Opinion ID: 894577
Heading Depth: 1
Heading Rank: 2

Heading: Assignment of DTPA Claims

Text: PPG first attacks the DTPA award, asserting that DTPA claims cannot be assigned. To determine whether DTPA claims are assignable, we look first to the words of the statute. The sale of Twindows was a sale of goods, and thus subject to the warranty provisions of Chapter 2 of the Texas Business and Commerce Code (the UCC). [4] Chapter 17 of the same Code (the DTPA) allows consumers to bring breach of warranty claims under that chapter as well. [5] Thus, a consumer may choose to bring warranty claims under either chapter, or both as JMB did here. The purposes and provisions of the UCC and the DTPA are, of course, not the same; otherwise, there would have been no need for both. The primary difference relevant here is that the UCC expressly provides that warranty claims are assignable, [6] while the DTPA says nothing about assignment. A statute's silence can be significant. [7] When the Legislature includes a right or remedy in one part of a code but omits it in another, that may be precisely what the Legislature intended. [8] If so, we must honor that difference. [9] Of course, legislatures do not always mean to say something by silence. Legislative silence may be due to mistake, oversight, lack of consensus, implied delegation to courts or agencies, or an intent to avoid unnecessary repetition. But we must at least begin our analysis by noting that the Legislature clearly knew how to indicate that warranty claims were assignable, but did not do so in the DTPA.
In some cases of statutory silence, we have looked to the statute's purpose for guidance. [10] Accordingly, we next look to the purposes of the DTPA to determine whether assignment of claims is consistent with its goals. The DTPA's primary goal was to protect consumers by encouraging them to bring consumer complaints: This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection. [11] While the DTPA allows the attorney general to bring consumer protection actions, [12] one of the statute's primary purposes is to encourage consumers themselves to file their own complaints: [The Legislature] provided for the recovery of attorney's fees under the Deceptive Trade Practices Act, as encouragement to those abused by certain proscribed conduct to avail themselves of the remedies of the Act. [13]    [O]ne purpose of the DTPA's treble damages provisions is to encourage privately initiated consumer litigation, reducing the need for public enforcement. [14]    [T]he legislative intent [was] to encourage aggrieved consumers to seek redress and to deter unscrupulous sellers who engage in deceptive trade practices. [15] Making DTPA claims assignable would have just the opposite effect: instead of swindled consumers bringing their own DTPA claims, they will be brought by someone else. The Legislature did not intend the DTPA for everybody. It limited DTPA complaints to consumers, [16] and excluded a number of parties and transactions from the DTPA, including claims by businesses with more than $25 million in assets, [17] and certain claims in which consumers were represented by legal counsel. [18] If DTPA claims can be assigned, a party excluded by the statute (such as JMB here) could nevertheless assert DTPA claims by stepping into the shoes of a qualifying assignor. This would frustrate the clear intent of the Legislature. The court of appeals reasoned that assignment would accord with one of the DTPA's other purposes โ discouraging consumer fraud. [19] But this proves too much; commercial trading in almost any kind of claim would likely encourage its proliferation, but raises a host of other concerns. [20] First, the DTPA's treble-damage provisions were intended to motivate affected consumers; [21] they may provide a different motivation for those who might traffic in such claims. It is one thing to place the power of treble damages in the hands of aggrieved parties or the attorney general; it is quite another to place it in the hands of those considering litigation for commercial profit. Second, appraising the value of a chose in action is never easy, due to the absence of objective measures or markets. [22] Consumers are likely to be at a severe negotiating disadvantage with the kinds of entrepreneurs willing to buy DTPA claims cheap and settle them dear. The result of making DTPA claims assignable is likely to be that some consumers will be deceived twice. Third, in many cases consumers may not even know they have DTPA claims when they sign a general assignment included in contractual boilerplate. [23] If such assignments are valid, the claims meant to protect consumers will quite literally be gone before they know it. In this case for example, both JMB and HCC were wealthy and sophisticated corporations, yet both denied any knowledge of a potential DTPA claim against PPG at the time of the 1989 building sale. [24] There was no assignment of claims generally, and no mention specifically of DTPA claims against PPG; instead, JMB relies solely on a general assignment of the building's warranties. [25] If this is enough, then HCC assigned away its DTPA rights against PPG without knowing it and without receiving anything for it; the $10 million in incentive damages left over after every Twindow is replaced will serve as a pure windfall for JMB. Every conceivable purpose of the statute is defeated if consumers may lose their claims by accident. JMB makes no attempt to defend commercial marketing of DTPA claims, arguing only for assignment in cases like this โ in which it bought the underlying building and will bear the costs of repairing it. But allowing DTPA claims by those who purchase defective goods from a consumer shifts the focus of the DTPA from deceptive practices to defective products. [26] If DTPA claims may be assigned to subsequent buyers like JMB, treble damages will often go to wealthy entrepreneurs rather than the consumers who were actually defrauded. Moreover, JMB's only claim here is based on the written assignment. JMB acquired no DTPA claims merely by becoming a subsequent owner of One Houston Center, [27] and asserts none in its own right. As JMB's only basis for DTPA claims is the written assignment, it is hard to see how its claims are different from those that might be obtained by arbitrageurs. In sum, allowing assignment of DTPA claims would ensure that aggrieved consumers do not file them, that some consumers receive nothing in compensation, and others are deceived a second time. All would defeat the very purposes for which the DTPA was enacted.
In some cases of statutory silence, we have also looked to related common-law principles. [28] With respect to the assignment of claims, we have recognized the collapse of the common-law rule that generally prohibited such assignments. [29] But the assignability of most claims does not mean all are assignable; [30] exceptions may be required due to equity and public policy. [31] Courts addressing assignability have often distinguished between claims that are property-based and remedial and claims that are personal and punitive, holding that the former are assignable and the latter are not. [32] The DTPA claims here (unlike the warranty claims under the UCC) clearly fall in the latter category. Unlike most other states, Texas adopted the UCC without choosing any of its three options concerning who may sue on warranties; [33] instead, the Legislature expressly delegated that choice to the courts. [34] Pursuant to that mandate, in Nobility Homes of Texas, Inc. v. Shivers, we held a downstream purchaser of a mobile home could bring implied warranty claims directly against a remote manufacturer, even though there was no privity of contract between them. [35] While it appears we have never addressed the same issue regarding express warranties, several lower courts have applied the same rule in that context โ express warranties pass with the goods. [36] But in Amstadt v. U.S. Brass Corp., we held downstream purchasers of non-mobile homes could not bring DTPA claims against remote manufacturers and suppliers of a defective plumbing system, because the deceptive acts alleged were not committed against or communicated to them in connection with their own purchases. [37] Recognizing the similarity to this case, JMB asserted no DTPA claims in its own right, as it had no connection with PPG's original Twindows sale, and never saw any PPG advertisements or warranties before it bought the building. [38] Thus, we have established a clear distinction between DTPA and warranty claims: a downstream buyer can sue a remote seller for breach of an implied warranty, but cannot sue under the DTPA. Clearly, if warranty claims are assignable because they are property-based, DTPA claims must be something else; there must be a personal aspect in being duped that does not pass to subsequent buyers the way a warranty does. DTPA claims generally are also punitive rather than remedial. In this respect, it is important to remember that the DTPA overlaps many common-law causes of action, including breach of contract, warranty, fraud, misrepresentation, and negligence. [39] Frequently, the DTPA is pleaded not because it is the only remedy, but because it is the most favorable remedy. In this case, for example, JMB pleaded one set of factual allegations that was then incorporated wholesale into claims for breach of contract, warranty, and the DTPA. The contract and warranty claims offered a remedy, but only the DTPA offered treble damages. In such cases, the most important role of the DTPA is the remedies it adds, not the ones it duplicates. [40] Economic damages and attorney's fees are certainly remedial, but they were recoverable in contract and warranty long before the DTPA was passed. The DTPA adds mental anguish and punitive damages [41] โ damages that could hardly be more personal. JMB never asserted a claim for mental anguish, but many DTPA claimants do and will. If consumers can assign their DTPA claims, they may still have to testify at trial about the nature, duration, and severity of their mental anguish, [42] but someone else will keep the money. JMB argues the DTPA's treble damages are remedial rather than punitive because they address individual rather than public injuries. Our dissenting colleagues would also find DTPA damages remedial, but overlook the fact that twenty years ago we held exactly the opposite. In Pace v. State , we held a DTPA treble-damage award could not be recovered from the Real Estate Recovery Fund (a fund set up for  reimbursing aggrieved persons) because treble damages under the DTPA are punitive damages. [43] JMB also points to cases in which federal statutory penalties have been held assignable. Statutes that create a remedy where none previously existed may be remedial; for example, there was no remedy at common law for being driven out of business by a monopolist. [44] But that cannot be said of JMB's warranty claims here. Of course, if manufacturers make representations or warranties directly to consumers, the latter may sue directly (despite the absence of privity) for breach of express warranty [45] or violation of the DTPA. [46] But JMB neither alleged nor proved that was the case here. As DTPA claims are too personal and punitive to pass with goods from one owner to the next, it is hard to see why they should pass with the same goods by assignment. [47]
Finally, we must consider whether assignment of DTPA claims may increase or distort litigation. We have never upheld assignments in the face of those concerns. [48] We have prohibited assignments that may skew the trial process, confuse or mislead the jury, promote collusion among nominal adversaries, or misdirect damages from more culpable to less culpable defendants. [49] First, as noted above, DTPA claims are unlike most contract-related claims in providing for mental anguish and punitive damages. Jurors are bound to experience some confusion in assessing mental anguish of a consumer, or punitive damages based on the situation and sensibilities of the parties, [50] when the affected consumer is not a party. The Legislature intended DTPA lawsuits to be efficient and economical; [51] assessing personal and punitive damages in these circumstances is likely to make that goal difficult. But more important, there is a serious risk here of skewing the adversarial process. When A sells goods to B who sells them to C, if the goods prove defective and there were no dealings between A and C (as is often the case in the stream of commerce), C will naturally look to B for a breach-of-contract remedy. But if DTPA claims are assignable, B and C both have a strong incentive to direct the suit elsewhere for relief. If B settles with C for a small amount and assigns any DTPA claims it may have against A, C now has a case with potential punitive damages, and B has avoided potential liability. Thus the litigation will continue with the parties in different roles โ precisely the results that have led us to prohibit assignments in other contexts. In this case JMB made no complaints against HCC, even though the window problems JMB discovered were very similar to the ones HCC encountered a few years before. [52] Further, to avoid any discovery rule problems, HCC joined JMB in downplaying the earlier problems that must have seemed disastrous to HCC at the time. We cast no aspersions on the litigants here; we only note that assignability of DTPA claims may encourage some buyers to cooperate โ if not collude โ with a seller who may have been the one that actually misled them.
The DTPA is primarily concerned with people โ both the deceivers and the deceived. [53] This gives the entire act a personal aspect that cannot be squared with a rule that allows assignment of DTPA claims as if they were merely another piece of property. Our dissenting colleagues assert we should skip over the question of DTPA assignability (which they proceed to address in detail) to address the threshold question whether HCC had a valid DTPA claim to assign. In reviewing this DTPA judgment in favor of an assignee, an appellate court could first ask whether the assignment, if proper, concerned a valid DTPA claim (as our colleagues do), or whether the DTPA claim, if proper, could be assigned (as do we). Clearly, the more important question to the jurisprudence of the state [54] is whether DTPA claims can be transferred (a matter of conflict in the courts of appeals), not whether pre-1983 DTPA claims survived the 1983 amendments (a matter as to which there has been neither case nor conflict in the twenty years since). Our dissenting colleagues suggest in a hypothetical that under our decision today, if A tampers with a car's odometer before selling it to B who sells it to C, C has no DTPA remedy against A. Of course, that is already the case under Amstadt if there is no assignment. Moreover, C can also sue B under the DTPA (perhaps for representing the car had lower mileage than it really had), [55] and B can bring an indemnity and contribution claim under the DTPA against A. [56] If we assume (as their hypothetical does) that A did the tampering, the effect is likely to be the same โ A pays DTPA damages, and C receives them. But if B did the tampering (and given the severe federal penalties, [57] no one is likely to admit it), the assignment of DTPA claims skews the normal litigation process by encouraging C to combine with B against A. Because only an assignment is before us, we do not decide whether DTPA claims survive to a consumer's heirs, a related but sometimes distinct inquiry. [58] For the same reason, we also reserve for another day the assignment of claims that were created within and could not be brought without the DTPA, such as false going-out-of-business sales [59] or price-gouging during a disaster. [60] Finally, our holding does not prohibit equitable assignments, such as a contingent-fee interest assigned to a consumer's attorney. [61] But because of the statutory differences between the UCC and the DTPA, the personal litigation by consumers that was the DTPA's primary purpose, the personal and punitive nature of both DTPA claims and DTPA damages, and the risks to the adversarial process, we hold that DTPA claims generally cannot be assigned by an aggrieved consumer to someone else.