The Idaho Supreme Court recently upheld the district court’s finding that a subcontractor violated the Idaho Consumer Protection Act (“ICPA”) by engaging in misleading, false, or deceptive billing practices. In McCarthy v. Stark Investment Group, LLC, Craig Stark (“Stark”) contracted with the McCarthy Corporation (“McCarthy”) for site excavation. In 2017, Stark decided to retire in Idaho, and planned to construct an RV and boat storage facility to provide him with retirement income. A dispute quickly arose when McCarthy began submitting duplicate invoices to Stark for work it had already performed and for work performed by another subcontractor on the site. After several instances, Stark confronted the president of McCarthy, who replied: “just pay it now and we’ll figure it out later.” McCarthy then sent Stark another invoice and falsely informed Stark that the paving company McCarthy had hired would require half of the paving cost upfront, stating in an email: “[w]ould you mind 50% upfront for asphalt? Asphalt is requesting it.” McCarthy further refused to continue work on the project until the invoice, including upfront paving costs, was paid in full. Stark disputed the invoice and ultimately terminated McCarthy’s right to proceed under the contract. McCarthy then filed a Claim of Lien on Stark’s property. Stark sued for breach of contract and other theories of recovery, including alleging that McCarthy had violated the ICPA.
The ICPA—like most state consumer protection statutes—prohibits unfair business methods and practices, including “engaging in any act or practice which is otherwise misleading, false, or deceptive to the consumer.” The Idaho Supreme Court found that McCarthy’s double billing and dishonest demand for money upfront fell within the conduct prohibited by the statute. The court explained that the email requesting 50% upfront was by definition a false or misleading statement within the meaning of the ICPA because the asphalt provider made no such request and McCarthy refused to continue work until Stark paid. The court concluded that McCarthy’s “cavalier” response to “just pay the bill” when Stark raised concerns about the validity of the invoice compounded McCarthy’s deceit.
The ICPA allows a consumer to recover “ascertainable losses” as damages. The court found that McCarthy’s double billing and misleading directive led to Stark’s additional construction loan costs and inspection fees, as well as the defense of the lien on his property. Due to McCarthy’s lien, the bank required Stark to place $265,037.55 as collateral into a non-interest-bearing account. The court upheld an award of lost interest on the funds ($26,503.76) deposited into the collateral account as an “ascertainable loss” under the statute, as well as attorney’s fees and costs both in the present action and in Stark’s separate defense of the lien.
Why does McCarthy matter? Consumer protection statutes may provide a new avenue of recovery for alleging false or misleading business practices without the heightened pleading requirement of fraud. Further, the ICPA and other similar statues allow the aggrieved consumer to recover attorneys’ fees and costs as well as the possibility of treble damages for willful and wanton disregard. It is critical that contractors take care to abide by consumer protection laws when engaging with property owners, or else they could find themselves facing enforcement actions, a potential loss of license, or a wide array of unexpected damages. When a contractor or developer enters a new state for its work, it should review the consumer protection statutes of that jurisdiction to determine if there are such statutes and how “consumer” is defined in the statutes.