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Milgram v. Comfort Direct, Inc.

A-0360-07T2 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD; CORPORATIONS; OFFICERS — New Jersey’s consumer fraud statutes allow liability to be imposed on a corporate officer if that officer has been found to have engaged in fraudulent contact on behalf of the corporation.

The New Jersey Attorney General sued a mattress retailer who claimed its mattresses ameliorated health issues for bedridden individuals. In the suit, the Attorney General alleged violations of consumer fraud laws, furniture delivery laws, and advertising regulations. The Attorney General based its allegations on the seller’s use of unauthorized testimonials from hospitals, physicians, and consumers appearing on the company’s website as well as claims by the company that it held patents for its mattresses. The allegations also included assertions that the mattress seller’s website contained false information regarding its research facility and about the sale of its mattresses to medical institutions. Additionally, the suit included allegations that a number of customers were unable to obtain refunds that the website promised, if requested by the customer, within ninety days of purchase.

The Attorney General presented statements from twenty customers who claimed not to have received their refunds and more than fifty certifications from hospitals and nursing homes asserting that their names and logos were unauthorized and that the testimonials were fabricated. The seller’s president and fifty percent shareholder denied the allegations, but presented no supporting documentation. He also presented a number of purported prescriptions for the company’s mattresses, but the lower court found the signatures to be illegible and that they did not match the testimonials displayed on the company website. Thus, the lower court granted the Attorney General’s motion for a decision on summary judgment, concluding that the seller had presented no evidence raising any genuine issue of material fact and pointed out that the company’s statements containing mere denials or unsupported assertions did not overcome the Attorney General’s motion.

On appeal, the seller’s president argued that the lower court incorrectly pierced the corporate veil when it entered a judgment against him personally. The Appellate Division rejected this argument, pointing out that consumer fraud statutes allow for liability to be imposed on a corporate officer if found to have engaged in fraudulent conduct. It added that there was no genuine issue of material fact as to whether the president was engaged in his company’s wrongful conduct. The Court also found that the lower court properly admitted a number of statements of fact presented by the Attorney General, each undisputed by the seller, and agreed with the lower court that an opponent of a summary judgment motion must do more than raise denials and possible doubts regarding the material facts. Based on its findings and conclusions, the Court affirmed the lower court’s grant of summary judgment in favor of the Attorney General on its claims against the mattress seller’s president for consumer fraud and for violations of consumer protection statutes.


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