§21.2 - Elements of a Private Action Under the CPA

§21.2 ELEMENTS OF A PRIVATE ACTION UNDER THE CPA

This section discusses the elements necessary to establish a private claim under the CPA.

(1) Five elements of a cause of action—the Hangman test

Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 719 P.2d 531 (1986), is the leading case setting forth the basic elements of a private action under the CPA. Hangman, which involved a real estate escrow transaction, expressly modified prior case law by establishing five necessary elements for a private cause of action:

Indoor Billboard/Wash., Inc. v. Integra Telecom of Wash., Inc., 162 Wn.2d 59, 74, 170 P.3d 10 (2007) (citing Hangman, 105 Wn.2d 778). A private plaintiff must satisfy all five elements to prevail. See Edmonds, 87 Wn.App. at 845. If any one of these elements is lacking, a private CPA claim must fail. Hangman, 105 Wn.2d at 793. See Susan Clyett Lybeck, New Consumer Protection Private Action Test: Clarification or Further Confusion?, 62 WASH. L. REV. 277 (1987), for an in-depth discussion of the Hangman standard.

The Hangman opinion deals with an alleged consumer protection violation of the unfair and deceptive practices aspect of RCW 19.86.020. Although the court's language in many respects is quite broad, the opinion does not deal explicitly with the antitrust/competitive business practices aspects of the statute, including the statute's prohibition of unfair methods of competition.

Thus, as demonstrated by the later opinion in Nordstrom, Inc. v. Tampourlos, 107 Wn.2d 735, 733 P.2d 208 (1987), the Hangman test is not workable in application to all claimed violations. Because antitrust and unfair methods of competition cases have traditionally been viewed as inherently implicating the public interest, the elaborate analytical structure established by Hangman to determine whether sufficient public interest exists to elevate a consumer protection claim above the category of an essentially private dispute is of doubtful value in such cases. For a pre-Hangman case that was the first Washington Supreme Court case to discuss what kind of conduct might constitute an unfair method of competition, see State v. Black, 100 Wn.2d 793, 676 P.2d 963 (1984).

The following summarizes what appear to be the key factors under Hangman and subsequent case law in applying this five-pronged test to consumer protection claims.

(2) Unfair or deceptive conduct in trade or commerce

The first two elements of the Hangman test—(1) unfair or deceptive act or practice; and (2) occurring in trade or commerce—may be established in at least two ways. First, a trade practice that violates a consumer protection statute expressly designating specific conduct as an "unfair or deceptive act in trade or commerce" or "an unfair trade practice" will constitute a per se violation of the CPA. Hangman, 105 Wn.2d at 786-87. The Hangman court held that a per se unfair trade practice exists when a violation of a particular statute has been declared by the legislature to constitute an unfair or deceptive act in trade or commerce. Id. at 786. The court in Hangman lists a number of statutes as examples of statutes containing such language, including several related to real estate: RCW 58.19.270 (land development); RCW 19.146.100 (mortgage brokers); RCW 64.36.170 (timeshare offerings). See also State v. Schwab, 103 Wn.2d 542, 546-47, 693 P.2d 108 (1985).

In situations in which a statute does not establish a per se statutory unfair trade practice, the first two elements of the Hangman test nevertheless may be met in a deceptive practices case by a showing that an act or practice has the capacity or tendency to deceive a substantial portion of the public and has occurred in the conduct of any trade or commerce. Hangman, 105 Wn.2d at 786. Hangman does not discuss how the first element of the test (unfair or deceptive act or practice) can be met when the violation alleged involves unfair rather than deceptive conduct. And although the Washington Supreme Court has reaffirmed that "an act or practice can be unfair without being deceptive," it declined to specifically define "unfair acts" for the purposes of the CPA. Klem v. Wash. Mut. Bank, 176 Wn. 2d 771, 787-88, 295 P.3d 1179 (2013). Although the court did note that "[c]urrent federal law suggests a ‘practice is unfair [if it] causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and is not outweighed by countervailing benefits,'" id. at 787 (citing 15 U.S.C. §45(n)), the court also acknowledged that "[a]lthough we have been guided by federal interpretations, Washington has developed its own jurisprudence regarding application of Washington's CPA." Id. Nonetheless, the U.S. District Court for the Western District of Washington, citing Klem, appears to have applied the federal definition of "unfair" to a CPA claim in Lucero v. Cenlar FSB, No. C13-0602RSL, 2014 WL 2972374, at *4 (W.D. Wash. July 1, 2014).

"Real estate sales clearly constitute 'trade' or 'commerce' for purposes of the second element of a CPA violation." Edmonds, 87 Wn.App. at 846.

Hangman establishes two separate per se tests. The first is whether a per se unfair trade practice exists satisfying the first and second elements of the Hangman test. The second is whether a per se public interest impact exists satisfying the third element of the Hangman test. Whether one or both of these tests is met in a particular case depends upon the precise language used by the legislature in the statute, breach of which is alleged to result in a per se violation. RCW 43.22.440(3) (providing that an unremedied violation of mobile home installation regulations constitutes a violation of the CPA); Anderson v. Valley Quality Homes, Inc., 84 Wn.App. 511, 928 P.2d 1143, review...