No Laughing Matter – Ascertainable Loss Under the CFA Revisited by NJ Supreme Court

A case involving alleged violations of the NJ Consumer Fraud Act (CFA),  described by the defense counsel to be so weak that he believed jurors were laughing during trial, is now before the state Supreme Court as to whether the plaintiffs are entitled to recover their attorneys’ fees and costs.  Specifically at issue is whether – and under what circumstances – a CFA defendant can be held liable for the plaintiff’s attorneys’ fees and costs when the claim is dismissed by the court after presentation of the plaintiff’s case at trial.

By way of legal background, the NJ Supreme Court long-ago confirmed that a plaintiff can recover attorneys’ fees and costs under the CFA merely by proving conduct unlawful under the Act, even if they ultimately fail to prove an ascertainable loss related to the unlawful conduct.  See Cox v. Sears Roebuck & Co., 138 NJ 2, 24-25 (1994).  In 2002, the Supreme Court clarified that, in order to recover fees and costs, the ascertainable loss claim must be capable of surviving a motion for summary judgment.  See Weinberg v. Sprint Corp., 173 N.J. 233, 251.

In the present case, Perez v. Swim-Well Pools, Inc., et als, the plaintiffs alleged several violations of the CFA including a failure of the defendant to state a work start and end date in the contract for installation of a pool. The plaintiffs asserted that they suffered an ascertainable loss stemming from the start/end date violation because they were unable to use the pool as they anticipated during the summer months that followed the signing of the contract. The plaintiffs moved for summary judgment as to all of their CFA allegations (including that they had suffered ascertainable losses).  The defendant cross-moved for summary judgment on certain CFA claims but not as to the claim based on the absence of  start/end dates in the contract. The trial court granted partial  summary judgment to the plaintiffs, determining that the defendant had violated the CFA by failing to state the start/end dates. However, the court found that material issues of fact existed as to whether the plaintiffs had suffered an ascertainable loss.

The case went to trial and, after plaintiffs’ proofs, the  trial court granted defendants’ motion to dismiss, ruling that plaintiffs failed to establish a prima facie showing of ascertainable loss.  The trial court also denied plaintiffs’ post-trial motion for fees and costs, relying on Pron v. Carlton Pools, Inc., 373 N.J. Super. 103 (App. Div. 2004).  In Pron, the Appellate Division held that a CFA plaintiff is not entitled  fees and costs when the defendant obtains an involuntary dismissal and does not need to present its defenses.

The plaintiffs argued on appeal that Pron undermines the CFA’s consumer-friendly objectives and should be overruled. The Appellate Division did not accept this argument, but still  reversed and remanded the case finding the circumstances distinguishable from Pron.  Specifically, despite the acknowledgement in Pron that summary judgment and involuntary dismissal were “functional equivalents,”  the Appellate Division observed that the issue of ascertainable loss issue was “first tested” in Pron with the motion for involuntary dismissal  whereas, in the present case, the issue was first tested not by motion for involuntary dismissal at trial but when plaintiff pursued summary judgment on all of their CFA claims.

The Appellate Division’s ruling  suggests that if a plaintiff seeks summary judgment on a CFA claim,  the defendant is required to cross-move for summary judgment or otherwise incur the plaintiff’s attorneys’ fees and costs even if an involuntary dismissal is obtained at trial.  (Notably, the issue of whether plaintiffs’ alleged inability to use the pool as anticipated qualified as an ascertainable loss under the CFA was not before the court.)

The state Supreme Court granted certiorari and recently heard argument. There appears to be some discordance between the Appellate Division’s ruling and the Pron decision that the Supreme Court will need to address.  We will continue to monitor this case, which will likely significantly impact strategical ligation tactics  when handling CFA claims.

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