Understanding the Kansas Consumer Protection Act in Unusual Circumstances

The Kansas Consumer Protection Act (“KCPA”), Ks. Stat. Ann. §§ 50-623 et seq., provides consumers protection from “suppliers who commit deceptive and unconscionable practices” and from “unbargained for warranty disclaimers.” It also creates a three-day cancellation period for door-to-door sales, but this is not the primary source of litigation involving the KCPA.

Rather, consumers primarily litigate against suppliers they allege have acted deceptively and unconscionably. Plaintiffs frequently use the KCPA as a sword instead of a shield as it provides for attorneys’ fees. Because of this, KCPA claims can be asserted in the most unexpected of cases. This article will evaluate the application of the KCPA in two unusual circumstances involving third-parties.

Under the KCPA, there must be a consumer, a supplier, and a consumer transaction before its protections can be invoked.

In Ellibee v. Aramark Correctional Services, Inc., 37 Kan. App. 2d 430 (Kan. Ct. App. 2007), an inmate complained to the Kansas Department of Corrections (the “DOC”) that he wasn’t being provided Kosher meals. Ellibee, 37 Kan. App. 2d at 431. Aramark provided meals to inmates under its contract with the DOC. Id. The inmate was unsatisfied with the DOC’s response and filed suit against Aramark, claiming that he was a consumer, Aramark was a supplier, and they had engaged in a consumer transaction. Id. Aramark moved to dismiss for failure to state a claim because there was no consumer transaction between Aramark and Ellibee. Id.

Ellibee argued he was a third-party beneficiary of Aramark’s contract with the DOC and that a fund he paid into was used to pay Aramark for its services. Id. The trial court found that a third-party beneficiary could not make a KCPA claim, and therefore granted Aramark’s motion to dismiss. Id. In doing so, the trial court looked to the appellate decision of The CIT Group v. E-Z Pay Used Cars, Inc., 29 Kan. App. 2d 676, 685 (Kan. Ct. App. 2001), which held that “the KCPA’s protection is limited to individuals who directly contract with suppliers for goods or services.” Ellibee, 37 Kan. App. 2d at 432.

The Court of Appeals looked to a Texas case that found “a third-party beneficiary may qualify as a consumer of goods or services ‘as long as the transaction was specifically required or intended to benefit the third-party and the good or service was rendered to benefit the third party.’” Id. (citing Bohls v. Oakes, 75 S.W.3d 473, 479 (Tex. App. 2002)). Bohls provided “three relevant inquires to be made in determining consumer status: (1) to whom were the representations made; (2) who suffered damages; and (3) who was affected by the defendant’s alleged misconduct.” Id.

The Court of Appeals found no evidence that Aramark ever made a representation to Ellibee. Id. at 433. Further, the KCPA requires a “disposition for value” as part of the consumer transaction. Id. Here, there was no evidence of any sale or trade “as the DOC is legally required to provide sustenance for all inmates.” Id. Additionally, Ellibee didn’t provide any value to Aramark. Id. “What was provided to Ellibee was simply a by-product of Aramark’s contract with the DOC. The facts are that Ellibee received the meals he requested. Aramark made no representations to Ellibee or engaged in any negotiations with him.” Id. Accordingly, the Court of Appeals found that “under this set of facts, a third-party beneficiary is not a party to a KCPA consumer transaction.” Id.

In Alexander v. Certified Masters Building Corp., 268 Kan. 812 (2000), plaintiffs contracted with Everhart, a third-party builder, based on representations made by Certified Masters Building Corp. (“CMB”) that its members, including Everhart, had home-building experience, met stringent qualifications, and their work was covered by warranty. Alexander, 268 Kan. at 816-818. Plaintiffs believed the CMB covered the contract and that CMB arbitration applied. Id. When problems arose during the construction, Plaintiffs were not able to arbitrate through the CMB. Id. at 817-818. Additionally, Everhart was not a full-time professional home-builder and did not meet all the requirements of the CMB. Id. at 816.

One of the questions certified to the Kansas Supreme Court was whether CMB was a supplier under the KCPA, and therefore subject to the KCPA. Id. at 818.

The Kansas Supreme Court found that CMB was a supplier under the KCPA. Id. at 826. CMB encouraged its members to identify themselves and to use CMB-provided promotional materials. Id. at 825. CMB advertised its program in newspapers and published a brochure that listed the benefits of contracting with a CMB builder. Id. Because of this conduct, the Court found that CMB “solicited consumers to contract with its member builders.” Id. at 826. Under these facts, the CMB was a supplier. Id. Accordingly, the KCPA applied.

In these two instances, a third-party was involved in a KCPA claim. A third-party beneficiary  of a consumer transaction had no standing to make a claim under the KCPA, whereas a third-party builders’ association that acted as an advertiser and solicitor was deemed a supplier under the KCPA, even though it was not a party to the consumer transaction. These third-party cases are extremely fact-specific, but do provide guidance on how the Kansas courts may rule in future cases.