NJ Supreme Court Holds Consumer Fraud Act and Product Liability Act Claims Can Be Brought in Same Suit

In Sun Chemical Corporation v. Fike Corporation, (A-89-18/082815) (July 29, 2020),the New Jersey Supreme Court held that a Consumer Fraud Act (CFA) claim can be filed concurrently with a Product Liability Act (PLA) claim in the same complaint. “PLA and CFA claims may proceed in separate counts of the same suit, alleging different theories of liability and seeking dissimilar damages,” Justice Lee Solomon wrote.

NJ Supreme Court Holds Consumer Fraud Act and Product Liability Act Claims Can Be Brought in Same Suit

Facts of Sun Chemical Corporation v. Fike Corporation

The New Jersey Supreme Court considered, in response to a question of law certified to the Court by the United States Court of Appeals for the Third Circuit pursuant to Rule 2:12A-3, whether a Consumer Fraud Act (CFA) claim can be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act (PLA).

Sun Chemical Corporation (Sun) purchased an explosion isolation and suppression system (Suppression System) from Fike Corporation and Suppression Systems Incorporated (collectively, Fike) to prevent and contain potential explosions in its new dust collection system. On the first day that the Suppression System was operational, a fire occurred, and an alarm on the Suppression System’s control panel activated but was not audible. An explosion sent a fireball through the ducts of the dust collection system, injuring seven Sun employees and damaging Sun’s facility.

Sun brought a single-count complaint under the CFA in federal court alleging that Fike made oral and written misrepresentations about four aspects of the Suppression System: (1) the Suppression System would prevent explosions; (2) the Suppression System would have an audible alarm; (3) the Suppression System complied with industry standards; and (4) the system had never failed. The District Court granted Fike’s summary judgment motion, finding that Sun’s claims would be governed by the PLA and that it could not avoid the requirements of the PLA by crafting its claims under the CFA. Sun appealed, and after determining that extant New Jersey case law was not sufficiently on point to guide its determination of which of the two statutes to apply, the Third Circuit certified its questions to the Court, which the Court reformulated and accepted.

NJ Supreme Court’s Decision in Sun Chemical Corporation v. Fike Corporation

The New Jersey Supreme Court answered in the affirmative, concluding that PLA and CFA claims may proceed in separate counts of the same suit, alleging different theories of liability and seeking dissimilar damages.

“We conclude that, irrespective of the nature of the damages, a CFA claim alleging express misrepresentations — deceptive, fraudulent, misleading, and other unconscionable commercial practices — may be brought in the same action as a PLA claim premised upon product manufacturing, warning, or design defects. It is the nature of the claims brought, and not the nature of the damages sought, that is dispositive of whether the PLA precludes the separate causes of action,” Justice Solomon wrote. “In other words, the PLA will not bar a CFA claim alleging express or affirmative misrepresentations.”

In reaching its conclusion, the court acknowledged that there is no authority directly addressing the interplay between the CFA and PLA in the context of the case. “Nevertheless, their statutory language, legislative history, and this Court’s relevant jurisprudence regarding both statutes inform our answer to the question before us,” Justice Solomon wrote.

The New Jersey Supreme Court went on to explain that the CFA prohibits deceptive, fraudulent, misleading, and other unconscionable commercial practices in connection with the sale of any merchandise or real estate. In addition, the language of the CFA evinces a clear legislative intent that its provisions be applied broadly. Meanwhile, the PLA imposes liability upon the manufacturer or seller for a product’s manufacturing, warning, and design defects. Under the PLA, a claimant can recover damages against the manufacturer or seller of a product upon proof that the product causing the harm was not reasonably fit, suitable or safe for its intended purpose.

“The CFA and PLA are intended to govern different conduct and to provide different remedies for such conduct. There is thus no direct and unavoidable conflict between the CFA and PLA,” Justice Solomon wrote.

“The PLA governs the legal universe of products liability actions as defined in that Act, and the CFA applies to fraud and misrepresentation and provides unique remedies intended to root out such conduct,” Solomon further explained. “The failure to warn of a product defect is cognizable under the PLA, while an affirmative misrepresentation that a specific flaw did not exist, or a product had never failed may be brought under the CFA.”

According to the New Jersey Supreme Court, PLA and CFA claims may proceed in separate counts of the same suit, alleging different theories of liability and seeking dissimilar damages. Justice Solomon explained:

If a claim is premised upon a product’s manufacturing, warning, or design defect, that claim must be brought under the PLA with damages limited to those available under that statute; CFA claims for the same conduct are precluded. But nothing about the PLA prohibits a claimant from seeking relief under the CFA for deceptive, fraudulent, misleading, and other unconscionable commercial practices in the sale of the product. Indeed, the CFA is expressly “in addition to and cumulative of any other right, remedy or prohibition accorded by the common law or statutes of this State.” N.J.S.A. 56:8-2.13. Said differently, if a claim is based on deceptive, fraudulent, misleading, and other unconscionable commercial practices, it is not covered by the PLA and may be brought as a separate CFA claim.

The court went on to find that the nature of the action giving rise to a claim determines how a claim is characterized. Accordingly, it found that Sun “is mistaken in its heavy reliance on the nature of the damages it seeks, claiming they are economic losses rather than damages for injury to persons or property. As Justice Solomon explained: “The nature of the plaintiff’s damages does not determine whether the cause of action falls under the CFA or PLA; rather, it is the theory of liability underlying the claim that determines the recoverable damages.”

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