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Furst v. Einstein Moomjy, Inc.

182 N.J. 1, 860 A.2d 435 (2004)

CONSUMER FRAUD; DAMAGES—The “original price” shown on a sales tag is presumed to be the replacement cost of the merchandise and the burden is on the merchant to show otherwise.

A customer purchased a carpet at a clearance sale for $1,199, which the sales tag stated was a reduction from the regular price of $5,775. After the customer complained that the carpet was damaged and smaller than indicated on the invoice, the merchant offered either a refund of the sale price of $1,199, or a similar carpet at an additional price. The merchant refused the customer’s demand for delivery of an undamaged identical carpet at the size he ordered and at the price he paid. The customer then sued the merchant, alleging violations of New Jersey’s Consumer Fraud Act (Act).

The lower court entered summary judgment on liability for the customer, finding that the merchant violated the Act. The merchant did not contest the ruling. Instead, it contested the Court’s determination that the customer’s ascertainable loss under the Act was the fair market or the replacement value of the carpet purchased. Since the customer intended to prove market value by introducing the carpet’s sales tag, the merchant moved to restrict the proofs the customer could offer to establish the replacement value, and argued that the regular price on the sales sticker did not suggest replacement value. The lower court granted the merchant’s motion to bar the sales tag. In light of the customer’s inability to prove replacement value, the court limited damages to the purchase price of the carpet, $1,199.

On appeal, the customer argued that the lower court erred by barring his proofs of replacement value. The Appellate Division held that the sales tag was sufficient evidence of replacement value to raise a triable issue. Specifically, it held that the sales tag could be used as evidence of the carpet’s market value without the need to produce expert testimony.

On further appeal by the merchant, the Supreme Court held that when a merchant violates the Act by delivering defective goods and then refusing to provide conforming goods, the consumer’s ascertainable loss is the replacement value of the goods. In proving replacement value, a customer is entitled to the rebuttable presumption that the regular price advertised on the sales tag is the replacement value. In determining the customer’s damages under the Act, a court must decide on the amount of ascertainable loss. Here, the Court concluded that the final marked-down price was relevant as a possible measure of damages. It held that the regular price on the sales ticket tends to establish replacement value because a product’s regular price must bear some relationship to what the merchant considered to be the market value of the merchandise. Merchants draw customers into their stores by holding sales events that promise the regular value of a product at a reduced price. According to the Court, since merchants can be expected to know the value of the merchandise they offer to the public, it is only fair that the burden be placed on them to come forward with contrary evidence of replacement value.

Accordingly, the Court held that there was a rebuttable presumption that the regular price on the sales sticker is the replacement value of the merchandise. The burden then shifts to the merchant to produce alternative evidence of replacement value. If the merchant presents such evidence, the presumption will disappear and the trier of fact will decide the issue based on all of the evidence presented and the burden to prove replacement value is put back on the customer. If the merchant fails to present evidence to refute the customer’s prima facie case, judgment should be entered in favor of the customer. Additionally, the Court held that the customer is not restricted to relying on the sales sticker.

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