978-0078023866 Chapter 15 Internet Exercise and Supplements Part 1

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Chapter 15 – Consumer Protection

Internet Exercises and Supplements

Internet Exercise (p. 678)

a. Texas: Covers new cars (with defect that substantially impairs the use or market value of the

vehicle) with four unsuccessful repairs in no more than two years or 24,000 miles; or two

unsuccessful repairs of a “serious safety hazard”; or 30 calendar days out of service over two

years or 24,000 miles; remedies include reimbursement for incidental costs from loss of use,

replacement of vehicle or return with refund less reasonable allowance for owner’s use;

complaints heard by state-run arbitration board.

Virginia: It applies to new, owned or leased cars with three unsuccessful repairs, or one repair

attempt of “serious safety defect,” or 30 calendar days out of service, within 18 months; covered

defects are “nonconformities”—failures to conform with a warranty, a defect or a condition,

including those that do not affect drivability, but which significantly impairs use, market value, or

safety; remedies include return with refund, including all collateral charges, incidental damages,

less a reasonable allowance for use up to the date of first notice of nonconformity; may also

receive mileage, expenses and reasonable loss of use necessitated by attempts to conform;

consumer may choose between a civil suit to enforce or use of informal dispute resolution

procedure provided by manufacturer.

West Virginia: It applies to new, owned or leased cars (with regard to nonconformance with

express warranties) with three unsuccessful repairs or 30 calendar days out of service or one

unsuccessful repair of problem “likely to cause death or serious bodily injury” within shorter of one

year or warranty period; remedies may be damages for diminished value or return and refund of

purchase price, including, but not limited to, sales tax, license and registration fees, damages for

cost of repairs and loss of use, and reasonable attorneys’ fees; consumer required to use

state-approved informal dispute resolution process before suing in civil court.

Students could choose other states as well. Therefore, students’ answers will vary.

b. This is a good question for a class discussion. Note that there are differences in the time period

within which the defect and repairs must be attempted. Also, states differ on the type and

magnitude of defects which are covered. Students’ answers will vary.

Student Project

1. Find a website illustrating a topic discussed in Chapter 15. Explain precisely the consumer

protection issue raised and relate it expressly to the chapter materials.

Answers

Answer to ‘Watery Beer’ Questions (p. 648)

1. Dilution of beer to an alcohol level lower than what is mentioned on the label is definitely

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Chapter 15 – Consumer Protection

2. This question calls upon students to recollect a previous incident where they feel they have been

Answer to ‘Did Apple Deceive Laptop Buyers’ Question (p. 648)

1. Vitt, understandably feels that he has been taken for a ride. Although, it is very much possible that

Answer to ‘Plan B’ Question (p. 661)

1. Students’ answers will vary. Considering girls reach puberty approximately at the age of 13-15,

Answer to ‘Credit and Charge Cards’ Question (p. 665)

1. The credit card industry argues that additional rules raise prices, reduce credit options, and

Answer to ‘Credit Cards Good for the World?’ Question (p. 667)

1. Some of the minuses of credit card use in developing nations: Credit card debt in Turkey rose

six-fold from 2002 to 2007 and default rates spiked. Those using cards in developing nations

Some of the pluses of credit card use in developing nations: Profit opportunities for credit card

issuers like Visa and MasterCard have soared. Growth prospects are brightest abroad. The cards

Answer to ‘Government-Mandated Diversity’ Question (p. 670)

1. There is no harm in doing so, it is the duty of the government to ensure that women and

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Chapter 15 – Consumer Protection

Answer to ‘GM Bankruptcy/Bailout’ Question (p. 677)

1. Students’ answers will vary. An October, 2010 Bloomberg National Poll found 41 percent of adults

A USA TODAY editorial attributed GM’s recovery to date more to the bankruptcy process than the

bailout. The “managed bankruptcy” allowed/forced GM to reduce its debt, eliminate dealers and

A USA TODAY editorial attributed GM’s recovery to date more to the bankruptcy process than the

Answer to ‘Bankruptcy—Who is to Blame?’ Question (p. 678)

1. Students’ answers will vary. There has been a lot of finger-pointing and blame games being

Cases and Answers

Tietsworth v. Harley-Davidson, 677 N.W. 2d 233 (Wis. S. Ct. 2004) (p. 649)

Syllabus

Plaintiffs are owners and lessees of a certain model of Harley-Davidson motorcycle. After

acquisition, Harley notified them that “the rear cam bearing in a small number” of the

motorcycles “has failed.” Thus, the company extended the normal warranty from one year,

unlimited mileage, to a five year/50,000 mile warranty. Plaintiffs filed a tort complaint,

requesting compensation for the diminished value of the motorcycles, for intentional

misrepresentation. The misrepresentation alleged is one of omission—the failure to disclose or

the concealment of the existence of the cam bearing defect. The court points out that, under

Wisconsin law, “silence, a failure to disclose a fact, is not an intentional misrepresentation

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Chapter 15 – Consumer Protection

unless the seller has a duty to disclose.” In a suit between a subdivider-vendor of a residential

lot and a noncommercial purchaser, the court had found such a duty. But the court went on to

say that was a “narrow holding,” “premised on certain policy considerations present in

noncommercial real estate transactions.” It stated it was an “open question” whether such a

duty would be found to exist in the context of the sale of consumer goods.

The court held for Harley on another issue: That plaintiffs had not alleged any legally

cognizable injury to support a fraud claim. It said, “Diminished value premised upon a mere

possibility of future product failure is too speculative and uncertain for purposes of a fraud

claim.” It noted that plaintiffs had not alleged that “their engines have failed, will fail, or are

reasonably certain to fail” or that they have “sold their motorcycles at a loss.”

Answers to ‘Tietsworth v Harley-Davidson’ Questions (p. 649)

a. “It is well-established that a nondisclosure is not actionable as a misrepresentation tort

b. The decision of the court reflects the ethical behavior that should have been shown by

Harley-Davidson. It states that Harley had a duty to inform and disclose details of the nature

a. The plaintiffs claim the motorcycles have diminished value—primarily a diminished resale

value. Students’ answers will vary.

b. No, a showing of actual damages at the time is not required, nor is an “absolute certainty”

c. The “benefit of the bargain” rule is typically deals with “the difference between the value of

3. The plaintiffs failed to establish an injury. “The amended complaint alleges only that the

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Chapter 15 – Consumer Protection

4. The trial court found against the plaintiff, concluding that “Indiana law does not impose a duty to

discover latent defects.” The court of appeals then affirmed, stating that defendants did not owe

Paul Sipe v. Workhorse Custom Chassis, 572 F.3d 525 (8th Cir. 2009) (p. 652)

Syllabus

Sipe purchased a Fleetwood motor home from Brambillas, an authorized dealer. Workhorse

manufactured the home’s chassis. Sipe claimed that his motor home’s engine stalled on several

occasions and that Brambillas failed to repair the problem. Sipe claimed that Brambillas told him that it

had conducted diagnostic tests, but a work order did not indicate that the tests were performed. Sipe

also alleged that the dealer refused to repair the transmission following fluid leaks. The court of

appeals held that the manufacturer was properly granted summary judgment. The lemon law claim

arising from the engine stalls failed because the owner did not establish a fact issue as to whether the

engine problem substantially impaired the use or market value of the vehicle, Further, Sipe did not

report the transmission problem to the dealer within two years as required by the lemon law statute.

Answers to ‘Paul Sipe v. Workhorse Custom Chassis’ Questions (p. 652)

a. Sipe had to show that the engine defect substantially impaired the use or market value of the

motor home. The court concluded that merely assuming that there weren’t enough people

b. Sipe lost because he could not provide evidence that the alleged defect had substantially

impaired his use of the motor home or substantially impaired the market value of the motor

2. Sipe lost his defective transmission claim because that claim was barred by the terms of

a. The lemon law does not apply because the consumers were aware of the defects when they

took delivery of the vehicle, but accepted the vehicle anyway. The coverage of the lemon law

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Chapter 15 – Consumer Protection

b. Chrysler won for the reasons stated in part a. Students’ answers will vary.

Barrer v. Chase Bank USA, 566 F.3d 883 (9th Cir. 2009) (p. 663)

Syllabus

The Barrers obtained a Chase credit card with a preferred annual percentage rate (APR) of 8.99

percent. In the event of default, the agreement stated that Chase could increase the APR on the

balance up to a stated default rate. Based on an adverse credit report, Chase increased the Barrers’

APR to 24.24 percent, although none of the agreement’s specified events of default had occurred. The

Barrers alleged that Chase did not disclose that if a cardholder’s credit report revealed certain “risk

factors,” the APR could go up. The appellate court found that under TILA any disclosures had to reflect

the terms of the legal obligation between the parties. The Barrers stated a claim because Chase could

not show that its agreement disclosed in a clear and conspicuous manner the APRs it was permitted to

use.

Answers to ‘Barrer v. Chase Bank USA’ Questions (p. 663)

a. Chase failed to clearly and conspicuously disclose Chase’s policy to change the APR for

b. The disclosure must be one that “a reasonable cardholder would notice and understand.”

2. No. When an arbitration clause has provisions that defeat the remedial purpose of a federal

3. Hamm won. The TILA was violated. The TILA clearly requires a direct expression of how many

Lucas Rosa v. Park West Bank & Trust Co., 214 F. 3d 213 (1st Cir. 2000) (p. 669)

Syllabus

Rosa, a male dressed as a woman, applied for a loan from the defendant bank. He was asked

for identification. When it was produced, he was told he would not be provided an application

until he went home and changed. Rosa sued under the ECOA for unlawful discrimination with

respect to a credit transaction “on the basis of sex.” The trial court granted bank’s motion to

dismiss, saying that the discrimination was not on the basis of sex, but in response to how he

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Chapter 15 – Consumer Protection

was dressed. The First Circuit reversed and remanded for a trial because “[i]t is too early to

say what the facts will show.” “[I]t is not yet clear why Brunelle told Rosa to go home and

change.” One possible inference is “that Rosa did not receive the loan application because he

was a man, whereas a similarly situated woman would have received the loan application.

That is, the Bank may treat, for credit purposes, a woman who dresses like a man differently

than a man who dresses like a woman.” If that were the case, Rosa may have a claim.

Answers to ‘Lucas Rosa v. Park West Bank & Trust Co.’ Questions (p. 669)

a. No. They sent the case back to the trial court with instructions to evaluate the facts in light of

b. The bank will win. “[O]ur precedents dictate that he [Rosa] would have no recourse under the

c. The lower court interpreted Rosa’s complaint as one of discrimination based upon style of

a. Style of dress is unprotected, but discrimination based upon sexual stereotypes about how a

b. This would be a good discussion question.

Williams v. OSI Educational Services, 505 F.3d 675 (7th Cir. 2007) (p. 672)

Syllabus

OSI was hired to collect a debt from Williams. It sent a letter and debt validation notice disclosing the

principal, interest, fees, and total amount due as of a specified date. The letter also stated that interest

was accruing on a daily basis and that the agency should be contacted to obtain an exact payout

amount. The consumer alleged that the letter did not comply with the FDCPA because it was confusing

with regard to the total debt owed. The trial court disagreed, finding that an unsophisticated recipient

would not misunderstand the letter. The appeals court affirmed. The consumer failed to show that a

material factual dispute existed as to whether the letter complied with the FDCPA. On its face, the

letter would not confuse a substantial number of recipients. It explicitly explained that the “total due”

amount was different from the “exact payout balance” because interest was continuing to accrue on a

daily basis. The letter was “entirely clear on its face.”

Answers to ‘Williams v. OSI Educational Services’ Questions (p. 672)

a. The court evaluated the letter from the perspective of an unsophisticated consumer or

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Chapter 15 – Consumer Protection

b. No. In order to survive a motion for summary judgment, the plaintiff must show that the

c. Two ways that a plaintiff may establish that a debt collection letter caused an impermissible

2. No, the form totally contradicted the FDCPA. The court noted: “We agree with Miller that the form

both contradicted and overshadowed the validation notice. A consumer could lose his rights under

3. This is a good discussion question. In good part, the effort to curb aggressive tactics is

Answers to Chapter Questions (p. 678)

1. Students’ answers will vary. The plaintiffs could plausibly prove the packaging was deceptive. The

descriptions and depictions on the packaging could deceive the reasonable consumer because,

a. Students’ answers will vary. The plaintiff, Ms. Greenwood, cannot bring the card provider to

court. This is in concurrence with what the court stated. The Judge in this case stated the

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Chapter 15 – Consumer Protection

b. Students’ answers will vary. The question may elicit a discussion. There are many cases

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