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Federal Trial in St. Louis Missouri

Tauler Smith Wins Federal Bench Trial for Insurance Consumer

Federal Trial in St. Louis Missouri

The insurance claim lawyers at Tauler Smith LLP recently won a major trial on behalf of a food & beverage manufacturer in a federal court in St. Louis, Missouri. The litigation began in a California courtroom with a business dispute over the manufacture of protein bars. Later, several of the parties in that case were also involved in insurance litigation heard by a U.S. District Court. Now, the judge has issued a ruling, with Tauler Smith winning a federal bench trial for their insurance consumer client.

The federal court’s decision can be read here. To learn more about Tauler Smith’s victory in the insurance claim lawsuit, keep reading this blog.

California Nutritional Supplement Lawyers Represent Food Manufacturer in Defective Protein Bar Lawsuit

One of the defendants in the nutritional supplement lawsuit was Eagle Mist Corporation, which does business as Osagai International and which is run by Kevin Laughlin. Eagle Mist is a company that invents and formulates functional foods, such as protein shakes and nutrition bars. They also provide other manufacturers with the technological ingredients they need for foods, beverages, and personal care products.

Nutritional Supplement Agreement

Eagle Mist entered into an agreement to supply ingredients to Sapphire Bakery, which would use the ingredients to reformulate and manufacture 13 types of nutritional protein bars. Sapphire then supplied the nutrition bars to Defense Nutrition, which finally supplied the bars to Julian Bakery.

Nutritional Supplement Dispute

Julian Bakery, the company that ultimately received delivery of the protein bars, alleged that the bars were defective due to the other companies modifying the formula of the bars, in addition to using certain processing agents during manufacturing. Julian Bakery sued Eagle Mist and Sapphire for breach of contract, damages related to defective goods, negligence, breach of warranty, unfair business practices, fraud, negligent misrepresentation, and promissory estoppel.

The lawsuit was filed in the Los Angeles County Superior Court, and the complex multi-party litigation included cross-complaints between seven (7) parties that all had a connection to the business dispute. Los Angeles nutritional supplement attorney Robert Tauler represented Eagle Mist in the California litigation, and successfully defeated three successive motions for summary adjudication in the case.

Insurance Coverage Dispute in California Food Supplement Case

Before starting production on the nutrition bars that were to eventually be delivered to Julian Bakery, Eagle Mist needed to get insurance coverage. At the time, Sapphire Bakery had a commercial general liability policy of insurance issued by Ohio Security Insurance Company. That policy called for Ohio Security to cover any legal expenses that Sapphire might one day become obligated to pay as damages in a lawsuit if sued. Since Sapphire’s insurance policy with Ohio Security allowed for the “named insured” to extend coverage to another company as an “additional insured,” Sapphire asked Ohio Security’s insurance broker to include Eagle Mist in its policy. The insurance broker then provided a certificate of liability insurance to Eagle Mist.

The insurance coverage became extremely important later when there was a business dispute over the manufacture of the nutrition bars. Sapphire Bakery’s insurance policy with Ohio Security meant that the insurance company would pay for Sapphire’s legal defense in the nutritional supplement litigation. The insurance company also agreed to pay for Eagle Mist’s legal defense in the civil suit because Eagle Mist was on the policy as an additional insured.

Texas Consumer Protection Attorney Camrie Ventry Wins Insurance Claim Litigation in U.S. District Court

The plaintiffs in the insurance claim litigation were Ohio Security Insurance Company and Ohio Casualty Insurance Company. The parent company of Ohio Security and Casualty is Liberty Mutual Insurance. Ohio Security and Liberty Mutual paid for Eagle Mist’s legal defense in the California nutritional supplement case. Later, the insurance companies argued at trial that Eagle Mist should be ordered to pay back their legal defense costs because they were never supposed to be covered under the insurance policy.

Dallas consumer protection attorney Camrie Ventry of Tauler Smith LLP represented Eagle Mist in the insurance coverage lawsuit. The case was heard by the United States District Court for the Eastern District of Missouri, with the court holding a one-day bench trial and issuing a memorandum opinion on December 16, 2022. The court was tasked with determining whether Ohio Security Insurance Company did, in fact, have a legal obligation to defend Eagle Mist under the terms of its insurance policy, as well as whether Ohio Security was entitled to reimbursement of the legal defense costs that they provided to Eagle Mist.

Federal Court Rules That Insurance Company Unreasonably Delayed Its Coverage Decision

Ohio Security’s argument at trial was that because Eagle Mist was never covered under the insurance policy, the insurance provider was entitled to recover all expenses it paid for Eagle Mist’s legal defense. The U.S. District Court rejected this argument and found that, under the circumstances, it was justified for Eagle Mist to retain the benefits of the legal expenses paid by the insurance company. Accordingly, the court entered judgment in favor of the Tauler Smith LLP client.

The court cited four main reasons for its ruling in favor of Eagle Mist and against the insurance company:

  1. Ohio Security voluntarily assumed the defense of Eagle Mist in the nutritional supplement lawsuit.
  2. Ohio Security had ongoing knowledge that Eagle Mist was not actually covered under the insurance policy.
  3. Ohio Security continuously paid the defense costs of Eagle Mist in the nutritional supplement lawsuit.
  4. Ohio Security unreasonably delayed for three (3) years before finally notifying Eagle Mist that they were not covered under the policy.

#1 – Insurance Company Agreed to Extend Policy Benefits

One of the benefits of Ohio Security’s insurance policy with Sapphire Bakery (and with Eagle Mist) was that Ohio Security agreed to pay all legal defense costs if there was a lawsuit brought by a third party.

As soon as the defective protein bars lawsuit was filed, Kevin Laughlin and Eagle Mist contacted Ohio Security Insurance Company to confirm that Eagle Mist was covered under the insurance policy. The U.S. District Court said that Eagle Mist had a good faith basis to believe that they were covered under the insurance policy. Kevin Laughlin communicated both verbally and in writing with Ohio Security to confirm that Eagle Mist was an additional insured under the policy, and he did the same with Sapphire Bakery. Moreover, the court found, Laughlin reasonably believed that the Certificate of Insurance issued by the insurance broker explicitly conferred coverage.

#2 – Insurance Company Knew the Policy Was Invalid

Shortly after the supplement civil suit was filed, the insurance company conducted its own investigation to verify whether Eagle Mist qualified as an additional insured under the insurance policy. During this investigation, Eagle Mist provided Ohio Security with email communications, purchase orders, and contracts.

According to the U.S. District Court, Ohio Security knew for several years that Eagle Mist was not actually covered under the insurance policy. But rather than acting quickly to provide notice, the insurance company delayed for three (3) years before finally informing Eagle Mist at a time when it would be most inconvenient for the food & beverage ingredient supplier.

#3 – Insurance Company Continued to Pay Legal Bills

After the investigation, Ohio Security still agreed to cover Eagle Mist’s legal fees for the nutritional supplement lawsuit. For the next three (3) years, the insurance company paid all of Eagle Mist’s legal bills in the case. During this time, Ohio Security made no statements to indicate that Eagle Mist was not covered under the insurance policy, nor did they provide notice to Eagle Mist that the food and beverage company was not covered under the insurance policy. It was only when the lawsuit was set to start trial that Ohio Security suddenly revealed that Eagle Mist never should have been covered under the policy. Ohio Security withdrew their defense, stopped paying Eagle Mist’s legal bills, and demanded that Eagle Mist repay nearly $1 million in defense costs already paid.

#4 – Insurance Company Delayed Its Coverage Decision

Although Ohio Security assumed the defense of Eagle Mist in the case and agreed to cover all legal costs, the insurance company argued that they had explicitly reserved the right to opt out of the arrangement. The court found this argument unpersuasive because the insurance company “essentially buried their head in the sand,” only to later “ask the Court to claw back funds they voluntarily paid over a span of years without producing any evidence that Defendants acted unjustly or that a three-year delay in asserting their coverage position was justified or reasonable.”

The insurance company knew at the start of the California nutritional supplement litigation that Eagle Mist was not supposed to be covered under the policy, but nevertheless continued to pay all legal costs while telling Eagle Mist that there were no issues. Then, after delaying for several years, the insurance company suddenly informed Eagle Mist that they were not covered under the policy. This sudden change in coverage came just one month before trial in the supplement lawsuit, when Eagle Mist would be most vulnerable.

The insurance company tried to justify its decision to withdraw coverage by pointing to a single, vague sentence about “reservation of rights” buried in a 25-page boilerplate letter. The court rejected this argument by noting that “a single mention in a twenty-five-plus-page boilerplate reservation of rights letter, without any further action by Plaintiffs for three years, was insufficient to put Defendants on notice they might not be covered under the Policy.”

Tauler Smith Insurance Litigation Team Represents Businesses & Consumers in California, Texas, and Throughout the U.S.

The Tauler Smith consumer protection & insurance litigation team is proud of its strong track record in insurance claim cases in state courts across California and Texas, as well as in federal courtrooms. Insurance companies must be held accountable when they attempt to take advantage of customers, which is why Camrie Ventry and our Texas litigators always fight so hard for clients in these cases.

After successfully defending Eagle Mist against Ohio Security and Liberty Mutual, Ms. Ventry called it “a great victory” for businesses and individuals who are unfairly forced to pursue the insurance benefits to which they are entitled. Ms. Ventry added, “This ruling shows that insurance companies cannot overreach by demanding to recover an exorbitant amount of money from the very people they are charged with protecting. The court got it right.”

Contact the California and Texas Insurance Claim Lawyers at Tauler Smith LLP

The attorneys at Tauler Smith LLP represent businesses and individuals in a range of practice areas, including dietary supplement lawsuits, consumer protection litigation, and insurance litigation. Call us today or send an email to schedule a free initial consultation about your case.

Texas Telephone Solicitation Act

Texas Telephone Solicitation Act

Texas Telephone Solicitation Act

Telemarketing is an important tool used by many businesses to generate revenues, but it can also expose consumers to misinformation and fraud. That’s why Texas lawmakers passed important consumer protection laws that explicitly prohibit false, misleading, or deceptive practices. One such law is the Texas Telephone Solicitation Act, which regulates attempts by companies to sell or rent property, products, or services to consumers via telephone solicitation. The law is part of the Texas Business and Commerce Code, which protects consumers against a wide range of fraudulent business practices. The section of the statute governing telephone solicitations is meant to protect purchasers against false, misleading, or deceptive practices on sales calls. When a company makes a sales call, they must abide by the guidelines set forth in the statute. This includes filing a registration statement that contains relevant sales information, as well as making required disclosures to purchasers during telephone solicitations about both the company and the items for sale.

To learn more about the Texas Telephone Solicitation Act and the protections it affords consumers, keep reading this blog.

What Is the Texas Telephone Solicitation Act?

The Telephone Solicitation Act is codified in Texas Bus. & Com. Code, Title 10, Subtitle A, Chapter 302. The statute defines a “telephone solicitation” as a telephone call that is initiated to induce someone to buy, rent, claim, or receive an item. Importantly, the Texas law also covers phone calls made by consumers in response to a solicitation that was sent electronically (e.g., an email) or physically (e.g., a letter in the mail). Moreover, the law applies to calls placed manually, calls initiated by an automatic dialing machine, and calls that involve a recorded messaging device.

Telephone Solicitation Registration Requirements in Texas

The requirements of the Texas Telephone Solicitation Act are strictly enforced, with any violation by a telemarketer possibly triggering both civil and criminal penalties. The statute imposes requirements on companies both during the registration process and when the phone solicitation is made.

Seller Disclosures at Registration

Before making a telephone solicitation, sellers must first fill out a Telephone Solicitation Registration Statement and obtain a registration certificate for their business. Moreover, the registration statement must list each telephone number that will be used by the seller, as well as the specific locations from which any phone solicitations will be made. Other sales information that must be disclosed in the statement includes a copy of all telephone solicitation scripts and other material provided to salespersons, a copy of any written material that might be sent to consumers, and the contact information for outside product suppliers.

The registration statement is filed with the Texas Secretary of State, and it must identify each principal of the seller: owners, executive officers, general partners, trustees, etc. The registration certificate is valid for one year, and it must be renewed annually. Additionally, for every three-month period after the certificate was issued, the business must provide information for each salesperson who solicited on behalf of the business.

One of the most important requirements imposed by the Telephone Solicitation Act is the security requirement: sellers must submit a security deposit in the amount of $10,000. The deposit is meant to ensure that the seller complies with the law. When a seller is found to have violated the statute, the deposit may be used as payment for any penalties imposed by the court.

Seller Disclosures on the Call

In addition to requiring disclosures in the registration statement filed with the state, the Texas Telephone Solicitation Act also compels companies to make certain disclosures to consumers before a purchase is made through a phone solicitation. For example, prior to the finalization of any transaction on a sales call, the seller must provide the consumer with the street address of the building or office from which the call is being made. Additionally, if the seller tells the consumer that the item is being offered at a reduced price, the seller must provide the name of the manufacturer. Along those same lines, if the seller represents that one of the items is a gift or prize, then they also need to clearly state the contest rules.

The Telephone Solicitation Act also places a significant limitation on exactly what telemarketers are allowed to say during a sales call: the caller is not allowed to state or otherwise reference their supposed compliance with the statute. The idea behind this restriction is that sellers should not be able to discourage consumers from investigating on their own to determine whether a seller violated the law by making a deceptive sales call.

How to File a Civil Lawsuit Against a Telemarketer in Texas

Consumers who are defrauded, scammed, or otherwise injured by a telemarketer’s violation of the Telephone Solicitation Act can take legal action. Experienced Texas consumer fraud lawyers know just how strong the statute’s protections are, and they also know how to navigate the legal system to hold businesses accountable for violating the law.

One option available to consumers is to file a civil suit against the company or person who made the sales call. Any individual who suffered economic losses due to a seller breaching an agreement that was entered into during a telephone solicitation may be eligible to recover financial compensation against the seller’s security deposit with the state. It might also be possible for consumers to bring a claim under the Deceptive Trade Practices Act (DTPA) because a violation of the Telephone Solicitation Act qualifies as a violation of the DTPA. Additionally, a person bringing a civil action under either statute may be entitled to compensation for reasonable attorney’s fees and related legal expenses.

Burden of Proof

The protections set forth in the Texas Telephone Solicitation Act are far-reaching and tend to be interpreted broadly by judges. In fact, the statute even stipulates that the burden of proof in these cases will be on the defendant accused of violating the law. For example, in civil proceedings where the defendant argues that they are exempt from the law, the burden of proving the exemption will fall on the defendant. Similarly, a company or individual who faces criminal charges for violating the telephone solicitation law is required to produce evidence supporting their defense that they are exempt from the statute.

Which Sellers Are Exempt from the Texas Telephone Solicitation Act?

Some sellers accused of violating the Telephone Solicitation Act may be able to argue that the consumer protection law does not apply to them, but only in certain situations. Those who may be exempt from the statute include agents of publicly traded companies, sellers for banks or other supervised financial institutions, anyone associated with companies regulated by the Public Utility Commission of Texas, individuals who are already subject to regulation by the Federal Communications Commission (FCC), and educational institutions or nonprofit organizations that are exempt from taxation by the IRS. In many instances, exemption from the Telephone Solicitation Act is possible because another law or regulation applies instead and takes precedence.

The Texas Business and Commerce Code also includes explicit exemptions from the phone solicitation law for the following categories of sellers:

  • Anyone selling a subscription to a newspaper, magazine, or cable television service.
  • Anyone selling items to a consumer who has consented in advance to receiving periodic deliveries of those items.
  • Individuals or companies delivering catalogs that are distributed in at least one other state and that have a circulation of at least 250,000 customers.
  • Anyone selling items to a business that plans to resell the items.
  • Persons or companies attempting to sell food products.
  • Persons calling about maintenance or repair of an item that was previously purchased from them.
  • Businesses soliciting a former or current customer.

Criminal and Civil Penalties Imposed by the Texas Telephone Solicitation Act

Every individual violation of a provision in the Texas Telephone Solicitation Act is considered a separate offense, which means that the penalties can add up very quickly even when the offenses stem from a single sales call. Beyond that, there can be both civil and criminal penalties imposed against sellers who violate the statute.

Criminal Penalties

Violations that may be charged as criminal offenses include failing to obtain the necessary registration certificate before making a phone solicitation, failing to make necessary disclosures to the consumer before finalizing a sale, and mentioning compliance with the statute on the sales call. Each of these offenses can be charged as a class A misdemeanor, which carries a possible fine of $4,000 and a sentence of up to one year in jail. Moreover, these criminal penalties can be imposed against both the business owner and the salesperson or telemarketer who made the call. Additionally, the defendant in a criminal action may be ordered to pay the costs of prosecuting the case, including the attorney general’s expenses for the investigation, depositions, witnesses, and related attorney’s fees.

Civil Penalties

Sellers who violate a provision in the Texas Telephone Solicitation Act are also subject to civil penalties. These penalties can be substantial, with the statute calling for a fine of up to $5,000 for each violation. The penalties become even harsher when the seller violates an injunction brought by the secretary of state for a previous offense: a $25,000 fine for each subsequent violation, plus an additional $50,000 fine for all violations after the injunction was issued.

Contact the Texas Consumer Protection Lawyers at Tauler Smith LLP

Did you receive a telemarketing call from a person who failed to identify themselves, their business, or their reason for calling? Did the telemarketer’s attempts to sell you something feel like part of a scam? The Texas Telephone Solicitation Act gives consumers the ability to take legal action by notifying the secretary of state and possibly filing a civil suit, and the Texas consumer protection attorneys at Tauler Smith LLP can help you.

Call or email us today to discuss your case.

Texas Deceptive Trade Practices Act

Texas Deceptive Trade Practices Act

Texas Deceptive Trade Practices Act

Texas has strong consumer protection laws that safeguard residents against scams, deceptive sales calls, and other illegal practices. Chief among these laws is the Texas Deceptive Trade Practices Act (DTPA), which gives plaintiffs the ability to recover additional damages when they have been defrauded by false, misleading, or deceptive business practices. When state lawmakers passed the DTPA, the intent behind the bill was that companies should think twice before committing any kind of fraud against consumers. Texas consumer protection lawyers know just how effective the DTPA can be at holding fraudsters accountable for their unethical actions.

To learn more about the Texas Deceptive Trade Practices Act, keep reading this blog.

What Is the Texas Deceptive Trade Practices Act?

The Texas Deceptive Trade Practices Act, or DTPA, is a consumer protection law that prohibits businesses from making false or misleading statements in advertisements, contracts, and any transactions involving consumers. The DTPA gives consumers a cause of action for a civil suit when they have been misled by a business. The text of the statute casts a wide net by explicitly forbidding businesses from knowingly deceiving customers in advertisements, marketing materials, and sales transactions. This includes “false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty.”

The DTPA applies to several different types of consumer transactions, including the sale or lease of commercial goods, products, services, or property. The Texas DTPA law has a lengthy list of examples of deceptive business acts, including the following:

  • Passing off goods or services as those of another.
  • Confusing consumers about the true source of goods or services.
  • Lying about the certification status of a product or service.
  • Misrepresenting whether a product or service has received sponsorship or approval.
  • Lying about the geographic origin of goods or services.
  • Misrepresenting the ingredients of goods such as food products or nutritional supplements.
  • Selling an item as “new” when the product is used or reconditioned.
  • Lying about the quality or grade of a product.
  • Using misleading statements to disparage a competitor’s goods or services.
  • Advertising items as available for sale when they are unavailable or there is only a limited supply.
  • Lying about the reasons for a price reduction.
  • Misrepresenting the need for additional parts, replacement, or repairs.
  • Falsely presenting a salesperson as having the authority to negotiate final terms of a transaction.
  • Secretly resetting the odometer on a motor vehicle for sale.
  • Lying about a “going out of business” sale when the store is not going out of business.
  • Using “corporation” or “incorporated” in the name of a business when it has not been incorporated.
  • Falsely representing that a solicitation has been sent on behalf of a governmental entity.
  • Price gouging during a natural disaster.

Additional Damages Available Under the DTPA

The damages and compensation that may be available to plaintiffs filing lawsuits under the Texas Deceptive Trade Practices Act include actual damages (i.e., economic damages), mental anguish damages, and attorney’s fees. The actual damages could involve things like the money spent on the purchase, as well as repair or replacement costs after the transaction.

Additionally, when a plaintiff in a DTPA case wins their claim, they may be eligible for up to three (3) times the usual damages awarded in a Texas civil suit.

Mental Anguish Damages

If the judge or jury finds that the defendant knowingly deceived the plaintiff, then it may be possible for the plaintiff to receive an award for mental anguish damages. The ability to recover damages for mental anguish is unique in DTPA claims because business transactions typically don’t involve the same kinds of mental or emotional harms as personal injury and wrongful death claims.

Treble Damages

The DTPA also allows for the recovery of treble damages, which means that the judge may impose a multiplier on the judgment or ruling and award up to three times the damages amount. When a defendant’s conduct is deemed egregious, it is not uncommon for plaintiffs to be awarded significantly higher damages as a way of sending a message and discouraging unethical behavior by other businesses in the future.

DTPA Waiting Period & Deadlines

Texas law requires victims of business fraud to wait at least 60 days before filing a DTPA lawsuit. The statute specifically requires plaintiffs to send a demand letter to the business owner or individual so that they have an opportunity to address the alleged fraud and potentially resolve the matter before a legal claim is necessary. Once 60 days have passed since the demand letter was sent to the defendant, then the plaintiff may choose to formally file their lawsuit in a Texas court.

Just as there is a waiting period on the front end of any DTPA claim, there is also a time limit for the plaintiff to take legal action. The deadline for a consumer to file a DTPA lawsuit is two (2) years from the date on which the false or deceptive business practice occurred. This statute of limitations is half the time that a plaintiff typically has available to file a breach of contract lawsuit in Texas.

Contact the Texas Consumer Fraud Lawyers at Tauler Smith LLP

The Deceptive Trade Practices Act (DTPA) gives Texas consumers the right to file a lawsuit and pursue damages when they have been victimized by a scammer or fraudulent business. If you have been misled or deceived in a commercial transaction, the Texas consumer fraud attorneys at Tauler Smith LLP can help you file a DTPA claim. Call or email us today to go over your options.