Consumer Fraud Act – “A Dog with Bite”

All business which interact with “consumers” must pay special attention to the bite of the “Consumer Fraud Act.” The Consumer Fraud Act, NJSA 56.8-1 to 20, is a civil statute and is remedial legislation which means that it warrants liberal construction by the courts. The standard of proof is by a preponderance of the evidence, the usual standard of proof in a civil case.

The statute reads, in part, at NJSA 56:8-2; in connection with sale or advertisement of merchandise or real estate as unlawful practice:

The act use or employment by any person of an unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has, in fact, been misled, deceived or damaged thereby, is declared to be an unlawful practice; provided, however, that nothing herein contained shall apply to the owner or publisher of newspapers, magazines, publications or printed matter wherein such advertisement appears, or to the owner or operator of a radio or television station which disseminates such advertisement when the owner, publisher, or operator has no knowledge of the intent, design or purpose of the advertiser.

The bite in the statute comes in the form of the recovery of damages once a consumer fraud is established. NJSA 56:8-19 indicates, “Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefore in any court of competent jurisdiction. In any action under this section, the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. In all actions under this section, including those brought by the Attorney General, the court shall also award reasonable attorneys’ fees, filing fees and reasonable costs of suit.”

Needless to say, a small civil fraud case can become very expensive once you add three times the damages plus attorneys fees and costs of suit.

Pursuant to NJSA 56:8-20, anyone presenting a claim under the Consumer Fraud Act shall mail a copy of the pleading to the Attorney General within ten (10) days after filing such pleading with the court. Upon application to the court, the Attorney General shall be permitted to intervene or appear in any statutes appropriate to the matter. This underscores the remedial nature of the legislation. The Attorney General will likely only get involved in matters thought to be of wide public interest.

The Consumer Fraud Act, because of its severely punitive nature, has been used and argued in a wide range of cases involving construction contracts, insurances sales and class actions involving document fees in connection with auto sales (the court rejected its application in Gross v. TJH Automotive Co., 380 N.J. Super. 176 (App. Div. 2005).

The question for those doing business with the consuming public on a daily basis becomes how do I avoid being the defendant in a consumer fraud case subject to treble damages, plaintiff attorney fees and a host of additional other issues such as time, defense fees and a lot of stress. The answer seems to be disclose, disclose, disclose! Closely examine and follow all consumer regulations. Have clients sign off on all changes made to repair orders. Utilize the internet and other high and low tech devices to make sure all repairs are authorized and customers are informed of the use of different materials or parts as may be mandated by insurance companies. Make sure to print out the correspondence to keep a clear record of communications and authorizations so that you can provide a road map of all your actions.

Bear in mind that the Consumer Fraud Act does not necessitate actual damages to inflict a real hurt on a defendant who is found guilty of violating its provisions. Even if no actual damages are found to exist, the plaintiff may well be entitled to costs of suit, attorney fees and filing fees. Those costs can add up very quickly. It is unlikely that any type of insurance will cover a business for a Consumer Fraud Act violation, so be forewarned. An ounce of prevention is clearly worth a pound of cure.