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Hoffman v. Hampshire Labs, Inc.

405 N.J. Super. 105, 963 A.2d 849 (App. Div. 2009)

CONSUMER FRAUD ACT — Where a consumer’s lawsuit does not allege that the consumer demanded a refund or has been refused a refund after using a product, the consumer will be unable to prove an ascertainable loss sufficient to support a claim under the Consumer Fraud Act.

A consumer placed an order with a company for a non-prescription erectile dysfunction product. The manufacturer apparently advertised that the product guaranteed superior sexual performance. Prior to receiving the product, the consumer filed a class action lawsuit against the manufacturer alleging violations of the New Jersey Consumer Fraud Act (CFA) and common law fraud. The consumer contended that the advertisements were false and deceptive because the product did not produce the promised results.

The manufacturer filed a motion to dismiss the complaint. The consumer opposed the motion, arguing that it did not matter whether he received the product before filing suit, as he had examined the product’s ingredients on the manufacturer’s website and concluded the product could not assist his dysfunction. The lower court dismissed the complaint with prejudice. It held that the consumer’s CFA claims were deficient because the consumer could not have known whether or not the product would live up to promised expectations without actually using the product. The lower court characterized the consumer’s complaint as containing broad and conclusory statements. It found that the consumer could not have used the product until after filing his complaint and thus had no way of knowing if the product worked as advertised. The lower court therefore held that the consumer could not prove common law fraud as he failed to plead detrimental reliance.

The Appellate Division affirmed the dismissal of the complaint. It found the consumer failed to articulate, on sufficient facts, a legal basis entitling him to relief under the CFA. The Court ruled that the consumer did not allege that he demanded his money back or was refused a refund after using the product. Therefore, the Court concluded the consumer failed to prove: (i) an ascertainable loss; or (ii) that the manufacturer engaged in an unlawful practice, as is required under the CFA.

The Court also affirmed the lower court’s finding that the consumer failed to plead sufficient facts to support a claim of common law fraud, i.e. that the manufacturer knowingly made false representations about the product with the intent that users would rely upon those representations to their detriment. It did, however, disagree with the lower court’s decision to dismiss the complaint with prejudice. Thus, the Court remanded the matter to the lower court to allow the consumer an opportunity to amend his complaint to provide additional facts that might support his CFA and common law fraud claims.

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