Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D.N.J.: Products liability law did not extinguish consumer fraud claims against fire protection system maker, (Mar 4, 2015)

By Pamela C. Maloney, J.D.

Consumer fraud claims based on misrepresentations regarding the suitability of a fire explosion and protection system were not subsumed by the New Jersey Products Liability Act (NJPLA), a federal district court in New Jersey ruled in a decision not designated for publication. According to the court, the essential nature of allegations did not appear to involve traditional products liability claims of manufacturing defect, design defect, or failure to provide adequate warnings or instructions (Sun Chemical Corp. v. Fike Corp., March 2, 2015, Hochberg, F.).

Background. Sun Chemical’s U.S. Ink Division purchased an explosion suppression/isolation system instead of a venting system for its ink manufacturing facility from Fike Corporation and Suppression Systems Inc., allegedly on the basis of the marketing materials and information provided by Fike and Suppression. On the first full day of regular operations for the new system, a fire allegedly ignited in the dust collection system. In response, the newly installed explosion protection system was triggered, releasing pressure and suppressant agent into the dust collection system, which allegedly resulted in a fire and an explosion. According to Sun’s allegations, the suppressant agent from the isolation unit failed to adequately infiltrate the ducting that contained combustible material and also failed to suppress and isolate the fire. The fire and explosion injured several workers and damaged the facility.

Sun sought recovery for damages under the New Jersey Consumer Fraud Act (CFA) alleging that it had sought advice from Fike and Suppression Systems as to the suitability of particular explosion suppression systems and the these two companies had represented that an explosion suppression system would be suitable for Suns’ needs and that explosion venting was unnecessary. Fike and Suppression Systems moved to dismiss the consumer fraud claims on the ground that they were subsumed by New Jersey’s comprehensive products liability statute.

New Jersey Products Liability Act. The NJPLA provides the sole method for pursuing a product liability action and subsumes any cause of action for harm caused by a product, irrespective of the theory underlying the claim, except for actions for harm caused by breach of an express warranty. New Jersey courts have concluded that despite the broad reach of the CFA, the NJPLA subsumes all common law and statutory fraud claims, as long as the harm alleged was caused by a product and the essential nature of the fraud claim was “that the product was not reasonably fit, suitable or safe for its intended purpose because it either contained a manufacturing defect, failed to contain adequate warnings or instructions, or was designed in a defective manner.”

Exceptions to scope of NJPLA. The federal district court pointed out that New Jersey courts have carved out several exceptions to the scope of the NJPLA, including an exception for claims that a seller purportedly misrepresented the suitability of a product. However, the court cautioned, a claim will not survive merely because it is labeled as “representation-based” if the core of the issue was that there was in fact a danger inherent in the product.

In this case, Sun alleged that Fike and Suppression Systems represented that: (1) the benefit of the suppression/isolation system was that an explosion was contained within the unit and deflagration was extinguished; (2) the system decreased the severity of an explosion to safe levels and prevented catastrophic destruction; (3) chemical isolation prevented pressure piling and a secondary explosion; (4) the suppression system extinguished the flame within the dust collector, preventing fire damage; (5) the system prevented possible death or injury to personnel; (6) the system minimized costly replacement and/or repair of the dust collector; (7) the system protected profits by reducing lengthy plant shutdown and loss of product; (7) the explosion venting system was not necessary as a result of the installation of the explosion suppression system; and (8) the suppression system released agent into any interconnected ducting which contained combustible material to prevent flame propagation. Sun further alleged that it relied on these representations. Sun did not allege that the suppression system was flawed or defective in design or manufacture or that Fike and Suppression Systems failed to warn Sun of any dangers associated with the product.

Based on these allegations, the court could not say that the core issue raised was the harmfulness of the product as distinguished from representations regarding suitability, installation, and testing. Therefore, at this stage in the proceedings, the CFA claims were not incompatible with the NJPLA and motion to dismiss the complaint was denied.

The case is Civil Case No. 13-4069 (FSH).

Attorneys: John McGahren (Morgan Lewis & Bockius, LLP) for Sun Chemical Corp. Gino Peter Mecoli (Reilly Janiczek & McDevitt PC) for Fike Corp., and Suppression Systems Inc.

Companies: Sun Chemical Corp.; Fike Corp.; Suppression Systems Inc.

Cases: StateUnfairTradePractices NewJerseyNews