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Harold M. Hoffman, Individually and On Behalf of the Class of v. Supplements Togo Management

May 13, 2011

HAROLD M. HOFFMAN, INDIVIDUALLY AND ON BEHALF OF THE CLASS OF PURCHASERS OF ERECTION MD, PLAINTIFF-APPELLANT,
v.
SUPPLEMENTS TOGO MANAGEMENT, LLC, AND WORLD CLASS NUTRITION, LLC, DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-2428-10.

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

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 28, 2011

Before Judges Reisner, Sabatino, and Alvarez.

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

This case arises out of the advertising and sale of a dietary supplement over the internet. Plaintiff, who purchased the supplement, principally alleges that the defendant sellers violated the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 ("CFA"), and the common law, by making false and exaggerated representations about the product's efficacy, which were allegedly lacking in scientific or objective support. The trial court granted defendants' pre-answer motion to dismiss plaintiff's lawsuit on two independent grounds: (1) plaintiff is precluded from suing defendants in New Jersey because of a forum selection clause contained within a disclaimer on defendants' internet website; and (2) the complaint fails to state a claim upon which relief can be granted because (a) it does not sufficiently allege that plaintiff sustained an "ascertainable loss of moneys or property" under the CFA, as required by N.J.S.A. 56:8-19, and (b) it does not sufficiently allege the elements of common-law fraud.

We reverse the determinations of the trial court on these two discrete issues and remand for further proceedings. In particular, we hold that, subject to the potential development of additional facts on remand that might affect the jurisdictional analysis, the clause is presumptively unenforceable. We do so because defendants' website was evidently structured in an unfair manner so that the clause would not appear on a purchaser's computer screen unless he or she scrolled down to display the "submerged" clause before adding the product to his or her electronic "shopping cart."

In addition, we reverse the trial court's order dismissing plaintiff's complaint for failure to state a cause of action. We do so because the complaint, when viewed under the generous construction that we must give to pleadings under Rule 4:6-2(e), sufficiently alleges the CFA element of "ascertainable loss." The complaint also sufficiently alleges the elements of common-law fraud. The complaint therefore must be reinstated, subject to potential dispositive motion practice after discovery is completed.

I.

Although it is not fully developed, the record presents the following circumstances and sequence of events relevant to the two key issues before us.

A.

Plaintiff, Harold M. Hoffman, is an attorney and a resident of New Jersey. At various times in the past, plaintiff has brought lawsuits, in his own name and on behalf of other putative class members, against companies that sell and advertise products in a deceptive manner allegedly in violation of the CFA and other laws.*fn1

Defendants, Supplements Togo Management, LLC ("STM"), and World Class Nutrition, LLC ("WCN"), have advertised and sold products on the internet on commercial websites*fn2 named "www.supplementstogo.com" and "www.worldclassnutrition.com." According to a public record in plaintiff's appendix, STM is an Arizona corporation, with its place of business and registered agent in Scottsdale.*fn3

As shown in plaintiff's appendix, defendants' website states that another company related to defendants, known as "STG Supplements," was started in Cincinnati in the early 1980s by a weightlifting enthusiast. According to that advertisement, STG Supplements has been in the industry "over 25 years" and the company has "a name you can trust for results." The products offered include protein supplements, weight loss products, and energy-boosting drinks.

One of the products advertised and sold on defendants' website is a dietary supplement known as "Erection MD." The product is sold in bottles of sixty pills, at a price of $59.99 per bottle. Defendants' records reflect sales of Erection MD to at least three New Jersey customers, including plaintiff. The website describes Erection MD as "a proprietary blend," consisting of various listed ingredients that defendants contend are "commonly found in diet pills and energy drinks."

According to an April 1, 2010 post-suit letter from defendants' counsel to plaintiff, the ads for Erection MD describe the product's benefits, in somewhat ungrammatical language, as follows: "Enhances Sex Drive, Maximum Performance, Instantly Boost Testosterone Levels, Rapid Blood Flow, Ultimate Stamina, Higher Volume of Ejaculate."

Defendants contend, however, that their website advertising also included the following disclaimer*fn4

The information on this website reflects the opinion of our staff and manufacturers and should not be interpreted as medical advice.

The descriptions and statements accompanying these products and vitamin supplements have not been evaluated by the FDA. These products are not intended to diagnose, treat, cure or prevent any disease. They are for use by healthy adults only. Consult your physician before beginning any bodybuilding or fitness program. Keep all products out of the reach of children. By placing your order with STG Investors, LLC*fn5 you are agreeing that any and all litigation will take place in the state of Nevada.*fn6

[Emphasis added.]

Plaintiff alleges that defendants portrayed Erection MD in their ads as "the most advanced sexual enhancement product." On the other hand, defendants' counsel asserted in his April 1, 2010 letter to plaintiff that the ads specifically cautioned purchasers that "results may vary."

After seeing the advertising, plaintiff bought a sixty-pill bottle of Erection MD over the internet on March 3, 2010, for the quoted price of $59.99, plus $6.99 for shipping. According to plaintiff, Erection MD was the first product displayed on defendants' website and it appeared near a box that could be clicked to "ADD TO SHOPPING CART." According to plaintiff, upon clicking that box, he was transferred to a checkout webpage. On that page, his credit card and shipping information were requested, both of which plaintiff provided.

The Erection MD pills ordered by plaintiff were delivered to him on March 11, 2010. Plaintiff does not contend that he ingested any of the pills. Four days after receiving the shipment of the product, plaintiff filed the instant lawsuit in the Law Division.

B.

The complaint pleads five counts alleging violations of the CFA, along with one count of common-law fraud. In particular, plaintiff alleges that defendants' representations, in connection with the advertising and sale of Erection MD and its supposed efficacy, lack a "valid factual, clinical and/or scientific basis." According to the complaint, no such valid scientific evidence or clinical testing exists to substantiate defendants' promises and representations. Plaintiff alleges that he and the other members of the proposed class "saw, read, and/or heard defendant[s'] advertisements, promises and representations" about Erection MD before purchasing the supplement.

Plaintiff asserts that defendants' alleged misrepresentations about Erection MD violate N.J.A.C. 13:45A-9.2, a regulation promulgated by the Division of Consumer Affairs. The regulation essentially requires an advertiser to substantiate with written proof any claim it makes concerning "the safety, performance, availability, efficiency, quality or price of the advertised merchandise," and to keep such written proof on file for at least ninety days after the effective date of the advertisement. Id. at -9.2(a)(10). Plaintiff contends that defendants cannot possess such written substantiation, and that their failure to have it comprises a per se violation of the CFA.

Plaintiff further alleges that the defendants' unsubstantiated claims about Erection MD constitute deception, misrepresentation, unconscionable trade practices, and false promises. He claims that such conduct proximately caused damage to him and other purchasers of the product, because they "received something less than, and different from, what they reasonably expected in view of defendant[s'] representations."

In his common-law fraud count, plaintiff similarly alleges that defendants "deliberately and knowingly" engaged in false representations, upon which plaintiff and others justifiably relied, causing them damage.

By way of remedy, plaintiff seeks for himself and the other class members compensatory and treble damages under the CFA, plus interest and counsel fees. On the common-law fraud count, plaintiff seeks compensatory relief, plus punitive damages.

C.

In lieu of filing an answer to the complaint, defendants moved to dismiss it on two separate grounds. First, defendants argued that plaintiff cannot sue them in New Jersey because the forum selection clause in their website disclaimer only permits their dissatisfied customers to file suit against them in the state of Nevada. Second, defendants contended that the complaint fails to state a claim upon which relief may be granted, because plaintiff cannot show that his purchase of Erection MD resulted in an "ascertainable loss" or other damages to him.

Plaintiff opposed both aspects of the dismissal motion. He argued that the forum selection clause was unenforceable because it was essentially hidden within defendants' website and was not reasonably conspicuous to him and other consumers. Plaintiff asserted that he did not agree to be bound by defendants' forum ...


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