Proposed Amendments to New Jersey’s Consumer Fraud Act Could Rein In Class Actions Against New Jersey Businesses

Types : Alerts

As many courts have recognized, New Jersey’s Consumer Fraud Act, N.J.S.A. 56:8-1, et seq. (“NJCFA”), is one of the strongest consumer protection laws in the country.  A variety of provisions in the NJCFA – e.g., businesses as well as individuals may sue; treble damages are mandatory when plaintiffs win; and prevailing plaintiffs are entitled to recover their attorneys’ fees – make the Act an attractive vehicle for class action lawsuits against companies that do business in New Jersey.

Recently proposed legislation enjoying bipartisan support in the Senate and General Assembly, however, may soon lessen some of the Act’s lure:

1) Senate Bill S-2855, and the identical Assembly Bill A-3333, would amend the NJCFA in the following fundamental ways:

• Only individuals would be able to assert NJCFA claims; businesses would be barred from suing.
• The plaintiff would have to prove detrimental reliance on the use or employ­ment of the allegedly deceptive practice. Plaintiffs in New Jersey – as in many states – have long been able to recover on statutory consumer protection claims without proving actual reliance.
• The NJCFA would no longer make treble damages mandatory; rather, the court would have discretion to enhance actual damages up to three times. And attorneys’ fees and costs would be limited to the greater of $150,000 or one-third of the judgment.
•  The NJCFA would apply only to transactions that take place within New Jersey.

Bills A-3333 and S-2855 have bipartisan support in both the New Jersey Assembly and Senate.  As of August 16, 2011, the New Jersey Office of Legislative Services in Trenton reports that Bill S-2855 is sitting in the Senate Commerce Committee and Bill A-3333 is sitting in the Assembly Commerce Committee; neither has yet been scheduled for a vote or other legislative action.

2) Assembly Bill A-1401 would amend the NJCFA to require that a person claiming damages of $250 or more first request a refund in writing before commencing suit.

As of August 16, 2011, the New Jersey Office of Legislative Services in Trenton reports that Bill A-1401 is sitting in the Assembly Commerce Committee and has not been scheduled for a vote or other legislative action in the Assembly.

3) On May 20, 2010, the General Assembly, by a vote of 76-2, passed Bill A-1064, which eliminates the award of  attorneys’ fees, filing fees and costs of suit for technical violations of the NJCFA. The bill defines a “technical violation” as “any violation where the person held in violation made a good faith effort to comply with [the NJCFA] and the resulting violation did not: (a) impact the quality of the product or service provided; or (b) result in an ascertainable loss to the consumer.” The Bill provides, however, that “attorneys’ fees, filing fees and reasonable costs of suit” would still be available “in any action under this section brought by the Attorney General, including for any violation determined to be a technical violation.”

A-1064 (introduced as Bill S-1790 in the Senate on May 20, 2010) awaits action by the Senate Commerce Committee.  The Senate will be back in session on August 25, 2011.  Bills A-1064 and S-1790 enjoy bipartisan support.

These bills are important steps towards leveling what many businesses operating in New Jersey regard as an uneven playing field.  The reach of the NJCFA will remain broad; for example, the New Jersey Supreme Court recently held that officers, owners, managers and employees of businesses providing services to consumers can be sued individually for violations of the NJCFA, even though they were acting through a corporation at the relevant time.  See Allen v. V & A Brothers, Inc., No. A-30-10, 2011 WL 2637270, at *1 (N.J. July 7, 2011) (relying, in part, on the Act’s expansive definition of “person” and its broad remedial purposes).  But these bills, if enacted, will help.

We will continue to monitor these proposed amendments.  Please let us know if you would like further information.