Misrepresentation of Licensed Contractor Status in Tennessee Can Cause Significant Liability

Tennessee law is clear that any person, firm or corporation who misrepresents that they are a licensed contractor is subject to significant penalties.  It is also against Tennessee law to act in the capacity of a “contractor” in Tennessee when one is not properly licensed.  Specifically, T.C.A. § 62-6-136 discusses this issue in subsection (A) as follows:

(a) It is unlawful for any person, firm or corporation to represent itself as a licensed contractor or to act in the capacity of a “contractor” as defined in §§ 62-6-102, or 62-37-103, and related rules and regulations of this state, or any similar statutes, rules and regulations of another state, while not licensed, unless such person, firm or corporation has been duly licensed under § 62-6-103 or § 62-37-104.

A licensed contractor is specifically defined in this statute.  This is a rather lengthy statute, but the key part is the provision that licensure is required for projects beyond $25,000.00.  The complete definition is found in T.C.A. § 62-6-102 which defines a contractor as follows:

(4)(A)(i) “Contractor” means any person or entity that undertakes to, attempts to or submits a price or bid or offers to construct, supervise, superintend, oversee, schedule, direct or in any manner assume charge of the construction, alteration, repair, improvement, movement, demolition, putting up, tearing down or furnishing labor to install material or equipment for any building, highway, road, railroad, sewer, grading, excavation, pipeline, public utility structure, project development, housing, housing development, improvement or any other construction undertaking for which the total cost is twenty-five thousand dollars ($25,000) or more; provided, however, with respect to a licensed masonry contractor, such term means and includes the masonry portion of the construction project, the total cost of which exceeds one hundred thousand dollars ($100,000), materials and labor;

(ii) “Contractor” includes, but is not limited to, a prime contractor, electrical contractor, electrical subcontractor, mechanical contractor, mechanical subcontractor, plumbing contractor and plumbing subcontractor, masonry contractor, and roofing subcontractor where the total cost of the roofing portion of the construction project is twenty-five thousand dollars ($25,000) or more;

(iii...

Tennessee Consumer Protection Act - Does the Tennessee Consumer Protection Act apply to claims derived from deceptive conduct in foreclosure proceedings?

Brief Summary:  The Tennessee Consumer Protection Act (also “TCPA”) does not provide the basis for a claim under the TCPA for deceptive conduct in a foreclosure proceeding.

Analysis:  The Tennessee Court of Appeals in David Paczko v. SunTrust Mortgages, Inc., No. M2011-02528-COA-R3-CV, 2012 WL 4450896 (Tenn. Ct. App. September 25, 2012) discussed whether allegedly deceptive foreclosure conduct can form the basis for a Tennessee Consumer Protection Act claim.  In this case the plaintiff alleged claims against SunTrust Mortgage, Inc. for instituting a foreclosure against the plaintiffs with knowledge that they did not have any rights, titles, or interest in the property in question.  Paczko at 2.

The trial court dismissed plaintiff's Tennessee Consumer Protection Act claim for failure to state a claim upon which relief can be granted under Tennessee Rule of Civil Procedure 12.02(6).  The Tennessee Court of Appeals affirmed this decision and found the Tennessee Consumer Protection Act "does not apply to allegedly deceptive conduct in foreclosure proceedings."  Paczko at 2. (citing Gibson v. Mortgage Elec. Registration Sys., Inc., 2011 WL 3608538 at *5 (W.D. Tenn. August 16, 2011)). 

The court relied upon the reasoning in the Tennessee Supreme Court's decision in Pursell v. First American National Bank, 937 S.W.2d 838 (Tenn. 1996) to support this decision.  In that case the Tennessee Supreme Court found: 

The TCPA did not create a cause of action for deceptive repossession procedures because the actions of a bank and its agent in carrying out a repossession “did not affect the ‘advertising, offering for sale, lease or rental, or distribution of any goods, services, or property, tangible or intangible, real, personal, or mixed, and other articles, commodities, or things of value wherever situated.

In the

Construction Defect – When can the Tennessee Consumer Protection Act be applied in a construction defect case?

Analysis:  The recent Tennessee Court of Appeals decision of Dan C. Ray v. Sadler Homes, Inc., No. M2011-01605-COA-R3-CV, 2012 WL 2150752 (Tenn. Ct. App. 2012) involved a construction defect case concerning the sale of a new home.  Soon after the plaintiffs purchased the home they started to experience hollow spots in the hardwood floors, leaking from the air conditioning, and uneven sagging flooring. Ray at 1.  After the defendant, Sadler Homes, Inc., was advised of the problems, Sadler Homes discovered that a load bearing beam was left off the construction plans and was not installed during construction.  Ray at 1.  Additionally, the home had been “stretched” from the construction plans “meaning the home was somewhat wider and longer and had more square footage than specified in the construction plans.”  Ray at 1.

After several repairs were conducted, the defendant refused to continue to conduct more repairs despite the fact the homeowner continued to experience more problems. Ray at 1. Sadler Homes’ representative testified that the plaintiff’s “were never going to be satisfied” which is one of the reasons he stopped making repairs. Ray at 2.  As a result, the case went to trial and the trial court found there was a breach of contract, breach of warranty and a knowing violation of the Tennessee Consumer Protect Act “based upon evidence that the house was built by an experienced contractor who stretched the house and left out a load bearing beam.”  Ray at 2.  The trial court found total damages of $90,000.00 based on diminution in value and also awarded additional attorney’s fee damages under the Tennessee Consumer Protection Act.

A prior blog post discussed when a diminution in value award is appropriate as damages in a construction defect case.  The second issue dealt with in this case was whether the trial court’s finding of a violation of the Tennessee Consumer Protection Act was appropriate.  The trial court used the “catch all provision” of the act found in T.C.A. § 47-18-104(b)(27) which makes it a violation of the act for “engaging in any other act or practice which is deceptive to the consumer or to any other person.”  Although the trial court record was not very clear, the appellate court noted it looked like the trial court found there was a deceptive act due to the omission of a load bearing beam and the fact the home was “stretched” from the original construction plans. 

The appellate court found that in order to recover damages under the Tennessee Consumer Protection Act a plaintif...

Tennessee Consumer Protection Act – The Tennessee Consumer Protection Act was amended to prevent punitive damages under the Act (after an award of treble damages).

The Tennessee tort reform bill of 2011 added a provision in the Tennessee Consumer Protection Act that explicitly prevents an award for punitive or exemplary damages beyond the treble damages found in the Act (T.C.A. § 47-18-101 – T.C.A. § 47-18-130).  This change went into effect with the adoption of Public Chapter No. 510 and applies to all actions that accrue on or after October 1, 2011.

T.C.A. § 47-18-109 (a)(3) now provides as follows:

(3) If the court finds that the use or employment of the unfair or deceptive act or practice was a willful or knowing violation of this part, the court may award three (3) times the actual damages sustained and may provide such other relief as it considers necessary and proper, except that the court may not award exemplary or punitive damages for the same unfair or deceptive practice.

(emphasis added and shows language added to statute).  The change made by Public Chapter No. 510 was the legislature added the last phrase in T.C.A. § 47-18-109(a)(3) providing "except that the court may not award exemplary or punitive damages for the same unfair or deceptive practice."  This addition to the statute expressly confirmed that exemplary or punitive damages could not be assessed for violation of the Tennessee Consumer Protect Act when treble damages are assessed under T.C.A. § 47-18-109(a)(3). 

Public Chapter No. 510 also added T.C.A. § 47-18-109(g) which provides that "no class action lawsuit may be brought to recover damages for an unfair or deceptive act or practice declared to be unlawful by this part."  As a result, this new addition to the Tennessee Consumer Protection Act bars any civil class action lawsuits under the Tennessee Consumer Protection Act.

Tennessee Consumer Protection Act – The “catch all” provision (T.C.A. § 47-18-107(b)(27)) found in the Tennessee Consumer Protection Act has been eliminated

The Tennessee tort reform bill of 2011 eliminated the “catch all” provision previously found in the Tennessee Consumer Protection Act (The Tennessee Consumer Protection Act is found in T.C.A. § 47-18-101 – T.C.A. § 47-18-130).  This change went into effect with the adoption of Public Chapter No. 510 (the Tennessee tort reform bill) and applies to all actions that accrue on or after October 1, 2011. 

The key operative portion of the Tennessee Consumer Protection Act is T.C.A. § 47-18-104(b) which provides a long detailed listing of "unfair or deceptive acts or practices" that are forbidden under Tennessee law.  Currently there are a total of forty-seven acts or practices that are listed and each of these is considered to be a Class B misdemeanor.  T.C.A. § 47-18-109(a)(1) creates a private cause of action for any person who suffers a loss as a result of one of the listed “unfair or deceptive acts or practices” found in T.C.A. § 47-18-104(b).  T.C.A. § 47-18-109(a)(1) provides as follows:

(a)(1) Any person who suffers an ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated, as a result of the use or employment by another person of an unfair or deceptive act or practice described in § 47-18-104(b) and declared to be unlawful by this part, may bring an action individually to recover actual damages.

(emphasis added).  Prior to the Tennessee tort reform bill of 2011, the Tennessee Consumer Protection Act had a “catch all” provision that provided a private cause of action for “engaging in any other act or practice which is deceptive to the consumer or to any other person.” (See T.C.A. § 47-18-107(b)(27)).  This “catch all” provided for a significant expansion of the Tennessee Consumer Protection Act beyond the specifically listed “unfair or deceptive acts or practices”.  This “catch all” provided the Court with great discretion to find violations of the Tennessee Consumer Protection Act even if the unfair or deceptive act was not explicitly listed in the statute.

The amendment to the statute found in Public...