Parker sued GP on behalf of a putative class alleging
violations of the New Jersey Products Liability Act (PLA); breach of express
warranty; and the New Jersey Consumer Fraud Act (CFA). Parker alleged that GP misrepresented the
quality of its exterior trim, PrimeTrim, which prematurely deteriorates and
promotes the growth of mold, insects, etc. in the structures on which it’s
installed. GP allegedly knew this as
early as 1998 and acknowledged it internally, but didn’t stop advertising the
product for a wide range of uses without explaining that specially exacting
installation was required. GP allegedly
rejected known design improvements due to their cost, while failing to test new
versions of PrimeTrim and failing to test in actual installations despite the
importance of such information. GP’s
allegedly false claims included that PrimeTrim: “offers up to four times more
decay resistance than lumber[;]”“outperformed lumber through two years of
direct exposure to sun, rain, and snow[;]” has “more than fifteen years with a
track record of proven performance[;]” “[f]eatures superior moisture and decay
resistance[;]” and was “proven in over four years of laboratory and field
testing.” GP denied Parker’s warranty claim under its express warranty on the
ground that the trim was misinstalled; Parker alleged that GP failed to provide
adequate installation instructions, particularly omitting instructions on how
to seal and prime site-cut ends despite knowing and intending that PrimeTrim
would be cut to size on site.
Parker brought its claims on behalf of a damages class, with
an economic loss damages subclass for property in which the PrimeTrim had been
damaged but not other property. The
allegations relating to the subclass included that PrimeTrim’s failure
typically began with its own deterioration, only later exposing other elements
of the building to damage.
GP moved to dismiss the CFA claim as preempted/subsumed by
the PLA. The court denied the motion. Economic losses due to harm to the product
itself are recoverable under the CFA, whereas they are explicitly exempted from
the PLA’s definition of harm to property: “physical damage to property, other
than to the product itself.” A product liability action is “any claim or action
brought by a claimant for harm caused by a product, irrespective of the theory
underlying the claim, except actions for harm caused by breach of an express
warranty.”
The Third Circuit has already examined the interaction
between the PLA and the CLA in a case seeking failure to warn and design defect
damages, plus a CFA claim for unconscionable consumer practices. Estate of
Edward W. Knoster v. Ford Motor Co., 200 Fed. Appx. 106 (3d Cir. 2006). The
court of appeals found no overlap. The
plaintiffs sought only economic damages resulting from the harm to the product
itself, and the PLA excludes those damages from its definition of “harm,” so
the CFA claim wasn’t a “product liability action”: “The PLA cannot subsume that
which it explicitly excludes from its coverage.”
The New Jersey Supreme Court has said that, in order to
overcome the presumption that the CFA applies to a covered activity, a court
must be satisfied that there’s a direct and unavoidable conflict between
application of the CFA and some other regulatory scheme, showing a legislative
intent not to subject parties to multiple regulations that will work at cross
purposes. Lyle Real v. Radir Wheels,
Inc., 198 N.J. 511 (2009). A mere
possibility of incompatibility is insufficient, given the importance of the CFA
in combating fraud.
The court found that the CFA and PLA claims weren’t
incompatible, at least not at this stage.
(Given the conclusion about “harm” here, how could they ever be as long
as Parker restricted its economic damages claims to the value of the trim
product itself?) The degree to which
consumers experienced damage to the PrimeTrim but not to adjacent materials was
as yet unclear. GP argued that the
damage to the PrimeTrim would eventually cause rot to the adjacent structures,
and “were damage to a class member's PrimeTrim to spread to adjacent property,
the claims may arguably be in direct conflict.”
But there was no indication “that the Legislature intended to foreclose
today's fraudbased remedies by providing a remedy for a tort-based harm which
may or may not materialize in the future.”
People who bought based on misrepresentations, but who hadn’t yet
experienced harm to adjacent materials, “would have to sit on their rights and
wait for the harm to spread to adjacent structures,” and that might bar relief
altogether based on complications of notice inquiry/tolling the statute of
limitations. (I would think that if they
didn’t have a complete cause of action today, the limitations period couldn’t
run, but New Jersey is weird about limitations periods.) Other cases have reasoned similarly, e.g., Rehberger
v. Honeywell, No. 11–0085, 2011 U.S. Dist. LEXIS 19616 (M.D. Tenn. Feb. 2011)
(“[T]he relevant harm was the plaintiff's decision to purchase the [product],
which was caused by the defendant's alleged misrepresentations and omissions,
not by the product. Indeed, this harm occurred before the plaintiff ever
operated the [product]. Because the plaintiff has not asserted any ‘product
liability’ claims, his claims are not subsumed by the PLA.”).
GP’s attack on Parker’s CFA standing was also premature. Parker alleged that it bought the product at
issue and suffered an injury in fact based on that purchase; its warranty claim
was denied. “Whether or not Parker will
need to amend the pleading … to identify an adequate subclass representative is
a question for another day.”
The court continued to find that Parker properly pled
unlawful affirmative acts, knowing misrepresentations and unconscionable
commercial practices under the CFA, but not regulatory violations. GP argued that no misrepresentations were
made to Parker, only to builders, subcontractors, and agents. But Parker alleged misrepresentations within
the 30-year express warranty, which was given to Parker; the allegations of
misrepresentations to others were part of explaining why the product was defective
and GP knew it. Specificity isn’t
required for specificity’s sake, but to put a defendant on notice of the precise
misconduct with which it is charged, and the allegations here did so.
Parker argued that the express warranty provided the crux of
its CFA claim; the court didn’t reach whether lack of privity with regard to
builders etc. would render the CFA inapplicable, but noted that the CFA explicitly
covered both direct and indirect acts. Perth Amboy Iron Works, Inc. v. Am. Home
Assur. Co., 226 N.J. Super. 200 (App. Div.1988), aff'd, 118 N.J. 249 (1990) (affirming
the CFA's coverage of “acts of remote suppliers, including suppliers of
component parts, whose products are passed on to a buyer and whose
representations are made to or intended to be conveyed to the buyer”).
Parker also sufficiently alleged knowing concealment of a
material fact with the intention that the consumer rely on the concealment.
Actual reliance wasn’t required, only a causal nexus between an unlawful act
and an ascertainable loss. New Jersey
implies a duty to disclose where that’s necessary to make a previous statement
true. The complaint clearly alleged that GP knew of the defect and that “GP's
senior sales personnel, over GP's own technical personnel's objections,
actively sought to conceal these facts, continued to advertise to the contrary,
and intentionally opted not to adopt available product improvements known to be
effective, solely due to cost.”
GP then argued that its conduct didn’t qualify as an
unconscionable commercial practice, one forbidden type of act in addition to
fraud/deception/misrepresentation.
Unconscionability is an amorphous concept. Breach of warranty isn’t per se
unconscionable without substantial aggravating circumstances. Relevant factors
include whether a supplier took advantage of a consumer’s inability to protect
her interests; whether the price was grossly excessive compared to market
prices; and whether the supplier made a misleading statement of opinion on
which the consumer was likely to rely to her detriment. This wasn’t clear before discovery, so the
court denied the motion to dismiss.
However, the court found that Parker hadn’t properly pled a
violation of the CFA due to regulatory violations; this kind of liability was
strict. Rather than alleging violations of regulations promulgated pursuant to
the CFA, Parker alleged that violations of other laws—here, the construction
code—were actionable.
New Jersey courts have found CFA claims actionable when
premised on violations of laws and rules independent of the CFA where the
conduct evidenced unconscionable commercial practice. But a violation of the
construction code in and of itself wasn’t actionable under the CFA. And Parker only vaguely and generally
asserted violations of parts of the code; this was inadequate.
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