In responding to the question of law certified by the United States Court of Appeals for the Third Circuit pursuant to Rule 2:12A-3, the New Jersey Supreme Court answered in the affirmative that a claim under the New Jersey Consumer Fraud Act (CFA) alleging express or affirmative misrepresentations – deceptive, fraudulent, misleading, and other unconscionable commercial practices – may be brought in the same action as a claim actionable under the New Jersey Products Liability Act (PLA). Sun Chemical Corporation v. Fike Corporation, A-89-19 (N.J. July 29, 2020). The Court held that “it is the nature of the claims, not the nature of the damages sought, that is dispositive on whether the PLA precludes a separate cause of action.”
Plaintiff filed a single-count complaint in federal court under the CFA alleging that defendant seller made various material oral and written misrepresentations in connection with the sale of an explosion isolation and suppression system (“Suppression System”). Fatefully, on the first day the Suppression System was operational, an uncontrolled fire erupted in the dust collection system, causing an explosion and sending a fireball through the ducts of the dust collection system, which injured plaintiff’s employees and damaged its facility. The District Court granted defendant’s motion for summary judgment, finding that the PLA subsumed plaintiff’s claims, and noting that “Plaintiff may not avoid the requirements of the PLA by artfully crafting its claims under the CFA.” Plaintiff appealed, arguing that despite the resemblance of its claim to a product liability action, “affirmative misrepresentations can be brought under the CFA.” Noting that the existing New Jersey case law did not provide sufficient guidance on which statute to apply, the Third Circuit certified the question to the New Jersey Supreme Court.
The Scope and Interplay of CFA and PLA
Recognizing that there is no authority directly on point, the New Jersey Supreme Court reviewed the legislative history and case law interpreting the interplay between the CFA and other statutes.
New Jersey’s CFA prohibits deceptive, fraudulent, misleading, and other unconscionable commercial practices in connection with the sale of any merchandise or real estate. Since “[t]he language of the CFA evinces a clear legislative intent that its provisions be applied broadly” (Lemelledo v. Beneficial Mgmt. Corp. of Am., 150 N.J. 255, 264 (1997)), there are very limited exceptions to the CFA’s reach. Real v. Radir Wheels, Inc., 198 N.J. 511, 523 (2009). Not only is the scope of the CFA broad, but its remedies include treble damages, costs, and attorney’s fees. The New Jersey Supreme Court analyzed these decisions to determine the reach of the CFA to this matter.
In Lemelledo, plaintiffs filed a class action under the CFA against a financial services company related to consumer loans. Lemelledo, 150 N.J. at 259-260. The New Jersey Supreme Court rejected defendant’s argument that the CFA was preempted by other consumer loan statutes. The court discussed a “presumption that the CFA applies to a covered activity” which 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.” Id. at 270.
In Radir Wheels, plaintiff filed a claim under the CFA against a private seller for fraudulent advertisement. 198 N.J. at 514. Applying Lemelledo, the New Jersey Supreme Court held that the Used Car Lemon Law did not preempt a consumer claim under the CFA because the statute expressly did not limit consumer remedies available under any other law. Lemelledo, 150 N.J. at 526.
Unlike the broad reach of the CFA – both in applicability and remedy – the more limited PLA is “intended to protect users from harm caused by defective products,” with recoverable damages including personal injury, pain and suffering, and loss of consortium.
In considering the kinds of claims actionable under the PLA, the Court reviewed In re Lead Paint Litigation, 191 N.J. 405, 436-437 (2007), where it held that the “PLA subsumed the plaintiffs’ common law public nuisance causes of action that were fundamentally PLA claims.”
The Court also reviewed Sinclair v. Merck & Co., 195 N.J. 51, 65-66 (2008), where plaintiffs filed separate but identical counts under the CFA and PLA, alleging that as a result of taking defendant’s drug, they were at increased risk of future cardiovascular injury. The Court held plaintiffs’ claims not cognizable under the PLA because the statute requires present rather than future physical injury, and plaintiffs wanted to “avoid the requirements of the PLA by asserting their claims as CFA claims.”
Applying the interplay of the CFA and PLA to Sun Chemical
Since the CLA and the PLA are intended to govern different conduct and offer different remedies, the New Jersey Supreme Court found “no direct and unavoidable conflict between the CFA and the PLA” (emphasis added).
The High Court emphasized it is the essential nature or “heart” of a case that gives rise to a claim – not the nature of damages. The underlying theory of liability dictates how a claim must be pled. As such, the Court disagreed that the nature of damages – economic losses – dictates its claim. Rather, plaintiff’s CFA claim alleging express misrepresentations about the Suppression System may be asserted alongside a PLA claim because those claims were not premised upon product manufacturing, warning, or design defect. Therefore, the PLA will not bar a claim alleging express or affirmative misrepresentation.
The New Jersey Supreme Court’s decision potentially gives plaintiffs the ability to pursue claims under both the CFA and PLA where plaintiffs assert express misrepresentation and product defect.
This alert is not a substitute for advice of counsel on specific legal issues.
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