Business Protections in Consumer Protection Laws

Not all consumer protection laws protect only non-commercial consumers. Some also protect businesses and, therefore, present an avenue for collecting attorney fees in situations where no such relief would be available in a straight forward breach of contract action. An example of this is found in New Jersey in a grouping of statutes titled “Frauds, Etc., in Sales or Advertisements of Merchandise,” which is more commonly referred to as the “Consumer Fraud Act,” or “CFA.

Among other things, the CFA provides, a cause of action for “unconscionable commercial practice, deception fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission of any material fact with the intent that others rely on such concealment suppression or omission, in connection with the sale or advertisement of any merchandise or real estate ….” Notably, unlike a cause of action for common law fraud, reliance on the deceptive behavior need not be shown before recovering damages under the “CFA.”

A prevailing CFA plaintiff (which includes a defendant that raises a CFA action as a counterclaim) will be awarded triple actual damages and costs of suit, including attorney fees. This can be good news for businesses as well as individual consumers because New Jersey state courts have held that the CFA does not exclude business from the protected class. Rather, the key determination as to a plaintiff’s ability to seek relief under the CFA rests on whether the transaction complained about goes to the sale or advertisement of merchandise or real estate, and whether the thing sold was offered for sale to the general public. In that regard, the purchase of a new franchise (but not of an ongoing business) and renovation services purchased by businesses have been found to fall under the CFA.

The take away point, is that business looking at a breach of contract action, where the contract does not provide for an award of attorney fees, should check to see if they can take advantage of the consumer protection law of their jurisdiction. If they can get into federal court (on diversity jurisdiction) they should see how the statute is interpreted in both the state and federal courts, because the state courts and federal courts will sometimes interpret the state’s laws differently. For example, federal courts in New Jersey are less likely than state courts to allow business to bring an action under the CFA.

The information contained in this blog is not legal advice and should not be relied on as such. For legal advice or for answers to specific questions, please contact the blog's author.