Pyramid Schemes. False Advertising. Deceptive Sales Scams. This behavior has been officially protected by the Alabama Legislature.
In March of 2016, Mr. Phillip “Phil” Williams, an Alabama state Senator from Huntsville, offered a huge favor to fraudulent businesses: he proposed SB270. This was a law that amended the Alabama Deceptive Trade Practices Act. The ADTPA is Alabama’s version of what most states call a UDAP (Unfair and Deceptive Acts and Practices) statute. Every state has one. These statutes regulate things like false advertising, door-to-door or telephone sales, sweepstakes scams, pyramid schemes, bait-and-switch advertising, and outright deceit. Basically, really bad stuff that some businesses do in order to make mor emoney. The sort of stuff that everybody in their gut knows is just morally wrong.
The Alabama Deceptive Trade Practices Act is pretty weak compared to other states, because it requires a 15 day advance warning letter, it exempts insurance companies and financial institutions, and it bans class actions in state court.
But apparently it wasn’t weak enough for the big money lobby. See, federal courts follow their own rules of civil procedure, and therefore allow class actions in federal court, even where the state law may not allow that. When the Eleventh Circuit recently confirmed that principle in the case of Lisk v. Lumber One Wood Preserving. That case was a typical deceptive trade practices case. What happened was this: a man bought some “treated” wood to build a fence that was supposed to be, well, “treated.” Which means that it is supposed to be protected from rot and termites. Well, Lumber One didn’t treat the wood. And it rotted. So Mr. Lisk was left with a worthless, rotting fence. He sued for himself and for everyone else that Lumber One had ripped off. The Eleventh Circuit confirmed that yes, you can do that in federal court.
You wouldn’t think this would be a big deal, right? I mean, who wants to protect a corporation that sells people rotting wood? Senator Phil Williams and the rest of the Alabama Legislature, that’s who.
As they do for every lawsuit, big businesses all across the country threw a hissy fit. They saw signs of the apocalypse. “If we don’t protect businesses from scams that leave people with rotting fences, jobs will leave! The economy will crash!” The corporate lawyers that represent them echoed the party line:
- “Eleventh Circuit throws open the door to state-law class actions in federal court.”
- “Recent opinion exposes Alabama businesses to class action liability.”
Obviously, this is a load of crap. Lumber One didn’t face a class action because some judges in Atlanta went crazy. They faced a class action because they cheated hundreds of honest paying customers out of millions of dollars. That’s how it always is.
But even when they’ve genuinely done wrong, big businesses hate having to pay the consequences of their actions. They hate class actions because if they can shut down class actions, they can get away with millions of small frauds and ripoffs as long as they only swindle a hundred bucks or so from each customer. So when they wanted a get-out-of-jail free card, they went to Senator Phil Williams, and asked him to pass a bill they wrote.
And guess what? It passed. Nearly unanimously. The bill changes the label on the no-class-action provision in an attempt to circumvent the federal rules. In other words, they want the state court rules to apply in federal court too.
This bill was utterly unnecessary. The ADTPA was rarely used anyway, because of its preexisting limitations. Fortunately, the Alabama legislature doesn’t have power over the federal courts. So hopefully, this anti-consumer sellout of our legislature will be ingored by the federal courts.