Consumer Fraud

Citizens in the United States are, unfortunately, awash in a sea of deceptive and unfair business practices defrauding them of hundreds of millions if not billions of dollars annually. A 2014 FTC publication put the total annual loss figure at 1.6 billion. Other sources estimate greater losses. The Financial Fraud Research Center of Stanford University published a report in 2013 entitled “The Scope of the Problem,” that begins as follows: “[w]ith billions of dollars in losses impacting an estimated tens of millions of victims, fraud is a major problem. . . .” The Federal Trade Commission or FTC characterizes the problem in similar terms in its “Consumer Fraud in the United States 2011, The Third FTC Survey.” This publication discusses the types of fraud or deceptive consumer tactics most frequently reported to the FTC, including fraudulent weight-loss products, fraudulent prize promotions, being billed for a buyer’s club members that one had not agreed to purchase, being billed for internet services that one had not agreed to purchase, and fraudulent work-at-home programs. These are only a small fraction of the types of fraud and deceptive practices targeting consumers, from securities and stock fraud, to business opportunity and franchise fraud, to home loan practices, to hidden credit card and bank charges, and more. It may be said, and has been said, that the type and variety of fraudulent, misleading, and unfair business and commercial practices are only limited by human ingenuity, which is to say they are without limit.

There are both common law claims and statutory claims which can be brought in response to fraudulent and deceptive practices. Common law claims include common law fraud and breach of contract. Common law fraud or misrepresentation typically requires a false statement of fact, made by a defendant knowing it to be false (or sometimes simply making it without a reasonable grounds for believing it to be true), with the intent that it be relied upon by a plaintiff, and reasonable reliance by the plaintiff causing harm or loss. False promises may also be the basis for consumer fraud claims.

In addition to such common law claims, there are numerous statutes which prohibit unlawful, deceptive, or unfair business practices. These include federal and state laws against stock fraud, franchise fraud, and deceptive and misleading representations in various businesses and professions. They also include laws to capture and outlaw new and creative schemes to defraud and mislead consumers. One such law is California Business Code sections 17200 and 17500.

Section 17200, which is sometimes called the “Little FTC Act,” outlaws three general types of conduct in the following terms: “[a]s used in this chapter, unfair competition shall mean and include any unlawful, unfair, or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 [starting with section 17500 of the Business and Professions Code].”

Section 17500 in turn outlaw a number of business practices, such as the failure of door to door salesmen to identify or conduct themselves in certain ways, misrepresentations about “former” prices, misrepresentations about products based on supposed “clinical evidence,” misrepresentations by merchants that they are “producers” or have a similar relationship to a product, and the failure of merchants to identify in advertisements that quantities are limited, to sell products advertised as available, to specify that certain goods are sold in multiple units, to specify that the purchase or lease of one product or service requires the purchase or lease of another, and numerous other practices concerning “consumer products” or services that the California State Legislature has determined to be deceptive or unfair per se.

A violation of section 17200 may be based on the violation of specific statutes outlawing behavior engaged by the defendant. Almost any state, federal, or local law can serve as a basis for an action under Section 17200. Alternately, 17200 is violated where the defendant has engaged in deceptive advertising or activities which are “likely to deceive the public.”

Section 17200 also prohibits “unfair” business practice. Put in others terms, section 17200 prohibits deceptive or unfair practices even if they are not unlawful per se. The independent “unfairness” prong of Section 17200 is intentionally broad, in order to empower courts to strike down new schemes to defraud. The test of “unfairness” here requires an examination of the practice’s impact on the alleged victim balanced against the reasons, justification and motive of the alleged wrongdoer. The court weights the utility of the defendant’s conduct against the gravity of the harm to the victim. An unfair business practice is found where the practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.

Class Actions

Class actions are procedural devices that allow persons whose claims are too small to be brought individually, to bring claims on behalf of themselves and other similarly situated persons who have been defrauded or harmed by the substantially similar conduct of a defendant. Section 382 of the California Code of Civil Procedure states in material part that “when the question is one of common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue for the benefit of all.”

Generally speaking, there is a numerosity requirement that must be met to proceed with a class action: that there are a sufficient number of individual claims to make the class action device the superior mode of adjudication of the claims. There must also be a common question of law or fact sufficiently pervasive to allow for a common resolution of claims. Similarly, the class plaintiff or representative most have a claim substantially similar to and representative of class members claims.

Class actions perform an important function in the American justice system. Unscrupulous corporations and businesses often defraud and cheat consumers out of small amounts of money. Consumers in such cases typically do not have a sufficient capacity or interest to bring suit or otherwise protect their rights. Class actions allow consumers to protect their rights in such instances, to recover the ill-gotten gains of unscrupulous corporations and businesses and, equally importantly, to stop the fraudulent, deceptive, and unfair practices of these entities in the future.


The federal Merchant Marine Act, otherwise known as the “Jones Act,” represents the primary basis for claims of seamen, fishermen, and similar offshore workers for workplace injuries. This body of law is found at Title 46 of the United States Code, starting at section 30104. The Jones Act allows injured seaman, called “sailors” under the Act, to make claims and collect from their employers for the negligence of a ship owner, captain, or fellow members of the crew. It does this by, in substantial measure, extending the worker’s compensation coverage and law applicable to railroad workers (the Federal Employers Liability Act), to seaman.

The Jones Act reads in material part as follows: “[a]ny sailor who shall suffer personal injury in the course of his employment may, at his election, maintain an action for damages at law, with the right to trial by jury, and in such action all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply. . . . “

This provision and related law allows seamen to bring actions against ship owners based on claims of unseaworthiness or negligence, rights not accorded to seaman under common maritime law. The Jones Act covers a number of industries, from shipping, to fishing, to dredging, oil, and tug boat operations, and a wide range of workers, including but not limited to deck hands, engineers, third bates, second mates, bosun or boatswain, captains, and roughnecks.

To qualify for coverage under the Jones Act, a worker must be a “seaman” injured while working on a “vessel” on a “navigable waterway.” Each of the words in italics represent a necessary precondition for coverage under the Jones Act.

Courts and practitioners have struggled with what exactly a “seaman” is here, although in general terms, a “seaman” is a member of a vessel’s crew, or permanently assigned to a fleet of vessels, who contributes to the function of the vessel and/or fulfillment of its mission. Persons who load and unload ships – or Longshoremen – are not covered under the Jones Act, but are covered under the Longshore and Harbor Workers Compensation Act, discussed elsewhere on this site. Similarly, a person who is temporarily on a vessel, such as a harbor pilot, even if contributing to the function of the vessel is generally considered not to be a “seaman.”

There is similar ambiguity with respect to what a “vessel” is under the Jones Act. For example, a river boat casino that was moored to the shore was considered not to be a “vessel.” Similarly, fixed drilling rigs are generally held not to be vessels while submersible rigs are generally considered to be “vessels.” The United States Supreme Court in Stewart v. Dutra (2005) 543 US 481, clarified the question somewhat by holding that a vessel is “a watercraft that is used, or capable of being used, as a means of transportation on water.” There will continue to be evolution in this definition as new technologies present definitional challenges.

A “navigable water” under the Jones Act includes the oceans, and navigable rivers, inland canals and waterways. Here too there can be questions concerning whether a particular body is “navigable,” but these too require a case-by-case analysis.

Injured “seaman” are entitled to two basic types of recovery under the Jones Act and related law. One is called “maintenance and cure.” Maintenance is that amount of money that would be required to provide room and board to a seaman similar to what he would be accorded on a vessel, and generally is modest in amount: for example, $8 per day at the low end, and $35 per day at the high end. “Cure” is reasonable and necessary medical care to bring a seaman to a point of being permanent and stationary, who is stabilized at a point where he or she is not going to improve or deteriorate any further. Maintenance and cure does not require a showing of unseaworthiness or negligence.

On the other hand, injured seaman can also seek and recover greater and more comprehensive remedies on a showing of unseaworthiness or negligence. This sort of recovery includes past and present loss of income (including fringe benefits), or wage earning capacity, past and future medical expenses, life care expenses, pain and suffering damages, and whatever other “proximate damages” or other losses that might be caused by the accident in question. These same sort of damages with some modification are available to surviving family members of a deceased seaman.

Here the seaman (or his surviving family members), are required to show that the employer or its officers, agents, or employees were negligent, or that the employer’s equipment was defective or insufficient (i.e. “unseaworthy”) due to the negligence of the employer, and that this negligence was at least in part the cause of the injury or death in question. “Unseaworthy” or “unseaworthiness” is specified to be as something on a vessel that is “not fit for its intended purpose” such as a corroded step or deteriorated rope that give ways or breaks. This test has been construed broadly to favor “seaman.” A showing of negligence is not required, however, under the Longshore and Harbor Worker’s Act (discussed elsewhere on this website),

A seaman’s fuller recovery described above may be reduced by his or her “comparative negligence.” For example, if it is determined that a seaman was 25% at fault for a fall on a ship’s ladder, his overall recovery would be reduced by 25%. Again, reductions for comparative negligence do not occur under the Longshore and Harbor Worker’ Act.

Injuries that may be compensated under the Jones Act are not limited to those that occur during the course and scope of work activities, but also those that occur during the course of living on board, or going to or coming from the vessel. Negligence of an owner has been found based on unsafe equipment and appliance, inadequate care in selecting a mater and fellow crewmen, assaults by fellow crewmen, failure to avoid heavy weather, and failure to supervise or rescue.

In summary, the Jones Act provides substantial benefits to injured seamen and their surviving family members. An attorney knowledgeable in the Jones Act and related remedies should be consulted in order to maximize an injured worker’s recovery.


Longshoremen and other harbor workers receive worker’s compensation benefits for their workplace injuries under the Longshore and Harbor Worker’s Act (LHWCA). Such injuries may also include occupational injuries, such as asbestosis. Spouses and families of workers who die from work place injuries also may receive compensation. The LHWCA is a federal law found in Title 33 of the United States Code, beginning at section 901. The law is administered by the Office of Worker’s Compensation Programs (“OWCP”), of the United States Department of Labor. Administrative law judges from the United States Office of Administrative Law Judges decide case under the LHWCA. In California and some other states, the United States Department of Labor and state worker’s compensation courts have concurrent jurisdiction over longshore and harbor worker’s cases. In many or most cases, the LHWCA is more favorable to injured workers than its California counterpart.

Longshore Coverage

The LHWCA extends coverage to maritime workers on or adjacent to “navigable waters of the United States,” including persons that load and unload ships (commonly called “longshoremen”), ship repairers, shipbuilders, shipbreakers and other harbor workers. Certain workers are excluded from coverage, including masters and members of ship’s crew. Masters and members of ship’s crews receive compensation for their work injuries under the Jones Act and related maritime law. The Jones Act is discussed elsewhere on this website, and is found in Title 46 of the United States Code, beginning at section 30104.

Whether a worker is covered by the LHWCA, Jones Act, or state worker’s compensation systems, can be a close question. Sometimes a worker laboring around ship loading and unloading operations can be found to be a member of a ship’s crew and covered by the Jones Act and not the LHWCA.

In addition to such “coverage questions,” there are other differences between these various statutory schemes including but not limited to burdens of proof and benefits provided. An injured worker under the Jones Act, for example, can recover pain and suffering damages. This is not true under the LHWCA. A knowledgeable attorney can help you determine whether your claim is a LHWCA claim or a Jones Act claim, and to describe the differences between these laws. Such differences can be critical, and prevent an injured worker from recovering full compensation if they are not understood and identified by counsel.

Related Statutory Schemes

There are a number of federal worker’s compensation laws that extend LHWCA-like coverage to non-maritime workers. The Non-Appropriated Funds Instrumentality Act extends coverage to employees of “non-appropriated funds instrumentalities.” These are entities that provide goods and services typically to United States military personnel on military bases within the United States, and can include military exchanges (sometimes called “px’s”), convenience markets, gas stations, hotels, golf courses, and similar facilities. This law is found at United States Title 10, section 1587.

The Defense Base Act likewise incorporates LHWCA terms and coverage for employees of contractors providing goods and services to the United States military and its bases overseas, including but not limited to such places as Iraq and Afghanistan. This law appears at United States Title 42, beginning with section 1651.

Finally, the Outer Continental Shelf Lands Act extends LHWCA protections to workers on drilling platforms on the outer continental shelf off the coast of the United States as set forth in Title 43 of the United States Code, section 1333(c).

Responsible Third Parties

The possibility that a non-employer, third party might be responsible for a worker’s injury should be considered to maximize his or her recovery. Such a third party might be responsible for pain and suffering and other damages far beyond the limitations of the LHWCA. A knowledgeable personal injury attorney should be consulted to determine whether there is a “third party case.” Ideally an attorney with substantial experience and expertise in both LHWCA and personal injury should be consulted, such as the Law Offices of Matthew Witteman. (See the article entitled “The Importance of Identifying Responsible Third Parties in Work Place Injury” elsewhere on this website).

To Initiate a Claim and Retain an Attorney

To initiate a claims for benefits under any of these statutes often can be done informally by lodging a notice of claim with employers or their agents, disability and medical benefits often being paid without further formal action. Employers are required under the LHWCA to report a workplace injury to the OWCP within 10 days of its occurrence or the employer notice of the injury. Formal claims and action, however, sometimes become necessary to secure the full extent of benefits due a worker. Such formal claims require the submission of a form LS-203 to the OWCP. Attorneys are sometimes engaged at this point in the process. Normally, the attorney’s fee in these instances is paid by the employer on the successful resolution of all or part of an employee’s claims.

Presumptions and Advantages of LHWCA

Workers enjoy a number of presumptions under the LHWCA that they have sustained a compensable injury. These appear in section 920 of the LHWCA and are commonly referred to as the “Section 20 presumption” or presumptions. It is therefore “presumed in the absence of substantial evidence to the contrary that (a) that the claim comes within the provisions of [the LHWCA], (b) that sufficient notice of such claim has been given, (c) that the injured was not occasioned solely by the intoxication of the injured employee, and (d) that the injury was not occasioned by the willful intention of the injured employee to injure or kill himself or another.” In order to take advantage of these presumptions, however, a worker must a “prima facie case,” or an initial showing that he or she suffered some harm or pain, and that an accident occurred or working conditions existed which could have caused the harm.”

The section 20 presumption represents an advantage of the LHWCA to other worker’s compensation schemes, For example, a showing that a person’s condition or illness was caused by toxic exposure may be easier to make under the LHWCA than the Jones Act. (See “Resources,” “Successful Decisions, a Sample:” Snoops v. Lyon Associates, Inc. (Agent Orange recovery from exposure in Vietnam)) A knowledgeable attorney can explain this and other advantages of the LHWCA.


Disability benefits under the LHWCA and related law are typically both temporary and permanent. Temporary disability benefits are paid up to and until the time a worker is deemed to have reached a point of being “permanent and stationary,” or “maximum medical improvement:” that is, where the worker’s condition has stabilized and the condition is not likely to improve or deteriorate significantly in the foreseeable future. Total temporary disability benefits are paid at 66 2/3 percent of a worker’s “average weekly wage” or “AWW.” Partial temporary disability benefits are 66 2/3 percent of the difference between pre-injury and post-injury AWW. In the case of total disability, there are statutory minimum and maximum limits. There are a number of ways for determining a worker’s AWW, but typically it is determined by looking at a worker’s wages in the 52 weeks preceding his or her injury and applying a formula to that wage to determine the AWW.

If there is permanent disability, a worker will be paid permanent disability benefits under the LHWCA and related law. If a worker’s has a “scheduled injury” as defined by the LHWCA, which is essentially any injury other than a spinal, shoulder, [other – check] injury, the American Medical Association’s Guide to Permanent Disability is consulted to determine a percentage impairment of the worker. A permanent disability payment is then made based on a schedule setting forth a set number of weeks of compensation at an AWW rate for the particular injury and percentage impairment. There may be multiple body parts injured in the same accident giving rise to multiple scheduled injury awards.

In the case of unscheduled injuries, such as spine, back, neck, and shoulder, permanent disability benefits require an evaluation of whether there has been a loss of “wage earning capacity.” Such a loss of “wage earning capacity” is typically measured by evaluating the AWW of a worker pre-injury, and comparing it to the actual or potential AWW of a worker post-injury. An injured worker is entitled to 66 2/3 percent of the difference between his pre-injury and post-injury AWW. Vocational rehabilitation experts are sometimes used to establish potential AWW of a worker post-injury. Knowledgeable attorneys can retain such experts and help maximize an injured worker’s permanent disability benefits.

In the case of death, the surviving spouse and/or family are entitled to benefits. A surviving spouse, for example, is entitled to 50% of the AWW of his or her deceased partner.

The LHWCA and related law also entitle an injured worker to medical benefits that are both reasonable and related to a work place injury. These laws also provide for vocational rehabilitation benefits for qualified workers. Vocational rehabilitation benefits can include education and vocational training to re-train a worker for another career. These are benefits provided by the OWCP itself. Temporary disability benefits are provided during the time a vocational rehabilitation plan is being followed.

Wrongful Denial of Claims and Right to an Attorney

From this writer’s perspective, there has been an increase in longshore claims wrongly denied by employers over the last 15 years. This may be attributable to a decrease in the number of administrative law judges – which can greatly lengthen the time in which claims can remain unpaid – or to other reasons. Whatever the reason, however, workers are entitled sometimes to statutory penalties for such wrongful denials, as well as an attorney to push their claims forward as rapidly as possible and maximize their recovery. Normally the employer must pay the cost of an attorney.

If you have any question about your benefits and whether you are receiving all of the benefits to which you are entitled, do not hesitate to contact the Law Offices of Matthew Witteman.