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New Jersey Consumer Fraud Act Can Apply in Business to Business Transactions

By Thomas W. Hartmann
The Hartmann Law Firm LLC
TheHartmannLawFirm.com; Tom.Hartmann@gmail.com; 908 769 6888


Business Consumers Can Sue Under Consumer Fraud Act. The New Jersey Consumer Fraud Act (the "CFA") can apply to business to business transactions, just as it applies to business to consumer transactions. The CFA prohibits "any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing concealment, suppression or omission of any material fact with intent that others rely upon such concealment, suppression or omission in connection with the sale or advertisement of any merchandise..." N.J.S.A. 56:8-2. The CFA defines "merchandise" as "any objects, wares, goods, commodities, services or anything offered, directly or indirectly to the public for sale." N.J.S.A. 56:8-1.

Nonetheless, New Jersey courts have closely scrutinized CFA claims brought by commercial enterprises or in connection with commercial enterprises. A business-entity consumer's ability to assert a CFA claim "hinges on the nature of [the] transaction, requiring case by case analysis." Papergraphics Int's., Inc. v. Correa, 389 N.J. Super. 8, 13 (App. Div. 2006); Hundred East Credit Corp. v. Schuster, 212 N.J. Super. 350, 357 (App. Div. 1986).

Transaction Should Involve Activities Generally Available to Public. New Jersey courts have construed the CFA's definition of merchandise as excluding transactions that are not generally capable of being sold "to the public." BOC Group, Inc. v. Lummus Crest, Inc. 251 N.J. Super. 271, 278 (Law Div. 1990). Where the merchandise that is the subject of the transaction is not of a type that is sold to the public at large, the claimant is not a "consumer" involved in a "consumer transaction," and the CFA is inapplicable. BOC Group, Inc. v. Lummus Crest at 278; R.J. Longo Construction Co., Inc. v. Transit America, Inc., 921 F. Supp. 1295, 1311-12 (D.N.J. 1996).

Highly Complex Matters are Generally Not within the Consumer Fraud Act. If the matter involves unique or highly complex matters, the courts have concluded that the CFA does not apply. BOC Group, Inc. v. Lummus Crest related to the design of a highly specialized and complex petroleum refining process. BOC Group, Inc. v. Lummus Crest at 271. In R.J. Longo v. Transit America, the issue involved highly specialized rail cars. R.J. Longo Construction Co., Inc. v. Transit America, Inc., 921 F. Supp. 1295 (D.N.J. 1996).

In Finderne Management Co., Inc. v. Barrett, 402 N.J. Super. 546, 552-54 (App. Div. 2008), plaintiffs claimed that defendants made representations concerning tax benefits that would result from participating in a complex, multiple employer welfare benefit plan being offered by defendants. When the plan did not result in the promised tax savings, defendants sued under the CFA. The trial court granted the defendants' motion for summary judgment, concluding that "an aggressive tax strategy ... hardly merits the protective cocoon of the CFA." Id. at 564. The Appellate Division affirmed, holding that the plan was "a device to shelter income from taxation" and "is not a consumer transaction as envisioned by the ... CFA." Id. at 572.

Even a complex commercial lease is not covered by the CFA. PIM Brands LLC v. Cabot Acquisitions, LLC, 2008 WL 5114467 (N.J. Super.) at 21. This was a multi-million dollar lease of 182,000 plus-square-foot manufacturing facility involving $1,000,000 in revenue, and experienced parties had engaged in months of negotiation.

In the case of Professional Cleaning and Innovative Building Services v. Kennedy Funding, 2009 WL 1651131 (D.N.J.), the plaintiff alleged unlawful business practices under the CFA in the context of non-traditional, alternative financing. The plaintiff engaged in the purchasing, leasing, and maintenance of commercial property. The court defined the defendants as "a New Jersey based lender of last resort" that provided "hard money financing. The court held that the transaction did not fall within the CFA. Not only were two commercial entities were involved, but the financing "offered to [the plaintiff] is not 'merchandise' was 'of the type sold to the general public...' Unlike the sale of credit to the general public, [the defendant-corporation] specializes in 'unconventional financing' where speed and attention to special circumstances are critical. ... This type of funding does not qualify as the sale of credit in the 'popular sense.'"

Standard Matters Involving Businesses Likely Covered by CFA. On the other hand, it would still seem that simple, standard contractual matters, leases, loans and other matters that are typically available to the general public will be covered by the Consumer Fraud Act, even if a business is the consumer.

The Hartmann Law Firm LLC can assist in determining whether a commercial business to business matter is one that can or should be covered by the CFA. Beyond this, we can help guide businesses through issues ahead of litigation or aggressively advocate in litigation and business disputes should the need arise.

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