0

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.”

Leave a Reply