Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—DNJ: New Jersey Products Liability Act Does Not Subsume Consumer Fraud Claims for Defective Exterior Trim, (May 22, 2013)

By Pamela C. Maloney, J.D.

The New Jersey Product Liability Act (PLA) did not subsume Consumer Fraud Act (CFA) claims brought on behalf of a subclass of consumers seeking economic losses arising from the use of exterior trim that was allegedly defectively designed and manufactured, the U.S. District Court for the District of New Jersey determined (Francis E. Parker Memorial Home, Inc. v. Georgia-Pacific LLC, May 20, 2013, Debevoise, D.).

Background. A company that constructed a large assisted living facility using an exterior trim designed, manufactured, warranted, advertised, and sold by Georgia-Pacific, brought a consumer class action on behalf of itself and all New Jersey persons and entities who own a home or other structure on which the manufacturer’s exterior trim was installed. The complaint alleged causes of action under both the New Jersey PLA and the CFA, as well as breach of warranty claims. Generally, the construction company alleged that the manufacturer of the trim misrepresented the quality of its products, thereby causing fraud- and tort-base harm resulting in damages to consumers. The class action identified a damages class and an economic loss damages subclass, as well as a declaratory relief class. The manufacturer sought dismissal of the CFA claims arguing that they were subsumed by the PLA.

Economic damages under CFA and PLA. The CFA claims were raised only by the economic damages subclass, which was comprised of purchasers of the trim who had only experienced damage to the product itself and not its supporting materials. If successful, the members of the subclass could recover treble damages—including economic losses—and reasonable attorneys' fees. On the other hand, the PLA explicitly exempts economic losses in its definition of harm, which allows for “physical damage to property, other than to the product itself.” In applying the holdings of both state and federal decisions that have considered this issue, the court determined that the CFA and PLA claims were not incompatible in this case, at least at the preliminary stage of review while discovery was ongoing. While both the damages class and the economic damages subclass might be related, they were distinct, the court explained, and it was not yet certain the factual degree to which consumers in the subclass might have experienced damage to the exterior trim but not to adjacent materials. The court went on to suggest that if the damage to the trim did extend to adjacent property, the claims could be in direct conflict. However, there was no indication that the state legislature intended to foreclose the subclass’s fraud-based remedies by providing a remedy for a tort-based harm that might or might not materialize in the future. To do so would require the class members to sit on their rights and wait for the harms arising out of the manufacturer’s misrepresentations to spread to adjacent structures. As a result, the subclass members could be barred from receiving relief altogether, as complications relating to notice inquiry and the tolling of the statute of limitations would affect the class member’s ability to proceed with their claims. Recognizing that the number of class members pursuing either claim might change as the case progressed, the court concluded that changes of this type did not imply the subclass should be barred from pursuing the CFA claims at this point in the proceedings. According to the court, had the legislature intended for one statute to replace or limit the remedy available under the other statute, it could have done so. Therefore, the PLA was not dispositive of claims involving consumer fraud, as the statutes relate to distinct harms and remedies, the court concluded.

The case number is: 2:12-CV-02441 (ES).

Attorneys: Jessica E. Vertullo (Parker Waichman LLP) for Francis E. Parker Memorial Home, Inc.; John T. Chester (Porzio, Bromberg & Newman, P.C.) for Georgia-Pacific LLC

Companies: Francis E. Parker Memorial Home, Inc.; Georgia-Pacific LLC; Georgia-Pacific Wood Products LLC

Cases: StateUnfairTradePractices NewJerseyNews