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,
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.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.
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, on occasion, giving a complimentary pillow, or, the like.
None of these statements were supported by any documentation or by any citation to the record.
Defendants also submitted a counter-statement of material facts, which only admitted or denied four of plaintiffs' ninety numbered paragraphs on a paragraph-by-paragraph basis. Defendants also offered an additional general, and somewhat equivocal, denial of plaintiffs' allegations:
3. At one point, or, another, each of the institutions which is named on the Comfort Direct website has purchased the products listed on that same website, either from Comfort Direct, Inc., or, another corporation, such as KCI, Inc., which Defendant Dyevich, or, Mr. John Wilkinson have been affiliated with. The products sold to those institutions were substantially the same as the products offered by Comfort Direct, Inc.
4. At no point in time did Defendant Comfort Direct or, Defendant Dyevich place 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 Defendant Dyevich, usually by way of a telephone call.
Once again, defendants failed to provide any documentary evidence or citation to the record for these additional statements of fact.
During oral argument on plaintiffs' motion, defendants produced, or at least referred to, 100 prescriptions and authorizations that they had provided to plaintiffs in discovery. The prescriptions were written on standard prescription order forms bearing the printed name of a physician. The signature on each was illegible. On top of each prescription was an identical "Authorization Letter" undated and on plain white paper containing the statement, "The SAT Self[-] Adjusting Technology mattress is recognized for its clinical benefits and it is prescribed for certain conditions. I agree and allow my professional endorsement of this technology in a public forum."
Defendants made no effort, either at argument or in their opposition to the motion, to match any of these 100 "Authorization Letters" to any of the fifty-three disavowal certifications that plaintiffs submitted in support of their motion. Ultimately, it was unclear which of plaintiffs' allegations the 100 prescriptions were intended to dispute because: 1) the signatures on the prescriptions were illegible; and 2) defendants failed to attach the prescriptions to the specific testimonials that the prescriptions allegedly verified.*fn1
In a comprehensive oral opinion on August 22, 2007, Judge Ciuffani concluded that defendants' submissions failed to raise a genuine issue of material fact. In particular, he reasoned that: defendants have failed to specifically refute any of the plaintiffs' certifications or documents and simply rely upon unsupported, just naked or bald assertions denying certain allegations. Such opposition does not create . . . an issue of material fact. . . . [A] flat denial by the defendant . . . does not satisfy the court rules or the case law as far as opposing a motion for summary judgment.
After analyzing the portions of the CFA and regulations that plaintiffs relied on, the judge granted summary judgment in plaintiffs' favor.
We review the trial court's grant of summary judgment de novo. See Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). Employing the same standard the trial court uses, ibid., we review the record to determine whether there are disputes over genuine issues of material fact, and, if not, whether the undisputed facts, viewed in the light most favorable to the party opposing the motion, nonetheless entitle the movant to judgment as a matter of law. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).
In Point I, Dyevich argues that the judgment against him should be vacated because the trial court erred when it pierced the corporate veil and entered judgment against him individually. This argument lacks sufficient merit to warrant extended discussion. R. 2:ll-3(e)(1)(E). We add only the following comments. The CFA, by its very terms, imposes direct personal liability on a corporate principal. A judge is not required to pierce the corporate veil in order to enter judgment against a corporate officer, where, as here, that officer personally engages in unlawful activity under N.J.S.A. 56:8-2.*fn2
Here, as we discuss in Part III below, no genuine issue of material fact existed on the question of whether Dyevich engaged in wrongful conduct. Consequently, we reject the argument Dyevich raises in Point I.
Defendants' argument in Point II that the judge erred in his application of the summary judgment standard is equally lacking in merit. As Judge Ciuffani correctly observed, a party opposing a summary judgment motion must do more than issue blanket denials of the movant's statements of undisputed fact. Brae Asset Fund, L.P. v. Newman, 327 N.J. Super. 129, 134 (App. Div. 1999) (holding that "bare conclusory assertions in an answering affidavit are insufficient to defeat a meritorious application for summary judgment"). Moreover, Rule 4:46-2(b) provides that where, as here, the party opposing the summary judgment fails to specifically dispute a movant's statements of fact by citation to a portion of the motion record, all of the movant's properly-supported statements of fact will be deemed admitted. Consequently, Judge Ciuffani properly deemed admitted all eighty-six of plaintiffs' undisputed statements of fact. Rule 4:46-2(b) provides ample support for so doing.
Last, we agree with plaintiffs' argument that the party opposing the motion must present a "genuine" issue of material fact. See Brill, supra, 142 N.J. at 540. The "'opponent must do more than simply show that there is some metaphysical doubt as to the material facts.'" Triffin v. Am. Int'l Group, Inc., 372 N.J. Super. 517, 523-24 (App. Div. 2004) (quoting Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3rd Cir. 1992), cert. denied, 507 U.S. 912, 113 S.Ct. 1262, 122 L.Ed. 2d 659 (1993)). Defendants made a blanket denial and presented 100 Authorization Letters without making any effort to specify the specific website testimonials that the 100 letters purportedly authorized. Therefore, we find that defendants' opposition to the motion is the sort of "gauzy," Brill, supra, 142 N.J. at 529, and insubstantial opposition to a summary judgment motion that the Court in Brill found to clearly warrant the grant of summary judgment. Ibid. Defendants failed to refute -- by anything other than an inadequate blanket denial --the well-supported and meticulously documented averments contained in plaintiffs' motion.