Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Consumer fraud claims against Samsung over Energy Star labels dismissed, (Jul 15, 2013)

By Jody Coultas, J.D.

An Arizona resident failed to state a New Jersey Consumer Fraud Act (CFA) claim against Samsung Electronics America, Inc. for misrepresenting that its refrigerators were energy efficient, according to the federal district court in Newark. The court also dismissed a similar Maryland refrigerator purchaser’s Maryland Consumer Protection Act (CPA) claim (Avram v. Samsung Electronics America, Inc., July 11, 2013, McNulty, K.).

Purchasers in Arizona and Maryland bought Samsung refrigerators from Lowe’s Home Center, Inc. that were affixed with Energy Star labels indicating that the refrigerators met certain standards of energy efficiency. The Department of Energy found that the refrigerators had failed DOE tests for the Energy Star program. The purchasers allegedly that they did not receive the benefit of the Energy Star bargain, and paid a price premium for what purported to be an Energy Star product but did not receive the energy savings they had paid for.

Courts apply the choice of law rules of the forum state in a diversity action to determine what law will govern the substantive issues of a case. New Jersey uses the most significant relationship test. Under the test, the court must determine whether a conflict actually exists between the potentially applicable laws. If a conflict exists, the court must determine which state has the ‘most significant relationship’ to the claim.

The Arizona purchaser could not state a CFA claim against Samsung because Arizona’s consumer protection law applied to the claims, according to the court. In its choice-of-law analysis, the court noted that the state laws conflicted. The Arizona law requires reliance, has a one-year statute of limitations, does not permit treble damages, and allows only the attorney general to collect attorney fees. The CFA does not require reliance, has a much longer statute of limitations, imposes treble damages, and provides an attorney fee award. The purchaser received and relied upon the Energy Star logo in Arizona, purchased the refrigerator there, used the refrigerator there, and performance of the contract occurred there. These factors outweighed the fact that Samsung was located in New Jersey.

Because the Maryland purchaser failed to allege reliance, the court dismissed the CPA claim. First, the court noted that Maryland law applied to the claims. The CPA prohibits unfair or deceptive trade practice such as false or misleading oral or written statements or other representations that have the capacity to mislead. A consumer relies on a misrepresentation when the misrepresentation substantially induces the consumer’s choice. The Maryland purchaser failed to sufficiently allege that the Energy Star logo substantially induced her to purchase the refrigerator. There was no evidence that she decided to purchase the refrigerator because of its Energy Star qualification or that she had limited her search to Energy Star-qualified refrigerators.

The cases are Nos. 2:11-6973 (KM) and 2:12-976 (KM).

Attorneys: Antonio Vozzolo (Faruqi & Faruqi, LLP) for Lynne Avram. James J. O'Hara (Graham Curtin, P.A.) for Samsung Electronics America, Inc.

Companies: Samsung Electronics America, Inc.; Lowe’s Home Center, Inc.

Cases: StateUnfairTradePractices NewJerseyNews