This week Law360 published an opinion piece by William J. Pinilis of PinilisHalpern LLP concerning our recent panel discussion of New Jersey’s Consumer Fraud Act and our overall efforts to reform the Act. As Mr. Pinilis notes, he was a member of the panel. It was a pleasure to host him and hear his well-expressed arguments then, and we are happy to continue this important policy discussion now.
On October 2, the New Jersey Civil Justice Institute and the American Tort Reform Association (ATRA) co-hosted a panel discussion on the New Jersey Consumer Fraud Act (CFA) featuring Emory University Law School professor Joanna Shepherd, and attorneys Gavin Rooney of Lowenstein Sandler and William J. Pinilis of Pinilis Halpern, who have experience pursuing and defending CFA claims in New Jersey. The discussion, which was moderated by former federal District Judge Dennis Cavanaugh, who is now of counsel at McElroy, Deutsch, Mulvaney & Carpenter, LLP, covered the evolution of the CFA, its current effectiveness, and what reforms, if any, the panelists would like to see in this area of law.
Our call for reform is not meant to “emasculate and invalidate” the CFA. We agree that fraudsters should be punished to the full extent of the law when a consumer is actually harmed by their bad acts. We do not, however, think honest businesses should be taken to court and made to pay attorneys’ fees when no consumer has suffered harm.
As NJCJI’s President Marcus Rayner noted in his own recent opinion piece, “When consumers suffer no actual harm, fee shifting only serves to encourage unnecessary litigation, discourage settlement and drive up the cost of litigation.”
The real debate is not about whether consumers should be protected from fraud – of course they should – the real debate is whether the courts should serve as an enforcement mechanism to regulate business through the CFA, or if the CFA should only be used to provide compensation for actual harm to consumers. We believe the latter is the more appropriate option.
We hope to continue this policy debate not only with Mr. Pinilis, but in the state legislature.
Sen. Oroho (R-24) and Asm. O’Donnell (D-31) have recognized that it is time to adopt some basic, technical changes that will make the CFA less onerous while still providing strong protections to consumers. Senate Bill 2293 and its companion, Assembly Bill 3497, have been introduced in the New Jersey Legislature to do just that. The bill would:
- Require plaintiffs to prove that they were aware of, and relied to their detriment on, an unlawful method, act, or practice when they purchased the product or service at issue;
- Limit the applicability of the CFA to transactions occurring in the State of New Jersey or to transactions with New Jersey residents;
- Limit the CFA’s applicability to actions and transactions not otherwise permitted or regulated by the FTC or any other federal regulator;
- Require consumers to ask for their money back or for the alleged fraud to be fixed prior to bringing suit;
- Allow the court discretion in awarding up to three time the amount of actual damages, as opposed to New Jersey’s current system of mandatory treble damages; and
- Prohibit the courts from awarding attorneys’ fees and court costs for “technical violations” of the CFA.
NJCJI strongly supports the common sense reforms embodied by this legislation.