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Taylor v. Foulke Management Corp.

A-6307-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

CONSUMER FRAUD ACT; STANDING — Although the assignee of the rights, title, and interest of a consumer defrauded by an unlawful practice may not have a remedy under the Consumer Fraud Act, where a consumer is indirectly defrauded, such as in a purchase made by the consumer through persons acting on the consumer’s behalf, there will be a remedy available to the consumer under the Act.

A consumer saw a car dealer’s television advertisement “offering to give a[n] $8000 credit against the price of a new [car] for any used car regardless of its condition.” The consumer had a car owned by his parents and that car was already subject to a financing agreement. Taking into account the balance due on the proposed trade-in car, the price of the new car would be raised by $4,070. Neither the consumer nor his wife qualified for financing, but the car dealer did not send him away. Instead, the car dealer’s agent told the consumer that if his parents purchased the car and he “made the payments on their loan for eight months[, he] would be permitted to transfer the loan to his name.”

The next day, the consumer returned to the dealership with his parents, who signed the contract, tendered their used car, and acknowledged that the used car “had negative equity, in an amount not specified, that was included and reflected in the purchase price.” Essentially, the car dealer, in a later admission, pointed out that the consumer’s parents had agreed to pay a price that was more than $15,000 above the price of the car because the purchase price included “an unspecified amount for the negative equity, a $20 filing fee, $2200 for service contracts, and $89 for the dealer’s preparation of the” new car. This translated to assignment of more than $12,000 in negative equity to the used car and did not reflect any value for the trade-in.

When the consumer figured all of this out, he sued the dealer, alleging violations of the Consumer Fraud Act (CFA) and seeking damages. The problem, in this case, was that the consumer was actually the “indirect purchaser” of the new car. “The private cause of action provided in the CFA is available to ‘[a]ny person who suffers any ascertainable loss of moneys or property, real or personal, as a result of the use or employment by another person or any method, act, or practice declared unlawful under’ the CFA.” The lower court concluded that the consumer, whose parents actually bought the new car, and who could not have qualified to purchase the car on his own, could not avail himself of the Consumer Fraud Act. The Appellate Division thought otherwise.

The CFA is applied “broadly in order to accomplish its remedial purpose, namely, to root out consumer fraud.” Under New Jersey case law, “[a]bsence of privity of contract between [a] plaintiff and defendant is not determinative if the plaintiff can determine an ascertainable loss caused by an unlawful practice.” Under other New Jersey case law, however, the assignee “of the rights, title and interest of a consumer defrauded by an unlawful practice in the initial sale of a vehicle has no standing to assert the consumer’s rights under the CFA.” Here, however, the consumer’s claim was distinguishable. This was an indirect sale by the car dealer to the consumer through his parents “acting on his behalf.” The consumer went to the dealership “believing that he would receive $8000 on a trade-in and was told that if his parents made the purchase and he made the payments on the loan for eight months he would be permitted to assume their obligations. Although he fulfilled these conditions, he was not permitted to assume the loan [because the car financing company refused to accept him in place of his parents], and he continued to perform under the agreement he made with his parents to make the payments.” Consequently, the consumer was permitted to pursue his claim that he had been defrauded by the car dealership in relation to the CFA.


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