Iowa Court of Appeals Affirms Consumer-Fraud Verdict Against Residential Home Builder
In Bradshaw Renovations, LLC v. Graham, 2024 WL 4368669 (Iowa Ct. App. Oct. 2, 2024), the Iowa Court of Appeals affirmed a consumer-fraud jury verdict against a home builder. Homeowners Barry and Jacklynn Graham contracted with Bradshaw Renovations, LLC, to renovate their home. The contract was in writing, but the parties disagreed whether it was a fixed-price contract or a time-and-materials contract (T&M contract). The Grahams asserted it was a T&M contract, and they claimed that Bradshaw defrauded them in its billings by charging them more than the allowed under the contract. Bradshaw countered that the contract was a fixed-price contract, and it disputed the fraud allegation because it only charged the fixed-price amount. The parties sued each other, with the Grahams bringing both a contract claim and a claim under Iowa’s Private Right of Action for Consumer Frauds Act at Iowa Code Section 714H.5. The jury sided with the Grahams, and awarded them $16,000.00 in damages on their contract claim, and $10,000.00 in actual damages and $30,000.00 in statutory damages under the Act. After the verdict, the district court awarded the Grahams attorney fees under the Act. Bradshaw appealed, and the Iowa Court of Appeals affirmed.
The Court of Appeals concluded that it was for the jury to decide the dispute over the contract details, and found that there was sufficient evidence to support the jury’s finding that the contract was a T&M contract. The Court of Appeals also rejected three other arguments Bradshaw made on appeal: (1) that the Grahams failed to prove they suffered an “ascertainable loss” as required under the Act, (2) that the Grahams failed to show that Bradshaw engaged in a “prohibited practice” under the Act, and (3) that the evidence does not support the jury’s award of $30,000 in statutory damages under the Act.
On the “ascertainable loss” argument, the Court of Appeals explained that the Grahams “claimed a loss of $22,468.91 from [Bradshaw’s billing] practices. They supported this claim with testimony and exhibits, including a detailed itemization of twenty-seven instances of erroneous billings on the invoices. The jury awarded about half the requested amount: $10,000 in actual damages. And two categories of improper billings easily show losses supporting that award—even factoring in the $18,799.15 billed amount the Grahams did not pay. First, the evidence that Bradshaw Renovations overbilled roughly $24,000 in labor charges by billing at $60 per hour rather than the $45 per hour that it said it was charging. And second, the evidence that it overbilled nearly $14,000 in subcontractor expenses and materials above the amount it actually spent—despite its statement that it was taking ‘no profit’ on ‘subs and materials.’”
On the “prohibited practice” argument, the Court of Appeals wrote, “The consumer-fraud statute applies to misrepresentations by home-construction contractors like Bradshaw Renovations. And the same evidence of overbilling for labor, subcontractor, and materials that supports the finding of an ascertainable loss also supports a finding that the conduct is a prohibited practice. We need not define the precise boundaries of each of the enumerated acts prohibited the statute because the jury could have found that Bradshaw Renovations made knowing misrepresentations and omissions of material facts in its itemized invoices with the intent that the Grahams rely on them by making payments above what they properly owed under the contract. And this is well within the heartland of the consumer-fraud statute.”
Finally, on the “statutory loss” argument, the Court of Appeals stated, “A jury may award statutory damages of up to three times the actual damages if it finds ‘by a preponderance of clear, convincing, and satisfactory evidence that a prohibited practice or act in violation of [chapter 714H] constitutes willful and wanton disregard for the rights or safety of another,’” and that “[t]he supreme court has explained that ‘conduct is “willful and wanton” when the actor has intentionally done an act of unreasonable character in disregard of a known or obvious risk that was so great as to make it highly probable that harm would follow, and which thus is usually accompanied by a conscious indifference to the consequences.’ While ‘mere negligent’ or ‘objectionable conduct’ alone does not meet this standard, ‘persistent’ reckless conduct can. Put another way, consumer-fraud statutory damages are proper if the jury could find Bradshaw Renovations engaged in ‘wrongful conduct ... with a ... reckless disregard for the rights of’ the Grahams.” The Court concluded that there was sufficient evidence from which the jury could find that the required standard was met to trigger statutory damages. “Given the ten months of Bradshaw Renovations’ interactions with the Grahams, and five invoices containing itemizations of costs that the jury could have found were false, the jury could have found that Bradshaw Renovations engaged in a persistent course of wrongful conduct that financially harmed the Grahams—recklessly disregarding the Grahams’ rights under the contract. Giving proper deference to the jury's role, the evidence here is enough to impose statutory damages.”
This case confirms that residential construction projects can fall within the scope of Iowa’s Private Right of Action for Consumer Frauds Act, and that residential contractors can be liable under the Act for improper billing practices. However, the Court of Appeals will not have the last word in this case because the Iowa Supreme Court recently granted Bradshaw’s request for further review of the case. This means the Iowa Supreme Court will have the final say in this case.
for more information
Contact attorney Steve Marso at 515-288-6041.
iowa judicial branch court of appeals opinion website
Click this link to the opinion.