Friday, November 18, 2011

Alaska High Court Declines to Follow Current FTC Interpretations

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

The Alaska legislature’s directive that courts should give great weight to the Federal Trade Commission and federal court interpretations of the Federal Trade Commission Act when interpreting the Alaska Unfair Trade Practices and Consumer Protection Act (CPA) did not require the Alaska Supreme Court to overrule previous decisions under the law, the state high court held.

An electric company alleged that it incurred lost profits and expenses because of a construction company’s (1) inability to timely provide permits, materials, and instructions as required by a contract entered into by the parties and (2) presentation of falsified requests for additional compensation in the amount of $5.7 million.

The electric company brought an action against the construction company, claiming misrepresentation, failure to make disclosures, and violation of CPA. At the close of trial, the court refused to direct a verdict for the electric company and gave a jury instruction based on the existing Alaska standards on unfair and deceptive practices rather than based on current FTC Act interpretations, as requested by the electric company.

In three special verdicts, the jury found that the construction company did not breach any contractual or common law obligations and did not engage in unfair trade practices. Instead, the jury found that the electric company breached contractual obligations to the construction company, breached the implied covenant of good faith and fair dealing, engaged in misrepresentations, and committed unfair trade practices. The jury awarded the construction company damages of more than $98,000, which was trebled under the CPA.

The electric company appealed, arguing that the trial court erred in refusing to grant it a directed verdict and refusing to give a jury instruction based on current interpretations of unfairness and deception promulgated by the FTC and federal courts, as required by a directive of the Alaska legislature.

Legislative Directive

In 1974, the Alaska legislature directed Alaska courts to give due consideration and great weight to the FTC and federal interpretation of the Federal Trade Commission Act in order to provide uniformity in unfair trade laws.

However, in State v. O’Neill Investigations, Inc. (609 P.2d 520, Alaska 1980), the Alaska Supreme Court held that the CPA had a “fixed meaning” derived from agency and judicial interpretation of the Federal Trade Commission Act. Since that case, the federal standards for unfair and deceptive practices have changed, while Alaska courts have continued to follow the standard set forth in O’Neill.

In this case, the state high court ruled that the trial court properly followed the O’Neill standards because incorporating current federal interpretations into the CPA would result in a loss of protection for Alaska consumers and businesses. It concluded that Alaska courts should continue to adhere to the CPA case law precedents for unfairness and deception.

“We decline to abandon our prior case law: We do not adopt the FTC’s 1980 policy statement now codified at 15 U.S.C. §45(n) as the standard for evaluating whether a practice be deemed unfair under the Alaska UTPA. We also decline to depart from our precedent regarding the definition of a deceptive practice. We thus conclude that the trial court did not err in evaluating [the electric company’s] motions or formulating jury instruction 28 according to our prior definitions of deceptive or unfair trade practices.”
The November 4 decision is ASRC Energy Services Power and Communications, LLC v. Golden Valley Electric Association, Inc., CCH State Unfair Trade Practices Law ¶32,352.

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