Plaintiffs who fail to show they suffered an ascertainable loss from violations of the New Jersey Consumer Fraud Act are not entitled to attorney fees, the state Supreme Court held Thursday.
The court, in Perez v. Professionally Green, expanded on an earlier holding that denied attorney fees where CFA claims did not survive summary judgment. In this case, the claims were dismissed after the plaintiffs' proofs.
"The ruling reflects a correct balance between protecting consumers and protecting the rights of small businesses," says the winning attorney, Jerald Howarth of Parsippany. "The court here properly precluded an overreach of the [CFA] legislation, which would unfairly punish contractors who have fulfilled their contractual obligations.
"Fee-shifting statutes should never be read to provide attorneys' fees when a claim is without merit," he adds.
David Osterman, who concentrates in consumer fraud defense, says that if the ruling had gone the other way, "it would have represented an unwarranted expansion of the Consumer Fraud Act's remedies.
"It would have created a 'winner-pays rule' advanced by the plaintiffs," says Osterman, of the Princeton office of Goldberg Segalla. "Under the facts of this case, a ruling in the plaintiffs' favor would have been a big expansion of the CFA and would have represented a major tilt in favor of plaintiffs."
Plaintiffs Alex and Cathy Perez sought between $150,000 and $200,000 in legal fees they incurred in suing contractors who built their swimming pool. The couple claimed, among other counts, that Swim-Well Pools failed to note the pool construction's start and finish dates, as the CFA requires for home-improvement contracts, thereby preventing them from enjoying the pool in the summer of 2004.
Superior Court Judge Charles Powers partially granted summary judgment in the Perezes' favor, finding that Swim-Well did commit a technical violation of the CFA. But, after close of the plaintiffs' evidence at trial, he granted Swim-Well's motion for an involuntary dismissal of the start-and-end-dates claim, based on lack of evidence that the violation caused an ascertainable loss. The jury returned a no-cause verdict on negligence.
The Perezes made a post-trial motion for counsel fees under the CFA, which Powers denied.
Appellate Division Judges Robert Gilroy and William Nugent reversed, saying a partial summary judgment in the plaintiffs' favor satisfied the statute. The Supreme Court then agreed to hear Swim-Well's appeal.
Justice Anne Patterson, writing for the court, cited the precedent set in Weinberg v. Sprint, 173 N.J. 233 (2002): that CFA attorney fee awards require a bona fide claim of ascertainable loss.
"Although plaintiffs' claim for ascertainable loss was tested by a different motion from the summary judgment motion addressed in Weinberg, it fell short of a similar standard, and did not rise to the level of a bona fide claim within the meaning of [the CFA].
"The trial court never ruled that there was sufficient evidence for a rational factfinder to find in plaintiffs' favor but rather found, after plaintiffs' proofs at trial, that no rational factfinder could find an ascertainable loss," Patterson said. "Thus, in the procedural setting here, plaintiffs did not present a 'bona fide claim of ascertainable loss that raises a genuine issue of fact' within the meaning of Weinberg."
"The CFA's broad and essential remedial provision requires a private plaintiff to demonstrate that the CFA violation resulted in an ascertainable loss," Patterson concluded.
The Perezes' attorney, Montclair solo Edward Grossi, says that while he respects the ruling, "I'm disappointed the court did not take this opportunity to expand the protections afforded to consumers under the act." •