Can North Dakota's Unlawful Sales or Advertising Practices Act reach a misrepresentation connected to our contract?
Yes, but only against the party who sold or advertised the merchandise, and only for conduct connected to that sale. N.D.C.C. § 51-15-02: "The act, use, or employment by any person of any deceptive act or practice, fraud, false pretense, false promise, or misrepresentation, with the intent that others rely thereon in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is declared to be an unlawful practice." Thimjon Farms Partnership v. First International Bank & Trust confirms the Act's private cause of action is limited to the selling party's own conduct: "We construed the Act to apply 'only to the conduct of the person who sells or advertises merchandise.'" That construction comes from Benz Farm, LLP v. Cavendish Farms, Inc., which draws the line on the statute's own definition: the Act "defines 'sale' as 'any sale, offer for sale, or attempt to sell any merchandise for any consideration,'" "does not define sale in terms of a purchase, offer to purchase, or attempt to purchase," and therefore "does not apply to, or create a cause of action against, a purchaser of merchandise." What counts as merchandise, by contrast, is wide: "any objects, wares, goods, commodities, intangibles, real estate, charitable contributions, or services."
The trap
Thimjon Farms shows the Act does not reach a deceptive statement simply because it influenced a transaction the plaintiff was harmed by. There, a bank's alleged misrepresentation was made to a THIRD PARTY (not to the plaintiffs) about future financing, and because that statement was not made "in connection with the sale or advertisement of any merchandise" by the bank TO the plaintiffs, the court held "the provisions of the Act creating a private cause of action are inapplicable." A misrepresentation embedded in contract negotiations can still fall outside § 51-15-02 if the person who made it was not the one selling or advertising merchandise to the party now suing, or if the statement was not made in connection with that sale: proximity between the deceptive statement and an actual sale to the plaintiff is doing real work in this test, not just the statement's falsity. Section 51-15-02 also has a second prong that the misrepresentation cases rarely reach, covering an act or practice "in connection with the sale or advertisement of any merchandise, which is unconscionable or which causes or is likely to cause substantial injury to a person which is not reasonably avoidable by the injured person and not outweighed by countervailing benefits to consumers or to competition," with the same connection-to-the-sale limit built into it.
6 authorities
- statuteN.D.C.C. § 51-15-02enactment date not established
The words that state the rule
The act, use, or employment by any person of any deceptive act or practice, fraud, false pretense, false promise, or misrepresentation, with the intent that others rely thereon in connection with the sale or advertisement of any merchandise, whether or not any person has in fact been misled, deceived, or damaged thereby, is declared to be an unlawful practice. The act, use, or employment by any person of any act or practice, in connection with the sale or advertisement of any merchandise, which is unconscionable or which causes or is likely to cause substantial injury to a person which is not reasonably avoidable by the injured person and not outweighed by countervailing benefits to consumers or to competition, is declared to be an unlawful practice.
- case837 N.W.2d 327Thimjon Farms Partnership v. First International Bank & TrustN.D.decided 2013read it at the source ↗
The words that state the rule
The Act authorizes a private cause of action “by any person against any person who has acquired any moneys or property by means of any practice declared to be unlawful in this chapter.”
- case837 N.W.2d 327Thimjon Farms Partnership v. First International Bank & TrustN.D.decided 2013read it at the source ↗
The words that state the rule
We construed the Act to apply “only to the conduct of the person who sells or advertises merchandise.” Benz Farm, LLP , at ¶ 20. “The statute prohibits deceptive or fraudulent acts ‘in connection with the sale’ of merchandise.” Id. (quoting N.D.C.C. § 51-15-02).
- case837 N.W.2d 327Thimjon Farms Partnership v. First International Bank & TrustN.D.decided 2013read it at the source ↗
The words that state the rule
Thimjon and Hagemeister argue First International made deceptive statements to Northern Grain by representing First International would provide future financing if Northern Grain paid down its line of credit. However, these statements were not made to Thimjon or Hagemeister, nor were they made “in connection with the sale or advertisement of any merchandise” by First International to Thimjon or Hagemeister. N.D.C.C. § 51-15-02. Therefore, the provisions of the Act creating a private cause of action are inapplicable, and the district court properly dismissed the claim.
- statuteN.D.C.C. § 51-15-01enactment date not established
The words that state the rule
"Merchandise" means any objects, wares, goods, commodities, intangibles, real estate, charitable contributions, or services. - "Person" means any natural person or the person's legal representative, partnership, corporation, limited liability company, company, trust, business entity, or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, trustee, or cestui que trust thereof. - "Sale" means any charitable solicitation or any sale, offer for sale, or attempt to sell any merchandise for any consideration.
The words that state the rule
We construe the Act to apply only to the conduct of the person who sells or advertises merchandise. The statute prohibits deceptive or fraudulent acts “in connection with the sale” of merchandise. The Act defines “sale” as “any sale, offer for sale, or attempt to sell any merchandise for any consideration.” N.D.C.C. § 51-15-01(5). It does not define sale in terms of a purchase, offer to purchase, or attempt to purchase. Rather, the language of the Act, and particularly the definition of “sale” applicable to the Act, focuses upon the conduct of the seller. We conclude the Act does not apply to, or create a cause of action against, a purchaser of merchandise.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.