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Leon v. Rite Aid Corp.

May 30, 2001

MARITZA LEON, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT,
v.
RITE AID CORPORATION, AND RITE AID OF NEW JERSEY, INC., DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Mercer County, L-0297-00.

Before Judges Kestin, Ciancia and Alley.

The opinion of the court was delivered by: Ciancia, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued May 8, 2001

Plaintiff Maritza Leon's consumer fraud complaint was dismissed with prejudice for failure to state a claim upon which relief could be granted. R. 4:6-2(e).*fn1 She appeals and we reverse.

As detailed subsequently, plaintiff's complaint alleged that defendants Rite Aid Corporation and Rite Aid of New Jersey, Inc. (collectively Rite Aid), violated the New Jersey Consumer Fraud Act. Rite Aid advertised that its merchandise, including prescription drugs, was sold at the lowest and best prices when, in fact, different prices were charged to different customers for the same prescription drugs and Rite Aid's own list prices were increased for certain kinds of transactions.

Initially, we emphasize the indulgent standard under which a plaintiff's complaint is evaluated when it is contended that a cause of action has not been stated:

We approach our review of the judgment below mindful of the test for determining the adequacy of a pleading: whether a cause of action is 'suggested' by the facts. Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988). In reviewing a complaint dismissed under Rule 4:6-2(e) our inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint. Rieder v. Department of Transp., 221 N.J. Super. 547, 552 (App. Div. 1987). However, a reviewing court 'searches the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.' Di Cristofaro v. Laurel Grove Memorial Park, 43 N.J. Super. 244, 252 (App. Div. 1957). At this preliminary stage of the litigation the Court is not concerned with the ability of plaintiffs to prove the allegation contained in the complaint. Somers Constr. Co. v. Board of Educ., 198 F.Supp. 732, 734 (D.N.J. 1961). For purposes of analysis plaintiffs are entitled to every reasonable inference of fact. Independent Dairy Workers Union v. Milk Drivers Local 680, 23 N.J. 85, 89 (1956). The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach. [Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989).]

The continuing viability of these precepts is not open to question. F.G. v. MacDonell, 150 N.J. 550, 556 (1997).

Plaintiff's complaint, read generously, sets forth the following facts, among others. Rite Aid prominently advertised that it had "the lowest and best prices" on pharmaceuticals. It also actively promoted a best-price guarantee, whereby it would "meet or beat" competitors' prescription prices. Rite Aid pharmacists were encouraged to, and did, charge more than Rite Aid's stated retail price to uninsured customers and other pharmacy customers who were unlikely to challenge its prices. Rite Aid directed its pharmacists to overcharge uninsured pharmacy customers, as well as those who were purchasing "emergency-type" drugs, or drugs designed to remedy an acute condition. These overcharges, referred to as positive overrides, increased prescription prices over Rite Aid's stated retail price from fifty cents to as much as fifteen dollars per prescription. Rite Aid directed and required its pharmacists to raise prescription prices above the Rite Aid retail price on every emergency room prescription, on the first refill of any antibiotic prescription and on certain controlled substances, such as pain killers. In addition, plaintiff asserted that Rite Aid pharmacists were directed to "round up" the stated retail price to the next figure ending in .89 on every prescription--for example, if a prescription's stated retail price was $7.09, Rite Aid pharmacists were required to raise the price to $7.89. If a pharmacy customer asked a prescription price before the prescription was filled, the pharmacist would quote the normal retail price as stated in the company's computer system. When Rite Aid was caught failing to comply with its lowest price program, Rite Aid managers described the "error" as an oversight, and advised concerned customers that the computer system would be updated to reflect the lower price. As part of the alleged "scheme," Rite Aid intentionally sought to, and did, deceive its pharmacy customers into believing that they would be provided Rite Aid's best available price when, in fact, they were charged prices well in excess of Rite Aid's stated retail price.

We believe it clear that these allegations constitute a cause of action under the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20. The goal of the Act is to "protect the consumer against imposition and loss as a result of fraud and fraudulent practices by persons engaged in the sale of goods and services." Fenwick v. Kay American Jeep, Inc., 136 N.J. Super. 114, 117 (App. Div.), rev'd on other grounds, 72 N.J. 372 (1975); Marascio v. Campanella, 298 N.J. Super. 491, 500 (App. Div. 1997). It has been said that the "history of the Act is one of constant expansion of consumer protection." Gennari v. Weichert Co. Realtors, 148 N.J. 582, 604 (1997). When the alleged violation is an affirmative act, plaintiff need not prove defendant's intent nor even necessarily actual deceit or fraud. Cox v. Sears Roebuck & Co., 138 N.J. 2, 17-18 (1994); Skeer v. EMK Motors, Inc., 187 N.J. Super. 465, 470 (App. Div. 1982). Any unconscionable commercial practice is prohibited. Ibid. It has consistently been emphasized that the Act is remedial legislation and should be liberally construed in favor of the consumer. Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999); Gennari, supra, 148 N.J. at 604; Cox, supra, 138 N.J. at 15-16; Barry v. Arrow Pontiac, Inc., 100 N.J. 57, 69 (1985). A plaintiff need not even show reliance on the violation of the Act as long as an ascertainable loss resulting from defendant's conduct is demonstrated. Carroll v. Cellco Partnership, 313 N.J. Super. 488, 502 (App. Div. 1998).

Some types of false advertising, although not all, are expressly prohibited by the regulations implementing the Act. See e.g., N.J.A.C. 13:45A-9.1 to -9.8 and specifically, N.J.A.C. 13:45A-9.2(a)(9) prohibiting, "[t]he making of false or misleading representations of facts concerning the reasons for, existence or amounts of price reductions, the nature of an offering or the quantity of advertised merchandise available for sale." An advertisement violating those regulations is per se a violation of the Act. Cox, supra, 138 N.J. at 17; Feinberg v. Red Bank Volvo, Inc., 331 N.J. Super. 506, 510 (App. Div. 2000).

Here, plaintiff does not allege a regulatory violation as such. Advertisements allegedly in violation of the Act, but not the subject of a specific regulation, are best left for jury determination. In Chattin v. Cape May Greene, Inc., 216 N.J. Super. 618, 639 (App. Div.), certif. denied, 107 N.J. 148 (1987), we stated:

But when an advertisement is not covered by a specific rule or regulation, it must be determined through adjudication 'whether the ad itself is misleading to the average consumer.' Barry v. Arrow Pontiac, Inc., 100 N.J. 57, 69 (1985); see also Kugler v. Romain, 58 N.J. 522 (1971); D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11, 25-32 (App. Div. 1985). Although there may be some circumstances in which an advertisement is so patently deceptive that a violation of the Consumer Fraud Act may be found as a matter of law, the determination whether an advertisement is misleading is ordinarily for the trier of ...


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