Delaware Consumer Fraud Act Excludes Post-Transaction Communications; No Jury-Trial Right for CFA Administrative Penalties Absent a Common-Law Fraud Analogue
1. Introduction
This appeal arose from an administrative enforcement action brought by the Delaware Department of Justice Consumer Protection Unit (“DOJ”) against Blue Beach Bungalows DE, LLC (“Blue Beach”) after Blue Beach acquired (and, during the executory period, pursued acquisition of) Pine Haven, a manufactured home and recreational vehicle community in Lincoln, Delaware.
Residents complained that Blue Beach sent escalating and inconsistent letters characterizing residents as seasonal “licensees,” threatening police involvement, eviction, and disposal of property, and pressing residents to vacate under shifting deadlines. Following a four-day administrative hearing, a Hearing Officer found numerous statutory violations and imposed penalties exceeding $700,000, including findings under the Delaware Consumer Fraud Act (“CFA”), 6 Del. C. § 2513(a).
The key legal issues on appeal were:
- Scope: Does 6 Del. C. § 2513(a) reach deceptive communications occurring after the consumer’s underlying “sale, lease, receipt, or advertisement” transaction—i.e., post-transaction communications?
- Constitutionality: Does the CFA’s administrative enforcement scheme violate Article I, Section 4 of the Delaware Constitution (“Trial by jury shall be as heretofore”) by denying a jury trial for CFA violations resulting in civil penalties?
The DOJ also cross-appealed aspects of the Superior Court’s vacatur of certain penalties tied to specific letters and rent-collection findings, but those issues became practically entwined with the Court’s scope holding.
2. Summary of the Opinion
The Delaware Supreme Court announced two central holdings:
- CFA scope: The Court held that the plain language of 6 Del. C. § 2513(a) limits the CFA to deceptive conduct “in connection with” the “sale, lease, receipt, or advertisement” of merchandise and does not apply to post-transaction communications. The Court reversed the Superior Court’s contrary ruling and remanded for fact-finding on whether the challenged communications occurred after residents entered their occupancy arrangements.
- Jury-trial challenge rejected: The Court held the CFA is constitutional under Article I, Section 4 because, for statutory causes of action, a jury right attaches only if the statutory action is sufficiently analogous to a historic common-law cause of action tried to a jury. Section 2513(a) is not sufficiently analogous to common law fraud.
Cross-appeal: Because the DOJ’s cross-appeal concerned communications likely now outside the CFA’s reach under the Court’s scope ruling, the Court treated those issues as moot and declined to decide them.
3. Analysis
A. Precedents Cited
1) CFA scope and “post-transaction” limitation
The Court grounded its “no post-transaction CFA” holding in both statutory text and a line of Delaware decisions applying a temporal cut-off at contract formation/transaction consummation.
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Norman Gershman's Things to Wear, Inc. v. Mercedes-Benz of N. Am., Inc.
Treated as the foundational Delaware decision framing the CFA as limited to deceptive practices “in connection with the sale or advertisement” of merchandise and excluding “post-sale representations” not connected to inducing the sale. -
Price v. State Farm Mut. Auto. Ins. Co.
Reinforced that § 2513(a) protects consumers “deceived while purchasing,” not customers disputing post-purchase performance/benefits—supporting a transaction-based cut-off. -
Lee ex rel. B.L. v. Picture People, Inc.
Applied the same logic where alleged deception occurred after the photography transaction had effectively been consummated; post-sale conduct fell outside the CFA. -
Foraker v. Voshell
Treated misrepresentations during post-contract performance (construction) as outside the CFA because the “sale” occurred upon contract execution.
The Court also acknowledged additional Delaware Superior Court decisions consistent with the temporal limitation, including: Thomas v. Harford Mut. Ins. Co., Ayers v. Quillen, Dunfee v. Newark Shopping Ctr. Owner LLC, and Olga J. Nowak Irrevocable Tr. v. Voya Fin., Inc.
The Court confronted contrary federal district court language:
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Lony v. E.I. du Pont de Nemours & Co.
The Superior Court relied on Lony’s statement that “an after sale statement may be viewed as ‘in connection with the sale of merchandise.’” The Delaware Supreme Court declined to give Lony weight (non-binding and inconsistent with Delaware authority). -
Williams v. Progressive Direct Ins. Co.
Cited as a later District of Delaware case aligning with Delaware’s post-transaction limitation and not relying on Lony.
2) Statutory-interpretation framework
- Judicial Watch, Inc. v. Univ. of Delaware: used for the “plain language first” approach to legislative intent.
- Oceanport Indus., Inc. v. Wilmington Stevedores, Inc., 1 Del. C. § 303, and In re Fox Corp./Snap Inc.: invoked for contextual/holistic reading of statutory language (including how “in connection with” must be read with “sale, lease, receipt, or advertisement”).
3) Amendment adding “receipt” and non-abrogation principles
- The Court relied on interpretive canons and Delaware authority disfavoring implied abrogation of common law or settled constructions: PHL Variable Ins. Co. v. Price Dawe 2006 Ins. Tr., ex rel. Christiana Bank & Tr. Co. and Makin v. Mack, and cited Scalia & Garner, Reading Law.
- The Court read the 2021 synopsis (Del. H.B. 91 syn, 151 st Gen. Assem., 83 Del. Laws. ch. 85, § 2) as clarifying that “receipt” targets “free-to-user” models (e.g., social media) and does not expand the CFA to post-transaction performance disputes.
4) Delaware jury-trial jurisprudence under Article I, Section 4
- Claudio v. State: the centerpiece for understanding “Trial by jury shall be as heretofore” as tying Delaware’s jury right to the common-law right as preserved historically, and for explaining Delaware’s deliberate divergence from federal phrasing and approach.
- State v. Cahill, Bon Ayre Land, LLC v. Bon Ayre Cmty. Ass'n, City of Wilmington v. Janeve Co.: cited to articulate the “common-law analogue” framework for statutory causes of action (jury right only if sufficiently analogous to a historic jury-triable claim).
- Illustrations of statutory re-routing/modernization where jury issues were analyzed historically: Hopkins v. Justice of Peace Court No. 1, Allstate Ins. Co. v. Rossi Auto Body, Inc., and Money Store/Delaware, Inc. v. Kamara.
5) Federal cases addressed and distinguished
- SEC v. Jarkesy: Blue Beach’s main federal analogy; the Court rejected it as non-binding and inconsistent with Delaware’s “as heretofore” historical common-law orientation.
- The Opinion referenced federal Seventh Amendment framework decisions such as Gasperini v. Center for Humanities, Inc., Williams v. Florida, Curtis v. Loether, Granfinanciera, S.A. v. Nordberg, and Tull v. United States—primarily to show federal doctrine’s remedy-focused method differs from Delaware’s constitutional history.
6) CFA’s relationship to (but distinction from) common-law fraud
- State ex rel. Brady v. Publishers Clearing House: used to stress the CFA is not simply codified common-law fraud and lacks key fraud elements; also invoked for the CFA’s distinct historical lineage (FTC Act roots).
- Stephenson v. Capano Dev., Inc.: recognized that although the CFA must be interpreted in light of common-law concepts of fraud and deceit, that interpretive borrowing does not collapse the CFA into common-law fraud.
- DCV Holdings, Inc. v. ConAgra, Inc.: supplied the elements of common-law fraud used for comparison.
- Washington v. William H. Porter, Inc. and State ex rel. Brady v. Gardiner: used to confirm the CFA’s lowered burdens relative to common-law fraud.
B. Legal Reasoning
1) The Court’s rule on CFA scope: a transaction-based temporal boundary
The Court read 6 Del. C. § 2513(a) as cabining liability to deceptive conduct “in connection with” enumerated transaction types—“sale, lease, receipt, or advertisement.” It treated these as transaction-oriented events (or inducement efforts) that, by their nature and by statutory definition, occur before or at the point of contract formation/consummation—not after.
Several reasoning moves are central:
- Definitions drive scope: The CFA’s definitions of “sale,” “lease,” and “advertisement” focus on “offer,” “attempt,” and inducement—conceptually tied to getting the consumer into the transaction.
- “In connection with” is broad—but not limitless: The Court accepted that “in connection with” is expansive, yet held it must be read in context; it does not convert the CFA into a general regulator of all post-contract dealings.
- Leases are still formed at a point in time: The DOJ argued leases are “ongoing” relationships and should be treated differently than sales. The Court rejected this, reasoning that leases (like sales) are contracts formed at a discernible point, and many “sales” also create ongoing relationships (warranties, insurance, service performance) that Delaware cases still treat as beyond the CFA once the transaction is complete.
- “Receipt” does not expand to ongoing performance disputes: The Court relied on the 2021 amendment synopsis to conclude “receipt” was added to capture “no-charge” consumer transactions (e.g., social media) so they are not immune merely because there is no direct sale/lease consideration—without changing the temporal cut-off.
2) Remand posture: fact-finding needed because the legal rule changed
Because the Hearing Officer and Superior Court had treated post-transaction communications as within the CFA, they did not make explicit findings on whether each contested letter or rent-collection practice occurred before or after the formation of each resident’s relevant lease/license arrangement. Applying “substantial evidence” review constraints (not de novo factfinding), the Court remanded for the Hearing Officer to determine timing and then reassess CFA applicability accordingly.
3) The Court’s rule on jury trial: “as heretofore” requires a common-law analogue, not a remedy-first test
The Court reaffirmed Delaware’s historically anchored approach to Article I, Section 4:
- Delaware is not the Seventh Amendment: The Opinion, following Claudio v. State, emphasized Delaware’s conscious constitutional choice to preserve the jury right “as heretofore,” meaning as it existed at common law, rather than adopting the federal remedy-centered test.
- Statutory causes of action: For newly created statutory claims, a jury trial is constitutionally required only if the statute is sufficiently analogous to a historic jury-triable common-law action.
Applying that framework, the Court held § 2513(a) is not sufficiently analogous to common-law fraud because it materially departs from fraud’s elements and purpose. In particular, common-law fraud (as stated in DCV Holdings, Inc. v. ConAgra, Inc.) requires scienter, intent to induce, justifiable reliance, and injury—elements “conspicuously missing” from the CFA as noted in State ex rel. Brady v. Publishers Clearing House. The CFA is a consumer-protection statute with roots in FTC-style unfair practices regulation; it is not a mere codification or modernization of common-law fraud akin to the statutes in Hopkins v. Justice of Peace Court No. 1 or Allstate Ins. Co. v. Rossi Auto Body, Inc..
The Court also rejected Blue Beach’s attempt to use an “as-applied” theory (based on “willful” penalties and alleged practical overlap with fraud elements) to force a jury right. Even assuming “willfulness” imports a knowledge component, the Court concluded the DOJ’s CFA posture still did not converge with the full architecture of common-law fraud, particularly regarding reliance and damages.
C. Impact
1) Consumer protection enforcement: a significant narrowing of CFA reach
The headline impact is doctrinal: Delaware’s CFA is now definitively limited to pre-transaction and transaction-stage deception, excluding deception in post-formation performance, termination, or dispute communications (unless those communications themselves are part of a new “sale, lease, receipt, or advertisement” inducement event).
Practically, this:
- reduces CFA exposure for businesses for post-contract communications (collection disputes, performance disputes, termination notices) unless the communications can be tied to inducing a new transaction; and
- channels many consumer controversies into other doctrines (contract, common-law fraud where elements are met, specific landlord-tenant statutes, insurance regulation, etc.).
2) Litigation strategy: timing becomes a core factual battleground
On remand and in future cases, parties will likely litigate:
- the precise moment a “sale” or “lease” is formed (especially in informal, undocumented arrangements like Pine Haven’s pre-sale practices);
- whether a later communication is actually an inducement to enter a new agreement (renewal, modification, settlement) rather than merely post-transaction performance or termination; and
- how the “receipt” category applies to modern “free” services without morphing into an “ongoing receipt” theory.
3) Constitutional stability of administrative CFA enforcement in Delaware
The Court’s constitutional holding fortifies Delaware’s administrative enforcement model against jury-trial attacks premised on federal cases like SEC v. Jarkesy. The Opinion underscores that Delaware’s Article I, Section 4 is historically keyed to common-law analogues, not simply to whether monetary penalties look “legal” under Seventh Amendment doctrine.
4. Complex Concepts Simplified
- “Post-transaction communications”: Statements or conduct occurring after the consumer has already entered the relevant deal (e.g., after the lease is formed). The Court held these are generally outside the CFA.
- “In connection with”: Broad linkage language, but the Court held it still must connect to one of the enumerated transaction types (sale/lease/receipt/advertisement), not merely any ongoing relationship.
- “Receipt” amendment: Added so businesses providing “free” goods/services to consumers (funded indirectly, like by advertising) can still commit consumer fraud during inducement/signup; it does not mean every later service interaction is covered.
- “Substantial evidence” review: On appeal from administrative decisions, courts do not freely re-decide facts; they check whether enough evidence supports the agency’s factual findings. That constraint drove remand for fact-finding on timing.
- Article I, Section 4 (“as heretofore”): Delaware’s jury-trial right is anchored to what historically received a jury at common law. New statutory claims get a jury only if they sufficiently resemble an old common-law jury claim.
- “Common-law analogue” test: The court looks for the closest historic cause of action (here, common-law fraud) and asks whether the statute is close enough in substance and purpose to trigger the same jury entitlement.
5. Conclusion
This Opinion establishes two consequential Delaware rules.
- Scope rule: The Delaware Consumer Fraud Act, 6 Del. C. § 2513(a), does not apply to post-transaction communications. CFA liability is confined to deception tied to inducing or consummating a “sale, lease, receipt, or advertisement.”
- Constitutional rule: The CFA’s administrative enforcement regime does not violate Article I, Section 4 because § 2513(a) is not sufficiently analogous to common-law fraud to require a jury trial “as heretofore.”
Going forward, Delaware CFA cases will turn more sharply on transaction timing and whether disputed communications are part of forming a new consumer transaction, while constitutional challenges to administrative CFA penalties will face the reinforced barrier that Delaware’s jury-trial right is tethered to historical common-law analogues—not federal, remedy-driven Seventh Amendment doctrine.
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