On appeal from Superior Court of New Jersey, Chancery Division, Hudson County, Docket No. C-166-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 5, 2011
Before Judges Parrillo and Skillman.
Defendant Rhode Island Novelty 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. The Act became effective on April 1, 2008. L. 2007, c. 224, § 4.
Notwithstanding enactment of the Yo-Yo Waterballs Act, defendant continued selling yo-yo waterballs in New Jersey. On June 19, 2008, an investigator for the Division of Consumer Affairs purchased ten 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 13,344 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 13,464 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 December 13, 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 13,464 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 $190,000, consisting of $5,000 for each of the thirty-four individuals and entities that purchased yo-yo waterballs from defendant and $5,000 for each of four other unlawful practices. The court also awarded plaintiffs $12,471.50 for attorneys fees and costs and entered final judgment in plaintiffs' favor for $202,471.50.
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. Henkels & 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 $190,000 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. Thus, the $5,000 penalty the trial court imposed for each instance of unlawful conduct it identified was substantially less than the penalties it could have imposed upon defendant for its violation of the Yo-Yo Waterballs and Consumer Fraud Acts. The reasonableness of the court's determination of penalties is supported by the number of yo-yo waterballs sold in each transaction and their potential danger to children. Even if defendant made little profit on the sale of yo-yo waterballs, their danger to children and the need to deter warranted a substantial penalty. Furthermore, it is clear from the court's oral decision that it 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 penalties that were much lower than the full amount that could have been imposed.
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 ...