by: Peter J. Gallagher (@pjgallagher) (LinkedIn)
I know the Law Division decision in Ferguson v. JONAH (Jews Offering New Alternatives For Healing f/k/a Jews Offering New Alternatives to Homosexuality) is an old one — it was decided way back on June 6, 2014 — but it was just approved for publication and it is worth revisiting, both because of the interesting subject matter and because of the court's analysis of an uncertain and ever-evolving area of consumer fraud law.
In Ferguson, plaintiffs were individuals who received services from JONAH, which the court described as a "nonprofit corporation dedicated to educating the Jewish community about the social, cultural, and emotional factors that lead to same-sex attractions." JONAH provided "conversion therapy and counseling services" to plaintiffs that were supposed to "change plaintiffs' sexual orientation from homosexual to heterosexual." The court described, in some detail, the "various individual and group activities" offered by JONAH. It also observed that JONAH typically charged $100 for individual sessions and $60 for group sessions, and that the total costs for these services could exceed $10,000 per year depending on the individual.
In Ferguson, plaintiffs alleged that JONAH's business practices violated the New Jersey Consumer Fraud Act. Plaintiffs alleged that JONAH engaged in "unconscionable commercial practice, deception, fraud, false pretense, false promise, and misrepresentation by claiming that homosexuality [was] a mental disorder and, in the face of empirical evidence to the contrary, that same-sex attractions [could] be reduced or eliminated through therapy." They sued for damages related to (1) the cost of JONAH's services and (2) money spent on reparative therapy necessitated by JONAH's services. JONAH moved for partial summary judgment, arguing that the second category of damages was not recoverable under the Consumer Fraud Act.
The court began its decision by identifying the three elements needed to sustain a cause of action under the Consumer Fraud Act: (1) unlawful conduct by defendant; (2) ascertainable loss by plaintiff; and (3) a causal relationship between the two. JONAH did not challenge any of the alleged unlawful conduct cited by plaintiffs. Instead, it argued that the costs of plaintiffs' reparative treatment was not an "ascertainable loss" under the Consumer Fraud Act. Unfortunately for JONAH, the court disagreed.
The Consumer Fraud Act itself offers little guidance on what constitutes ascertainable loss. In Ferguson, the court observed that, to demonstrate ascertainable loss, a plaintiff must "present sufficient credible evidence from which a factfinder can find or infer that the plaintiff suffered an actual loss," and this actual loss must be "quantifiable or measurable," not "hypothetical or illusory." That being said, the court noted that ascertainable loss is not "limited to an out-of-pocket loss to the plaintiff."
JONAH characterized plaintiffs' reparative treatment costs as damages arising out of emotional distress. It argued that they were, therefore, "non-economic and, thus, not an ascertainable loss." In support of this argument, JONAH relied on Gupta v. Asha Enterprises LLC, a case in which several Hindu vegetarians sued a restaurant that inadvertently served them meat-filled samosas. Plaintiffs in that case claimed their ascertainable loss was the cost of a trip to India to undergo a purification ritual along the Ganges River. The Appellate Division rejected this argument, holding that "the cost of cure for an alleged spiritual injury cannot be categorized as either a loss of money or property," particularly because the restaurant provided plaintiffs with vegetarian samosas free of charge.
The Court rejected JONAH's argument and its reliance on the Gupta decision. It held that Gupta was distinguishable because "the alleged unlawful conduct in respect of the merchandise offered in that case was unrelated to mental or emotional counseling." Stated differently, the emotional distress alleged in Gupta was "a step removed from the product or services rendered." The court held that this was not the case in Ferguson:
Just as the purchaser of a home is a consumer of a product, the recipient of conversion therapy is a consumer of services. Because, assuming the facts in the light most favorable to Plaintiffs, JONAH’s conversion therapy damaged the individuals it was meant “to cure,” any subsequent costs of repairing plaintiffs’ mental or emotional health are the direct and proximate result of JONAH’s actions and, hence, should be borne by JONAH, provided of course that plaintiffs tender evidence both competent and sufficient to establish such damages . . . . Accordingly, the cost of reparative therapy caused by the alleged CFA violations may properly constitute an ascertainable loss under the CFA.
Accordingly, the court denied JONAH's motion for summary judgment and allowed plaintiffs' Consumer Fraud Act claim to proceed. While the unique facts of Ferguson are unlikely to recur, the court's decision is nonetheless instructive on the issue of ascertainable loss when the damages alleged are not obviously economic in nature.
JONAH's summary judgment motion denied, Ferguson eventually proceeded to trial and, almost one year after the court denied JONAH's summary judgment motion, a jury entered a verdict in plaintiffs' favor for $72,000. Later that year, as part of a settlement, JONAH agreed to shut down, and its founder agreed not to engage in any form of conversion therapy commerce in New Jersey.