June 5, 2018
By Bob Incollingo
The New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -109, punishes deception by advertisers or sellers of goods and services with judgments for three times the money or property lost by their victims, and forces them to pay the injured parties’ attorneys’ fees and litigation costs. Most business people are well aware of this law, and steer wide of situations where their business could be the defendant in such a case. What most business people don’t know is that the New Jersey Consumer Fraud Act (CFA) doesn’t limit consumer rights to natural people, but in commercial transactions involving merchandise or services that are offered to the general public, it provides those rights to corporations and limited liability companies as well.
While the term “consumer” has historically meant an individual purchaser, the CFA has been interpreted to afford protection to corporate and commercial entities who purchase goods and services for use in their business operations. See Hundred East Credit Corp. v. Eric Schuster, 212 N.J.Super. 350, 515 A.2d 246 (App.Div.), certif. denied, 107 N.J. 60, 526 A.2d 146 (1986); Coastal Group, Inc. v. Dryvit Systems, Inc., 274 N.J.Super. 171, 643 A.2d 649 (App.Div.1994).
The rule was set down in the case of BOC Group, Inc. v. Lummus Crest, Inc., 251 N.J.Super. 271 , 277, 597 A.2d 1109 (Law Div. 1990), that protections under the CFA extend to corporate plaintiffs “in a consumer oriented situation.” Just what is and what is not a consumer oriented situation is to be analyzed and determined by the courts on a case by case basis, and the law on this issue continues to evolve. See, for example, All the Way Towing, LLC v. Bucks County International, Inc., 452 N.J. Super. 565 (App. Div. 2018), certification to the NJ Supreme Court granted 05/04/2018.
The nature of the transaction rather than the nature of the buyer is key, so that where goods or services are purchased for resale, case law indicates the CFA will not apply. Under one relevant line of cases, a wholesale buyer is not considered a consumer, and the purchase is not a consumer transaction. Arc Networks, Inc. v. Gold Phone Card Co., Inc., 333 N.J.Super. 587, 590, 756 A.2d 636 (Law Div. 2000). Other cases focus on the type of goods or services sold; if the transaction involves the purchase of non-consumer goods such as, for example, a commercial restaurant franchise, an insurance agency contract, or an industrial plant, there will be no trigger of liability under the CFA.
On the other hand, a business that buys a common consumer product or service for its own use may very well be considered a “consumer” under the CFA, and the sale found to be the type of “consumer transaction” covered by the statute. In my opinion, the range of situations when a business can sue for consumer fraud appears to be expanding. When a corporation or limited liability company can show that it was relatively unsophisticated, with less industry knowledge than the seller, and was victimized after being lured into a purchase through deceptive selling or advertising practices, liability under the CFA is warranted, along with fees, costs, and a treble damage award.
South Jersey construction lawyer Robert J. Incollingo is a Director of the Camden Business Association, and practices construction law, business law, and real estate law in Gloucester County, Burlington County, and Camden County, New Jersey from his office in Cherry Hill. RJILAW.com