The Ohio Consumer Sales Practices Act ("OCSPA" or the "Act") (Ohio Rev. Code § 1345.01 et seq.) is a set of laws that aim to protect consumers from sales practices that are deceptive, unfair, or unconscionable. While the OCSPA serves a legitimate need of protecting consumers, its impact on businesses can be profound. Many Ohio businesses, especially smaller ones, may not realize that their actions are subject to the OCSPA. What is more, although many well-intentioned business owners know that the OCSPA lurks, they fail to take the time and effort necessary to ensure that they are in compliance.
The OCSPA is a Remedial Law that Prohibits Unfair, Deceptive, and Unconscionable Acts
Before getting into the meat of the OCSPA, one first needs to understand its purpose. The OCSPA is a remedial law that "is designed to compensate for traditional consumer remedies" and, as such, is "liberally construed" by Ohio courts.[1] Its objective is to make private enforcement more appealing to consumers "who otherwise might not be able to afford or justify the cost of prosecuting an alleged [O]CSPA violation, which, in turn, works to discourage [O]CSPA violations in the first place via the threat of liability for damages and attorney fees."[2] In some ways, then, the OCSPA is similar to class action lawsuits in that it is designed in a manner to make it easier and more attractive for consumers to bring lawsuits that they would otherwise have little incentive to bring.[3]
So, what exactly does the OCSPA prohibit? Ohio Rev. Code § 1345.02(A) prohibits a supplier from committing "unfair or deceptive" acts toward a consumer in a "consumer transaction." Deceptive or unfair acts are "those that mislead consumers about the nature of the product they are receiving."[4] A non-exhaustive list of representations considered to be deceptive can be found in Ohio Rev. Code § 1345.02(B). For example, representing to someone that what they are buying is new or unused, when in fact it is not, is considered deceptive.[5] The Act also applies to home solicitation sales and requires the seller to notify the buyer of the right to cancel the sale and provide the buyer with a cancellation notice form, which can be returned to the seller via email or fax. Ohio Rev. Code §§ 1345.21 and 1345.23.[6]
In 2017, the OCSPA was amended to include another item for which a supplier can be held liable and something to which small business owners should pay special attention: "the failure of a supplier to obtain or maintain any registration, license, bond, or insurance required by state law or local ordinance for the supplier to engage in the supplier's trade or profession is an unfair or deceptive act or practice." Ohio Rev. Code § 1345.02(G).
In addition to the statutory provisions, the Ohio Attorney General has also adopted rules and regulations (which can be found in the Ohio Administrative Code) that expressly identify various other practices that are unfair, deceptive, and in violation of Ohio Rev. Code §1345.02. Some of the practices considered deceptive (and thus a violation of the OCSPA) include when a supplier uses the word "free" with respect to a transaction, when in reality the costs of the "free" offer are passed to the consumer by raising the price of the goods or services that must be purchased in conjunction with the "free" offer. Ohio Admin. Code § 109:4-3-04. It is also a violation for certain suppliers to fail to provide written estimates to consumers regarding work to be done (Ohio Admin. Code § 109:4-3-13), or to fail to complete the work within eight weeks without offering a refund (Ohio Admin. Code § 109:4-3-09(A)(2)), or to fail to give the consumer written receipts for deposits (Ohio Admin. Code § 109:4-3-07(C)).[7]
Similarly, Ohio Rev. Code § 1345.03(A) prohibits suppliers from committing "an unconscionable act or practice in connection with a consumer transaction." Unconscionable acts are those that "relate to a supplier manipulating a consumer's understanding of the nature of the transaction at issue."[8] Although "unconscionable" is not expressly defined in the statute, businesses may look to Ohio Rev. Code § 1345.03(B), which provides various factors to be considered when determining whether a supplier has knowingly taken unfair advantage of a consumer. For example, did the supplier knowingly give a misleading opinion on which the consumer was likely to rely?
While the statute does provide for a "bona fide error" defense, Ohio Rev. Code § 1345.11, which would limit liability for violations of the statute to actual damages only, the defense is narrowly applied,[9] and "[s]ubstantial compliance is irrelevant when the supplier is required by a regulation to specifically perform certain actions to avoid committing an unfair and deceptive act."[10]
Does the OCSPA Apply to Me?
How does a business determine whether the OCSPA applies to it? As mentioned above, the OCSPA prohibits unfair and deceptive acts taken by a supplier in connection with a consumer transaction. The first step, then, would be to determine whether one is a "supplier." Ohio Rev. Code § 1345.01(C) defines a supplier as "a seller, lessor, assignor, franchisor, or other person engaged in the business of effecting or soliciting consumer transactions, whether or not the person deals directly with the consumer."[11] "The terms 'effecting' and 'soliciting' are not defined by the statute, so [courts] give the terms their plain and ordinary meanings. 'Effect' is defined as '[t]o bring about; to make happen. . . .' 'Solicitation' is defined as '[t]he act or an instance of requesting or seeking to obtain something; a request or petition.'"[12] The definition of "supplier" is very broad and likely covers many businesses that do not realize they are subject to the Act.[13]
The next step is to determine whether the transaction qualifies as a "consumer transaction." A "consumer transaction," essentially, is one that involves an exchange of goods or services for personal purposes, as well as any solicitation to do so and is defined in the Act as follows:
"'Consumer transaction' means a sale, lease, assignment, award by chance, or other transfer of an item of goods, a service, a franchise, or an intangible, to an individual for purposes that are primarily personal, family, or household, or solicitation to supply any of these things."
Ohio Rev. Code § 1345.01(A).[14] A consumer transaction under the Act must involve an individual consumer on one side. It does not apply to transactions between businesses.[15]
Bottom line, if one is a supplier and is involved with transactions with consumers, then the OCSPA applies. As noted above, what constitutes an unfair, deceptive, or unconscionable act is not limited to the provisions of the OCSPA (Ohio Rev. Code § 1345.01 et seq.). Indeed, the Act contemplates corresponding regulations that explicitly identify numerous other acts that would be violations of the OCSPA. In addition, acts found to be deceptive and violating the Act have also been enumerated by the courts as well as the Ohio Attorney General. It is imperative that businesses – especially smaller ones – educate themselves and their employees as to how to comply with the Act.
What Types of Damages Can Be Expected if the Act is Violated?
Generally, upon violation of the OCSPA, a consumer has options when it comes to remedies, but the consumer must make an election. The consumer may either rescind the agreement or transaction or seek damages.[16] The consumer may recover actual damages "plus an amount not exceeding five thousand dollars in noneconomic damages." Ohio Rev. Code § 1345.09(A). Actual damages, however, are not required.[17] If the consumer does not have or cannot prove actual damages, the consumer can seek to recover statutory damages of $200 per each, individual violation.[18] Still, the consumer cannot recover both statutory and actual damages.[19] The OCSPA can be potentially devastating for small businesses, however, because of the threat of an additional penalty it provides upon violation of the Act in certain circumstances – the award of treble damages. Ohio Rev. Code § 1345.09(B). As one court has stated, "[r]ecovery under the [O]CSPA, therefore, is not limited to making the consumer whole."[20] Rather, the treble damages provision is intended to act as a punishment for violating the law.[21]
When are Treble Damages Required?
Pursuant to Ohio Rev. Code § 1345.09(B), a plaintiff consumer can recover treble damages if the act committed was expressly declared unconscionable or deceptive by statute, or if the act committed was expressly declared unconscionable or deceptive in a court decision and the decision was made available for public inspection.[22] To obtain treble damages, however, there must be a finding of actual damages.[23] In the event that trebling damages results in an amount less than $200, the consumer will be entitled to the $200 statutory amount.
By way of example, Ohio Admin. Code § 109:4-3-13(A)(1) specifically defines a deceptive act as one where a vehicle is serviced without a prior written estimate[24] or work order authorizing the work to be performed without an estimate. If a car repair company engages in such an act, then the repair company could be liable for treble damages, since the act was expressly declared deceptive by statute.
Importantly, treble damages are not discretionary when a party satisfies the prerequisites: "When a plaintiff has made its election for damages and has met the prerequisites for treble damages under R.C. 1345.09(B), the statute does not make it discretionary for a trial court to award either actual damages or treble damages[.]"[25] Put differently, "after a plaintiff satisfies the predicate requirements, R.C. 1345.09 mandates that a trial court award treble damages."[26]
In fact, it matters not whether a court believes that a company acted in good faith, or believes that an award of treble damages would be unjust. If a consumer satisfies the requirements, then denying treble damages because of perceived unfairness or good faith on the part of the company "is in direct contravention of the statute." [27] In other words, "[g]ood faith and substantial compliance do not provide a defense to an award of treble damages. The trial court is not free to exercise its sound discretion in fashioning a remedy appropriate to the fact[s]."[28] Ohio appellate courts routinely reverse trial court decisions denying treble damages, despite the trial court's belief that the business's conduct was not sufficiently egregious to warrant treble damages, because the consumer satisfied the requirements of Ohio Rev. Code § 1345.09(B).[29]
Attorney's Fees
In addition to treble damages, businesses should be aware of other damage traps. For example, if the consumer can prove that a supplier knowingly committed an unconscionable or deceptive act, then the consumer may recover reasonable attorney's fees. Ohio Rev. Code § 1345.09(F).[30] "Knowingly" means only that the supplier knows that it acted or failed to act in a certain way, not that the supplier realizes that its act violated the OCSPA.[31] In other words, a supplier could violate the OCSPA even if it has no intent to deceive. The silver lining for businesses that might find themselves in a suit for violation of the Act, though, is that an award of attorney's fee is discretionary, not mandatory like treble damages. In addition, if the supplier finds itself wrongly accused of an OCSPA violation and prevails in the action, the supplier can seek recovery of its attorney's fees from the plaintiff consumer, but again, at the discretion of the court.[32]
Cure Offer
There is some other good news for suppliers. Suppliers are permitted to make a "cure offer" to consumers who have filed claims under the OCSPA pursuant to Ohio Rev. Code § 1345.092. If a cure offer is rejected by the consumer, and that consumer is not awarded a greater amount by the trier of fact, then the consumer is not permitted to recover treble damages, court costs, and attorney's fees that otherwise might have been available. A cure offer must:
- be made within 30 days of service of process;
- be sent via certified mail, return receipt requested, to the plaintiff consumer (or his/her attorney);
- be filed with the court;
- include the supplier's offer "that consists solely of monetary compensation to resolve alleged violations" of the OCSPA;
- include an offer to pay reasonable attorney's fees necessary to cover the filing of the original complaint, not exceeding $2,500; and
- include an offer to pay court costs incurred by the consumer and relating to filing costs.
Additionally, the cure offer must include a disclosure, pursuant to Ohio Rev. Code §1345.092(D)(2), which essentially spells out for the plaintiff consumer what the cure offer entails and the potential consequences of not accepting the offer. The consumer then has 30 days in which to accept the cure offer, which acceptance must be filed with the court.
While many defendant businesses might be reluctant to make offers to settle a matter so early in proceedings, this "right to cure" provision provides both parties with an incentive to try to settle the case early, and it provides businesses with a mechanism in which to avoid potentially devastating treble damages awards.
For businesses, especially small businesses, that routinely engage in transactions with consumers, it is important to keep in mind the OCSPA, and all of its requirements and potential pitfalls. As the statute has been amended, and more and more courts have found certain actions to be deceptive and/or unconscionable, a business could find itself, through no fault of its own or with no intent to do so, in violation of the statute. Consultation with an attorney well-versed in this area of the law is advised if you have any questions or concerns about compliance.[33]
[1] Taylor v. First Resolution Invest. Corp., 148 Ohio St.3d 627, 2016-Ohio-3444, 72 N.E.3d 573, ¶ 88; Perrucci v. Whittington, 2d Dist. Miami No. 2017-CA-33, 2018-Ohio-2968, ¶ 111; Williams v. Sharon Woods Collision Ctr., Inc., 1st Dist. Hamilton No. C-170511, 2018-Ohio-2733, ¶ 11; Gaither v. Wall & Assocs., Inc., 2017-Ohio-765, 79 N.E.3d 620, ¶ 52 (2d Dist.) ("[T]he [O]CSPA is a remedial law which is designed to compensate for traditional consumer remedies and so must be liberally construed pursuant to R.C. 1.11."); Whitaker v. M.T. Automotive, Inc., 111 Ohio St.3d 177, 2006-Ohio-5481, 855 N.E.2d 825, ¶ 11.
[2] Whitaker, 2006-Ohio-5481, at ¶ 11 (internal quotation marks and citation omitted).
[3] There is some relief for businesses in that the ability of a consumer to bring a class action under the statute is very limited. Ohio Rev. Code § 1345.09(B) sets forth when a class action may be brought for violation of the Act. Vuyancih v. Jones & Assocs. Law Group, L.L.C., 2018-Ohio-685, 95 N.E.3d 458, ¶ 5, 13 (8th Dist.) ("[A] consumer may qualify for class-action status only when a supplier acted in the face of prior notice that its conduct was deceptive or unconscionable. The prior notice may be in the form of (1) a rule adopted by the Attorney General under R.C. 1345.05(B)(2) or (2) a court decision made available for public inspection by the Attorney General under R.C. 1345.05(A)(3). A consumer intending to rely upon R.C. 1345.09(B) must specifically inform the trial court of the decision or rule relied upon." Consent judgments and default judgments are not sufficient notice. (Citations omitted.)); Martin v. Lamrite W., Inc., 8th Dist. Cuyahoga No. 105395, 2017-Ohio-8170, ¶ 8-13. To meet the prior notice requirement, the decision or rule must deal with "substantially similar" conduct. Marrone v. Philip Morris USA, Inc., 110 Ohio St.3d 5, 2006-Ohio-2869, 850 N.E.2d 31, syllabus, and ¶ 24 ("The question before us is what degree of similarity is necessary for purposes of R.C. 1345.09(B). We hold that there must be a substantial similarity between a defendant's alleged violation of the Act or an act or practice previously declared deceptive by either a rule promulgated by the Attorney General or a court decision that was publicly available when the alleged violation occurred. 'Substantial similarity' means a similarity not in every detail, but in essential circumstances or conditions."). Also, in order to maintain a class action, all consumers in the class must have suffered actual damages. Felix v. Ganley Chevrolet, Inc., 145 Ohio St.3d 329, 2015-Ohio-3430, 49 N.E.3d 1224, ¶ 1, 31("Proof of actual damages is required before a court may properly certify a class action."); id. at ¶ 36 ("[W]e hold that all members of a class in a class-action litigation alleging violations of the OCSPA must have suffered injury as a result of the conduct challenged in the suit."). Treble and statutory damages are not available in class actions. Id. at ¶ 29.
[4] Whitaker, 2006-Ohio-5481, at ¶ 10 (internal quotation marks and citation omitted).
[5] Ohio Rev. Code § 1345.02(B)(3).
[6] Griffin Contracting & Restoration v. McIntyre, 2018-Ohio-3121, 107 N.E.3d 22, ¶ 27 (12th Dist.) ("[A]ny violation of the [Home Solicitation Sales Act] is a violation of the CSPA.").
[7] Ottney v. All Sobb's Auto & Truck Frame Serv., Inc., 6th Dist. Lucas No. L-17-1086, 2018-Ohio-4054, ¶ 2, 24, 28, 31.
[8] Whitaker, 2006-Ohio-5481, at ¶ 10 (internal quotation marks and citation omitted).
[9] Ohio Rev. Code § 1345.11(A) ("In any case arising under Chapter 1345. of the Revised Code, if a supplier shows by a preponderance of the evidence that a violation resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid the error, no civil penalties shall be imposed against the supplier under division (D) of section 1345.07 of the Revised Code, no party shall be awarded attorney's fees, and monetary recovery shall not exceed the amount of actual damages resulting from the violation.").
[10] Ottney, 2018-Ohio-4045, at ¶ 22.
[11] Baaron, Inc. v. Davidson, 2015-Ohio-4217, 44 N.E.3d 1062, ¶ 6 (9th Dist.). "Although there is no requirement of privity between the supplier and the consumer for the CSPA to be applicable, the defendant must have some connection to the consumer transaction in question in order to be liable as a supplier . . . ." Michelson v. Volkswagen Aktiengesellschaft, 2018-Ohio-1303, 99 N.E.3d 475, ¶ 10 (8th Dist.) (internal quotation marks and citation omitted).
[12] Taylor, 148 Ohio St.3d 627, 2016-Ohio-3444, 72 N.E.3d 573, at ¶ 95 (first alteration added; citations omitted).
[13] But note that "engaged in the business" has been interpreted to require more than one isolated sale. Perrucci, 2018-Ohio-2968, at ¶ 113.
[14] Note, however, that the definition of "consumer transaction" has some explicit exceptions. "Consumer transaction" does not include, for example, "transactions in connection with residential mortgages between loan officers, mortgage brokers, or nonbank mortgage lenders and their customers;" "transactions between certified public accountants or public accountants and their clients; transactions between attorneys, physicians, or dentists and their clients or patients; and transactions between veterinarians and their patients that pertain to medical treatment but not ancillary services." Ohio Rev. Code § 1345.01(A).
[15] Semco, Inc. v. Sims Bros., Inc., 3d Dist. Marion No. 9-12-62, 2013-Ohio-4109, ¶ 38-42.
[16] Sharon Woods Collision Ctr., 2018-Ohio-2733, at ¶ 12; Williams v. Kia of Bedford, 2018-Ohio-283, 104 N.E.3d 924, ¶ 24 (8th Dist.); Griffin, 2018-Ohio-3121, at ¶ 27 (once a consumer elects to rescind, the consumer cannot seek damages).
[17] Ottney, 2018-Ohio-4045, at ¶ 22.
[18] Kia of Bedford, 2018-Ohio-283, at ¶ 27.
[19] Hayward v. Bellmann, 6th Dist. Williams No. WM-09-007, 2010-Ohio-3438, ¶ 42.
[20] Stultz v. Artistic Pools, Inc. 9th Dist. Summit No. 20189, 2001 Ohio App. LEXIS 4561, at *8 (Oct. 10, 2001).
[21] Grieselding v. Krischak, 6th Dist. Lucas No. L-06-1010, 2007-Ohio-2668, ¶ 28. Note, however, that punitive damages are not permitted for violation of the OCSPA "unless [t]he actions or omissions of [the] defendant demonstrate actual malice or aggravated or egregious fraud." Kelley v. Sullivan, 8th Dist. Cuyahoga No. 106189, 2018-Ohio-1410, ¶ 8 (alterations in original; internal quotation marks and citations omitted).
[22] Arales v. Furs by Weiss, Inc., 8th Dist. Cuyahoga No. 81603, 2003-Ohio-3344, ¶ 40.
[23] Kia of Bedford, 2018-Ohio-283, at ¶ 24.
[24] Alexander v. Transmission by Bruce, Inc., 8th Dist. Cuyahoga No. 89908, 2008-Ohio 2029, at ¶ 6-7.
[25] Stultz, 2001 Ohio App. LEXIS 4561, at *8 (alteration in original; internal quotation marks and citation omitted).
[26] Pep Boys -- Manny, Moe & Jack of Delaware, Inc. v. Vaughn, 10th Dist. Franklin No. 04AP-1221, 2006-Ohio-698, ¶ 40.
[27] Stultz, 2001 Ohio App. LEXIS 4561, at *7.
[28] Id. at *8 (second alteration in original; internal quotation marks and citations omitted).
[29] Crow v. Fred Martin Motor Co., 9th Dist. Summit No. 21128, 2003-Ohio-1293, ¶ 35.
[30] Recovery of attorney's fees, however, is not mandated but left to the sound discretion of the court. Charvet v. Ryan, 116 Ohio St.3d 394, 2007-Ohio-6833, 879 N.E.2d 765, ¶ 26-27; Gale v. Pattie Group, Inc., 8th Dist. Cuyahoga Nos. 103336 and 103368, 2016-Ohio-5233, ¶ 32.
[31] Charvet, 2007-Ohio-6833, paragraph 3 of the syllabus ("To establish a knowing violation of R.C. 1345.09, for an award of attorney's fees, a plaintiff need prove only that the defendant acted in a manner that violated the Ohio Consumer Sales Practices Act, R.C. Chapter 1345, and need not prove that the defendant knew that the conduct violated the law.").
[32] Semco, Inc., 2013-Ohio-4109, at ¶ 38-42 (trial court did not abuse its discretion in awarding the defendant attorney's fees; plaintiff's OCSPA claim was groundless; it lacked any legal or factual basis.).
[33] This blog was originally two blogs authored by Trey Pauley, a former associate with Faruki+. The blogs have been recently updated by Melinda K. Burton.
