Robert C. ProcterCharles V. Sweeney

AXLEY BRYNELSON, LLP

The Lessons of Stuart vs. Weisflog’s Showroom Gallery, Inc.

and “The Home Improvement Practices Act”

(ATCP § 110)

HIPA - § ATCP 110• The Wisconsin Department of Agriculture,

Trade and Consumer Protection (DATCP) regulates unfair and deceptive business practices.

• DATCP has adopted administrative rule § ATCP 110, the “Home Improvement Practices Act” (HIPA) to protect consumers against unfair home improvement practices.

HIPA Generally Addresses:

• Prohibited Trade Practices• Home Improvement Contract Requirements• Building Permits• Warranties

ATCP 110

• Applies to oral and written contracts.

• ATCP applies to nearly all “home improvements” but does not apply to new home construction or to commercial construction.

ATCP 110• “Home improvement” means the “remodeling, altering,

repairing, painting, modernizing of residential or non-commercial property, or the making of additions thereto, and includes, but is not limited to, the construction, installation, replacement, improvement or repair of driveways, sidewalks, swimming pools, terraces, patios, landscaping, fences, porches, garages, basements and basement waterproofing, fire protection devices, heating and air conditioning equipment, water softeners, heaters and purifiers, wall-to-wall carpeting or attached or inlaid floor coverings . . .”

General Prohibited Sales Practices

• ATCP 110.02(11) – prohibits “any false, deceptive or misleading representation in order to induce any person to enter into a home improvement contract, to obtain or keep any payment under a home improvement contract, or to delay performance under a home improvement contract.”

Stuart v. Weisflog

• The Stuarts hired Weisflog to remodel their home.

• Total cost of work was $278,000.

• Discovered problems with work 7 years after construction commenced.

• Filed lawsuit 2 years after discovery of problems.

Stuart v. Weisflog

• Hot tub room had to be demolished and rebuilt. • Total cost to repair faulty project was $96,000.00.

• Deficiencies stemmed partially from the nonconformance of the completed work to the plans and partially from poor workmanship.

Stuart v. Weisflog

• The Stuarts filed a lawsuit against Weisflog’s Showroom Gallery, Inc. and against Ronald Weisflog, individually.

• The Stuarts alleged that Weisflog made misrepresentations to induce them into entering into a home improvement contract in violation of ATCP 110.

The alleged misrepresentations:

• Weisflog promised to provide the Stuarts “independent architectural services”.

• Weisflog also told the Stuarts that he understood local building codes and regulations, and that he would comply with all codes.

Misrepresentations:

• The two statements that allegedly violated ATCP 110’s prohibition against misrepresentations:– It was determined at trial that Weisflog was not a

licensed architect and such architectural services were not provided; and

– Ronald and Robert Weisflog admitted at trial that they were not familiar with the local building laws.

Double Damages• The Jury awarded the Stuarts $95,000 in damages.

• The Stuarts asked the Judge to double the damages.

• ATCP 110 is a consumer protection law subject to section 100.20(5) of the Wisconsin Statues, which allow for recovery of “twice the amount of such pecuniary loss…” for any such violation.

• In other words, the Stuarts were entitled to double the award of damages.

Double Damages

• The trial court judge ruled that the Stuarts were only entitled to double the damages that resulted from the misrepresentations, and not the damages that resulted from faulty construction because those damages were not the result of any violation of ATCP 110.

• The Court of Appeals and the Supreme Court overruled the trial court, and determined that the all of the Stuarts’ damages should be doubled unless the defendant can show that the damages can be separated.

• The Supreme Court ruled that damages cannot be separated in this case because all of the damages flowed from the initial misrepresentations that induced the Stuarts to enter into the contract.

Attorney Fees• If there is a violation of ATCP 110, then section 100.20(5) of

the Wisconsin Statutes allows for the recovery of attorney fees.

• The attorneys’ fees requested at the trial court level were very significant – hundred thousands, and the Stuarts were also entitled to all of their attorneys’ fees incurred at the Court of Appeals, at the Supreme Court and at the trial court after the remand.

• The large amount of attorneys’ fees is always a significant hurdle to any potential settlement.

Personal Liability

• ATCP applies to any “Seller”, which means a “person engaged in the business of making or selling home improvements and includes corporations, partnerships, associations and any other form of business organizations or entity, and their officers, representatives, agents and employees.” ATCP 110(5).

• Based on this language, the Supreme Court ruled that any corporate employee may be personally liable for acts, he or she takes on behalf of the company.

• Ronald Weisflog was sued personally for the double damages and was potentially personally responsible Stuarts’ attorneys’ fees.

Prohibited Practices

• ATCP 110 also prohibits:– Advertising any free gift or bonus offer without

providing the specific terms.– Misrepresenting the contract price or other

contract terms.– Pressuring a buyer into entering into a home

improvement contract by delivering materials or starting work before there is a contract.

Other Prohibited Practices

• ATCP 110 prohibits:– Making false statements about a competitor, or the

competitor’s products or services.– Misrepresenting that a home improvement contract will aid

any charity or other organization.– Encouraging a buyer to misrepresent his or her financial

condition in order to obtain financing.– Falsifying the contract price in order to help the buyer

obtain financing.– Asking the buyer to sign a completion slip or make final

payment before completion of the work.

Other Prohibited Practices

• ATCP prohibits:– Misrepresenting that the buyer’s home will be

used as a “model” or “advertising job.”– Misrepresenting that products or materials meet

certain standards or specifications.– Misrepresenting that the buyer’s home contains

a defective or dangerous condition requiring repair.

Other Prohibited Practices

• ATCP 110 prohibits:– Engaging in “bait and switch” tactics.– Misrepresenting the seller’s identity, status or

affiliation.– Misrepresenting that the seller is licensed,

bonded, or insured. If the seller claims to be licensed, bonded or insured, the seller must provide the buyer with a written statement describing the license, bonding or insurance. (Should put such a statement in your contract)

ATCP 110 Contract Requirements• A written contract is required:

– When a buyer is required to make any contract payment prior to completion of the seller’s obligations under the contract; or

– The seller initiates the contract by any of the following means:• Face-to-face solicitation away from the

seller’s regular place of business.• Mail or telephone solicitation.• Handbills or circulars delivered or left at a

place of residence.

ATCP 110 Contract Requirements

• If a written contract is used, must provide a copy to the buyer before the seller begins work or receives any payment.

• If negotiated in another language (for example, Spanish) the contract must be in English and that other language.

ATCP 110 Contract Requirements

• If a written contract is required, the contract must contain the following information:– Seller’s name and address, and the name and

address of the seller’s sales representative or agent.– A description of the work to be done and the principal

materials. Must clearly describe any specific products to be installed or used (for example, a certain brand window, etc.).

– The Total Price (including finance charges)– Start date and completion date.

ATCP 110 Contract Requirements

• If a written contract is required, the contract must contain the following information (cont.):– A description of any mortgage or security interest

created in connection with the sale or financing of the home improvement.

– All warranties that the seller makes for labor, services, products or materials.

– A description of every document incorporated in the home improvement contract.

– Insurance coverage included in the home improvement contract.

ATCP 110 Contract Requirements

• NOTICE OF DELAY

• ATCP 110.02(7) requires the seller to give buyer timely notice of any impending delay, if delayed beyond deadline specified in the contract.

• Notice shall specify the reasons for delay, and shall specify new proposed deadline.

• If a written contract is required or used, no changed deadlines are effective unless buyer agrees in writing.

ATCP 110.03 Building Permits • Before a buyer enters into a home improvement

contract, the seller shall inform the buyer of all building and construction permits that are required for the home improvement.

• No seller may start without all required state or local permits.

• Copies of all midpoint or final inspection certificates shall be furnished to the buyer when construction is completed or the signing of a completion slip is requested.

ATCP 110.04 Warranties

• IF A WARRANTY IS PROVIDED, IT MUST BE IN WRITING

• ALL WARRANTY DOCUMENTS EXCEPT MANUFACTURER WARRANTIES MUST BE GIVEN TO BUYER AT TIME OF CONTRACT

• A COPY OF ANY MANUFACTURER’S WARRANTIES MUST BE GIVEN WHEN THAT PRODUCT IS INSTALLED

Questions

Robert C. Procter, Attorney Charles V. Sweeney, AttorneyAxley Brynelson, LLP Axley Brynelson, LLPrprocter@axley.com csweeney@axley.com(800) 368-5661 (800) 368-5661

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