Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Washer dryer (pd)New Jersey's Consumer Fraud Act (CFA) has long been a favorite of  plaintiff's attorneys, but there is another consumer protection statute that is rapidly gaining on the CFA in popularity — the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) (or, as it is sometimes awkwardly pronounced, "ta-KWA-na"). Although it has been around for thirty years, case law interpreting the TCCWNA is still in its infancy because the act has only recently become a common claim in putative consumer class actions. In a new, unpublished decision, Matijakovich v. P.C. Richard & Son, the U.S. District Court for the District of New Jersey, addressed one unsettled aspect of the still developing body of case law surrounding the TCCWNA.

First, a brief primer on the TCCWNA, which provides, in part:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

Its purpose is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract; and (4) that the consumer contract contained a provision that violated a legal right of the consumer or a responsibility of the seller. Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, in addition to reasonable attorneys' fees and court costs.

Continue reading “Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute”

A Rare Narrowing Of The Consumer Fraud Act’s Scope: Medical Malpractice Insurance Not Covered

 by:  Peter J. Gallagher (@pjsgallagher)

It is not every day that a New Jersey court limits the scope of the New Jersey Consumer Fraud Act (“CFA”), so when one does, it is worth writing about. Anyone who litigates in New Jersey knows about the CFA and, depending on whether you are on the plaintiff’s side or the defendant’s side, either loves it or hates it. (I am mostly on the defendant’s side, but occasionally find myself representing a plaintiff, so my relationship with the CFA is “complicated.”) Because it is remedial legislation, the CFA is liberally construed to afford the greatest protection to consumers. This philosophy has led courts to apply the CFA (and its treble damages and prevailing party’s attorney fees) to a seemingly ever growing, and very rarely contracting, variety of disputes. In fact, many years ago, the New Jersey Supreme Court observed that: “The history of the Act is one of constant expansion of consumer protection.”

With this in mind, we turn to the Law Division’s published decision in Khan v. Conventus Inter-Insurance Exchange. That case was a putative class action in which plaintiff, a doctor, alleged that defendant violated the CFA in connection with the sale of medical malpractice insurance and the administration of the policy after it was purchased. Plaintiff purchased a policy from defendant and, as part of her initial membership, was required to make a one-time contribution, equal to the first year’s premium, to defendant’s surplus fund. (Defendant is not a traditional insurance carrier, but is instead a “non-profit physician member-owned risk sharing exchange.”) Plaintiff elected to make this contribution in installments over a ten-month period, with the understanding that if she cancelled her policy before the final payment was made, she would still be responsible for the full surplus fund contribution. Plaintiff eventually cancelled her policy before the ten-month period passed and defendant demanded that she immediately pay her entire surplus fund contribution rather than allowing her to pay it off in installments as originally agreed upon by the parties. Plaintiff sued alleging that this attempt to accelerate the surplus fund payment was a breach of contract and a violation of the CFA. She sought to bring her claims as a class action.

Before addressing whether plaintiff could sustain a class action and be appointed class representative, the court first had to decide whether the CFA applied to “transactions involving the purchase and sale of medical malpractice insurance.” Because the court held that it did not, it never had to reach the class certification issues.

 

 

Continue reading “A Rare Narrowing Of The Consumer Fraud Act’s Scope: Medical Malpractice Insurance Not Covered”

Another Reminder That Even When You Win You Still Lose Under The New Jersey Consumer Fraud Act

by:  Peter J. Gallagher

The Appellate Division issued an unpublished decision today that again emphasizes the power (some might say, inequity) of the New Jersey Consumer Fraud Act.  In Logatto v. Lipsky, plaintiffs hired defendant to build an addition on their home and perform other renovations.  Although defendant prepared a written proposal with cost estimates, he never prepared a written contract.  After the project was 90% complete, and plaintiffs had paid him $247,500, defendant notified plaintiffs that actual expenses exceeded the proposed costs, and therefore he required an additional $78,469.37 to complete the project.  Plaintiffs refused and, when the parties could not come to a resolution on the issue, defendant left the job.  Plaintiffs then sued defendant under the Consumer Fraud Act for the costs of completion of the project, and defendant counterclaimed for $50,000 in unpaid costs.  Both parties moved for summary judgment, but both motions were denied.

The case was tried to a jury.  After plaintiffs put on their evidence, they moved for judgment on liability in connection with their Consumer Fraud Act Claims.  The trial court granted the motion, finding that there were technical violations of the Act (failure to have a signed contract and change orders).  However, the trial court left the question of whether plaintiffs had suffered an "ascertainable loss," a requirement under the Consumer Fraud Act, to the jury.  The jury ultimately returned a verdict in favor of defendant, finding that plaintiffs did not suffer any ascertainable loss.  After the verdict, however, plaintiffs moved for, among other things, fees and costs under the Consumer Fraud Act.  The trial court denied the motion, but the Appellate Division reversed the trial court and remanded the issue back to the trial court for disposition of the fee motion. 

You may be asking yourself – how is this possible?  How can a defendant prevail at trial but still be responsible for the plaintiffs' legal fees?  What happened to the "American Rule"?  The answer to all of these questions is, the New Jersey Consumer Fraud Act.  Under the Act, as it has been interpreted by the New Jersey Supreme Court — in cases like Cox v. Sears Roebuck & Co. and Weinberg v. Sprint Corp. — plaintiffs can recover costs and fees if they prove that a defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss.  While a plaintiff cannot recover treble damages under the Act without an ascertainable loss, it can still recover its costs and fees.  What this means is that if a plaintiff survives summary judgment and presents a prima facie case of ascertainable loss, it will be able to recover its costs and fees even if, as in the Logatto case, it ultimately loses on the merits at trial. 

This case, like seemingly every other decision handed down in connection with the Consumer Fraud Act, should be a cautionary tale for any business or entities that sell products or provide services that are covered by the Act.

 

When Do Condominium Associations Have Standing To Sue Under The Consumer Fraud Act?

by:  Peter J. Gallagher

In a recent decision, the Appellate Division restated and clarified the rules regarding when a condominium association has standing to sue a developer.  In Belmont Condominium Association v. Geibel, an association sued the sponsor/developer/contractor of the Belmont, a seven-story, thirty-four unit condominium in Hoboken, asserting common law fraud and negligence claims along with statutory claims under both the New Jersey Consumer Fraud Act (“CFA”) and The Planned Real Estate Development Full Disclosure Act (“PREDFDA”).  The claims arose out of the allegedly faulty construction of the Belmont, and certain pre-construction statements from the developer, including that it had “overseen the building and renovation of Over 400 Single Family & Condominium Homes.”  (Although largely irrelevant to the issues addressed by the Appellate Division, it turned out that the Belmont was actually the first building that the developer’s owner and general manager had ever constructed.)  As it relates to the faulty construction, the association alleged that the building was “plagued by water leaks” almost immediately after construction was complete.  These leaks impacted both the individual units and the common elements.  After years of repairs that did not correct the problem, the association sued the developer.  The association argued that construction defects were the cause of the water filtration, while the developer blamed the problems on poor and inadequate maintenance.        

Among other things, the developer in Belmont argued that the association lacked standing to bring claims under the CFA.  At the outset, the Appellate Division observed that New Jersey courts take a liberal approach to standing, and  have historically given wide recognition to suits by condominium associations.  It then analyzed the language of the New Jersey Condominium Act (“NJCA”) to determine whether the association had standing.  As it related to claims arising out of damage to the common elements, the Appellate Division held that the association had standing to sue because the NJCA vests condominium associations with the “exclusive right”(emphasis in original) to sue a developer for defects pertaining to the common elements, and generally prohibits individual unit owners from doing so. 

The Appellate Division rejected the developer’s argument that the association lacked standing because it could not demonstrate reliance by the original purchasers on any of the alleged misstatements.  On this point, the Appellate Division noted that reliance is not an element required to sustain a claim under the CFA.  The Appellate Division also rejected the developer’s argument that the association could only recover damages for the unit owners who actually sustained damage as a result of the developer’s alleged misrepresentations.  The Appellate Division held that because the NJCA allows associations to sue for damages to the common areas sustained by “any or all” of the unit owners, it was entitled to recover all of the damages necessary to repair any damages, not a prorated amount based on the number of unit owners who identified damages. 

However, the Appellate Division held that the association lacked standing to sue for damages to the individual units because the NJCA only vests it with authority to sue or be sued in connection with damages to common elements.  In Belmont, the damages associated with individual units all related to the windows, which the Appellate Division held were “personal to the unit owners,” and therefore not part of the Belmont’s common elements.  On this point, the Appellate Division reviewed the definition of common elements contained in both the NJCA and the master deed for the Belmont, neither of which identified windows as common elements.  Once the Appellate Division concluded that the windows were unit elements, not common elements, its decision on standing was a simple one because it had already concluded that an association has standing to sue for damage to common elements, but lacks standing to sue for unit elements.   

Digging Behind The Veil: New Jersey Supreme Court Decision Threatens To Impose Increased Liability On Home Improvement Contractors

Eric L. Probst represented several non-profit home improvement associations as amicus curiae on an important issue of first impression before the New Jersey Supreme Court.  The question before the Court was whether a homeowner has to pierce the corporate veil to hold individual shareholders of home improvement contractors personally liable for violations of New Jersey’s Home Improvement Practices regulations under the State’s Consumer Fraud Act.  In his article,  New Jersey Supreme Court Hears Oral Argument On Whether To Impose Personal Liability Against Corporate Shareholders Of Home Improvement Company For Violating New Jersey’s Home Improvement Practices Regulations, published in Community Builders and Remodelers Association newsletter, Eric reviews the oral argument from the case, Allen v. V and A Brothers, Inc., and predicts that the Supreme Court will likely uphold the Appellate Division's decision imposing personal liability against individual shareholders.  Eric further predicts that such a decision will cause an increase in lawsuits against corporate shareholders for violations of the CFA and HIP.  Stay tuned to the blog for more information about the Supreme Court's decision in this case, which should be handed down in the next 60-90 days.