McDowell - Riga - Posternock, PC Attorneys at Law

NEW JERSEY SUPREME COURT DECIDES CONSUMERS ARE NOT REQUIRED TO SEEK REFUNDS BEFORE
FILING SUIT UNDER THE CONSUMER FRAUD ACT.

On February 19, 2009 the New Jersey Supreme Court issued its decision in Bosland v. Warnock Dodge,Inc. which presented the Court with another opportunity to rule on an important and provocative issue concerning New Jersey’s Consumer Fraud Act (“CFA”). Rhonda Bosland purchased a 2003 Jeep Grand Cherokee from Warnock Dodge and discovered that she was charged a registration fee ($117) that was greater than the one permitted by law (at best $97). The excessive fee violated the state administrative code that concerns motor vehicle sales.

Ms. Bosland did not contact Warnock to complain or ask for refund. Rather, she retained counsel and filed a suit on her own behalf and on a behalf of a class of similarly situated car buyers, claiming in part that the excessive fee, charged in violation of the administrative code, violated the CFA. If successful, Ms. Bosland would be able to receive a refund of approximately $20, which would have been trebled under the CFA, and reasonable counsel fees. Of course, if the case proceeded as a class action, the exposure of Warnock would have been much greater.
On appeal to the Supreme Court the sole issue presented was whether the CFA had an implicit requirement that prior to filing a CFA complaint a consumer had to seek a refund from a merchant or seller. The Court’s determination was:

Our reading of the plain language of the statute and our
understanding of the Legislature's overall intent, both in
enacting the CFA and in expanding its scope, compels us
to answer this question in the negative. We therefore
conclude that the CFA does not require a consumer, who
has been victimized by a practice which the statute is designed
to remedy, to seek a refund from the offending merchant as a
prerequisite to filing a complaint.

In reaching this decision, the Court used two important methods of legal analysis.

First, the Court analyzed the plain language of the statute to see if there was any suggestion that a pre-suit demand for a refund was required. The Court found that there are only three statutory elements required for a valid CFA claim: 1) unlawful conduct by defendant; 2) an ascertainable loss by plaintiff; and 3) a causal relationship between the unlawful conduct and the ascertainable loss. The Court noted that the requirement of “an ascertainable loss” means that the consumer’s loss must be quantifiable and subject to some measurement and that “ascertainable loss” often equates to “any lost benefit of the bargain” and may be proven when a consumer is forced to make or will be forced to make out-of-pocket repairs. In the case of Ms. Bosland, the Court explained:

… [T]he overcharge in question is one that can be readily
quantified [$20.00]and thus is ascertainable within the meaning
of the CFA. That she could have requested a refund and, theoretically, could have secured complete relief in no way diminishes the fact that she sustained an immediate, quantifiable loss when she paid the fee representing the overcharge.

Although the Court could have relied solely upon the plain language of the CFA to reach its decision, it took pains to outline the legislative intent behind the statute. It quoted then-Assemblyman Thomas (“Tom”) H. Kean as saying amendments to the CFA providing consumers with the right to sue “represent an enlightened approach to provide greater protection for the consumer against fraud.” Governor William Cahill proclaimed that the amendments were designed to “give New Jersey one of the strongest consumer protection laws in the nation.” The Court also looked to its earlier cases which stated that “the history of the CFA is one of constant expansion of consumer protection.” Armed with this view of the legislative intent behind the CFA, it was predictable that the Court would declare:

We discern in the CFA a clear expression of the Legislature's
intent to empower consumers who seek to secure relief for
themselves and for others who may not be aware that they
have been victimized. Because reading a pre-suit demand
for refund requirement into the CFA would thwart those
salutary purposes, we will not endorse it.

The Court’s opinion included a comment that emphasized that the public policy issues raised by Warnock were not for it to decide.

Although there may be sound reasons for adopting a
different approach entirely or for limiting the available
remedies to ameliorate the harsh consequences of the CFA
in circumstances in which a consumer does not first offer
the merchant the opportunity to make amends in advance
of pursuing litigation, we conclude that those concerns
implicate public policy choices that are for the Legislature,
rather than this Court, to make.

As stated at the outset, this is an important and provocative case. It seems somewhat strange that a $20.00 overcharge can result in extensive legal fees if a merchant could simply cure the problem by paying a refund. On the other hand, if a pre-suit demand were required, a merchant could willfully engage in an unlawful practice and be immunized from liability by paying refunds only when “caught”. That scenario would not seem to foster honest commercial behavior.

The attorneys at Barron & Posternock, LLP handle CFA matters both for consumers and merchant, including class actions. We have innovative ideas and strategies that are responsive to the issues raised by Bosland and other recent CFA cases. If you have any questions about a CFA matter, call Dan Posternock or Tom Barron at (856) 642-6445.

***The information included in this newsletter is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.