April 13, 2010Client Alert

Deceptive Trade Practices Act: Private Cause of Action Does Not Extend to Competitors

Section 100.18(1) of Wisconsin’s Deceptive Trade Practices Act (“DTPA”) does not create a private cause of action between competitors based upon alleged misrepresentations made to the public, according to a recent decision from the United States District Court for the Western District of Wisconsin. This decision places a limit on the scope of section 100.18, which has been a popular cause of action based upon its mandate that a successful plaintiff be reimbursed for its attorneys’ fees by the defendant.

In Grice Engineering, Inc. v. JG Innovations, Inc., 2010 WL 768971 (W.D.Wis. 2010), the plaintiff asserted a claim for deceptive trade practices under Wisconsin Statute § 100.18(1) claiming that the defendant had caused it damage by allegedly making misrepresentations to the public. The plaintiff’s allegations were based solely on alleged misrepresentations by the defendant to third parties and not to the plaintiff.

A claim under § 100.18(1) of the DTPA requires: (1) a representation to the public with the intent to induce an obligation; (2) the representation was untrue, deceptive, or misleading; and (3) the representation materially caused a pecuniary loss to the plaintiff. Novell v. Migliaccio, 2008 WI 44, ¶49. In Grice, the plaintiff alleged that it had suffered a pecuniary loss because consumers would have purchased products from the plaintiff in the absence of the misrepresentation. In response, the defendant argued that the “cause” of the plaintiff’s speculative loss in sales was not the type of causation contemplated by the statute. The Court agreed with defendant, persuaded largely by the reasoning of Spacesaver Corp. v. Marvel Group, Inc., 621 F. Supp. 2d 659 (W.D.Wis. 2009).

In Spacesaver, the Court held section 100.18(1) of the DTPA does not extend to misrepresentations made to non-parties. The Spacesaver Court cited the Wisconsin Supreme Court’s decision in Novell v. Migliaccio in which the Supreme Court noted that “reliance is an aspect … of whether a representation caused the plaintiff’s pecuniary loss.” According to Spacesaver and now Grice, this means that a plaintiff must do more than show it sustained a loss that is somehow connected to “the public.” Rather, plaintiffs asserting a § 100.18(1) claim must show that the representation materially induced their decision to act and that they would not have acted in the absence of the representation.

The Court in Grice also considered the general purpose of § 100.18(1), which is “to protect the residents of Wisconsin from any untrue, deceptive or misleading representations made to promote the sale of a product” to a consumer. K&S Tool & Die Corp. v. Perfection Machinery Sales, Inc., 2006 WI App 148, ¶26. “The statute is not designed to protect product manufacturers from the deceptive acts of their competitors;” Wisconsin law contains other doctrines for that. Grice at *6.

Thus, under new case law, section 100.18(1) of the DTPA does not provide a cause of action for competitors based upon alleged misrepresentations made to the public. Other causes of action exist to address such misrepresentations, including a claim of false advertising under the federal Lanham Act. A false advertising claim, however, does not mandate the imposition of attorneys’ fees on violators, as does section 100.18 of the DTPA.

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