Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Conn. Sup. Ct.: Exhaustion doctrine did not apply to unfair business practices claims, (Jan 15, 2014)

By Jody Coultas, J.D.

The Connecticut Supreme Court remanded a Connecticut Unfair Trade Practices Act (CUTPA) claim filed by Fairchild Heights Residents Association, Inc. to a trial court, based on an appellate court’s misapplication of the exhaustion doctrine and association standing requirements (Fairchild Heights Residents Association, Inc. v. Fairchild Heights, Inc., January 21, 2014, Zarella, P.).

The Association represented mobile home owners at the Fairchild Heights Mobile Home Park, and was established in part to address maintenance issues. Attorneys for the Association sent a letter to Fairchild Heights, Inc., listing maintenance violations, giving Fairchild three weeks to make the necessary repairs or commit to make the repairs in a timely manner. The parties’ relationship broke down and the Association filed the CUTPA claims. The Department of Consumer Protection conducted two inspections, and eventually found that the Park was “in compliance” with state law, “no further action [was] warranted,” and the file regarding the Park had been “closed.”

A trial court finally found in favor of Fairchild on the CUTPA count, declining to modify the Department’s finding that Fairchild was in compliance with the statutes cited in the Association’s complaint. An appellate court reversed the trial court’s judgment.

The Association argued that the appellate court incorrectly concluded that it failed to exhaust its administrative remedies before requesting declaratory relief and that it did not have standing to bring an action under CUTPA.

Fairchild was correct that the appellate court did not reject the CUTPA claim on the ground that the Association had failed to exhaust its administrative remedies, according to the court. The Association argued that the appellate court incorrectly concluded that the Association was required to seek a declaratory ruling from the department prior to seeking a judicial remedy under CUTPA. There was no administrative remedy that the Association could have exhausted to obtain such relief before bringing its CUTPA claim, and the exhaustion doctrine did not apply to CUTPA claims. The Department had no authority to award the injunctive relief, punitive damages, attorney’s fees, and costs available under CUTPA. Any administrative request for such remedies would have been futile and inadequate. Therefore, it was not improper for the Association to go directly to the trial court and seek judicial relief under CUTPA.

Individual members of the Association were not required to testify regarding their firsthand knowledge of the violations and how they were individually harmed, according to the court. The Association argued that the appellate court erred in holding that it lacked associational standing to bring a CUTPA claim on the ground that the third prong of the associational standing test required residents of the park to testify regarding their firsthand knowledge of the alleged statutory violations. An award of injunctive relief, punitive damages, attorney’s fees, and costs does not require proof of injuries to the individual association members. The Association was able to properly represent its individual member’s insight of the relief requested and the proof required to establish the alleged statutory violations and ascertainable loss under CUTPA. Therefore, the appellate court improperly determined that the Association lacked standing to assert its CUTPA claim.

Participation by the Association’s individual members was not necessary to establish ascertainable loss, according to the court. To establish an ascertainable loss, a plaintiff is not required to prove actual damages. When money damages are not sought for alleged injuries to the individual members, proof relating solely to the variant experiences of each member is not necessary. The allegations that the members were not receiving the benefits to which they were entitled as tenants, and for which they made monthly rental payments, were sufficient because the alleged violations affected the mobile home park as a whole. Therefore, all of the association members received something less than they bargained for

The court reversed the appellate court’s ruling only as to the Association’s CUTPA claim and directed the appellate court to remand the case for a new trial on that claim. Fairchild argued that the court should remand the case to the trial court with direction to render judgment for Fairchild because the Association failed to prove a violation of CUTPA. The trial court dismissed the CUTPA claim based on the Department’s finding that Fairchild was in compliance with chapter 412 of the General Statutes, and that finding must be given preclusive effect in the absence of any legal authority provided by the Association that would support the court’s modification of the finding. However, the CUTPA claim was separate from the Department’s investigation. The trial court improperly deferred to the Department’s conclusions, and the court failed to engage in the fact-finding process necessary to reach its own conclusions with respect to the independent CUTPA claim. Thus, the Association was entitled to a new trial.

The case is No. SC 18917.

Attorneys: Douglas J. Varga (Lucas Bagnell Varga LLC) for Fairchild Heights Residents Association, Inc. Thomas T. Lonardo (Thomas T. Lonardo, P.C.) for Fairchild Heights, Inc.

Companies: Fairchild Heights Residents Association, Inc.; Fairchild Heights, Inc.

Cases: StateUnfairTradePractices ConnecticutNews