Business to Business Consumer Fraud
McLaughlin & Nardi’s New Jersey business attorneys represent businesses in all aspects of their legal needs, be it litigation, transactions, negotiations, advice – in short, all their legal needs. One of the most important areas of New Jersey business law is the Consumer Fraud Act.
The Consumer Fraud Act prohibits unconscionable commercial practices in the sale of “merchandise” to “consumers.” These can be overt acts of fraud, misrepresentations or omissions. In fact, except in the case of omissions, these acts do not even require intent to deceive to violate New Jersey’s Consumer Fraud Act. Because the Consumer Fraud Act provides for triple damages and requires losing side to pay the prevailing party’s attorneys fees and litigation expenses, the Consumer Fraud Act has serious teeth. It is an important element of New Jersey business law which no business can afford to ignore.
New Jersey’s Consumer Fraud Act protects transactions in which both parties are business entities, provided that the merchandise is held for sale to the public – not that it has widespread appeal, but that anyone or any business could buy it if they had the need, resources or desire.
In the seminal 2019 case of All the Way Towing, LLC v. Bucks County International, Inc. the New Jersey Supreme Court affirmed the applicability of the Consumer Fraud Act to business to business transaction. The facts of the case demonstrate the reach of the Act. In that case, the buyer was a towing company organized as a limited liability company. It purchased an all wheel truck from one company, and as part of the purchase specified that a specific tow package manufactured by a third company had to be installed on the back of the truck. When the third company received the truck it found that the tow package couldn’t be installed as manufactured, but had to be modified for installation. When the truck was delivered to the buyer four separate times it was found that the truck always had defects and could not work as intended. The buyer therefore finally rejected the truck and demanded its deposit back. When the seller refused the tow company sued for, among other things, violation of the Consumer Fraud Act. The case wound its way on appeal to the New Jersey Supreme Court. The Supreme Court rejected the defendants arguments that because the truck and tow package were modified at the customer’s insistence, the truck and tow package were not covered by the Consumer Fraud Act. However, the Supreme Court rejected this argument and held that because any member of the public could have ordered the truck and tow package, it was “merchandise” covered by the Consumer Fraud Act. The Court then established a test to be applied to determine when merchandise is covered by the Consumer Fraud Act in business to business transactions. Courts will need to examine:
(1) the complexity of the transaction, taking into account any negotiation, bidding, or request for proposals process; (2) the identity and sophistication of the parties, which includes whether the parties received legal or expert assistance in the development or execution of the transaction; (3) the nature of the relationship between the parties and whether there was any relevant underlying understanding or prior transactions between the parties; and, as previously noted, (4) the public availability of the subject merchandise.
Our business attorneys have significant experience in both prosecuting and defending claims of consumer fraud. Call us at (973) 890-0004, or fill out the contact form on this page to arrange a consultation with one of our attorneys. We can help.