This is the sixth 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:
- Part One: Ignore Ohio Consumer Law at Your Own Peril
- Part Two: Who Must Worry About The CSPA?
- Part Three: How Can You Avoid Being Sued Under The CSPA?
- Part Four: Are you Violating Consumer Law?
- Part Five: How Does Someone Violate the CSPA?
As a business owner, you probably have your hands full with day to day operations, employee management, and monitoring your customers’ and vendors’ satisfaction. Then one day: Boom. You’re unexpectedly hit with a lawsuit. In this case, it’s a lawsuit that includes a CSPA claim. Now what?
First, if you have a lawyer, call him or her immediately and get a copy of the suit in their hands. Second, call your insurance agency and do the same thing. Failure to put your insurance carrier on notice of a lawsuit can be grounds for the insurer to deny your claim. Do not call your customer and try to talk them out of the lawsuit. Third, pull all paperwork, notes, order forms, e-mails, phone records and anything else connected with the sale and set them aside. Make sure nothing is lost, make copies of everything, and print hard copies of any electronic communications if the volume of electronic documents is not too great. Back up any large electronic files. At the same time, identify all employees and sub-contractors who had anything to do with this customer. Tell them not to talk about the customer to anyone without prior approval and to make sure they do not destroy any documents.
The Benefits of the CSPA’s “Right to Cure” Provision
One of the unique aspects of the CSPA is an underused provision allowing for early settlement of claims. This provision, entitled “Supplier’s Right to Cure” (R.C. 1345.092), allows the business to make a settlement offer to the customer within 30 days of being served with the lawsuit. Upon receiving the offer, the customer has an additional 30 days to notify the business of acceptance or rejection of the offer. If the customer does not respond to the business’s offer, it is considered rejected.
The cure offer must contain language that clearly explains the resolution being offered by the business, including:
- The amount the business is offering to pay the customer to resolve the CSPA claims;
- An offer to pay up to $2,500 of the customer’s attorney’s fees for filing the lawsuit;
- An offer to pay the customer’s court costs for filing the lawsuit; and
- A prominent disclosure explaining the consequences of accepting or rejecting the cure offer. The required language for the disclosure is provided in the Ohio Revised Code (R.C. 1345.092(D)).
If the customer accepts the cure offer, then they will provide documentation for their fees and costs to the business, and the business will issue payment to resolve the CSPA dispute. If, however, the customer files a notice rejecting the cure offer, or if the offer is deemed rejected, the customer may proceed with the lawsuit. This can be a risky decision for the customer, though, because if the customer is awarded damages in an amount less than the business’s cure offer, the customer will lose the ability to recover certain CSPA damages. Specifically, the customer will be unable to seek:
- Treble damages;
- Court costs incurred after the offer was made; and
- Attorney’s fees incurred after the offer was made (R.C. 1345.092(G)).
This provides an incentive for businesses to make a cure offer, as it may significantly limit the amount of damages that the customer can recover if the lawsuit goes to trial. It also places the customer in a position where they must weigh the settlement offer against any potential increased damages they may receive if they continue the suit.
In sum, if your business is served with a lawsuit containing a CSPA claim, reach out to your lawyer and insurance company, speak with your employees, and gather and preserve all relevant information. Do not speak to the customer directly. If you think settlement may be the best option, it is essential to send an offer to cure to the customer in a timely manner. Even if the customer rejects the offer, merely sending the offer may have the effect of significantly limiting the amount of damages the customer may recover in the lawsuit.
Continue reading this series on the CSPA
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.
