New Jersey Supreme Court Clarifies Consumer Fraud Act

In All the Way Towing, LLC v. Bucks County Int’l, Inc., (A066/67-17) (Decided January 24, 2019), the Supreme Court of New Jersey held that the Consumer Fraud Act’s (CFA) definition of “merchandise” should be liberally construed. It went on to hold that the definition extends to a customized tow truck.

Facts of All the Way Towing, LLC v. Bucks County Int’l, Inc.

Chayim Goodman is the sole owner of plaintiff, All the Way Towing, LLC (ATW) (Goodman and ATW collectively, plaintiffs). In or around November 2010, plaintiffs sought to purchase a medium-duty tow truck with all-wheel drive because ATW was interested in securing a contract that required medium-duty towing capability.

Goodman stated that, after conducting online research, he decided to purchase an “International” brand truck from defendant, Bucks County International, Inc. (BCI),

with an installed Dynamic 801 model autoloader tow body manufactured by co-defendant Dynamic Towing Equipment and Manufacturing, Inc. (Dynamic). Goodman contacted a salesman at BCI, Herb Krewson, and they spent “a couple of months” negotiating options and pricing.

BCI and ATW signed a ten-page contract, dated February 3, 2011. The contract between BCI and ATW contains a list of specifications, which were to be included in the truck chassis prepared at the Navistar factory, and included the cost of attaching a Dynamic 801 rig model to the truck. Goodman testified that he was aware that the truck was to be custom-built according to his requested specifications. According to the contract, the overall estimated cost of the outfitted truck was $166,089.27. ATW paid BCI a $10,000 deposit.

After BCI delivered the truck to Dynamic, Dynamic discovered that its tow body was incompatible with the truck, prompting Dynamic to make modifications to the towing unit. Goodman testified that defendants attempted to deliver the truck with the tow rig to ATW on four occasions. Each time, ATW identified deficiencies with the truck and/or the towing rig. After the fourth attempted delivery, ATW rejected the truck and wanted a refund of the deposit. When BCI refused to return ATW’s $10,000 deposit, plaintiffs filed a lawsuit, which included a CFA claim.

Legal Background in All the Way Towing, LLC v. Bucks County Int’l, Inc.

The CFA prohibits unconscionable commercial practices, deception, and fraud “in connection with the sale or advertisement of any merchandise.” The CFA defines “merchandise” to “include any objects, wares, goods, commodities, services or anything offered, directly or indirectly to the public for sale.”

The trial court dismissed the CFA count on defendants’ motion for summary judgment. The court determined that the truck’s custom design caused the product not to fit within the definition of merchandise, and thus, the CFA did not apply. The Appellate Division reversed, concluding that the customized truck with towing rig met the definition of merchandise under the CFA.

In reaching its holding, the Appellate Division distinguished two prior Appellate Division cases cited by defendants and plaintiffs — Princeton Healthcare System v. Netsmart New York, Inc., 422 N.J. Super. 467 (App. Div. 2011), and Finderne Management Co., Inc. v. Barrett, 402 N.J. Super. 546 (App. Div. 2008) — where products were determined not to be a “sale of merchandise” because “the goods and services sold there were ‘complex.’” Finally, because the trial court did not reach the issue, the panel declined to determine whether plaintiffs had established the elements of a CFA claim and could therefore survive summary judgment, instead remanding the case for the trial court to make that determination first.

New Jersey Supreme Court’s Decision in All the Way Towing, LLC v. Bucks County Int’l, Inc.

The New Jersey Supreme Court affirmed. “The customized tow truck and rig fit within the CFA’s expansive definition of “merchandise’ and, therefore, plaintiff’s CFA claim should not have foundered based on an application of that term,” the court held.

In reaching its decision, the court emphasized that New Jersey courts have consistently recognized that the CFA must be liberally construed and that the CFA is applicable to commercial transactions. Nonetheless, the court noted that context is important. It also clarified that it was not suggesting that all business-to-business transactions fit the intendment of a sale offered to the public.

With respect to custom-made goods, the court noted that several cases have already recognized that the CFA may apply. Thus, neither the commercial setting of a transaction nor a customization of an item removes a transaction from the CFA’s reach. However, a more nuanced assessment can be required to determine whether a transaction, good, or service is of the type offered to the public, bringing it within the CFA.

To promote consistency in assessing the nature of a transaction in a business-to-business setting for purposes of determining whether the CFA will apply to the merchandise, the New Jersey Supreme Court adopted the following considerations for use by New Jersey courts: (1) the complexity of the transaction, taking into account any negotiation, bidding, or request for proposals process; (2) the identity and sophistication of the parties, which includes whether the parties received legal or expert assistance in the development or execution of the transaction; (3) the nature of the relationship between the parties and whether there was any relevant underlying understanding or prior transactions between the parties; and, as previously noted, (4) the public availability of the subject merchandise.

In this case, the court determined that the customization did  not remove the product from the CFA’s definition of “merchandise.” In support, the court stated:

Simply because identically customized tow trucks are not typically sold to the “public at large” does not mean the trucks are not offered “to the public for sale.” Here it was a direct consumer purchase transaction; no attorneys or other experts were involved. Similarly, it is irrelevant that the “public at large” does not purchase International trucks onto which a Dynamic 801 tow unit is installed. The relevant point is that a member of the public so inclined could purchase an operational tow truck consisting of a Dynamic 801 tow body installed onto an International chassis.

Finally, the New Jersey Supreme Court also affirmed the appellate panel’s remand to the trial court for a determination of whether defendants’ other bases for seeking summary judgment are meritorious.

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