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Supreme Court of New Jersey Holds the Products Liability Act Does Not Bar a Consumer Fraud Act Claim Alleging Express Misrepresentations

The Supreme Court of New Jersey recently considered “whether a Consumer Fraud Act (“CFA”) claim can be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act (“PLA”).”  Stated differently, can a CFA claim be maintained where a PLA claim could also be asserted?  In Sun Chemical Corp. v. Fike Corp., 243 N.J. 319 (2020), the Court held that where a CFA claim alleges express misrepresentations, such a claim may be asserted notwithstanding the plaintiff’s ability to assert a separate claim under the PLA.

In 2012, Sun Chemical Corporation (“Sun”), an ink manufacturing business, installed a dust collection system at its facility.  Sun then purchased an explosion isolation and suppression system (the “Suppression System”) from Fike Corporation and Suppression Systems Incorporated (collectively, “Fike”) to prevent and contain potential explosions in the dust collection system.  On the first day the Suppression System was operational, a fire occurred in the dust collection system and an alarm on the Suppression System’s control panel activated, but was not audible.  An explosion sent a fireball through the ducts of the dust collection system, injuring seven Sun employees and damaging Sun’s facility.

Sun brought a single-count complaint under the CFA alleging that Fike made oral and written misrepresentations about, inter alia, the ability of the Suppression System to prevent explosions.  The District Court granted Fike’s summary judgment motion, finding that Sun’s claims would be governed by the PLA, and that it could not avoid the requirements of the PLA by crafting its claims under the CFA.  On appeal, the Third Circuit determined there was no New Jersey case law which sufficiently addressed this issue.  As such, it certified its questions to the Supreme Court of New Jersey, which reformulated and accepted same.

The Supreme Court noted that the CFA explicitly states “the rights, remedies and prohibitions” contained therein are “in addition to and cumulative of any other right, remedy or prohibition accorded by the common law or statutes of this State.”  N.J.S.A. 56:8-2.13.  Citing its prior decisions in Lemelledo v. Beneficial Management Corp. of America, 150 N.J. 255 (1997) and Real v. Radir Wheels, Inc., 198 N.J. 511 (2009), the Court stated there is a “presumption that the CFA applies to a covered activity,” which presumption can be overcome only when a court is satisfied “that a direct and unavoidable conflict exists between application of the CFA and application of the other regulatory scheme or schemes.”

Beginning its analysis with the CFA, the Court noted that Act prohibits deceptive, fraudulent, misleading, and other unconscionable commercial practices in connection with the sale of any merchandise or real estate.  In contrast, the PLA imposes liability upon manufacturers or sellers for a product’s manufacturing, warning, or design defects.  Under the PLA, a claimant can recover damages against the manufacturer or seller where the product causing the harm was not reasonably fit, suitable or safe for its intended purpose.

Based on the above analysis, the Court found the CFA and PLA are intended to govern different conduct and provide different remedies for such conduct.  The PLA governs the legal universe of products liability actions, while the CFA applies to fraud and misrepresentation and provides unique remedies intended to root out such conduct.  As such, the Court concluded there is no direct and unavoidable conflict between the two statutes.

With regard to the circumstances under which CFA and PLA claims may be simultaneously asserted, the Court noted that if a claim is premised upon a product’s manufacturing, warning, or design defect, that claim must be brought under the PLA, with damages limited to those available under that statute; CFA claims for the same conduct are precluded.  However, nothing prohibits a claimant from seeking relief under the CFA for deceptive, fraudulent, misleading, and other unconscionable commercial practices in the sale of the product.  Stated differently, if a claim is based on deceptive, fraudulent, misleading, and other unconscionable commercial practices, it is not covered by the PLA and may be brought as a separate CFA claim.  Under those circumstances, PLA and CFA claims may proceed in separate counts of the same suit, alleging different theories of liability and seeking dissimilar damages.

Importantly, the nature of the plaintiff’s damages does not determine whether the cause of action falls under the CFA or PLA.  Rather, it is the theory of liability underlying the claim that determines the recoverable damages.  The Court thus held that “a CFA claim alleging express misrepresentations — deceptive, fraudulent, misleading, and other unconscionable commercial practices — may be brought in the same action as a PLA claim premised upon product manufacturing, warning, or design defects.  In other words, the PLA will not bar a CFA claim alleging express or affirmative misrepresentations.”

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Borough’s Alleged Premature Enforcement of a CO Ordinance Does Not Constitute a Substantive Due Process Violation

By: Voris M. Tejada, Jr., Esq.

In Reed v. Scheffler, 2018 U.S. Dist. LEXIS 71032 (D.N.J. April 27, 2018), Plaintiff sued the Borough of Palmyra (the “Borough”) and its Housing Official alleging, inter alia, violations of substantive due process as a result of the enforcement of certain ordinances in connection with the sale of Plaintiff’s mother’s home.  Prior to the sale, Plaintiff contacted the Borough to inquire as to whether any inspections were required before the home could be sold.  Plaintiff noted he had a buyer who was interested in purchasing the property “as is,” and who was interested in a “quick sale.”  The Borough’s Housing Official advised Plaintiff, consistent with an ordinance previously enacted by the Borough, that an inspection and issuance of a certificate of occupancy (“CO”) were required prior to the sale of any residence in the Borough.

Following Plaintiff’s contact with the Borough, an inspection of Plaintiff’s mother’s home was scheduled.  The inspection revealed 33 code violations at the property, which violations were required to be abated prior to the issuance of a CO.  While Plaintiff abated the violations, he alleged he spent tens of thousands of dollars in doing so, and also lost his buyer due to the resulting delay.  Plaintiff ultimately sold his mother’s home at an increased price to a different buyer.

Following the sale of the home, Plaintiff began searching the Borough’s website for additional information concerning the relevant ordinance.  During his search, Plaintiff came across a post indicating enforcement of the relevant ordinance had been delayed to a date two months after his initial communication with the Borough.  Plaintiff then initiated suit, alleging, inter alia, violations of substantive due process as a result of (1) the Borough’s enforcement of an ordinance which Plaintiff claimed was not then in effect; (2) the Housing Official’s failure to inform Plaintiff that under the terms of the ordinance, a CO was only required prior to the reoccupation of the home, rather than the mere sale of the home; and (3) the Housing Official’s failure to inform Plaintiff about the option of obtaining a temporary CO, which, under certain circumstances, would have allowed the originally planned sale to go forward while the code violations were being abated.  The Borough and its Housing Official were represented by Capehart Scatchard in the ensuing litigation.

The Court noted that to prove a substantive due process claim, a plaintiff must prove (1) that he was deprived of a protected property interest; and (2) that a state actor acted with a degree of culpability which shocks the conscience.  Addressing Plaintiff’s first argument, the Court found that the relevant ordinance was in effect at all relevant times, as a post on the Borough’s website was not sufficient to override the formal process by which the ordinance had been adopted, and by which its effective date had been set.  Moreover, the Borough had enforced the relevant ordinance against other homeowners during the relevant time period.  The Court further noted that even if the enforcement of the ordinance was on hold when Plaintiff initially sought to sell the property, his claim would still fail, as the Borough’s action was not sufficiently egregious to be “conscious-shocking.”  It was undisputed that the Housing Official was never informed of any delay in the enforcement of the ordinance, and thus acted in good faith in enforcing same.  In addition, the ordinance served an important public purpose in promoting decent housing to all Borough residents.  Under these circumstances, Plaintiff’s first due process argument was without merit.

Addressing Plaintiff’s second argument, the Court noted Plaintiff provided no proof that the original buyer would have proceed with the sale without a CO, thereby agreeing to undertake the repairs of the 33 code violations himself after the sale and prior to moving in.  Indeed, the only detail Plaintiff provided about the falling-through of the initial sale was the buyer’s statement that he just was not interested in the property anymore.  Because there was no evidence the original buyer would have proceed with the sale without a CO, the Court rejected Plaintiff’s second argument.

Addressing Plaintiff’s third and final argument, the Court found there was no evidence the Housing Official had an independent duty to inform Plaintiff about the possibility of obtaining a temporary CO where Plaintiff did not inquire about same.  Moreover, there was no evidence that a temporary CO would have saved the initial sale of the home.  The ordinance made clear that the issuance of a temporary CO was a matter of discretion which could only be exercised under certain circumstances.  In addition, Plaintiff again failed to provide any evidence that the initial buyer would have consummated the sale with a temporary CO, assumed responsibility for abating the 33 code violations, and submitted to a re-inspection.  Plaintiff’s claim that the Housing Official failed to inform him about the option of obtaining a temporary CO thus did not rise to the level of a substantive due process violation.  Having rejected each of Plaintiff’s three arguments, the Court granted summary judgment in favor of Defendants.