The Appellate Division issued an unpublished decision today that again emphasizes the power (some might say, inequity) of the New Jersey Consumer Fraud Act. In Logatto v. Lipsky, plaintiffs hired defendant to build an addition on their home and perform other renovations. Although defendant prepared a written proposal with cost estimates, he never prepared a written contract. After the project was 90% complete, and plaintiffs had paid him $247,500, defendant notified plaintiffs that actual expenses exceeded the proposed costs, and therefore he required an additional $78,469.37 to complete the project. Plaintiffs refused and, when the parties could not come to a resolution on the issue, defendant left the job. Plaintiffs then sued defendant under the Consumer Fraud Act for the costs of completion of the project, and defendant counterclaimed for $50,000 in unpaid costs. Both parties moved for summary judgment, but both motions were denied.
The case was tried to a jury. After plaintiffs put on their evidence, they moved for judgment on liability in connection with their Consumer Fraud Act Claims. The trial court granted the motion, finding that there were technical violations of the Act (failure to have a signed contract and change orders). However, the trial court left the question of whether plaintiffs had suffered an "ascertainable loss," a requirement under the Consumer Fraud Act, to the jury. The jury ultimately returned a verdict in favor of defendant, finding that plaintiffs did not suffer any ascertainable loss. After the verdict, however, plaintiffs moved for, among other things, fees and costs under the Consumer Fraud Act. The trial court denied the motion, but the Appellate Division reversed the trial court and remanded the issue back to the trial court for disposition of the fee motion.
You may be asking yourself - how is this possible? How can a defendant prevail at trial but still be responsible for the plaintiffs' legal fees? What happened to the "American Rule"? The answer to all of these questions is, the New Jersey Consumer Fraud Act. Under the Act, as it has been interpreted by the New Jersey Supreme Court -- in cases like Cox v. Sears Roebuck & Co. and Weinberg v. Sprint Corp. -- plaintiffs can recover costs and fees if they prove that a defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss. While a plaintiff cannot recover treble damages under the Act without an ascertainable loss, it can still recover its costs and fees. What this means is that if a plaintiff survives summary judgment and presents a prima facie case of ascertainable loss, it will be able to recover its costs and fees even if, as in the Logatto case, it ultimately loses on the merits at trial.
This case, like seemingly every other decision handed down in connection with the Consumer Fraud Act, should be a cautionary tale for any business or entities that sell products or provide services that are covered by the Act.