Opinion ID: 1678768
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Heading: Elements Required by the Iowa Consumer Fraud Act.

Text: It was originally believed that a freely competitive economy was sufficient to protect buyers from fraudulent practices. See Note, Consumer Protection Under the Iowa Consumer Fraud Act, 54 Iowa L.Rev. 319, 326 (1968). A dominant theme in commercial law was caveat emptor, let the buyer beware. Lovett, State Deceptive Trade Practice Legislation, 46 Tulane L.Rev. 724, 726-27 (1971-72). The consumer was assumed to be able to strike a fair bargain with any seller, and the customer was individually responsible to remedy any deficiencies. Defrauded customers were left with a common-law action for fraud against the seller as their primary recourse. See Note, Developments in the Law: Deceptive Advertising, 80 Harvard L.Rev. 1005, 1016-17 (1967). The protection afforded consumers by common-law remedies was generally ineffective. The burdens of a common-law action were sufficient to dissuade all but the most persistent and most seriously injured customer. Id. In Iowa, an action for common-law fraud required the purchaser to prove reasonable reliance, misrepresentation, knowledge of falsity, and intent to deceive. See Note, 54 Iowa L.Rev. at 321. The difficulties in proving these elements were summarized by one commentator: The purchaser willing to seek recovery of the nominal sum usually involved was likely to be told by the court that scienter had not been adequately proved, that his reliance on the misrepresentation was unreasonable because he should have examined the goods or obtained the counsel of impartial and reliable persons, that the representations concerned matters of opinion and thusas puffingshould have been treated with skepticism, or that in any case he had not sufficiently demonstrated that his purchase was induced by the advertisement. Note, 80 Harvard L.Rev. at 1017 (citations omitted). Eventually, however, large scale marketing and manufacturing reached a point where government involvement became necessary. The Iowa Consumer Fraud Act was enacted in 1965 in order to protect the public from unfair and deceptive business practices. The Consumer Fraud Act provides the attorney general with broad powers to investigate acts which may be unlawful as defined by Iowa Code section 714.16(2)(a) (1983). The attorney general may seek and obtain in district court an injunction prohibiting acts defined as unlawful. See Iowa Code § 714.16(7). The district court may enter such orders as necessary to prevent fraudulent acts and to restore to any person money or property taken by unlawful acts. Id. The basis for both injunctive relief or restoration of monies is an unlawful practice. An unlawful practice is defined as The act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice. Iowa Code § 714.16(2)(a) (1983). Early commentators interpreted this section as omitting the common-law requirements of reasonable reliance and damage. See Note, Consumer Protection Under the Iowa Consumer Fraud Act, 54 Iowa L.Rev. 319, 326 (1968). There have been relatively few cases dealing with the Iowa Consumer Fraud Act. Our principle decision concerning the Consumer Fraud Act was State ex rel. Turner v. Limbrecht, 246 N.W.2d 330 (Iowa 1976). In Limbrecht, the attorney general brought an action under the Iowa Consumer Fraud Act against several individuals involved in cemetery merchandise and services. One of the individuals sold his interest in the business prior to July 4, 1965, the effective date of the Consumer Fraud Act. [1] See id. at 331. Limbrecht addressed two basic questions. First, whether the Consumer Fraud Act could be retroactively applied, and second, whether the attorney general may obtain restoration of monies when there is no ground for injunctive relief. See id. at 331-34. We determined that the Consumer Fraud Act was to be given retroactive application. Id. at 333. In order to give this law retroactive application, we found that the Consumer Protection Act was plainly remedial and not substantive. We went on to state: We believe the civil provisions of the section are plainly remedial and not substantive. It is clear the defrauded parties could themselves have brought a common law fraud action under the pleaded facts.... .... It is true § 713.24(2)(a), in defining unlawful frauds, does not specify reliance and damages. But that definition, with its omission does not reach the description of when injunction or restoration is appropriate. In order to prevail the attorney general was still required to allege and prove reliance and damages. Accordingly we find no difference between the actionable fraud alleged by the attorney general and the common law action for fraud available to injured parties on an individual basis prior to the advent of § 713.24. Id. at 333 (emphasis added). We went on to hold that the retroactive application of the Consumer Fraud Act was constitutional, id. at 334, and that a suit for restoration of monies can be brought either independently or in conjunction with a suit for injunction, id. at 335. Based upon Limbrecht, the district court found that reliance and damages must be established in an action for restoration under section 714.16. We recognize that the language of Limbrecht is susceptible to that interpretation. That language was not, however, necessary to the holding and we will not use that language to determine the necessary elements in this case. We now hold that reliance and damages are not elements which need to be established in an action for restoration or injunctive relief under Iowa Code section 714.16. Several factors favor this holding. First, the plain language of section 714.16 establishes that the basis for an action to enjoin or restore is to be based on an unlawful practice. An unlawful practice is defined by Iowa Code section 714.16(2)(a) as any misrepresentation of a material fact with the intent that others rely upon such misrepresentation whether or not any person has in fact been mislead, deceived or damaged thereby. This statutory language expresses a clear intent that the elements of reasonable reliance and damages are not necessary in an action brought by the attorney general under the Consumer Fraud Act. As stated earlier, the historical development of consumer law reveals that the Consumer Fraud Act was enacted in order to better protect consumers from fraud. Eliminating the common-law elements of reliance and damages is essential to the purpose of the Consumer Fraud Act. Several states have adopted a definition of unlawful acts in their respective consumer protection acts which is similar to section 714.16(2)(a). See, e.g., Ariz.Rev.Stat. Ann., § 44-1522(A) (West 1987); Del.Code Ann., tit. 6, § 2513 (Michie 1975); Ill.Ann. Stat. Ch. 121½, para. 262, § 2 (Smith-Hurd 1988-89). The Iowa Consumer Fraud Act was patterned after the Illinois Consumer Fraud Act. See Note, Consumer Protection Under the Iowa Consumer Fraud Act, 54 Iowa L.Rev. 319, 324-25 (1968). Illinois courts, as well as courts in Arizona and Delaware, have expressly recognized that the definition of an unlawful action under the respective consumer fraud acts expanded the consumer's rights beyond the common-law action for fraud. In these states, a violation of the Consumer Fraud Act does not involve the same elements as a common-law action for fraud. See People ex rel. Babbitt v. Green Acres Trust, 127 Ariz. 160, 168, 618 P.2d 1086, 1094 (App.1980); In re Brandywine Volkswagen, Ltd., 306 A.2d 24, 29 (Del.Super.), aff'd sub nom., Brandywine Volkswagen, Ltd. v. State, 312 A.2d 632 (Del.1973); Duhl v. Nash Realty, Inc., 102 Ill.App.3d 483, 495, 57 Ill.Dec. 904, 913, 429 N.E.2d 1267, 1277 (1981). In Arizona, reliance or actual deception or damage is not a prerequisite to a consumer fraud action brought by the attorney general. See Green Acres Trust, 127 Ariz. at 167, 618 P.2d at 1094. We conclude the Iowa Consumer Fraud Act was not merely a codification of common-law fraud. The Consumer Fraud Act provides broader protection to the citizens of Iowa by eliminating common-law fraud elements of reliance and damages. To maintain an action for either injunction or restoration under the Consumer Fraud Act, it is necessary to show a misrepresentation of any material fact with the intent that others rely on this misrepresentation. To the extent that the discussion in State ex rel. Turner v. Limbrecht, 246 N.W.2d 330, 333 (Iowa 1976), can be interpreted to be inconsistent with this holding, it is overruled.