Posts Tagged ‘CFA’

Best Buy Meet the NJ Consumer Fraud Act: Honest Mistakes

Written by Mike Pisauro on August 24th, 2009 in Consumer Fraud | No Comments »

On Wed. August 12, 2009 the Best Buy website listed a 52 inch Samsung LCD TV for a whopping $9.99.  Unfortunately, this was not the price that should have been listed and, upon discovering the error, Best Buy corrected the website and rescinded all of the orders placed using the wrong price, indicating that it will not honor the orders for those who have placed them at that price level.

Now a few NJ lawyers are looking for plaintiffs to go after Best Buy for a violation of the New Jersey Consumer Fraud Act.  For the purposes of this post, I am assuming that the price error was a genuine mistake, it being a typo and not the result of any intent to defraud its consumers.  The question for Best Buy in NJ is whether that honest mistake will subject them to the penalties of the Consumer Fraud Act.

As I have noted in past posts, the Consumer Fraud Act provides:

the act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, . . .in connection with a 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 mislead, deceived or damaged thereby, is declared to be an unlawful practice.  NJSA 56:8-2.

The online price listing was clearly an advertisement of merchandise. It is also, clearly, a misrepresentation of the true sales price at the very least.  News reports indicate that Best Buy does not intend to honor those orders which were made prior to Best Buy learning of the erroneous sales price; therefore, their subsequent performance (i.e., returning the money and not honoring the orders) may be an unconscionable commercial practice.

In addition to showing that Best Buy had an advertisement that was false or misleading the Plaintiffs also have to show that the price was material to the transaction and that the false price induced the Plaintiffs to buy the TV from the store.

If Best Buy is found to be in violation of the consumer fraud act, then they are subject to treble damages and attorney fees.  The damages would be the difference between what the TV was listed for and what Best Buy was willing to sell the TV for or $1,690.00 which is then trebled to: $5,070.  The plaintiffs’ would also be entitled to attorney fees and costs of suit.

But this leaves the question of “can a seller of merchandise make an honest mistake under the Consumer Fraud Act and not be liable?” It is important to note that for there to be a violation of the Consumer Fraud Act, the Plaintiff did not have to show that Best Buy intentionally or knowingly made the mistake in the advertisement.  There must only be shown that that Best Buy placed an advertisement which was not accurate.  It must be remembered that the Act was passed in order to provide broad protections to consumers against sharp practices engaged in by businesses.  Given the broad scope and purpose of the Consumer Fraud Act, there does not appear to be room for honest mistakes.  While everyone makes mistakes, the lesson here is to correct the mistake as soon as possible and honor the deals made prior to the fix.  This will reduce the chance of a lengthy legal battle that could end of paying triple the original cost, plus the plaintiff and your legal fees.

For more posts regarding NJ’s Consumer Fraud Act you can read:

NJ Consumer Fraud Act – What is Merchandise?

Written by Mike Pisauro on August 4th, 2009 in Consumer Fraud | 2 Comments »

In past posts I have written about what the Consumer Fraud Act (CFA) is and to who it applies.  In this post I will look at what kind of items or transactions fall under the CFA.  The first place to look to see what is covered is the statute itself.  NJSA 56:8-2 provides that the act applies to the “sale or advertisement of any merchandise or real estate. . .”    What is merchandise?  The Act defines merchandise as “any object, wares, goods, commodities, services or anything offered directly or indirectly to the public for sale.”  NJSA 58:8-1.

While this is not meant to be an exhaustive list the following transactions have been deemed to fall under the CFA:

  • The sale of computers
  • The sale of cars
  • The sale of a life time membership in a consumer discount program
  • Home improvement contracts for work on an existing structure
  • The sale of pets
  • The sale of real estate through a realtor

The CFA has not been applied to the following kinds of transactions:

  • The sale of securities. Although securities were going to be included when the Act was originally proposed, they were purposely removed – and, therefore, not covered.
  • Attorney services
  • Medical services
  • Construction of a new home.  It does, however, apply to renovations of current homes and to contractors hired by the homeowner to perform work on new construction.
  • Sale of businesses

The CFA also does not apply to the sale of an ongoing business, although there is some question as to whether it may apply to the purchase of a franchise.  According to a NJ Appellate Court case, the sale of a franchise is covered by the consumer fraud act when the sale is not covered by the Franchise Practices Act.  A U.S. Federal District Court for New Jersey and the Third Circuit Court of Appeals, however, have found that the CFA does not apply to the sale and purchase of a franchise.  So, for the sale/purchase of a franchise there may be a question as to whether it is likely the NJ courts would enforce the consumer fraud act.  In other words, the application of the CFA to the purchase of a franchise is likely but not guaranteed.

NJ Courts have consistently applied to the CFA in a liberal manner to provide the full protection of the law to consumers.  While the above list is not an exhaustive list, it does demonstrate that the CFA can cast a wide ranging net on sales activities.  As you plan your sale of your merchandise keep it is very likely that the CFA applies to you.

For more information on the Consumer Fraud Act, please read:

With Consumer Fraud a person really means a person

Consumer Fraud Act and Any Person

Consumer Fraud Act – The Basics

With Consumer Fraud a person really means a person.

Written by Mike Pisauro on April 9th, 2009 in Consumer Fraud, Courts | 3 Comments »

Back in January, I wrote about a case before the N.J. Supreme Court called Real v. Radir Wheels. As I discussed the case could have wide ranging impact on who was covered by the Consumer Fraud Act. Well that statement was correct. The New Jersey Supreme Court came out with its decision on Radir Wheels on Wednesday. In keeping with the broad reach of the Consumer Fraud Act’s causes of action and remedies, the Court found Mr. Conklin was subject to the act and that he had violated it.

The Court began its analysis of whether a person selling an item or items on eBay was subject to the CFA, by noting that the CFA was enacted in response to unlawful sales and advertising practices and was meant to be remedial legislation. The courts are required to give remedial legislation a very liberal interpretation.

The Court’s decision came down to a plain reading of the statute’s definition of “person.” The statute defines person 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” NJSA 56:8-1(d). The Supreme Court easily found that Mr. Conklin was a person. The Court then noted that there were some exceptions to the CFA’s reach, despite a plain reading, but noted that the Defendant did not fall into those narrow exceptions. As Mr. Conklin was subject to the CFA, the Court also found that the Plaintiff pled and proved a “textbook” case of a CFA violation.

The moral of story is that whether you are a large multinational store or a single parent selling your kids used toys and clothes on the internet, you are subject to the consumer fraud act. You are subject to the CFA whether this is you one and only sale or your 10,000’s listing. As everyone would like to avoid be liability for treble damages and attorney fees, any advertisement made on the internet must be accurate. It must not only be accurate as far as you, but it must be completely accurate. It must be completely accurate because if you make a statement regarding the item, which latter turns out to be untrue that is an actionable violation of the CFA. It is actionable even if you thought the fact to be true when you made it.

For more on the CFA see my previous post on the basics of the statute.

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