TEXAS DECEPTIVE TRADE PRACTICES ACT: HOW TO PUT THE RISK ON THE PLAINTIFF Michael Northrup Cowles & Thompson, P.C. 901 Main Street, Suite 4000 Dallas, Texas 75202 214.672.2150 mnorthrup@cowlesthompson.com April 13, 2002 A. Introduction The Texas Deceptive Trade Practices Act (вЂњDTPAвЂќ) sets out two significant defenses, which are powerful weapons in the defendantвЂ™s arsenal. The DTPA establishes a tender defense, which may be used as a complete defense to the plaintiffвЂ™s cause of action. The DTPA also establishes an offer of settlement defense, which may be used as a partial defense. Whether either or none of these two defenses is appropriate for your case will depend upon the facts and circumstances of your specific case. B. 1. Tender Defense Amounts required for complete defense A defendant has a complete defense to a consumer complaint if the defendant tenders (1) the amount of economic damages and mental anguish damages claimed and (2) expenses including attorneyвЂ™s fees reasonably incurred. TEX. BUS. & COM. CODE ANN. В§ 17.506(d) (Vernon Supp. 2002). This defense is useful in cases in which the damages sought are minimal and the cost of litigating the case exceed the damages. This defense is also useful in cases in which there is a real danger of an award of additional damages under the DTPA because of some knowing or intentional conduct by the defendant. The amounts required to be tendered do not include additional amounts that could be awarded because of the defendantвЂ™s knowing or intentional conduct; thus this tender defense is a way of escaping an award of additional damages. The amounts tendered also do not include prejudgment interest; consequently, this defense provides defendants a way of escaping the assessment of prejudgment interest. According to the plain language of this statute, an offer of these amounts is supposed to provide a defense вЂњto a cause of action.вЂќ Id. В§ 17.506(d). Whether that phrase means that the tender defense is a defense only to a DTPA cause of action, or whether the phrase encompasses all causes of action the plaintiff may assert, is unclear. There are no cases deciding that question. Ordinarily, when a plaintiff seeks damages against a defendant under multiple theories, such as DTPA, negligence, and breach of contract, the plaintiff must make an election as to which theory of recovery he or she wants to recover under. Boyce Iron Works v. Southwestern Bell Tel. Co., 747 S.W.2d 785, 787 (Tex. 1988). Usually, the plaintiff chooses the theory that affords him or her the greatest damages possible. Under this body of case law, it may be that the plaintiff would have the right to choose between accepting the DTPA tender and pursuing his or her other theories of recovery. Notably, this question may become a moot one because the Texas Supreme Court is considering a new proposed rule, like the one here, which would allow a defendant to tender the plaintiffвЂ™s claimed damages and establish a complete defense to the plaintiffвЂ™s claims. This rule would apply to all other causes of action. From a practical standpoint, if the defendant offers everything the plaintiff has asked for, it is unlikely the plaintiff would refuse the tender defense. 2 2. Timing of offer The defendant does not have a lot of time to prepare a tender offer. To be effective, ordinarily the tender must be made within 30 days after the day the defendant received notice from the plaintiff. TEX. BUS. & COM. CODE ANN. В§ 17.506(d) (Vernon Supp. 2002). In many cases, the plaintiff must send this notice prior to filing suit. TEX. BUS. & COM. CODE ANN. В§ 17.505(a). The DTPA requires the plaintiff to give notice of his or her claim, including the damages sought and attorneyвЂ™s fees, at least 60 days prior to filing suit. Id. Thus, in this scenario, the defendant would make the tender offer prior to the filing of any suit. In some cases, however, the plaintiff may be excused from giving written notice. If the plaintiff is unable to give 60 dayвЂ™s notice because the statute of limitations is less than 60 days from running, the plaintiff is excused from giving this statutory notice. Id. В§ 17.505(b). In this instance, the defendant can still make a tender of damages and he or she has 60 days after the service of the suit to make the tender. Id.; see Grizzle v. Texas Commerce Bank, 38 S.W.3d 265, 277 (Tex. App.вЂ”Dallas 2001, pet. granted). However, because the plaintiff will not have sent the defendant any written notice stating the amounts he or she is required to offer, the defendant may be required to conduct some immediate discovery to ascertain what those amounts are. C. 1. Settlement Offer Defense Amounts required for settlement offer defense Upon receipt of notice of a claim under Section 17.505, a party may tender an offer of settlement. TEX. BUS. & COM. CODE ANN. В§ 17.5052(a)(Vernon Supp.2002). An offer of settlement must include the following separately stated amounts: (1) an amount of money or other consideration, reduced to its cash value, as settlement of the plaintiffвЂ™s claim for damages; and (2) an amount of money to compensate the plaintiff for the plaintiffвЂ™s reasonable and necessary attorneyвЂ™s fees incurred as of the date of the offer. Id. В§ 17.5052(d). These amounts differ from the tender defense in that the settlement offer does not require the defendant to offer expenses, separate from attorneyвЂ™s fees. Moreover, the settlement offer does not require the defendant to offer the full amount of actual damages claimed. 3 The purpose of the DTPA notice requirement is to discourage litigation and encourage settlement of claims by giving the defendant an opportunity to compromise the claim without the expense of a trial and the possibility of treble damages. An offer of settlement may function as a partial defense in a DTPA claim. If the settlement if rejected, it should be filed with the court along with an affidavit certifying its rejection. TEX. BUS. & COM. CODE ANN. В§ 17.5052(f). After the verdict, if the court finds that the amount tendered is the same as, or substantially the same as, or more than the damages found by the trier of fact, the consumer may not recover as damages any amount in excess of the lesser of (1) the amount of damages tendered in the settlement offer, or (2) the amount of damages found by the trier of fact. Id. В§ 17.5052(g). The offer may also result in the limitation on the amount of attorneyвЂ™s fees recovered or it may preclude recovery of attorneyвЂ™s fees altogether. Id. В§ 17.5052(h). The settlement offer defense is useful in two situations. First, this defense may be useful when there is a dispute as to the proper measure of damages. In such a case, the defendant could make an offer of settlement to settle for the lesser amount of damages the defendant believes are recoverable. If the defendant is correct, then he effectively limits the plaintiffвЂ™s recovery. In a broader context, the settlement offer may be useful simply as a tool to compromise any claim while hedging your bets that if the offer is rejected and the verdict comes back at an amount that is the same as or substantially the same as the offer, the defendant can successfully limit damages. An offer of settlement made under this Section may not be offered in evidence at trial for any purpose. Id. В§ 17.5052(k). A party making such an offer should take care to make sure that the offer is expressly made with reference to this section. Under the common law, such an offer might be construed as an admission of liability up to the amount of the offer. 2. Timing of settlement offer defense A person who receives the written notice required under Section 17.505 may tender an offer of settlement at any time within 60 days after the date the notice is received. TEX. BUS. & COM. CODE ANN. В§ 17.5052(a) (Vernon Supp. 2002). As previously indicated, in cases in which the statute of limitations is about to run, the plaintiff is excused from providing this written notice. Thankfully, the DTPA provides yet another window of opportunity to make a settlement offer so as to set up the settlement offer defense. The defendant has another opportunity to make a settlement offer, the timing of which depends on whether the defendant has sought to compel mediation. Under Section 17.5051, a defendant may seek to compel mediation by filing a motion for that purpose within 90 days after service of a pleading seeking DTPA relief. TEX. BUS. & COM. 4 CODE ANN. В§ 17.5051 (Vernon Supp. 2002). The trial court then has 30 days to sign an order setting a time and place for mediation. Id. If this is a case in which mediation was not conducted, the defendant may tender an offer of settlement before the 91st day after the original answer was filed. Id. В§ 17.5052(b). However, if this is a case in which a mediation is conducted under Section 17.5051, then the defendant may tender an offer of settlement before the 21st day after the date the mediation ends. The offer is rejected unless both parts are accepted by the consumer not later than the 30th day after the date the offer is made. Id. В§ 17.5052(e). 5