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New Jersey courts are wont to wax liberal in applying the state’s Consumer Fraud Act – one of the nation’s toughest laws against disreputable sale practices. Any sale of consumer goods usually qualifies for the Act’s protection and may trigger its weighty treble-damages penalty. But one appeals panel has rethought that propensity for broad interpretation, ruling that consumer goods purchased with the intention of resale do not fall within the law’s aegis. Thus, the corporate buyer of 5,000 Epson ink-jet printer cartridges over the Internet from a liquidation warehouse should not have recovered $238,206 in treble damages when the items turned out to be counterfeit. “[A]lthough plaintiff purchased a common consumer product, plaintiff was not a ‘consumer’ under the CFA and the nature of this sale demonstrates it was not the type of ‘consumer transaction’ covered by the statute,” the panel wrote Tuesday in Papergraphics Intl. Inc. v. Liquidation Direct Inc., A-0360-05. “The quantity of goods purchased, along with the purpose of the purchase, belies CFA application.” The ruling appears to part company with earlier New Jersey decisions that focused on the nature of the goods – not the character of the buyer or the intended use – in judging the applicability of the Consumer Fraud Act, N.J.S.A. 56:8-01. In Marascio v. Campanella, 298 N.J. Super. 491 (App. Div. 1997), for example, an appeals court cited a long line of cases holding that “so long as the disputed contract involves goods or services generally sold to the public at large, the mere fact that a corporation purchases the goods for use in its business does not preclude invocation of the Act.” But in Papergraphics, Appellate Division Judges Howard Kestin, Ronald Graves and Marie Lihotz opted instead to follow federal court cases holding that a wholesale buyer of goods intended for resale is not a “consumer,” and the sale is a nonconsumer transaction outside the ambit of CFA protection. The panel partially reversed Morris County Superior Court Judge Stephen Smith Jr.’s grant of summary judgment to the plaintiff, saying that “notwithstanding a broad and liberal reading of the statute, . . . CFA applicability hinges on the nature of a transaction, requiring a case by case analysis.” Smith had not looked at the nature of the transaction but only at the nature of the goods and at evidence – supplied by a plaintiff expert’s testimony – that they were counterfeit. The plaintiff’s lawyer, Craig Ollenschleger of Orloff, Lowenbach, Stifelman & Siegel in Roseland, says that not until the appeal did the defense argue that CFA remedies were unavailable because the goods were not purchased for the plaintiff’s own use. The appeals judges seemed swayed by the fact that the transaction was between merchants, noting that “the parties were experienced commercial entities of relatively equal bargaining power which engaged in negotiated contracts.” Plaintiff Papergraphics International Inc. is a New Hampshire company that sells toner and developer for copy machines. Defendant Liquidation Direct Inc. advertised computer goods for wholesale distribution through its Web site, Liquidationdirect.com. Papergraphics “was not an unsophisticated buyer, suffering a disparity of industry knowledge” and thus denying relief under the CFA “will not thwart the central purpose of the legislation,” Lihotz wrote for the panel. Defense counsel Salvatore Salibello, a Morristown solo, says he is pleased that the treble damages were overturned. Ollenschleger says he and his client have not yet decided whether to seek state Supreme Court certification.

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