“Intent To Deceive” Is Not Required To Run Afoul Of The Guam Consumer Protection Act
In December 2009, the Guam Supreme Court issued a little-noticed ruling in the case of Mendiola v. Bell, which has the effect of dramatically increasing exposure to legal liability under the Guam Consumer Protection Act (“CPA”).
The CPA sets forth rights and remedies available to consumers based on numerous particular business practices deemed to be “false, misleading or deceptive.” The CPA has strong teeth, because businesses sued under the Act can be subject to an award of treble damages and even having to pay all of the consumer’s attorneys’ fees in the event of an adverse court ruling.Most of the business practices mentioned in the CPA are not deemed wrongful unless there was some “scienter” or intent on the part of the business to take unfair advantage of the consumer.
Mere negligence or non-disclosure of facts is generally insufficient to constitute a “deceptive trade practice” under most of the CPA’s provisions, which use words such as “knowingly” or “knows” in describing the prohibited conduct. However, the CPA also contains a “catchall” provision, Subsection 29, which generally proscribes, “doing any other act which is prohibited by the laws of Guam to mislead a consumer to his detriment or to induce another person to buy or sell goods or services to such person’s detriment.” In the Mendiola case, the high court held that this “catchall” provision allows liability to be imposed upon a business even in the absence of evidence of any intent to deceive the consumer.
The Plaintiffs in the Mendiola case were homeowners whose homes sustained severe damage during the passages of Typhoons Chata’an and Pongsona in 2002. They sued the developer under the CPA, claiming that they should have at least been alerted to the fact that the property had inadequate drainage.The court held that, “the failure to abide by Guam law regarding storm drainage for subdivisions, and the failure to disclose this to prospective purchasers, was a deceptive act, practice or omission which misled or induced (the Plaintiffs) to buy lots they might not otherwise have bought had they known there was no storm drainage system in place.”
The court’s conclusion was supported by the fact that words such as “knowingly” and “knows” were not included in Subsection 29—unlike in other CPA provisions—and that if the Legislature had intended to impose an “intent to deceive” requirement in Subsection 29 it could and should have said so.
The Supreme Court’s ruling effectively raises the bar for developers—and businesspeople in general—in situations where the product or service they offer falls short of what the law requires. Under those circumstances, even a negligent or careless accident of non-compliance can subject a business to the severe penalties set forth in the CPA.
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