Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: ADT secures dismissal of claims that it failed to provide residential alarm protection as promised, (Jul 24, 2015)

By Michael Menzhuber, J.D., LL.M.

A couple’s complaint that ADT LLC violated the New Jersey Consumer Fraud Act (NJCFA) by failing to provide alarm protection, as promised, at their home was dismissed by the federal district court in Camden, New Jersey. The court determined that the statement that the couple would receive the same system at their residence as they had at their business did not amount to an affirmative misrepresentation constituting an unlawful practice under the NJCFA (Berman v. ADT LLC, July 22, 2015, Kugler, R.).

Background. In 1997, Frederick and Sandra Berman received a proposal for a home security and fire alarm system from ADT. During negotiations, an ADT representative stated that they would receive the same security system as the one they had installed at their jewelry store. They accepted the proposal, which included additional equipment, installation cost, the monitoring service and a negotiated parts guarantee. Absent from the proposal was a “sound discriminator” and certain other equipment that was included in the security system contract for the couple’s jewelry store.

Several years after the couple executed the security system contract for their home, it was burglarized. As a result of the burglary, they sustained injuries, incurred medical expenses, and suffered a loss of property. The couple filed suit against ADT, alleging, in part, that ADT misrepresented the included equipment in their home security system in violation of the NJCFA. ADT then moved for summary judgment to dismiss the complaint.

NJCFA. To make out a prima facie case under the NJCFA, there must be evidence of: (1) an unlawful practice by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal relationship between the unlawful conduct and ascertainable loss. The court held that ADT did not violate the NJCFA because the alarm company did not engage in an unlawful practice.

The couple argued the ADT representative’s statement that they would receive the same security system as the one they had in their jewelry store amounted to an affirmative misrepresentation, constituting an unlawful practice under the NJCFA. The court, however, noted that, to constitute an unlawful practice, the affirmative misrepresentation must be: (1) a material statement of fact; (2) found to be false; and (3) made to induce the buyer to make the purchase.

Although the court determined that the representative’s statement was not “puffery” for purposes of being “material,” there was no evidence that it was material to their decision to install the security system. The court noted that Mrs. Berman specifically reviewed the itemized equipment in the proposal and negotiated the inclusion of additional equipment before entering into the contract. Also, the couple did not separately contract for the same monitoring service that they had in their jewelry store. The court determined that, based on these actions, the couple believed it to be at least important, and possibly even material, that they have different system in their residence than the system at their store. Because the court concluded that the couple was unable to demonstrate an unlawful practice from an affirmative misrepresentation, it was unnecessary to consider the second and third elements of an affirmative misrepresentation, falsity and inducement.

The court further concluded that, even if the couple had met their burden of materiality with respect to the representative’s statement, his statement was inadmissible under the parole evidence rule. It noted that, although there is a fraud exception to the parole evidence rule, the exception was inapplicable. His “same system” statement was not extraneous to the security system contract for the couple’s home because it was directly contradicted by the itemized features listed in the contract. Finally, the couple’s reliance on the representative’s statement was not justified because: (1) the contract for the security system was negotiated, rather than a boilerplate unilaterally prepared by a more sophisticated party; and (2) Mrs. Berman reviewed the contract and negotiated add-ons.

The case is No. 12-7705 (RBK/JS)

Attorneys: Thomas A. Shovlin (Riley & Shovlin, PA) for Frederic K. Berman. Charles Carson Eblen (Shook Hardy & Bacon LLP) for ADT LLC.

Companies: ADT LLC.

Cases: StateUnfairTradePractices NewJerseyNews