Tuesday, February 16, 2010


The New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 et seq., (the Act) in pertinent parts, provides 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….”
N.J.S.A. 56:8-2. (Emphasis added)

Further, the Act provides for recovery of damages as follows:

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.

N.J.S.A. 56:8-19.
A “person is defined under the Act as “any natural person or his legal representative, partnership, corporation, company, trust, business entity or association, and any agent, employee, salesman, partner, officer, director, member, stockholder, associate, trustee or cestuis que trustent thereof…”. N.J.S.A. 56:8-1(d) (emphasis added).

“Merchandise” is defined under the Act as “… any objects, wares, goods, commodities, services or anything offered, directly or indirectly to the public for sale…” N.J.S.A. 56:8-1(c).

The Home Improvement Practices were promulgated by the Attorney General Office’s Division of Consumer Affairs to “implement the provisions of the Consumer Fraud Act… by providing procedures for the regulation and content of home improvement contracts and establishing standards to facilitate enforcement of the requirements of the Act.” N.J.A.C. 13:45A-16.1(a).

“Home improvement" is defined as the “remodeling, altering, painting, renovating, restoring demolishing, or modernizing of residential or noncommercial property or the making of additions thereto, and includes, but is not limited to, the construction, installation, replacement, improvement, or repair of … central heating and air conditioning equipment… [etc.].” N.J.A.C 13:45A-16.1A (emphasis added).

A “Home improvement contract" is defined as “an oral or written agreement between a seller and an owner of residential or noncommercial property … for the payment of home improvements made in, to, or upon such property, and includes all agreements under which the seller is to perform labor or render services for home improvements, or furnish materials in connection therewith. Id.

“”Seller” is defined as a person engaged in the business of making or selling home improvements ….“ Id.

Acts defined as “Unlawful” under the Home Improvement Practices include, but not limited to, failure to have a written contract (contract must be in excess of $500); misrepresentation of material used (brand, quality, size, etc); bait-and-switch schemes; failure to ensure required building permit; failure to furnish copy of final inspection when construction is completed and before final payment; failure to furnish written copy of guarantee or warranty in a specific, clear and definite language;

A Consumer is entitled to Recovery under the CFA even if there is no showing of an Ascertainable loss

In Cox v. Sears, Roebuck & Company, 138 N.J. 2, 17, 22 (1994), the seminal case for interpretation of the Act, the New Jersey Supreme Court stated that to violate the CFA, a person must commit an “’unlawful practice’” which falls into three (3) general categories: (1) affirmative acts, (2) knowing omissions and (3) regulation violations. Id. at 17 (emphasis added). According to the Court, the first two are found in the language of N.J.S.A. 56:8-2 and the third is based on regulations enacted under N.J.S.A. 56:8-4. Id. (citations omitted). When the alleged consumer-fraud violation consists of an affirmative act, intent is not an essential element and the plaintiff need not prove that the defendant intended to commit an unlawful act.” Id. at 17-18. (citing Chattin v. Cape May Green, Inc., 124 N.J. 520, 522 (1991). However, according to the Court, intent is an element where the consumer fraud consists of an omission. Id.

With respect to regulation violation, the third category of unlawful acts, the Court also stated that “intent is not an element of the unlawful practice, and the regulations impose strict liability for such violations. Id. at 18 (citations omitted)(emphasis added). Proof of any of the three (3) categories of unlawful acts –affirmative acts, knowing omission or regulation violations- is “sufficient to establish unlawful conduct under the [CFA],” according to the Court. Id. at 19.
As to damages, the Court stated that an award of treble damages and attorneys’ fees are mandatory under the CFA if the consumer proves both an unlawful practice and an ascertainable loss. However, even without the showing of an ascertainable loss, a consumer is entitled to reasonable attorneys’ fees and costs if the plaintiff can prove that the defendant committed an unlawful practice under the CFA. Id.

In Cox, the homeowner sought the services of Sears, Roebuck & Company (“Sears) to renovate his kitchen. 138 N.J. at 7. A written contract was entered into by Sears and the homeowner, which required Sears to remove the old cabinets and install new ones and to install a vinyl floor, a countertop, a sing and faucet, wallpaper, a microwave hood, garbage disposal and an additional electrical outlet. Id. at 8. The homeowner signed a repair contract agreement and financed the entire costs. Id. at 7. Sears promised the homeowner “’satisfaction guaranteed or your money back.” Id.

The homeowner became dissatisfied with Sears’ work relating to the microwave hood and vent, the cabinets and the vinyl flooring, and made several telephone calls to Sears. Id. A Sears’ repairman made four (4) trips to the homeowner’s home to address the problem. The homeowner then retained counsel and Sears made no further repairs to the kitchen. Id. The homeowner, without making any payments, then sued Sears for breach of contract, and Sears counterclaimed for the full contract price totaling $8,795.69. Id. at 8.

At trial, evidence was introduced that “Sears’ work was deficient in that the resulting appearance of the renovations was unattractive, that Sears' rewiring of the kitchen was incomplete and substandard, and that Sears ' work failed to comply with building and electrical codes and home-repair regulations. The microwave hood was installed in a lopsided manner and contained a large crack. The door to the microwave slammed shut if not held open. The wallpaper did not cover all wall areas and did not line up evenly with the cabinets. The wood coloring of the cabinets and the trim did not match, and one cabinet had cracks in it. The glue in the cabinet joints was visible and the joints were not clean. Sears improperly re-installed the moldings so that they were not flush to the ceiling or walls. The vinyl flooring buckled, and Sears did not install cove molding to keep it in place. The garbage-disposal unit leaked. The microwave vents recirculated exhaust back into the house instead of outside…” Id. at 8-9 (emphasis added).

In addition, at trial, the homeowner introduced evidence that, inter alia, a building permit was required for the removal of old cabinets and installation of new ones. Id. at 9. However, no building or electrical permit had ever been requested or issued for the homeowner’s residence before, during or after Sears’ work in the homeowners’ kitchen. Id.

A jury returned a verdict in favor of the homeowner on his claim for breach of contract and violation of the CFA and awarded damages of $6,830. Id. at 10. The trial court, however, granted Sears JNOV motion and entered a no cause verdict concluding that the homeowner failed to prove any ascertainable loss, and “continued to enjoy the use of Sears’ labor and materials since the installation.” Id. at 11. The trial court also denied the homeowners’ requested attorneys’ fees of $56, 840.57 concluding that since the homeowner did not prove a loss, he was not entitled to any attorneys fees.” Id. The Appellate Division affirmed.

The Supreme Court, however, reversed and remanded the case for entry of its judgment. Id. at 14, 25. The Court held that Sears’ conduct did constitute an unlawful practice and that the homeowner suffered a loss caused by Sears’ violation of the Act. The Court also concluded that the homeowner was entitled to recover attorneys’ fees, filing fees and cost under the CFA, irrespective of whether an ascertainable loss was demonstrated. Id. at 14 (emphasis added).

Applying the foregoing principles, the Court agreed with the jury’s finding and concluded that “Sears’ noncompliance with the Home Improvement Practice regulations constitutes a clear violation of the [CFA].” Id. at 19. The Court further stated that:

The regulations are in place to prevent precisely the poor-quality work that characterized Sears' performance in this case and to protect consumers such as Cox, even though such sloppy workmanship falls short of an unconscionable commercial practice. For instance, the jury could have concluded that although several permits were required, none was obtained for plaintiff's renovations. Although no statute or regulation requires a home-repair contractor to obtain all permits for an owner, N.J.A.C. 13:45A-16.2(a) 10i does provide that no contractor may begin work until he or she is sure that all applicable permits have been issued. Sears, by beginning work without checking for permits, disregarded the regulation and therefore violated the Act. Moreover, once a permit is obtained, a code inspector will inspect the residence periodically and issue a Certificate of Continued Occupancy to conform to the municipality's inspection process. Because no permit was ever issued for the Cox home, no inspections took place and no certificate was issued. In that regard, Sears violated N.J.A.C. 13:45A-16.2(a) 10ii, which requires a contractor to give the owner a copy of an inspection certificate before final payment is due and before the contractor asks the owner to sign a completion slip. In addition, plaintiff presented evidence to support an inference that Sears had asked him to sign a certificate-of-completion form before the work had been completed, a violation of N.J.A.C. 13:45A-16.2(a) 6v.

Id. at 20.

The Court concluded that the homeowner met the requirement of the CFA by proving that Sears committed an unlawful practice, which consisted of “Sears’ violation of the CFA’s regulations relating to permits, inspections, and certificates.” Id. at 21-22. The Court also concluded that “Sears’ failure to comply with the Home Improvement Practices regulations visited an ascertainable loss on plaintiff.” Id. at 22.

With respect to the calculation of damages, the Court disagreed with the Appellate Division’s conclusion that since Cox did not spend money to repair or finish the work, he incurred no loss. Id. The Court stated that that interpretation is contrary to the CFA’s remedial purpose. Id. The Court stated that “traditionally, to demonstrate a loss, a victim must simply supply an estimate of damages, calculated within a reasonable degree of certainty. The victim is not required actually to spend the money for the repairs before becoming entitled to press a claim. Id. (citations omitted). The Court therefore concluded that Cox loss amounted to the cost of repairing the kitchen, $6,830.00, as the jury found, trebled to $20,490. Id. at 23-24.

However, the Consumer must show a bona fide claim of ascertainable loss before case goes before jury

In Weinberg v. Sprint Corp., 173 N.J. 233 (2002), our Supreme Court established that in order to proceed with a CFA claim, a private plaintiff only need present a bona fide claim for an ascertainable loss, defined as a loss that is capable of withstanding a motion for summary judgment because it “raises a genuine issue of fact requiring resolution by the factfinder.” Id. at 251, 281. That is, a consumer is not required to prove an ascertainable loss in order to survive a motion for summary judgment, but to bring forth evidence sufficient to raise a genuine issue of material fact as to the ascertainable loss. The Court stated that “[t]o say that a plaintiff must present a claim of ascertainable loss to have standing under the Act does not require that the claim ultimately prove successful. A claim may be unsuccessful for any number of reasons even though it was brought in good faith and has support in the facts. Requiring a plaintiff ultimately to prove an ascertainable loss in order to obtain injunctive relief is too difficult a standard and would deter, rather than encourage, private causes of action, in contravention of the legislative scheme. Thus, although we perceive a claim of ascertainable loss to be an essential element for a private cause of action under the Act, that does not mean that only a plaintiff who successfully proves ascertainable loss may have access to the Act's remedies of equitable relief and attorneys' fees.” Id. at 251.
Moreover, reaffirming its earlier decision in Cox, supra, the Court held that “the plaintiff with a bona fide claim of ascertainable loss that raises a genuine issue of fact requiring resolution by the factfinder would be entitled to seek also injunctive relief when appropriate, and to receive an award of attorneys' fees, even if the plaintiff ultimately loses on his damage claim but does prove an unlawful practice under the Act.” 138 N.J at 253 (original italics).

In Thiedemann v. Mercedes-Benz, USA, LLC, 183 N.J. 234 (2005), our Supreme Court, stated that “[t]o raise a genuine dispute about such a fact, the plaintiff must proffer evidence of loss that is not hypothetical or illusory. It must be presented with some certainty demonstrating that it is capable of calculation, although it need not be demonstrated in all its particularity to avoid summary judgment.” Id. at 248.

In Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 559 (2009), our Supreme Court stated that “[t]he CFA does not demand that a plaintiff necessarily point to an actually suffered loss or to an incurred loss, but only to one that is ‘ascertainable.’” Id. at 559.

The Cox court concluded that the plaintiff's ascertainable loss for defendant's shoddy home improvement work included the projected repair costs. Cox, supra, 138 N.J. at 24. “To demonstrate a loss, the plaintiff must supply an estimate of damages, calculated within a reasonable degree of certainty. Id. at 22. “… In the home improvement context, a plaintiff's loss is measured by the cost of repairing the defendant's errors. Id at 22-23. See also, Furst v. Einstein Moomjy, Inc., 182 N.J. 1, 10, 860 A.2d 435 (2004)( “when a merchant violates the [CFA] by delivering defective goods and then refusing to provide conforming goods, a customer's ascertainable loss is the replacement value of those goods.”).

In Cox, the Court concluded (after reviewing plaintiff’s trial expert testimony) that plaintiff’s “ascertainable loss amounted to the cost of repairing his kitchen, $6,830, as the jury found.” 138 N.J. at 23. This amount was then trebled to $20,490 under the CFA. Id. at 23-24.

In sum, a CFA claim could be alleged against a contractor or other home improvement merchants, where the home improvement practices were violated. However, in order for the consumer to recover, she must suffer a loss. If a loss cannot be shown, the case will be dismissed on summary judgment. If a loss is shown, and the case proceeds to trial, the consumer can recover reasonable attorneys’ fees and costs even if she fails to convince the jury of her loss, so long as her claim was bona fide. If she does prove a loss proximately caused by the CFA violation, then she is entitled to treble damages as well as reasonable attorneys’ fees.