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Multiverse, Inc. v. Scarab

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


January 20, 2009

MULTIVERSE, INC., PLAINTIFF-APPELLANT,
v.
REN SCARAB, I/T/A JUST ROCK PR, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey Law Division, Special Civil Part, Morris County, Docket No. DC-102-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued October 22, 2008

Before Judges Rodríguez and Lyons.

Plaintiff Multiverse, Inc. (Band) appeals from a judgment in favor of Ren Scarab as Just Rock PR (Scarab), the United States Publicity Director for Just Rock PR, an entity that books tours and provides publicity for rock bands in the United States, Europe and Japan.

In December 2005, the Band contracted with Scarab to book twelve shows during July 2006 and to provide publicity services in order to promote the Band and the tour. Scarab represented that revenue earned on the proposed tour would at least cover the costs of the tour. Scarab submitted an initial invoice for payment followed by monthly invoices from February through June 2006, totaling $3,338. The Band paid these invoices.

By June 2006, the Band concluded that there was no way that it would break even on its investment because Scarab had booked only four shows. Therefore, John Kimball, President of the Band and father of one of its members, sent Scarab an e-mail advising him of the Band's decision not to go forward with the tour and demanding a full refund of the $3,338 paid. Scarab confirmed he would cancel the booked shows and that "booking fees already paid for unbooked shows [would] be processed and refunded accordingly."

There was no refund. Therefore, the Band sued Scarab alleging breach of contract and violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. Scarab answered and denied the allegations. The Band served Scarab with a demand to produce documents. There was no response. The Band moved to strike the answer and separate defenses. There was no opposition to the motion. The judge granted the motion. Because there was no motion to restore, nor production of the documents, the Band moved to strike with prejudice. The judge granted the motion.

Following a proof hearing, the judge entered a judgment for $3,338. However, the judge declined to treble the damage amount because the record did not support a finding that there had been an unlawful practice or regulatory violation pursuant to CFA. The Band moved for reconsideration, requesting interest, treble damages and counsel fees. The judge denied the motion because he found that the actions of Scarab: in failing to adhere to the contract (price quota), [did not] rise to the level of an unlawful consumer practice. Nor was the defendants' failure to comply with the notice to produce documents the type of omission contemplated by the [CFA].

The Band appeals contending that the judge erred in denying treble damages and prejudgment interest. We disagree on the first point, but agree on the second.

In 1960, the Legislature passed the CFA 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." Scibek v. Longette, 339 N.J. Super. 72, 77 (App. Div. 2001) (quoting Fenwick v. Kay Am. Jeep, Inc., 136 N.J. Super. 114, 117 (App. Div. 1975), rev'd on other grounds, 72 N.J. 372 (1977). In light of its remedial purpose, the CFA should be liberally construed in favor of the consumer in order to accomplish its dual objectives of deterrence and protection. Lettenmaier v. Lube Connection, Inc., 162 N.J. 134, 139 (1999); Joe D'Egidio Landscaping, Inc. v. Apicella, 337 N.J. Super. 252, 258 (App. Div. 2001).

The relevant sections of the CFA to this appeal are N.J.S.A. 56:8-2 and -19. They provide:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such persons as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice . . . . [N.J.S.A. 56:8-2 (emphasis added).]

Any person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person of any method, act, or practice declared unlawful under this act or the act hereby amended and supplemented may bring an action or assert a counterclaim therefor in any court of competent jurisdiction. In any action under this section the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest. In all actions under this section, including those brought by the Attorney General, the court shall also award reasonable attorneys' fees, filing fees and reasonable costs of suit. [N.J.S.A. 56:8-19 (emphasis added).]

To establish a prima facie case under the CFA, a plaintiff must prove defendant committed an "unlawful practice" pursuant to N.J.S.A. 56:8-2 and that some "ascertainable loss" was caused by defendant's "unlawful practice." Cox v. Sears Roebuck & Co., 138 N.J. 2, 14 (1994); Scibek, supra, 339 N.J. Super. at 78.

Unlawful practices fall into three general categories: affirmative acts, knowing omissions and regulation violations. Cox, supra, 138 N.J. at 17. The first two are found under N.J.S.A. 56:8-2, and the third is based on regulations enacted pursuant to N.J.S.A. 56:8-4, which is not relevant to this case as there has been no regulatory violation. Additionally, an unlawful practice under the CFA is broader than proving only an "unconscionable commercial practice." Cox, supra, 138 N.J. at 19. Rather, the CFA specifies the conduct that will amount to an unlawful practice in the disjunctive and proof of any one of those acts or omissions will be sufficient to prove a violation. Ibid.

An "unconscionable commercial practice" in regards to an affirmative action under the CFA entails a lack of "good faith, honesty in fact and observance of fair dealing." Kugler v. Romain, 58 N.J. 522, 544 (1971). However, a simple breach of warranty or breach of contract is not per se unconscionable and does not alone violate the CFA. Gennari v. Weichert Co. Realtors, 288 N.J. Super. 504, 533 (App. Div. 1996), aff'd, 148 N.J. 582 (1997). The law provides for remedial damages in an action on the contract. Treble damages and attorneys' fees and costs are awarded when there are "substantial aggravating circumstances be present in addition to the breach." Cox, supra, 138 N.J. at 18. See also Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 475 (1988) (holding that the CFA is not applicable to a breach of contract involving a defective engine that prevented the boat from performing in the manner anticipated); DiNicola v. Watchung Furniture's Country Manor, 232 N.J. Super. 69, 72-73 (App. Div.), certif. denied, 117 N.J. 126 (1989) (holding that breach of warranty in supplying faulty furniture and denying that any default existed was not unconscionable).

Judged against that standard, the proofs here show that Scarab's failure to book the twelve promised shows is no more than a breach of contract. By booking only four shows and providing no evidence of any promotional materials besides one poster, Scarab did not perform under the contract. Therefore, he committed a breach. However, the proofs do not support a finding that he committed an unconscionable commercial practice. Nor is there proof that there was any deception on the part of Scarab.

Here, the Band argues, by the failure of [Scarab] to produce the documents under the notice to produce, an inference can be drawn that the defendant had knowledge of his failure to comply with the contract in producing the bookings and publicity and PR material. Based on a reasonable conclusion drawn from such inference [], there should be a determination that the defendant intended to mislead and conceal or suppress material facts.

We conclude that the judge was correct in finding that the omission the Band refers to, the failure of Scarab to comply with the notice to produce documents, is not the type of omission contemplated by the CFA. An omission under the CFA must relate to a material fact and further Scarab must have had the intent to omit or conceal the material fact. See Leon v. Rite Aid Corp., 340 N.J. Super. 462, 469 (App. Div. 2001). There was no material fact omitted by Scarab in the discussions surrounding the contract. Further, it does not appear that there was any intent on the part of Scarab to conceal anything from the Band. The fact that Scarab did not provide documents requested during discovery was remedied by the judge's order to strike with prejudice Scarab's answer and separate defenses. It would not be proper for the court then to find the same failure to provide discovery as the basis for a violation of the CFA with mandatory treble damages and attorneys' fees.

The Band also contends that the judge erred in not awarding interest. We agree. Pursuant to Rule 4:42-11(b), the Band is arguing that the judge should have awarded prejudgment interest. Unlike prejudgment interest in tort actions, which is expressly governed by Rule 4:42-11(b) and thus a matter of right, prejudgment interest on contract and equitable claims is based on equitable principles. County of Essex v. First Union Nat'l Bank, 186 N.J. 46, 61 (2006); North Bergen Rex Transport, Inc. v. Trailer Leasing Co., 158 N.J. 561, 574 (1999). In such cases, granting of prejudgment interest is a matter of discretion for the trial court. In re Estate of Lash, 169 N.J. 20, 34 (2001). Furthermore, it is no longer the case that contract damages must be liquidated or clearly ascertainable in advance for prejudgment interest to be applicable. Ellmex Constr. Co. v. Republic Ins. Co., 202 N.J. Super. 195, 210-11, 213 (App. Div. 1985), certif. denied, 103 N.J. 453 (1986).

The primary consideration in awarding prejudgment interest is that "the defendant has had the use, and the plaintiff has not, of the amount in question; and the interest factor simply covers the value of the sum awarded for the prejudgment period during which the defendant had the benefit of monies to which the plaintiff is found to have been earlier entitled." Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 506 (1974).

Here, the judge found that Scarab had received $3,338, but had not performed per the contract and was therefore in breach. The Band was not found to be at fault. See A.J. Tenwood Assocs. v. Orange Senior Citizens Hous. Co., 200 N.J. Super. 515, 526-27 (App. Div.), certif. denied, 101 N.J. 325 (1985). Scarab benefited from money that rightfully belonged to the Band. Further, the amount at issue was readily ascertainable as the amount paid was not in contention. See Meshinsky, supra, 110 N.J. at 478; A.J. Tenwood, supra, 200 N.J. Super. at 526-27.

Accordingly, we affirm the denial of treble damages. However, we reverse the denial of prejudgment interest and remand to the Special Civil Part, Morris County, for an award of prejudgment interest to be added to the judgment.

Reverse in part and affirm in part.

20090120

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