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Business Owners Can be Sued Personally Under the New Jersey Consumer Fraud Act

Business Owners Can be Sued Personally Under the New Jersey Consumer Fraud Act

By Thomas W. Hartmann
The Hartmann Law Firm LLC
[email protected]; 908 769 6888

The New Jersey Consumer Fraud Act (“CFA”) may be the most powerful consumer protection act in the country. It protects consumers against fraud, misrepresentations, omissions and unconscionable commercial practices. Should an entity or merchant who provides services violate the principles of the CFA, that entity or merchant is potentially liable for triple the damages (or ascertainable loss) of the consumer and the consumer's attorney fees.

Business owners may think that they are personally protected from the CFA if they have dealt with the consumer through a business entity such as a corporation or limited liability company. This is not necessarily so.

A business owner, not just the business, is considered a “person” under the CFA and is subject to personal liability as outlined by the New Jersey Supreme Court in Allen v. V and A Bros., Inc., 208 N.J. 114, 131 (2011). As an overarching principle, the Allen Court stated:

In light of the broad remedial purposes of the CFA and the expansive sweep of the definition of ‘person,' it is clear that an individual who commits an affirmative act or a knowing omission that the CFA has made actionable can be liable individually. Although the statute would also impose liability on the individual's corporate employer for such an affirmative act, there is no basis on which to conclude that the statute meant to limit recourse to the corporation, and thereby to shield the individual from any liability in doing so.

In discussing individual liability further, the Allen Court noted, particularly as to the Home Improvement Practices regulations at issue there, “a distinction can be drawn between the principals of the corporation and its employees. The principals may be broadly liable because they are the ones who set the policies…” Allen v. V and A Bros., Inc., 208 N.J. 114, 134.

According to the Court, the concept of individual liability does not violate statutory protections of the Business Corporation Act, which might shield a business owner from liability under traditional piercing the corporate veil theories. Allen v. V and A Bros., Inc., 208 N.J. 114, 135.

If you are a business owner, you should be particularly cautious to insure that both you and your business fully comply with obligations under the CFA, starting with the initial meeting with the consumer, drafting the contract and complying with the CFA through the course of performance. From a business management perspective, it may be wise to consult with counsel to insure that your contract and standard practices meet your obligations under the CFA.

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At the Watchung office of The Hartmann Law Firm LLC, attorney Tom Hartmann represents clients across New Jersey to advance their business, commercial, and personal goals when legal issues arise. We are responsive, communicative, and fully dedicated to your needs. Attorney Tom Hartmann represents clients across New Jersey, including Westfield, Plainfield, Berkeley Heights, Basking Ridge, Bernardsville, Edison, Piscataway, North Brunswick, East Brunswick, Sayreville, New Brunswick, Union, Elizabeth, Orange, East Orange, Morristown, Livingston, Scotch Plains, Summit, Mountainside, Springfield, Watchung, Union County, Somerset County, Middlesex County and Morris County, New Jersey. You can use the contact form, email me at [email protected] or call me on on my cell (203 451 6919).