Delaware Consumer Fraud Act Does Not Apply Post-Transaction

The Delaware Supreme Court recently held that the state Consumer Fraud Act (CFA), which prohibits misleading statements in connection with the sale, lease, receipt, or advertisement of any merchandise, does not apply to communications after the underlying transaction occurred. 

The case stems from a 2022 purchase of a manufactured home and recreational vehicle community.  The purchaser sent several letters that generally notified existing residents of their occupancy status, increases in rent payments, and threatened that if the residents did not vacate, they would be subject to legal repercussions.  As a result, the Delaware Department of Justice Protection Unit initiated an enforcement action against the purchaser, which included claims of CFA violations.  After an administrative hearing, which initially resulted in $700,000 in penalties against the purchaser, and subsequent appeal to the Delaware Superior Court, the parties appealed to the Delaware Supreme Court.

The court held that based on the plain meaning and decades of caselaw interpretation, the CFA does not apply to post-transaction communications.  The court remanded the case to the administrative tribunal to determine explicitly which communications were post-transactional and to reassess violations and penalties accordingly.  The court noted that consumers still have recourse for any post-transaction wrongdoing pursuant to tort, contract, or other statutory claims.    

In addition, the court rejected the purchaser’s claim that the CFA’s administrative enforcement mechanism violated the state constitutional right to a jury trial, by distinguishing the CFA from common law fraud due to differences in elements, intent requirements, and remedies.