December 20, 2011
PAULA T. DOW, ATTORNEY GENERAL OF THE STATE OF NEW JERSEY, AND THOMAS R. CALCAGNI, ACTING DIRECTOR OF THE NEW JERSEY DIVISION OF CONSUMER AFFAIRS,
INDIANA NOVELTY INTERNATIONAL, INC., D/B/A KIPP BROTHERS, DEFENDANT-APPELLANT.
On appeal from Superior Court of New Jersey, Chancery Division, Union County, Docket No. C-85-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 5, 2011
Before Judges Parrillo and Skillman.
Defendant Indiana Novelty International is engaged in the business of selling novelties, candies, prizes and toys throughout the United States. One of the products defendant sells is yo-yo waterballs, which are rubber balls filled with liquid attached to a rubber cord.
On January 3, 2008, the Governor signed into law the Yo-Yo Waterballs Act, N.J.S.A. 2A:65B-1 to -3, which prohibits the sale of yo-yo waterballs in New Jersey. This prohibition was based on a legislative finding that yo-yo waterballs "are inexpensive, easily accessible toys that pose a strangulation hazard and threaten the health of children." N.J.S.A. 2A:65B-1. It became effective on April 1, 2008. L. 2007, c. 224, § 4.
Notwithstanding the enactment of the Yo-Yo Waterballs Act, defendant continued selling yo-yo waterballs in New Jersey. On June 6, 2008, an investigator for the Division of Consumer Affairs purchased three dozen yo-yo waterballs from defendant through its website. As a result of its subsequent investigation, the Division was able to document the sale by defendant of 408 other yo-yo waterballs in New Jersey after the effective date of the Yo-Yo Waterballs Act.
The Attorney General and Acting Director of the Division of Consumer Affairs brought this action in the Chancery Division to enjoin defendant from selling yo-yo waterballs in New Jersey and for the civil penalties provided under the Yo-Yo Waterballs Act and Consumer Fraud Act, N.J.S.A. 56:8-1 to -20. After a period for discovery, plaintiffs brought the case before the trial court by a motion for summary judgment.
In its response to the motion, defendant did not dispute that it had sold 444 yo-yo waterballs in New Jersey after the effective date of the Yo-Yo Waterballs Act. However, defendant argued that it was unaware of New Jersey's enactment of legislation prohibiting the sale of yo-yo waterballs, that it had no intent to violate this prohibition, and that it stopped selling yo-yo waterballs in New Jersey immediately after the Division notified it of this prohibition.
By an oral opinion rendered on August 27, 2010, the trial court determined that defendant's violations of the Yo-Yo Waterballs Act and Consumer Fraud Act were established by defendant's undisputed sale of 444 yo-yo waterballs in New Jersey after the effective date of the Yo-Yo Waterballs Act, and therefore, plaintiff was entitled to a judgment enjoining the future sale of this product and statutory penalties. The court determined that the appropriate penalty, under all the circumstances of the case, was $54,300, consisting of $10,000 for defendant's first violation and $100 for each of defendant's 443 other violations. The court also awarded plaintiffs $13,021.50 for attorneys fees and costs and entered final judgment in plaintiffs' favor for $67,321.50.
On appeal, defendant does not dispute that it violated the Yo-Yo Waterballs Act and Consumer Fraud Act by continuing to sell yo-yo waterballs after the effective date of the Yo-Yo Waterballs Act. Defendant argues, however, that the penalties and fees the trial court imposed for those violations were excessive and unreasonable.
A trial court has "considerable discretion in determining the penalty appropriate in each case." Kimmelman v. Henkel's & McCoy, Inc., 108 N.J. 123, 136 (1987). Our review of the amount of a statutorily authorized civil penalty imposed by a trial court is limited to determining whether "the court abused its discretion." Ibid.
Although this court may have been inclined to impose a lesser penalty, we conclude that the $54,300 penalty imposed by the trial court did not constitute an abuse of discretion. The Yo-Yo Waterballs Act authorizes imposition of a penalty of $10,000 for the first offense and $20,000 for the second and any subsequent offense. N.J.S.A. 2A:65-3. Even if we were to agree with defendant's argument that the number of violations of the Yo-Yo Waterballs Act should be determined based on the number of sales of waterballs, rather than the total number of waterballs sold, and defendant only made nine sales of waterballs after April 1, 2008, the trial court could have imposed a penalty of $190,000 ($10,000 for the first violation and $20,000 for each subsequent violation). It is clear from the court's comments at the argument on the plaintiffs' motion for summary judgment and its oral decision that the court considered the recentness of enactment of the Yo-Yo Waterballs Act and defendant's alleged ignorance of its prohibition upon the sale of waterballs in imposing a penalty that was substantially less than this maximum amount.
Defendant's argument that the Division erred in failing to allow a "grace period" before enforcing the Yo-Yo Waterballs Act is based on the false premise that the Act became effective immediately. In fact, the Act was signed into law on January 3, 2008 and did not become effective until April 1, 2008. L. 2007, c. 224, § 4. Moreover, there is no basis in the Act for defendant's argument that the Division had an obligation to notify every seller of yo-yo waterballs of enactment of the prohibition against the sale of this product.
Defendant's argument that the trial court's award of attorneys fees and costs to plaintiffs was excessive is clearly without merit. R. 2:11-3(e)(1)(E).
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