On certification to the Superior Court, Appellate Division.
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).
In this Consumer Fraud Act case, pursuant to N.J.S.A. 56:8-1 to -20, the Court determines whether plaintiff's ascertainable loss was the replacement value or the purchase price of the defective product.
Plaintiff purchased the carpet at issue in this appeal from defendants at a clearance sale. Plaintiff paid $1,199.00 for the carpet, which the sales tag stated was a reduction from the"regular price" of $5,775. After plaintiff complained that the carpet was damaged and smaller than indicated on the invoice, defendants offered either a refund of the sale price of $1,199.00 or a similar carpet at an additional price. Defendants refused plaintiff's demand for delivery of an undamaged identical carpet at the size he ordered and at the price he paid.
Plaintiff's complaint alleged, among other things, violations of New Jersey's Consumer Fraud Act (Act). The trial court entered summary judgment, finding that defendants violated the Act in the sale of the carpet. Defendants did not contest that ruling in their appeal. Instead, defendants contested the court's determination that plaintiff's"ascertainable loss" under the Act was the benefit of his bargain, i.e., the fair market or replacement value of the carpet. Because plaintiff intended to prove market value by, among other things, introducing the carpet's sales tag, defendants moved to restrict the proofs plaintiff could offer to establish the replacement value, arguing that the regular price on the sales sticker did not suggest replacement value. The court granted defendants' motion to bar plaintiff's evidence, including the sales tag. In light of plaintiff's inability to prove replacement value, the trial court limited damages to the purchase price of the carpet, $1,199.00, trebled under the Act. The court also denied defendants' request for a plenary hearing on plaintiff's attorney-fee application and awarded plaintiff attorneys' fees totaling $28,050.00 plus $1,055.55 in costs.
On appeal, defendants contended that the trial court erred in awarding excess attorneys' fees and by failing to conduct a plenary hearing to determine the reasonableness of those fees. Plaintiff filed a cross-appeal, arguing that the trial court erred by barring his proofs of replacement value. The Appellate Division agreed with the trial court that the ascertainable loss was the replacement value of the carpet, but it held that the sales tag was sufficient evidence of replacement value to raise a triable issue. In particular, the panel held that the sales tag could be used as evidence of the carpet's market value without the need to produce expert testimony. The panel also found that the trial court did not properly explain its reasons or reference the standards set forth in Rendine v. Pantzer, 141 N.J. 292 (1995), in awarding attorneys' fees. The panel ordered a remand, but it found no need for a plenary hearing and stated that after the parties submitted detailed certifications they could present their positions in court.
HELD: When a merchant violates New Jersey's Consumer Fraud Act by delivering defecting goods and then refusing to provide conforming goods, the consumer's ascertainable loss is the replacement value of the goods. In proving replacement value, plaintiff is entitled to the rebuttable presumption that the regular price advertised on the sales tag is the replacement value of the carpet.
1. The Legislature passed the Consumer Fraud Act to give consumers relief from fraudulent practices in the marketplace and to deter merchants from employing those practices. Under the Act, it is a deceptive practice for a merchant to deliver household furnishings that are damaged or that are not the exact size, style, color or condition indicated on the sales contract, and for the merchant to refuse to offer the consumer the choice of a refund or delivery at a later date. Here, defendants offered the plaintiff a refund or the option of receiving conforming goods at an additional price, which is a deceptive practice in violation of N.J.A.C. 13:45A-5.1. (Pp. 7 - 8).
2. In quantifying plaintiff's damages under the Act, the Court must determine his ascertainable loss, pursuant to N.J.S.A. 56:8-19. Because there exists neither plain meaning nor legislative history for that term, the Court looks to the clear objectives of the Act, informed by well-established remedies available in typical breach-of-contract cases. Among the remedies available under the Act to address unfair practices are treble damages, reasonable attorneys' fees, and costs of suit. Their purpose is not only to make whole the victim's loss, but also to punish the wrongdoer and to deter others from engaging in similar practices. Reviewing basic principles of contract law, including that an innocent party in a breach-of-contract case must be given the benefit of his bargain and be placed in as good a position as he would have been in had the contract been performed, the Court concludes that the replacement cost, trebled, is the proper measure of damages under the Act. (Pp. 8 - 12).
3. In proving ascertainable loss, the merchant's sales tag was admissible as a statement of a party-opponent, N.J.R.E. 803(b)(1) and (b)(4), providing it contained information relevant to the case. The description of the carpet included on the sales tag in this case was relevant for the purpose of identifying the item for replacement value. The final marked-down price -- the price paid for the carpet -- is relevant as one possible measure of damages. The Court finds that the regular price on the sales ticket is evidence that tends to establish replacement value. Under both federal and state regulations, a product's regular price must bear some relationship to what the merchant considered to be the market value of the merchandise in the recent, regular course of his business. Merchants draw consumers into their stores by holding sales events that promise the regular value of a product at a reduced price. Merchants commit no wrong by profiting from consumers' craving to shop smartly, provided they do not place the value of the products they sell in a false light. Further, because merchants can be expected to know the value of the merchandize they place for sales to the public, it is only fair to place the burden on them to come forward with contrary evidence of replacement value. Accordingly, the Court holds that there will be a rebuttable presumption that the regular price on the sales sticker is the replacement value of the carpet. The burden will then shift to defendants to produce alternative evidence of replacement value. If defendants present such evidence, the presumption will disappear and the trier of fact will decide the issue based on all the evidence with the burden of persuasion resting with plaintiff. If defendants present no evidence to refute plaintiff's prima facie case, judgment will be entered in plaintiff's favor. Plaintiff is not restricted in his proofs to the sales sticker, however, and may call witnesses and produce other evidence. Because other evidential issues concerning proof of replacement value were raised before the Appellate Division but not decided, the matter is remanded initially to the Appellate Division for resolution of those issues, and then to the trial court for a trial on damages. (Pp. 12 - 21).
4. In respect of defendants' challenge to the award of attorneys' fees, the Court agrees with the Appellate Division that the trial court failed to explicitly apply the standards set forth in Rendine. Therefore, the award is vacated and the matter is remanded to the trial court for an analysis of the Rendine factors, as described by the Court in this opinion, and for a statement of the court's reasons on the record for awarding a particular fee. (Pp. 21 - 26).
5. In respect of defendants' request to challenge the fees in a plenary hearing, the Court holds that a plenary hearing should be conducted only when the certifications of counsel raise material factual disputes that can be solved solely by the taking of testimony. The Court expects such hearings to be rare occurrences. Fee applications should be sufficiently detailed to allow a trial court to determine the nature of the work performed and by whom, the reasonableness of the hourly rate, the hours expended, and whether the litigation involved great risk or novel issues. Here, on remand, the Court advises that sufficient information should be contained in the attorneys' certifications to permit the trial court to resolve the issues. A plenary hearing should be a last resort. (Pp. 26 - 30).
The judgment of the Appellate Division is AFFIRMED, and the matter is REMANDED in accordance with this opinion.
CHIEF JUSTICE PORITZ and ASSOCIATE JUSTICES LaVECCHIA, ZAZZALI, WALLACE, and RIVERA-SOTO join in JUSTICE ALBIN's opinion. JUSTICE LONG did not participate.
The opinion of the court was delivered by: Justice Albin
Argued September 13, 2004
In this case, defendants, a carpet department store and its president, sold plaintiff-customer a defective carpet at a warehouse clearance sale in violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20. The trial court determined that plaintiff's "ascertainable loss" was the replacement value of the carpet, not the purchase price. The court, however, found that plaintiff did not offer sufficient evidence establishing replacement value to warrant a jury trial and, therefore, the ascertainable loss was simply the price paid by plaintiff. Although the Appellate Division agreed that replacement value was the proper measure of damages, it held that the "regular price" on the marked-down sales sticker was proof sufficient to justify a damages trial. Last, the Appellate Division found that the trial court did not adequately state its reasons for its award of attorneys' fees to plaintiff.
We affirm the Appellate Division decision. Plaintiff's ascertainable loss in this consumer fraud action is the carpet's replacement value. Moreover, at a new damages trial, plaintiff will be entitled to a rebuttable presumption that the regular price on the marked-down sales sticker represents the carpet's replacement value. On remand, at a new hearing to determine plaintiff's reasonable attorneys' fees, the trial court will give its reasons for its fee award with reference to the governing case law.
The essential facts are not in dispute. Defendant Walter Moomjy is the president of defendant Einstein-Moomjy, Inc., a large retail distributor of carpets with stores located in Paramus, North Plainfield, Whippany, and Manhattan. In August 1999, at an annual clearance sale held by Einstein-Moomjy, plaintiff Henry F. Furst purchased five remnant carpets for his home for $10,139.68. After delivery, plaintiff discovered that two of those carpets 23af the "Jungle Fever Antelope" and the "Mystery Ivory" 23af were defective. Only the Mystery Ivory is of concern to us in this appeal.
Attached to the Mystery Ivory carpet at the time of its sale to plaintiff was a tag containing the following information:
Einstein Moomjy, The Carpet Department Store