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Now more than ever, consumer protection is important. As a result of the Covid-19 pandemic, we see new products on our shelves, promising safe disinfection for hands and surfaces as one example. However, what if the chemicals in that product were harmful? What if the product does not disinfect as advertised? The consequences could be dire.
In New Jersey, the Consumer Fraud Act (“CFA”), N.J.S.A. 56:8-1 to -224, and Products Liability Act (“PLA”), N.J.S.A. 2A:58C-1 to -11, are two statutory schemes designed to protect consumers from unconscionable business practices, such as false advertisement, and defective products and warnings, respectively. Until recently, case law has not been fully developed to address a scenario where a consumer invokes both statutes. In other words, the consumer is harmed by a defective product and that product was sold to the consumer under false pretense? The New Jersey Supreme Court determined that a consumer may invoke both statutes in order to seek damages.
In Sun Chemical Corporation v. Fike Corporation, the New Jersey Supreme Court ruled on July 29 that a CFA claim may be brought in the same action as a PLA claim. The product at issue was a suppression system designed to prevent explosions in Sun Chemical’s dust collection systems. On the first day Sun Chemicals suppression system was in operation, a fire broke out triggering an alarm in the system that was inaudible. Consequently, an explosion occurring injuring several workers.
Sun Chemical sued Fike Corporation and Suppression Systems Incorporated under a Single CFA claim. The CFA is a statute that can be broadly applied to actions surrounding consumer fraud and improper marketing. N.J.S.A. 56:8-2 of the CFA states as follows:
The act, use or employment by any person of any 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.
Sun Chemical alleged that the defendants made misrepresentations as to the following: (1) the Suppression System would prevent explosions; (2) the Suppression System would have an audible alarm; (3) the Suppression System complied with industry standards; and (4) the system had never failed.
Defendants moved for summary judgment, arguing that the PLA instead applies to those claims. The PLA is more limited in scope and remedy: it allows for suits by “claimants” for “harm” as defined in the statute. Furthermore, damages under the PLA are limited to those traditionally available in tort actions, whereas the CFA allows plaintiffs to collect treble damages, costs and attorneys’ fees. The District Court granted defendants’ motion, finding that “a plaintiff may not avoid the requirements of the PLA by artfully crafting its claims under the CFA.”
Sun Chemical appealed, and the Third Circuit certified the following question to the court: whether “a Consumer Fraud Act claim [can] be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act.” The Supreme Court concluded that a CFA claim may be brought in the same action as a PLA claim premised upon manufacturing, warning or design defects.
The Supreme Court’s decision benefits Sun Chemical, since Sun Chemical is able to seek damages limited by the PLA as well as broad damages afforded by the CFA. For example, Sun Chemical may seek damages to the suppression system itself, which is outside the scope of loss defined under the PLA, as well as damages for lost workhours of the injured workers and the workers compensation benefits paid to them.
The Supreme Court cited the background, purpose and language of the CFA and PLA to support its decision. The CFA was passed in 1960 and its history has been described as “one of constant expansion of consumer protection.” Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604 (1997). Its expansive remedies are provided “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.
The PLA was enacted in 1987 with the intention of protecting users from harm caused by defective products. Specifically, liability is imposed upon manufacturers for manufacturing defects, warning defects, and design defects.” Under N.J.S.A. 2A:58C-1(b)(2), damages under the PLA are limited to the following:
(a) physical damage to property, other than to the product itself; (b) personal physical illness, injury or death; (c) pain and suffering, mental anguish or emotional harm; and (d) any loss of consortium or services or other loss deriving from any type of harm described in subparagraphs (a) through (c) of this paragraph.
After analysis of the statutes, the Supreme Court concluded that “the CFA and PLA are intended to govern different conduct and to provide different remedies” and thus do not conflict with one another. A distinguishing case is Sinclair v. Merck & Co., 195 N.J. 51, 54 (2008), wherein the Court determined that the plaintiff in that case sought to avoid the requirements of the PLA by asserting their claims as CFA claims. The difference between Sun Chemical’s case and the Sinclair case is the nature of the claims and the theory of the case. If a claim is premised upon a product’s manufacturing, warning or design defect, such a claim would fall squarely within PLA jurisdiction, and a claimant could not bring that action under the CFA. Here, however, Sun Chemical alleged misrepresentations amounting to deceptive, fraudulent, misleading, and other unconscionable commercial practices. This claim falls within the purview of the CFA, even though the allegations may also support a PLA claim.
This expansive reading of the interaction between the PLA and CFA will no doubt benefit many consumers. However, manufacturers and vendors seeking to defend themselves would be wise to question the nature of a CFA claim, and whether it ultimately seeks relief for a product’s manufacturing, warning or design defect. Claimants may attempt to bring a CFA claim when the claim actually falls within the purview of the PLA in order to seek enhanced damages. The Sun Chemical decision does not change the fact that such a claim would be improper and subject to dismissal.
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