January 26, 2021

Joshua Clayton

Dirty Dealing: Where Does Louisiana Draw the Line for “Free Competition”?

While business disputes often involve one party claiming that another party breached a contract, sometimes unethical or shady commercial behavior does not breach an explicit provision of a contract. The Louisiana Legislature has addressed these kinds of situations within what it has termed the “Unfair Trade Practices and Consumer Protection Law,” sometimes known as the “Louisiana Unfair Trade Practices Act” (LUTPA). See LA. REV. STAT. §§ 51:1401-1431. LUTPA provides that “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce” are unlawful. LA. REV. STAT. § 51:1405(A). At first blush, the language of this law appears to provide a broad opportunity for parties to claim that others’ business dealings are unlawful.

Exactly what kind of conduct would a court find to be an “unfair” trade practice? Interpreting LUTPA, the Louisiana Supreme Court has stated that “only egregious actions involving elements of fraud, misrepresentation, deception, or other unethical conduct” are unlawful. Cheramie Servs. Inc. v. Shell Deepwater Prod. Inc., 2009-1633 (La. 4/23/10), 35 So. 3d 1053, 1060. Thus, to be unlawful, the commercial practice must be fraudulent, unethical, or similarly severe. Still, the Louisiana Supreme Court has left judges some discretion in assessing the lawfulness of business practices: “Because of the broad sweep of this language, ‘Louisiana courts determine what is a LUTPA violation on a case-by-case basis.’ ” Quality Environmental Processes, Inc. v. I.P. Petroleum Co., Inc., 13-1582 (La. 5/7/14), 144 So. 3d 1011, 1025. Reported case decisions indicate that a variety of actions can be found “unfair” or “deceptive” in violation of LUTPA. Yet, courts also are quick to recognize that considerations of free competition and freedom of speech limit the reach of LUTPA’s protections for business owners and others who have been the victims of dirty dealing.

The decision in National Oil Service of Louisiana, Inc. v. Brown, 381 So. 2d 1269 (La. App. 4th Cir. 1980), provides a good overview of the analysis a court typically will use to assess an unfair trade practice claim. In that case, managers of a company, while still employed there, concocted a detailed scheme to start a new company and take their employer’s customers with them to the new company. The scheming managers convinced co-employees to join them at the new company. The court acknowledged that the freedom to compete is firmly entrenched in Louisiana law and held that employees generally are permitted to leave a company, compete with their former employer, and rely on their memory to solicit customers of the former employer. But the court found that certain competitive actions of the managers had crossed the line: the managers took physical customer lists from their former employer to the new company, lied to customers by falsely claiming that the former employer was “out of business,” and took numerous other steps to leave the former employer’s business in a state of disarray. Hence, the court of appeal granted some relief to the former employer and sent the case back to the lower court for further proceedings, with this guidance: “While perhaps no single factor would alone be considered unfair competition, the evidence . . . established a course of calculated misconduct over a considerable period of time, and plaintiff should have been granted some preliminary injunctive relief in order to prevent defendants from profiting from their misdeeds (in addition to their reserved claim for damages).” Id. at 1274.

In a recent case, 26 New Orleans taxicab drivers sued 31 drivers for the software-based transportation company Uber. The taxi drivers claimed that the Uber drivers violated LUTPA by failing to follow various state and municipal driving regulations, in order to take market share from taxi drivers who were adhering to the regulations. See Green v. Garcia-Victor, 2017-0695 (La. App. 4 Cir. 5/16/18), 248 So. 3d 449. For example, Uber drivers allegedly were operating outside the Uber software app to offer rides to passengers who “hailed” cars for cash—acting like taxi drivers—even though the Uber drivers were not paying the costs to comply with burdensome laws applicable to taxi drivers. Addressing the Uber drivers’ threshold question of whether the taxi drivers should be allowed to bring the lawsuit, the court of appeal held that if the Uber drivers actually were operating like taxi drivers without following the taxi laws, the drivers’ business practices were unfair, in violation of LUTPA.

For conduct that violates LUTPA, the Legislature made investigation and legal action by the Louisiana Attorney General the primary enforcement mechanism. See LA. REV. STAT. §§ 51:1404, 1407. Thankfully, the Legislature also created a private right of action allowing injured persons to file suit for damages without the need for the Attorney General to be a party to the lawsuit. See LA. REV. STAT. § 51:1409. A private party’s lawsuit asserting a LUTPA claim must be filed within one year from the date of the unfair trade practice. If the defendant continues to knowingly engage in the unfair trade practice after receiving a notice from the attorney general, the court is required to award the plaintiff three times the actual damages sustained. If the plaintiff wins his LUTPA claim, the court is required to award attorneys’ fees and costs to the plaintiff. But if the plaintiff loses his LUTPA claim and the court finds that the claim was “brought in bad faith or for purposes of harassment,” the court may award attorneys’ fees and costs to the defendant.

Which members of the public have standing to bring a LUTPA lawsuit—a competitor? former business partner? contracting party? consumer? Likely, all the above can file suit. The statute provides that “any person” who suffers an “ascertainable loss” of money or property due to the unfair or deceptive practice may sue to recover actual damages. LA. REV. STAT. § 51:1409(A). Even though businesses are allowed to compete and make money, LUTPA places moral boundaries on those freedoms. LUTPA authorizes courts to provide a level of protection to businesses and members of the public who have been harmed by unfair trade practices. If you have suffered a financial loss as a result of an unfair or deceptive commercial practice, keep in mind the one-year time limit for filing suit.


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