The internet is up in arms over a news story from Boston.com detailing the harassing emails Ben Edelman, a lawyer and associate professor at Harvard Business School, sent to a family owned Chinese restaurant over a $4 overcharge. His aggressive attack shocked the conscious of the internet, but his actions are not at all surprising to those of us who have been paying attention to how consumer fraud laws have been distorted in recent years to the detriment of small business.
Demands like those made by Edelman are becoming increasingly more common. There are certain attorneys in New Jersey that spend the majority of their time finding ways to sue businesses for Consumer Fraud Act (CFA) violations. Why are these cases so enticing?
- Over the years, the CFA has been amended by the legislature and expanded by the courts into an enormous and unwieldy piece of legislation. Compliance is difficult, especially for New Jersey’s small businesses, so it is easy to find a business who is violating some part of the law.
- Plaintiffs do not have to prove that defendants actually defrauded or deceived them to recover damages or attorney’s fees. In many cases a technical violation will suffice.
- If the plaintiff wins, they get triple the amount of any damages they can show, and the attorney gets all their fees paid for by the defendant.
Most big companies have whole teams of people keeping them out of trouble, but small businesses, like the restaurant Edelman attacked, do not, making them easy targets.
One of NJCJI’s top priorities this session is adopting some basic, technical changes that will make the CFA less onerous while still providing strong protections to consumers. NJCJI urges the legislature to:
- Limit the CFA to transactions occurring in the State of New Jersey or to transactions with New Jersey residents.
- Require plaintiffs to prove that they relied on the misrepresentation when they purchased the product or service.
- Require consumers to ask for their money back or for the alleged fraud to be fixed prior to bringing suit.
- Limit the award of attorney’s fees and costs to those fees reasonably attributable to the CFA claim.
- Allow the court discretion in awarding treble damages, as is common in other states.
- Limit the CFA’s applicability against industries that are already subject to the Federal Trade Commission and other regulatory structures.
Please contact us if you would like to help us stand up for the little guy and make New Jersey’s Consumer Fraud Act more manageable.
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