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Mamacita, Inc. v. Colborne Corp.

A-0873-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT — Even a corporation is considered a person under the Consumer Fraud Act and is therefore entitled to sue for unconscionable business practices; merchandise, as defined in the Act, is any object, good, commodity, service or other thing offered directly or indirectly to the public for sale.

A manufacturer produced certain frozen food products for a food marketing company. It was approached by the food marketer about providing dough discs for the food marketing company’s use in making empanadas. In response to this opportunity, the manufacturer developed a dough recipe and searched for a supplier to furnish the equipment needed to make the dough discs.

An equipment manufacturer agreed to supply the manufacturer with a certain quality of equipment to be used in making the dough discs. The equipment was to be USDA approved and corrosion resistant. The manufacturer was not satisfied with the quality of the equipment, alleging that the equipment did not function properly, was not USDA approved, and was not corrosion resistant. It sued the equipment manufacturer for breach of contract, breach of warranties, and violations of the Consumer Fraud Act (CFA).

The lower court found in the food manufacturer’s favor on the breach of contract claim, but it rejected the CFA claim. It held that the CFA was inapplicable because both parties were experienced commercial entities of equal bargaining power, and the equipment was not a product sold to the public, but was specialized equipment.

The food manufacturer appealed and the Appellate Division reversed. In doing so, the Court noted that the CFA “is applicable if the nature of the transaction comes within the purview of the Act, and if the defendants’ conduct amounted to an unconscionable commercial practice.” It also noted that under the CFA, even a corporation is considered a “person” and can be entitled to sue for unconscionable business practices. Further, the statute defines “merchandise” as any objects, goods, commodities, services or anything offered directly or indirectly to the public for sale. The Court found that the lower court improperly dismissed the corporation’s CFA claims as a matter of law and did not examine whether or not the equipment manufacturer had engaged in unconscionable business practices. It directed the lower court, on remand, to determine whether or not the equipment manufacturer’s failure to provide corrosion resistant equipment constituted a knowing concealment of a material fact with intent that the food manufacturer relied upon it. A false misrepresentation of material fact by the equipment manufacturer in connection with the sale of the dough making equipment, with intent that the food manufacturer would rely upon it, would constitute a violation of the CFA. If the lower court determined that there was a CFA violation, the food manufacturer would still need to prove an ascertainable loss that was caused by that violation.


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