Unlawful Trade Practices, Investigations, and Claims: Are Long Term Care Providers at Risk? By Jeff Brecht and Gabriela Sanchez
Unlawful Trade Practices, Investigations, and Claims: Are
Long Term Care Providers at Risk?
By Je Brecht and Gabriela Sanchez
02/12/2016
ough the statutory names vary from state to state,1 certain laws exist in every state for the same general reason—to
protect consumers from fraud and unfair or deceptive business practices.2 Known generally as unfair or unlawful
trade practice laws and acts, they codify, in particular, the states’ public policies of protecting particularly vulnerable
consumers.3 Even though the long term care industry is regulated by state and federal laws, unlawful trade practice
laws can still apply to long term care providers. Not surprisingly, for long term care providers, who generally provide
services to individuals who may be elderly or suer cognitive decits, the implication of unfair trade practice laws is
signicant.
Unfair trade practice laws are generally enforced by state attorneys general (AGs).4 However, individuals who claim
to have been damaged by deceptive practices that violate the law,5 or entire classes of similarly situated individuals,6
usually also have standing to bring unfair trade practice claims.
Prohibited Conduct and Remedies for Committing Unfair Trade Practices
Unfair trade practice statutes proscribe a wide variety of conduct, ranging from representing “that real estate, goods or
services have sponsorship, approval, characteristics, ingredients, uses, benets, quantities or qualities that the real estate,
goods or services do not have,”7 to using “unfair or deceptive acts or practices in the conduct of any trade or commerce,”8
to engaging in “any other conduct which similarly creates a likelihood of confusion or of misunderstanding.”9
State unlawful trade practice actions against long term care providers can be especially problematic. Remedies for
violation of these laws can be substantial. Such remedies may include declaratory judgments that specic actions
violate the law,10 injunctions to prevent certain actions,11 civil penalties,12 awards of economic damages,13 awards of
punitive damages,14 awards of attorneys’ fees, and additional remedies as may be deemed appropriate by the court to
“restore to any person in interest any moneys or property, real or personal, of which the person was deprived by means
of any practice declared to be unlawful.”15 Moreover, responding to unfair trade practice investigations, or defending
against such claims, can impose other hardships on long term care providers, such as disruption of business, heightened
scrutiny from licensing authorities (including imposition of license conditions), negative impacts on management and
sta morale, and negative (and potentially one-sided and inaccurate) public relations fallout.
Civil Investigative Demands and Unfair Trade Practice Investigations
Generally, state laws empower state AGs to issue Civil Investigative Demands (CIDs) to investigate potential unlawful
trade practices.16 CIDs are broad statutory discovery tools that require those served with such demands to provide
requested information, including documents, written responses to interrogatories, and testimony. In eect, CIDs are
administrative subpoenas.17 e factual threshold for issuance of a CID is generally low, meaning that state AGs may,
for example, need to only show that they believe issuance of a CID is in the public interest18 or that the subject of the
CID possesses information relevant to the investigation.19 CID statutes generally also provide mechanisms to challenge
CIDs, such as by ling a petition to modify or set aside the CID.20 However, given the broad powers CID statutes
bestow, such challenges can seem like, and are often, an exercise in futility.21
