Making the case for legislation to curb junk lawsuits
Gas dealers, rental companies and even your favorite food manufacturers have become targets in Missouri as lawyers troll grocery shelves to find a reason to sue under Missouri’s lax Missouri Merchandising Practices Act (MMPA.) The American Tort Reform Association has compiled a list of such cases in which consumers took home a few dollars, while trial attorneys earned millions.
“A law that was created to protect consumers, the MMPA is now more commonly being used against consumers to make trial attorneys rich,” said Missouri Chamber general counsel Brian Bunten. “Years of erosion of the law has resulted in making many areas of our state, like St. Louis City, a destination for bringing class action lawsuits against employers. This abuse makes it harder for companies to compete in Missouri and increases the cost on many good and services.”
But legislation sponsored by Sen. Ron Richard, Senate Bill 5, would take the law back to its intended consumer-protection mission. The legislation awaits debate by the full Senate.
The MMPA was enacted fifty years ago to prohibit “unfair” or “deceptive” practices in the sale of products and services to consumers. Amendments to the MMPA in the 1970s began to erode the law, including adding a private right of action, which allows personal injury lawyers to recruit supposedly defrauded clients for consumer lawsuits. Additional amendments opened the door for private lawsuits to seek punitive damages, attorneys’ fees, and monstrous class actions.
A 1985 amendment further broadened the scope by declaring that consumer lawsuits could target allegedly unlawful practices outside of Missouri if a Missouri consumer was affected. According to a study by Northwestern University, this change to the MMPA resulted in an astonishing 678 percent rise in reported decisions of consumer fraud claims from 2000 to 2009.
The Regulatory Compliance Provision in Senate Bill 5 has gotten a lot of attention. It is a provision that is in two-thirds of state consumer protection laws which recognize that certain business practices are already specifically regulated by government agencies charged with protecting consumers, and therefore are better litigated under those existing laws.
“With this provision, our courts can rely on well thought-out decisions made by regulatory agencies and decades of guidance from the Federal Trade Commission. It removes the very real risk of a plaintiffs’ lawyer bringing a private lawsuit claiming a business’s action is unfair or misleading when that same action is permitted by a government agency,” said Jennifer Artman, a Missouri attorney who testified in support of Senate Bill 5.
Examples of how this provision works in practice
- The Missouri Attorney General has issued advertising regulations under the MMPA that cover such areas as when it is permissible to make price comparisons. Conduct permitted by these regulations would not be the basis of a private MMPA lawsuit.
- Missouri’s Public Service Commission approves electric, gas, and water rates. An MMPA lawsuit claiming that a rate increase was unfair because it was not sufficiently justified by increased costs would be dismissed.
- The Missouri Department of Agriculture regulates the labeling of pet foods. Its regulations permit a pet food seller to designate a product as “100 percent” or “All” of a single ingredient even if it contains water sufficient for processing and trace amounts of preservatives. A court would dismiss an MMPA claim alleging that dog food advertised as 100% beef is deceptive because the product includes a small amount of water and preservatives.
- Similarly, the Department of Agriculture has adopted the definition of “natural” used by the Association of American Feed Control Officials (AAFCO) for pet food advertising. An MMPA lawsuit that alleges pet food is not natural, but meets the Missouri Department of Agriculture regulation, would be dismissed.
- The Missouri Gaming Commission regulates how and where rules and payoff schedules for games must be published. An MMPA lawsuit claiming that a casino committed an unfair or deceptive practice by posting the rules in an insufficiently noticeable location would be dismissed if it was posted in accordance with the MGC’s regulations.
- The FDA approves a prescription drug’s label. The agency also reviews a product advertisement submitted by the manufacturer, finding it is supported by science and consistent with the FDA approval. A MMPA claim alleging that this advertisement misleads doctors to prescribe the drug to patients who would not benefit from it would be dismissed.
- The FDA is currently considering use of the term “natural” on product labeling. If the FDA specifies when it is permissible to use natural and food makers follow the FDA’s standards, lawsuits that allege consumers were nevertheless misled because they had a different understanding of what is natural would be precluded.
Source: American Tort Reform Association