August 12, 2020
On July 29, 2020, New Jersey’s Supreme Court issued a decision in the matter of Sun Chemical Corp. v. Fike Corp., 2020 N.J. LEXIS 880 (2020). The decision was issued in response a question of law certified by the United States Court of Appeals for the Third Circuit, which was “whether a Consumer Fraud Act [“CFA”] claim [can] be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act.” Ultimately, the Court concluded that “irrespective of the nature of the damages, a CFA claim alleging express misrepresentations — deceptive, fraudulent, misleading, and other unconscionable commercial practices — may be brought in the same action as a PLA claim premised upon product manufacturing, warning, or design defects.”
The case arose from Sun Chemical Corporation’s purchase of an explosion isolation and suppression system to prevent and contain potential explosions in a newly-installed dust collection system. This was purchased from the defendant, Fike Corporation (and a similarly situated entity). On the first day of the new system’s operation, a fire occurred in the dust system and a warning light on the suppression system was activated, but no audible alarm activated. The fire ultimately caused an explosion that injured seven employees and caused property damage to Sun Chemical’s facility.
Sun Chemical Corp. filed a lawsuit under New Jersey’s Consumer Fraud Act, alleging that oral and written misrepresentations were made by Fike, including that: (1) the suppression system would prevent explosions; 2) the suppression system would have an audible alarm; 3) the suppression system complied with industry standards; and 4) the system had never failed. The trial court ultimately dismissed the lawsuit on a motion for summary judgment, finding that Sun’s claims were governed under New Jersey’s Products Liability Act, and holding that “a plaintiff may not avoid the requirements of the PLA by artfully crafting its claims under the CFA.” The Third Circuit, on appeal, noted that the plain text of the Consumer Fraud Act seemed “potentially hospitable” to the claims of Sun Chemical, even though the damages caused by any misrepresentations by the defendant involved personal injuries and property damage.
Sun argued that the damages it sustained were not caused by defects in the products, but by misrepresentations. As such, even though their damages were “physical damage to property,” which is a “harm” that is specifically identified in the Products Liability Act, Sun contended that the Products Liability Act was simply not applicable to the wrongs purportedly committed by Fike.
Reviewing the statutory history of the Consumer Fraud Act, the Court noted that it was passed as a remedial statute and was intended to be applied broadly. Moreover, by the plain terms of the CFA, its remedies were intended to be “in addition to and cumulative of any other right, remedy or prohibition accorded by the common law or statutes” of New Jersey.
The Products Liability Act, on the other hand, was enacted to provide clear rules in actions for damages for harms caused by products. The statute specifically imposed liability upon a manufacturer or seller of a product for a product’s manufacturing defects, warning defects, and design defects. It authorizes the recovery of damages against manufacturers and sellers upon proof that the product causing the harm was not reasonably fit, suitable, or safe for its intended purpose.
The Court noted that each act was intended to govern different conduct and to provide different remedies for such conduct. There was no direct or unavoidable conflict between the statutes. As such, the Court acknowledged that a plaintiff could plead violations of the CFA for deceptive, fraudulent, misleading, and other unconscionable commercial practices, in separate counts of the same pleading as a Product Liability Act claim.
For more information on this topic, please contact MKCI’s Tom Emala.