Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. Colo.: Conversion and use of professional society’s websites might violate Colorado Consumer Protection Act, (Jul 19, 2013)

By Jody Coultas, J.D.

A professional society stated a Colorado Consumer Protection Act (CPA) claim against former employees that allegedly converted the society’s property and sold it by taking control of society websites and intellectual property, the federal district court in Denver has held (International Academy of Business and Financial Management, Limited v. Mentz, July 17, 2013, Arguello, C.).

The American Academy of Financial Management, LLC (AAFM), a professional society that offers professional designations as well as professional development, certification, and copyrighted training programs, was founded by George Metz. Former AAFM employees brought business disparagement, tortious interference with prospective business advantage, and defamation claims against AAFM. AAFM counterclaimed under, among other statutes, the CPA alleging that the former employees converted AAFM’s property to their own use and sold the property to AAFM customers.

To state a CPA claim, AAFM needed to allege that the former employees engaged in an unfair or deceptive trade practice, the challenged practice occurred in the course of the former employees’ business, vocation, or occupation, the deceptive practices significantly impacted the public, and an injury in fact caused by the practices.

Deceptive trade practices. AAFM’s identification of the circumstances of the deceptive trade practices met the heightened pleading standard of Federal Rule of Civil Procedure 9(b), according to the court. To meet the Rule 9(b) standard, a plaintiff must allege the time, place, and contents of the false representation as well as the identity of the party making the false statements and the consequences thereof. AAFM identified the place of the false representations as Arizona and a number of Internet websites, the names of those who allegedly engaged in the deceptive trade practices, and the that the representations resulted in the public sending money and fees to the former employees instead of to AAFM.

Impact on public. The court held that AAFM showed that the former employee’s actions impacted the public, according to the court. Impact on the public is gauged by the number of consumers directly affected by the challenged practice, the relative sophistication and bargaining power of the consumers affected, and evidence that the challenged practice has previously impacted other consumers or has the significant potential to do so in the future. Because the alleged deception prevented AAFM from receiving communication from their customers and the public at large, it could not be required to plead the actual number of individuals affected. Consumers affected were public members, customers, and existing or potential business partners of AAFM. However, because of the nature of the alleged deceptive trade practice, the relative sophistication factor supported AAFM’s ability to show significant public impact. The scheme has the potential to impact consumers in the future, because the former employees maintained control over AAFM’s stolen websites and domains.

The case is Civil Action No. 12-cv-00463-CMA-BNB.

Attorneys: John Joseph Higson (Dilworth Paxson LLP) for International Academy of Business and Financial Management, Limited. Richard W. Hanes (Hanes & Bartels, LLC) for George Mentz

Companies: International Academy of Business and Financial Management, Limited; The American Academy of Financial Management, LLC

Cases: StateUnfairTradePractices ColoradoNews