Laying Down the Law – The Arizona Consumer Fraud Act
July 27, 2023
with Christopher J. Charles, Esq.
“Those who deal with the public must be careful that their goods are valuable; that they are genuine, and will give satisfaction.”
PT Barnum – The Art of Money Getting
The Arizona Consumer Fraud Act
Arizona, like many states, has a consumer fraud act to protect consumers. The Arizona Consumer Fraud Act, A.R.S. §§ 44-1521 to 44-1534, as amended (the “Act”) was passed in 1967 with the goal of promoting truthful business practices and to combat deceptive and fraudulent advertising in connections with the sale of merchandise. Since then, the Act has been the subject of considerable litigation and appellate court opinions. In the electronic age in which we live, truthful advertising and fair business practices are critical to consumers who often buy goods manufactured in foreign countries from nameless faceless entities. Importantly, the Act expressly applies to real estate.
Meaning and Application of the Act
Like most statutes passed by the legislature, definitions are vitally important to the operation of the law. The Act defines important terms related to consumer transactions:
‘Advertisement’ includes the attempt by publication, dissemination, solicitation or circulation, oral or written, to induce directly or indirectly any person to enter into any obligation or acquire any title or interest in any merchandise.
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‘Merchandise’ means any objects, wares, goods, commodities, intangibles, real estate or services.
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‘Sale’ means any sale, offer for sale or attempt to sell any merchandise for any consideration, including sales, leases and rentals of any real estate subject to any form of deed restriction imposed as part of a previous sale.
A.R.S. § 44-1521.
These are just a few of the definitions in the Act. Notice that the term merchandise is broad and encompasses more that consumer “wares [and] goods” but covers “intangibles, real estate or services” as well. This definition gives the Act a broad reach when protecting consumers in a transaction.
The Act specifies unlawful practices, including but not limited to deceptive practices in connection with sale of merchandise:
The act, use or employment by any person of any deception, deceptive or unfair act or practice, fraud, false pretense, false promise, misrepresentation, or concealment, suppression or omission of any material fact with intent that others rely on 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.
A.R.S. § 44-1522(A).
The Act applies to both affirmative acts of trickery (ie. “deception”) and a withholding of information (ie. “suppression or omission”). The Act permits the Attorney General to enforce the law in a government action or, permits a private citizen to enforce it in a lawsuit between private parties. This allows a consumer to determine whether they wish to seek damages in a lawsuit or contact the Attorney General if they believe there was a violation of the Act. The Attorney General has a consumer complaint portal that many consumers utilize to report what they believe are deceptive or fraudulent trade practices.
Proof of a consumer fraud claims generally requires that a defendant used deception or fraud; or concealed a material fact and “intended that others rely on the concealment or suppression” in connection with the “sale or advertisement of merchandise”; and plaintiff suffered damages as result of reliance on defendant’s fraud or concealment. State ex rel. Horne v. Autozone, Inc., 227 Ariz. 471 (App. 2011) (vacated in part on other grounds); Powers v. Guar. RV, Inc., 229 Ariz. 555 (App. 2012).
A claim for consumer fraud differs from a usual common law fraud claim in that consumer fraud does not require the same elements. For example, in a consumer fraud action, it is not necessary to show the defendant’s intention to deceive the plaintiff. In addition, if plaintiff was harmed as a result of reliance on any false statement or misrepresentation made by the defendant, the reasonableness of plaintiff’s reliance is not an element of the consumer fraud claim. See, Arizona Pattern Jury Instructions (Civil) Consumer Fraud Elements (7th ed), at Comment 1; Flagstaff Med. Ctr., Inc. v. Sullivan, 773 F. Supp. 1325 (D. Ariz. 1991), aff’d in part, rev’d in part on other grounds, 962 F.2d 879 (9th Cir. 1992); Parks v. Macro-Dynamics, Inc., 121 Ariz. 517, 520 (App. 1979), appeal after remand, 134 Ariz. 495 (App. 1982).
In a lawsuit between private parties for consumer fraud, one should carefully consider the damages available to the Plaintiff bringing the suit if they succeed. Generally, a Plaintiff can recover “actual damages” which includes consideration paid in the contract and out-of-pocket expenses. Holeman v. Neils, 803 F. Supp. 237 (D. Ariz. 1992). In a case where the standard is met, punitive damages may also be available.
The Act can be an important tool when considering claims and defenses arising out of a transaction in which a party feels they were mislead or that material information was withheld from them. It applies to a very broad range of transactions, including but not limited to, real estate and service contracts. In any consultation with an attorney, you should always ask about their experience in court generally with large commercial cases and specifically with the Act.
Timothy Watson is the chair of the commercial litigation and trial practice group at Provident Law®. He is a trial advocate with more than 24 years of experience in high profile, high value litigation. He is also a former Trial Team Leader in the Office of the Arizona Attorney General. He has successfully tried numerous cases in state and federal courts including multi-million dollar claims in the areas of business litigation, real estate, high net worth probate, injury and insurance matters. He holds a Martindale Hubbell peer review rating of AV-Preeminent with high ethical standing. In addition to representing clients in large, complex litigation, Mr. Watson provides mediation and arbitration services. He can be reached at: Tim@ProvidentLawyers.com or at 480-388-3343.
Disclaimer: The information in this article is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this article should be construed as legal advice from the individual author or the Firm, nor is it intended to be a substitute for legal counsel on any subject matter.
Christopher J. Charles is the Founder and Managing Partner of Provident Law ®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS ® (the “AAR”). In 2017, Mr. Charles obtained one of the Top Ten Civil Verdicts for his client in a real estate dispute. Mr. Charles holds the AV ® Preeminent Rating by the Martindale-Hubbell Peer Review Ratings system which connotes the highest possible rating in both legal ability and ethical standards. He serves as an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher regularly teaches continuing education classes at the Arizona School of Real Estate and Business, and he can be reached at Chris@ProvidentLawyers.com or at 480-388-3343.