Monday, April 20, 2009

Vehicle Retailer Held Liable Under Consumer Fraud Act for False Internet Ad

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

An out-of-state consumer was entitled to damages in a New Jersey Consumer Fraud Act (CFA) claim against an in-state seller of used vehicles that advertised over the Internet, according to the New Jersey Supreme Court. A lower court’s judgment and award of more than $25,000 in damages—plus attorneys’ fees and costs—was reinstated.

The consumer, living in Missouri, placed a bid for a used vehicle in an online auction run by the retailer, which was doing business in New Jersey. The online advertisement for the vehicle stated that the frame and convertible top were in good condition. The retailer spoke with the consumer on the telephone and stated that the car was in good enough condition to drive from New Jersey to Missouri.

After the consumer won the auction, the retailer informed the consumer that the car was probably not safe enough to drive across the country. The automatic headlights and windshield wipers did not work and the car lacked a spare tire. Nevertheless, the consumer paid for the car and had the retailer ship it to Missouri.

Once it arrived, the consumer had it inspected by a repair shop, which found that the frame was nearly rusted in half—thereby disqualifying it from registration in Missouri—and the top was in poor condition. The consumer filed a CFA claim in New Jersey against the retailer for losses sustained as a result of the allegedly false advertising.


At trial, the retailer asserted that he did not misrepresent the condition of the car and that, in any event, he was not a “dealer” subject to the reach of the CFA. The trial court found that, contrary to the advertisement, the car did not have a solid frame, the engine did not “run strong,” the headlights and windshield wipers did not function, the car had been owned by more than one person, and the radio was not original equipment.

It further found that the retailer qualified as a “dealer” under the CFA and that the retailer had violated the CFA by clear and convincing evidence. The trial court awarded $25,953 in trebled damages, $29,950 in attorneys’ fees, and $6,544 in costs.

The state appellate court dismissed the CFA claim on the ground that the trial court should have entered judgment for the retailer at the close of the consumer’s case instead of deferring consideration and hearing the retailer’s evidence. It did, however, award the compensatory damages of $8,651 under a common law fraud claim.

"Textbook" Claim

On review, the New Jersey Supreme Court found that the seller pled and proved a “textbook” CFA claim. The CFA prohibits any person from committing any unconscionable commercial practice, deception, fraud, or misrepresentation of a material fact in connection with the sale or advertisement of any merchandise.

The definition of “person” was “sufficiently expansive to ensnare [the retailer].” He could not claim that he was exempt from coverage as a member of a regulated industry or learned profession.

An assertion that the retailer was not a “dealer” subject to the CFA was unavailing. It was “simply irrelevant” whether the retailer qualified as a “dealer” within the state lemon law, which expressly stated that it did not limit rights or remedies under any other law. Accordingly, the Supreme Court reinstated the trial court judgment in all respects.

The April 8 decision is Real v. Radir Wheels, Inc., CCH State Unfair Trade Practices ¶31,802.

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