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Milgram v. Comfort Direct

October 28, 2008

ANNE MILGRAM, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND LAWRENCE DEMARZO, ACTING DIRECTOR OF THE NEW JERSEY DIVISION OF CONSUMER AFFAIRS, PLAINTIFFS-RESPONDENTS,
v.
COMFORT DIRECT, INC., AND KEVIN DYEVICH, DEFENDANTS-APPELLANTS.



On appeal from Superior Court of New Jersey, Chancery Division - General Equity Part, Middlesex County, Docket No. C-108-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 2, 2008

Before Judges Cuff, C.L. Miniman and Baxter.

This is a consumer fraud action in which defendants Comfort Direct, Inc. and its president and fifty percent shareholder, Kevin Dyevich, appeal from an August 22, 2007 order that granted summary judgment to plaintiffs, Attorney General Anne Milgram and Acting Director of the Division of Consumer Affairs (Division), Lawrence DeMarzo. Both defendants argue that, because there were genuine issues of material fact, the judge erred in granting summary judgment. Additionally, Dyevich argues that the court erred by imposing personal liability on him because there was no justification for piercing the corporate veil. We affirm.

I.

Plaintiffs filed a complaint against defendants alleging various violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20; the Delivery of Household Furniture and Furnishings Regulations, N.J.A.C. 13:45A-5.1 to -5.4; and the General Advertising Regulations, N.J.A.C. 13:45A-9.1 to -9.8. In particular, plaintiffs alleged that defendants violated the CFA by engaging in unconscionable commercial practices, false promises and misrepresentations in connection with their marketing and sale of the "Self Adjusting Mattress" (mattress) that defendants advertised on their websites at www.comfortdirect.com and www.satbed.com. Defendants advertised the product as a specialized, self-adjusting mattress that provides pressure relief for consumers with health problems such as multiple sclerosis, quadriplegia, paraplegia and those who spend significant time bedridden.

Plaintiffs alleged that the website advertising was fraudulent and violated applicable regulations because: 1) the testimonials and prize ribbon depictions from hospitals, rehabilitation facilities, educational institutions, physicians and consumers were fabricated and unauthorized; 2) the claims that Comfort Direct is "[t]he World's Premier Manufacturer of Alternative Mattresses" and is the "Holder of 13 World Wide Patents in the Mattress Industry" were false because the company did not manufacture the mattresses it sold and holds no patents; 3) the claim that defendants' self-adjusting mattress was used "in hospitals and nursing homes" was false because defendants did not sell to hospitals, only directly to the public; 4) the photograph that defendants claimed showed their "nationally recognized" and "state of the art R[esearch] and D[esign] facility located in upstate New York" was false because it was not a photograph of a Comfort Direct facility but instead depicted an unrelated "stock photograph" of a factory elsewhere; and 5) despite the website's promise of a full refund of the purchase price within ninety days of purchase, a number of dissatisfied customers were unable to obtain the promised refund.

Pretrial discovery revealed that Dyevich controlled the day-to-day operations of the company and developed and approved the content of the website. Specifically, he compiled the text for the consumer and health care professionals' testimonials, and obtained and placed on the website the photographs and logos of the nursing homes and hospitals that had supposedly purchased defendants' mattress. He asserted in his answers to interrogatories that he had contacted each of the institutions named and depicted on the website, and had obtained their permission to use their photographs, trademarks, logos and testimonials.

On July 6, 2007, after discovery ended, plaintiffs filed their motion for summary judgment. As required by Rule 4:46-2(a), plaintiffs presented, "in [ninety] separately numbered paragraphs a concise statement of each material fact as to which [plaintiffs] contend[ed] there [was] no genuine issue[,] together with a citation to the portion of the motion record establishing the fact or demonstrating that it [was] uncontroverted." See R. 4:46-2(a). Plaintiffs supported the allegations in those ninety paragraphs by submitting: twenty certifications from consumers who described their inability to obtain refunds for defective or unsuitable merchandise; fifty-three certifications and letters from hospitals and nursing homes asserting that their names, logos and testimonials were fabricated and unauthorized (disavowal certifications); specific references to the transcript of Dyevich's deposition; and a certification from a Division investigator.

In opposition to plaintiffs' motion, defendants submitted an affidavit from Dyevich, in which he asserted:

4. At no point in time did I place, or allow to be placed, any factually incorrect statements, or, testimonials on the corporate website. Each testimonial was authorized by the client, either verbally, or, in writing. The wording of each testimonial was agreed upon by each individual offering the testimonial and myself, usually by way of a telephone call.

6. At no point in time did Comfort Direct ship any . . . defective, or, damaged merchandise to any consumers. Any merchandise which was delivered in a damaged condition to any consumer was damaged in transit, on a common carrier.

9. On the rare occasion when a product does arrive late, or, damaged, Comfort Direct, Inc. has always done everything possible to keep the customer happy, either by replacing the damaged product, refunding money, or, ...


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