Third Circuit Affirms That CFA and PLA Claims Can Coexist Independently

We recently blogged about a New Jersey Supreme Court decision in which the court held that claims under New Jersey’s Consumer Fraud Act (CFA) may be brought in the same action as claims under the Products Liability Act (PLA). In a follow-up to that case, the Third Circuit in Sun Chemical Corporation v. Fike Corporation and Suppression Systems, Inc. applied the New Jersey Supreme Court’s guidance on the interplay between the CFA and PLA. The Third Circuit affirmed in part and reversed in part a District Court judgment, finding that some of the claims were “absorbed by the PLA” and some could be brought independently pursuant to the CFA.

Sun sued defendant Fike under the CFA for alleged misrepresentations related to Sun’s purchase of an explosion-suppression system. Sun alleged that Fike “misrepresented various aspects of the suppression system in its pre-purchase conversations” and that Fike was therefore liable for injuries and property damages suffered by Sun from an explosion that occurred at Sun’s facility. The District Court of New Jersey determined that Sun’s CFA claims were precluded and absorbed by the PLA because “Sun was seeking damages because various features of the suppression system failed and that failure caused personal injury to Sun’s employees.” The CFA, the District Court reasoned, could not be used to subvert the PLA’s pleading requirements. After seeking clarification from the Supreme Court of New Jersey regarding the relationship between PLA and CFA claims, the Third Circuit affirmed the District Court’s ruling in part. The New Jersey Supreme Court has previously held that the PLA is “paramount when the underlying claim is one for harm caused by a product.”

The Third Circuit found that Sun’s claims that were related to “express or affirmative misrepresentations” were quintessential examples of CFA claims and were properly pled as such. The court distinguished these types of claims from claims premised on “manufacturing, warning, or design defects,” which are more properly pled under the PLA. While one of Sun’s claims was a CFA claim, the court found that two other claims presented “closer questions.” As to one of those claims, which was based on an alleged misrepresentation “that the system’s alarm would be audible,” the court found that the underlying theory of liability was not that the suppression system was defective but, rather, that the alleged promise surrounding the audible alarm constituted an affirmative representation – a CFA claim. As to the second claim – that the suppression system failed to operate according to Fike’s promise of its capabilities – the court found that this claim was properly dismissed under the CFA because “there is no scenario in which the suppression system could simultaneously perform its intended purpose and still fail to fulfill Fike’s representations on this point.” Such a claim could not be pled under the CFA.

Next, the court addressed the District Court’s analysis of the remaining CFA claims: “(1) the suppression-system alarm would be audible; (2) the suppression system would comply with FM 5700’s pressure-sensor requirements; (3) Fike would provide training to Sun employees; and (4) the suppression system had never experienced any failures in the field.” The Third Circuit disagreed with the District Court’s conclusion that “Sun could not show that any of these alleged misrepresentations caused its harm.” Specifically, the Third Circuit noted that there were issues of fact concerning Fike’s pre-sale representations of compliance with industry standards and whether Sun “would have purchased the suppression system” without these misrepresentations. The court rejected Fike’s argument that the CFA “does not apply to the sale of the suppression system because it is not a good or service sold to the public at large.” The court cited New Jersey Supreme Court case law that expressly held that the CFA’s applicability turns on whether the general public could purchase goods. The court noted that there existed evidence that “any member of the public could, if inclined, purchase Fike’s explosion-suppression system.” Consequently, the court affirmed the grant of summary judgment in part and reversed in part and remanded.

With the New Jersey Supreme Court’s guidance as a backdrop, this case underscores that PLA and CFA claims may, in fact, exist in the same action so long as there exists separate, distinct factual bases. Most importantly, this case provides an analytical framework based on a full factual record for cases in which conduct may form the basis for either PLA or CFA claims.

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