Controlling Moral Hazard in Limited Liability With the Consumer Sales Practices Act

The few states that have passed the Model Consumer Sales Practices Act have common definitions and case law regarding the definition of a “supplier.” This definition is broad enough to include managers of companies in limited liability entities in the states that have adopted the model act. The practicality is that business principals, owners, and managers can be held personally liable for deceptive practices under the state acts. But this is not a piercing of the corporate veil or of the limited-liability company. This Article is meant to accomplish four purposes: (1) exhibit the origins of the act, (2) show examples from three states that have adopted the model legislation in their interpretation of the term “supplier,” (3) contrast the differences between a claim for piercing the entity veil as opposed to an action for supplier liability under state laws that have adopted the model legislation, and (4) examine the full effects in an economic framework regarding moral hazard