Businesses Are Not “Individuals” and Cannot Bring TCPA Claims for Purchase of Goods, Tennessee Supreme Court Says

 In Blog, Litigation and Dispute Resolution

During the 2012 presidential campaign, Mitt Romney famously said, “Corporations are people, my friend.” While that may or may not be true, corporations and other business entities are definitively not “individuals” who can bring claims for purchase of goods under the Tennessee Consumer Protection Act (TCPA). That was the unanimous conclusion of the Supreme Court of Tennessee in its recent decision in Milan Supply Chain Solutions, Inc. v. Navistar, Inc.

As discussed in our previous post, Milan also made headlines for its extended take on the “economic loss” doctrine. But the Court’s exclusion of businesses from certain protections and remedies of the TCPA is at least as important for companies which purchase products that don’t perform as promised.  Before Milan, it was routine for businesses to bring claims under the TCPA, introducing the prospect of treble damages and attorney fee shifting in commercial disputes.  After Milan, that will be a lot harder.

 

Big Business and Big Trucks With Big Problems

The case involved Milan’s $30 million purchase of trucks manufactured by Navistar. The purchase contract contained a standard limited warranty in which Navistar agreed to “repair or replace covered truck components that proved defective in material and/or workmanship in normal use and service.”

After the purchase, Milan had significant problems with some vehicles. Following the warranty, Navistar made the necessary repairs and returned the trucks to Milan. But the problems continued, and Milan concluded that the defendants had made several misrepresentations about the trucks’ quality, reliability, and other characteristics before Milan signed the agreement.

Accordingly, Milan sued Navistar and the company that sold the trucks, making several claims, including fraudulent inducement and a claim under the TCPA. A jury found in Milan’s favor on both its fraud claim and its TCPA claim. It awarded Milan over $30 million in damages, including punitive damages and Milan’s lost profits when the trucks could not operate.

The Court of Appeals reversed the judgment, holding that the economic loss doctrine barred Milan’s fraud claims and that the TCPA was inapplicable. The Supreme Court of Tennessee agreed with the appellate court on both counts.

TCPA Only Covers “Goods” Purchased by “Individuals”

The Court began its analysis with the plain language of the TCPA, which makes it unlawful to “[r]epresent[] that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another.”

As defined in the TCPA, “goods” are “any tangible chattels leased, bought, or otherwise obtained for use by an individual primarily for personal, family, or household purposes or a franchise, distributorship agreement, or similar business opportunity.”

The Court noted that while a corporation or other entity may be a “person” as defined elsewhere in the act, they are not “individuals” for purposes of the operative language of the act. Even if Milan was considered an “individual” for TCPA purposes, its claim would still fail because the purchased trucks did not constitute “goods” as defined in the act, the Court held. That is “because Milan acquired the trucks for commercial purposes not ‘for use . . . primarily for personal, family, or household purposes.'”

As with the “economic loss” aspect of the Court’s Milan decision, its ruling excluding business entities from the protections of the TCPA means that business purchasers of goods and services will largely be left to the warranty, limitations of damages, indemnification, and other provisions and remedies in their contract if things go south.

After Milan, it is possible that businesses can bring some claims under the TCPA, but they clearly cannot bring claims related to the purchase of goods.  We recommend evaluating with your attorney whether to bring a TCPA claim in your particular case.

Photo by ZC_Photography Concept from Shutterstock

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