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The Importance of a Supplier’s Knowledge Under the CSPA

By November 8, 2018September 9th, 2021No Comments

This is the seventh installment of our series on Ohio’s consumer laws, designed to raise awareness of a part of business owner’s potential pitfalls of these laws and how they can be avoided. You do not want to find yourself on the wrong side of a CSPA lawsuit. If you haven’t already, catch up on this series on the CSPA:

As previously discussed in this blog series, there are a variety of responsibilities and risks associated with being a business owner, especially if you are a “supplier,” as defined by the Consumer Sales Practices Act (CSPA).[1] For instance, if a court finds that you are a supplier and have violated certain provisions of the CSPA, you may be liable for three times the consumer’s actual damages, also called “treble damages.” Though treble damages alone can lead to a sizeable judgment against the supplier, if the consumer can demonstrate that the supplier knowingly committed a deceptive or unconscionable act, then the consumer may recover their reasonable attorney fees as well. (See R.C. 1345.09(F)(2)).

These attorney fees may be significant, particularly if the lawsuit proceeds through trial. Fortunately for suppliers, these damages are discretionary, not mandatory like treble damages, and depend heavily on whether the supplier had “knowledge” that such act was being committed.

Illustration of a construction working with their thumbs up

But what does having “knowledge” really mean? The Ohio Revised Code defines “knowledge,” as it pertains to the CSPA, to mean “actual awareness, but such actual awareness may be inferred where objective manifestations indicate that the individual involved acted with such awareness.” (R.C. 1345.01(E)). Because many have found this definition to be unclear, the Ohio Supreme Court has interpreted the provision to mean that “the supplier need only intentionally do the act that violates the [CSPA]. The supplier does not have to know that his conduct violates the law for the court to grant attorney fees.”[2]

This interpretation can be problematic for suppliers because it means that they can violate the CSPA even if they have no intent to deceive the consumer. Simply put: the supplier merely needs to know that the act is taking place to be found liable under the statute.

For example, if you are hired as a contractor to perform work on a homeowner’s patio and you hire a sub-contractor to perform portions of the work without informing the homeowner, you would “knowingly” be violating the CSPA, as that type of conduct is considered to be an “unfair and deceptive practice.”

Therefore, to help avoid getting hit with treble damages and attorney fees, the supplier should take precautions to ensure that its contracts, forms, policies and procedures are all in compliance with the CSPA. It should also take steps to ensure that all employees follow these procedures. Or, if a consumer has already filed a lawsuit against the supplier for violating the CSPA, the business owner should discuss the extent of their “knowledge” of the violation with their attorney, and consider sending an offer to cure to the consumer (as discussed in Part 6 in this series) to, at the very least, limit their exposure for the consumer’s attorney fees.

[1] As defined in R.C. 1345.01, a “supplier” means “a seller, lessor, assignor, franchisor, or other person engaged in the business of effecting or soliciting consumer transactions, whether or not the person deals directly with the consumer.”

[2] Einhorn v. Ford Motor Co., 48 Ohio St. 3d 27, 548 N.E.2d 933 (1990).

Gertsburg Licata is a full-service, strategic growth advisory firm focusing on business transactions and litigation, M&A and executive talent solutions for start-up and middle-market enterprises. It is also the home of CoverMySix®, a unique, anti-litigation audit developed specifically for growing and middle-market companies.

This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction. If you have specific questions about your matter, please contact an attorney licensed to practice in your jurisdiction.

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