1070 (8th ed.2004) (defining nexus as [a] connection or link, often a causal one). Other courts have recognized that post-sale conduct may be in connection with the sale of merchandise. See, e.g., Lony v. E.I. du Pont de Nemours & Co., 821 F.Supp. 956, 962 (D.Del.1993) (holding post-sale activity may be in connection with the sale); Pack & Process, Inc. v. Celotex Corp., 503 A.2d 646, 658 (Del.Super.Ct.1985) (same); see also Celebrezze v. United Research, Inc., 19 Ohio App.3d 49, 482 N.E.2d 1260, 1261-62 (Ohio Ct.App.1984) (post-sale activity of suing consumers in distant fora fell within statute that stated [n]o supplier shall commit an unfair or deceptive act or practice in connection with a consumer transaction, where consumer transaction included the sale of any good or service). But see Norman Gershman's Things To Wear, Inc. v. Mercedes-Benz of N. Am., Inc., 558 A.2d 1066, 1074 (Del.Super.Ct.1989), aff'd on other grounds, 596 A.2d 1358 (Del.1991). Likewise, courts faced with broad language in consumer protection laws similar to Iowa's have also held that post-sale conduct may constitute an unfair practice. See, e.g., Showpiece Homes Corp. v. Assurance Co., 38 P.3d 47, 59 (Colo.2001) (holding post-sale activity actionable; if legislature had wanted to impose a temporal requirement, it knew how to do so); Elder v. Coronet Ins. Co., 201 Ill.App.3d 733, 146 Ill.Dec. 978, 558 N.E.2d 1312, 1320 (1990) (interpreting in the conduct of any trade or commerce to include a series of unfair acts in processing insurance claims); Hines v. Evergreen Cemetery Assoc., 865 S.W.2d 266, 269 (Tex.App.1993) (finding no requirement that the defendant's act occur simultaneously with the sale; [s]o long as the goods or services form the basis of the plaintiff's claim post-sale actions can violate state consumer protection law); Griffith v. Porter, 817 S.W.2d 131, 134 (Tex.App.1991) (similar); Salois v. Mut. of Omaha Ins. Co., 90 Wash.2d 355, 581 P.2d 1349, 1351 (1978) (refusing to limit state consumer protection law to unfair or deceptive practices designed to induce a sale of an insurance policy; consumer did not simply purchase a piece of paper, but rather potential benefits and security of coverage that would continue into the future). It appears those courts holding to the contrary have generally done so because the statute at issue required a showing of a fraudulent practice for the plaintiff to recover under the consumer protection law. See, e.g., Norman Gershman's, 558 A.2d at 1074 (citing 6 Del.Code Ann. tit. 6 § 2513(a)). Here, of course, the State may prevail even if it only shows an unfair practice. [D]eceptive and unfair practices are distinct lines of inquiry.... [W]hile a practice may be both deceptive and unfair, it may be unfair without being deceptive. Orkin Exterminating Co. v. FTC, 849 F.2d 1354, 1367 (11th Cir.1988). The disjunctive language of the Iowa Act clearly requires proof of only one, not both, sorts of conduct. See Commonwealth v. DeCotis, 366 Mass. 234, 316 N.E.2d 748, 753-54 (1974) (post-consummation conduct can be unfair even if pre-contract disclosure was not deceptive); accord Therrien v. Res. Fin. Group, Inc., 704 F.Supp. 322, 329 (D.N.H.1989). Recognizing this fact about the Iowa statute is important because [d]eception occurs primarily (though not exclusively) at the formation stage of the contract. Conversely, unfairness occurs primarily (though not exclusively), with respect to the substance or performance of a contract. Michael M. Greenfield, Consumer Law: A Guide for Those Who Represent Sellers, Lenders and Consumers § 4.1, at 161 (1995). Were we to interpret the phrase in connection with as containing an implicit per se rule barring all post-sale activity from the ambit of the Act simply because other courts have interpreted statutes which are directed only at fraudulent practices in such a manner would ignore the plain language of the Iowa statute and thereby eviscerate much of the statute's protection against unfair practices. We will not do so. Once again, the legislature chose broad language for a good reason, and we are compelled to interpret the statute as written. The foregoing interpretation of the phrase in connection with is also consistent with prior precedent in this state. In Stromberg Hatchery v. Iowa Employment Security Commission, we were asked to decide whether, for purposes of Iowa's unemployment statute, hatchery employees who were not engaged in the manual process of incubating chicks were performing agricultural labor. 239 Iowa 1047, 1048-54, 33 N.W.2d 498, 499-503 (1948). The unemployment statute defined agricultural labor as including all services performed ... `in connection with'... the hatching of poultry. Id. at 1048, 33 N.W.2d at 499-500 (quoting Iowa Code § 96.19 (1946)). In our analysis, we pointed out that the statutory language at issue was identical to that in the federal Social Security Act, see 26 U.S.C. § 1426 (1939), which was designed to relieve agriculture of the social security tax burden. See Stromberg, 239 Iowa at 1050-54, 33 N.W.2d at 500-02. We therefore concluded the statutory phrase in connection with should be interpreted liberally, and included employees not engaged in the manual process of incubating chicks. Id. Similarly, in the case at bar we are presented with a statute that serves a remedial purpose and must be interpreted liberally. See Koscot Interplanetary, 191 N.W.2d at 630; ICFA Article at 325. As in Stromberg, we will not impose a bright-line restriction  in this case a temporal one  upon the phrase in connection with.
The difficult factual question posed in this case is whether the Club's collection campaign, itself admittedly post-sale conduct, is an unfair practice in connection with the sale of merchandise. Viewed in a light most favorable to the State of Iowa, we conclude the summary judgment record before us may show one. The State should get its day in court. A trier of fact could find a nexus between the Developer's sales of the undivided interests in the early 1980s and the Club's collection campaign today. For example, a trier of fact could find the Developer established this entire elaborate arrangement, including continued control over the Club, from the outset to the substantial detriment of consumers. There is evidence in the record the Developer conceived, created, and has retained control over the Club throughout the years to the present day. [5] On this theory of the case, the Club is nothing more than the present-day operating arm of the Developer. The Developer retains control over the Club because the Developer stopped selling undivided interests in 1986. Later the Developer solidified its control of the Club when the Club, presumably at the Developer's direction, started buying them up. By virtue of its controlling share, the Developer is able to maintain a sizeable interest in real estate free of property tax. All property taxes and improvements upon the property are paid for by the owners of all the other undivided interests. In doing so, the Developer and Club have reduced the number of dues-paying interests, thereby increasing proportionally the costs those that did buy must bear. A trier of fact may view this as unfair and in connection with the sale. Importantly, a trier of fact could find that at the time the consumers bought the shares they had every reason to believe all shares would be sold, or at least that any shares the Developer or the Club owned would be dues-paying shares. The documents the consumers received at the time of the sale apparently contemplated as much. In other words, a trier of fact could find the Developer and the Club have a duty to use good-faith efforts to sell their undivided interests. As matters stand, however, the Developer does not pay the Club dues and the Club, controlled by the Developer, does not require the Developer to pay them. Even if the trier of fact were to take a narrower view, it could find the Club's collection campaign constitutes an unfair practice in connection with the sale of the undivided interest. The connection between the sale and the collection campaign is plain. All the Club's alleged rights vested at the time of the sale and continue to this day on account of that transaction. See Hines, 865 S.W.2d at 269 (finding statute applies to post-sale conduct when sale gives rise to ongoing rights and obligations in the future); see also Bexley Vill., Ltd. v. Limbach, 68 Ohio App.3d 306, 588 N.E.2d 246, 248 (Ohio Ct.App.1990) (only furtherance of purpose, not unity of ownership, required to satisfy connected with element of statute). A trier of fact could find the Club sat on these rights for an unreasonable period of time. By all accounts the Club snoozed for as many as sixteen years. Bills were not sent. No collection efforts were undertaken. Termination procedures, spelled out in the installment contracts, the Restrictions, and the Bylaws, were not invoked. Only decades later did the Club awake from its slumber, track down ex-campers, and sue them for back dues. In light of the ambiguous nature of the Restrictions and Bylaws, owners of undivided interests could reasonably have thought under these circumstances their memberships were terminated when they stopped paying dues and ceased using the campground. In a variety of equitable doctrines developed over the years, we have long recognized the unfairness of one party unreasonably delaying the prosecution of an alleged claim against another party. See, e.g., Garrett v. Huster, 684 N.W.2d 250, 255-56 (Iowa 2004) (setting forth elements of laches and estoppel by acquiescence); Davidson v. Van Lengen, 266 N.W.2d 436, 439 (Iowa 1978) (explaining differences between two doctrines, as well as their underlying policies); see also Lake Caryonah Improvement Ass'n v. Pulte Home Corp., 903 F.2d 505, 509-10 (7th Cir.1990) (explaining laches doctrine in property context). [6] Our decision today does not mean the Iowa Consumer Fraud Act grants the attorney general broad authority to police bad bargains. We have no quarrel with the fact some campers entered into bad bargains, insofar as they paid thousands of dollars for a small slice of a campground they rarely or never used. See Walker v. Gribble, 689 N.W.2d 104, 110 (Iowa 2004) (Parties to contracts should not look to courts to rescue them from their bad bargains.). As other courts have recognized, conduct carried out pursuant to contractual relations does not often constitute an unfair or deceptive practice. See Riese, 284 F.3d at 536 (construing North Carolina law). For now, however, we think there is sufficient evidence in the summary judgment record before us to warrant a decision by the trier of fact. We remand for a decision on the merits. [7]