We have made the turn past Memorial Day and the world feels restless to move forward as the sun shines bright with summer on the horizon. Hopefully you find a moment to soak it in, perhaps from a deck or patio, with this edition of HKMP’s Case Alerts which finds the spotlight shining bright on consumer focused litigation.
As reported last week, the New Jersey Supreme Court issued a landscape altering opinion in
Whelan v. Armstrong Int’l, Inc.
, __ N.J. __ (2020) favoring plaintiffs in asbestos litigation extending a manufacturers’ duty to warn consumers about the risks posed by future replacement parts, which it did not manufacture, containing asbestos. That theme is also seen in a recent New Jersey Supreme Court decision regarding the scope of consumer contracts subject to the Retail Installment Sales Acts finding it applies to services contracts regardless of whether the contracts possess financing components.
Consumer-focused and favorable cases have been capturing the New Jersey Appellate Division’s attention too. The Appellate Division heard oral argument recently in
Browne v. Capital One Bank (USA) NA et al.,
Docket No. A-002102-1 concerning the trial court’s denial of plaintiff’s motion for class certification in a suit alleging violations of the Truth-in-Consumer Contract, Warranty and Notice Act. The Appellate Division also issued an unpublished decision affirming class certification and speaking to the review a trial court must give to the evidence in certifying a class under the New Jersey Court Rules.
Meanwhile, the Third Circuit certified to the Pennsylvania Supreme Court whether an e-commerce business, like Amazon, is strictly liable for a defective product purchased on its platform from a third-party vendor, where the e-commerce business neither owned nor possessed the product.
Other topics include: enforcement of arbitration for claims against a trampoline park, application of the New Jersey Supreme Court’s recent decision in
Shields v. Ramslee Motors
to a premises liability action; reversal of the dismissal of a plaintiff consumer’s Lemon Law case premised upon alleged spoliation of the car at issue; challenge to a an award of attorneys’ fees under the Prompt Payment Act in a construction contract dispute; whether an insurance policy’s step-down provision applied to UIM coverage; and dismissal of a wrongful death action for insufficient proof that the defendant was the driver in a hit-and-run accident.
We hope these cases are of interest. As always, we appreciate the chance to catch up with you and we hope you enjoy this edition of HKMP’s Case Alerts.
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I.
PUBLISHED/PRECEDENTIAL DECISIONS
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Sanchez v. Fitness Factory Edgewater, LLC
, __ N.J. __ (2020)
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The New Jersey Supreme Court recently overturned a lower court’s decisions regarding the Retail Installment Sales Act,
N.J.S.A.
17:16C-1, (“RISA”) and held that the Act does apply to services contracts, and that the definition of “retail installment contracts” does not require that a contract contain a financing arrangement. Plaintiff brought a class action contending the “initiation fee” charge in a gym membership contract violated the RISA. The contract offered two options, paying the membership in full upon signing the contract, or allowing the member to make monthly payments; with only members who elected to pay monthly being required to pay an “initiation fee”.
The Court observed that the RISA’s definition of “retail installment contract” states that it includes “an agreement to pay the retail purchase price of goods
or services
.”
N.J.S.A.
17:16C-1(b) (emphasis added). The RISA also includes a definition of “services” and definitions of both “retail seller” and “retail buyer.” Thus, the RISA, on its face, applies to services contracts without requiring a financing arrangement. The Court also rejected an argument that the only statute to regulate gym membership contracts was the Health Club Services Act. While some of that Act’s provisions overlap with RISA, the distinct provisions in each act could “be applied cumulatively, and thus, in harmony” as neither statute claimed to provide an exclusive remedy.
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PERSONAL INJURY/PREMISES LIABILITY
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Underhill v. Borough of Caldwell
, __ N.J. Super. __ (App. Div. 2020)
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The New Jersey Appellate Division recently issued a published opinion clarifying a property owner’s right to contractually delegate snow and ice removal duties to a tenant following the Supreme Court’s recent decision of
Shields v. Ramslee Motors
which found a commercial property owned did not owe a duty to clear snow and ice from a driveway while the property was in the tenant’s sole possession and control. The plaintiff sued a private owner of a parking lot and the borough which had leased the lot from the private owner. The subject lease unequivocally provided that the borough was solely responsible for keeping the parking lot free of snow and ice. After the borough and the owner were granted summary judgment at the trial level, plaintiff appealed only the owner’s dismissal. The Appellate Court affirmed summary judgment in favor of the private owner finding, in light of
Shields
, that a property owner does not have a duty to clear snow and ice when the property is in sole possession and control of a tenant. While this case concerned a parking lot, the Court clarified that
Vasquez v. Mansol Realty
remains controlling in that property owners still have a duty to clear their sidewalks from snow and ice where the owner has not vested the tenant with exclusive possession and relinquished the power of entry onto the premises.
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II. UNPUBLISHED DECISIONS
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Sharma v. Sky Zone, LLC, Docket No. A-5601-18T1 (App. Div. June 4, 2020) (per curiam)
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Addressing two separate personal injury lawsuits against SkyZone LLC, the Appellate Division consolidated back-to-back appeals to affirm orders compelling arbitration though reversing the dismissals of the complaints for entry of stays pending arbitration.
Plaintiffs had purchased admissions to the defendant’s trampoline park executing agreements to use the facility. The agreements contained arbitration provisions referring to the JAMS arbitration rules. Prior to the agreements being executed, the New Jersey Advisory Committee on Professional Ethics, Committee on the Unauthorized Practice of Law, and Committee on Attorney Advertising determined that JAMS’s operating procedure was not compliant with New Jersey law.
Defendants moved to dismiss and compel arbitration in both cases. The parties did not dispute that JAMS was not licensed to operate in New Jersey. Nonetheless, the trial court granted the defense motions finding that under the Federal Arbitration Act (“FAA”) and the New Jersey Arbitration Act that it was required to appoint a substitute arbitrator since the designated forum was unavailable.
The Appellate Division affirmed finding: the agreement had designated a forum and applicable rules for arbitration; JAMS was not designated as an exclusive arbitral forum; there was no indication the parties intended to not arbitrate if JAMS was unavailable; and it possessed a severability clause so that if one term was unenforceable the others were unaffected. The court also noted any arbitration was governed by the FAA suggesting its mechanism applied for appointing a replacement arbitrator in the event JAMS was unavailable. Last, the arbitrator was to decide the enforceability of the agreement based upon plaintiffs’ challenging JAMS’ procedures.
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Sutton v. Hoffman-La Roche Inc
., Docket No. A-5545-18T3 (App. Div. May 27, 2020) (per curiam)
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The Appellate Division granted leave to consider defendants’ interlocutory appeals of an order granting class certification and, in an unpublished decision, affirmed the trial court’s finding that plaintiffs met the requirements for class certification under R. 4:32-1. Plaintiffs filed their complaint against Hoffmann La Roche, Inc. (“Roche”) seeking damages for the reduction in the value of their homes caused by widespread groundwater contamination emanating from Roche's former facility in Nutley and Clifton (also named defendants) and alleged failure to remediate the environmental contamination emanating from the site.
Defendants appealed the grant of class certification arguing that the judge failed to consider defendants’ hydrogeology evidence about the source of the contamination. The Appellate Division affirmed that the judge properly exercised discretion to the extent defendants’ evidence was not weighed by the judge since the evidence went to the merits of plaintiffs’ claim and sought to contradict the factual allegations in the complaint. The consideration of such evidence would have been unfair for class certification because merits discovery had been stayed. Further, defendants’ evidence only showed the factual issue of the origin of the contamination was disputed and plaintiffs were not yet required to offer opposing expert evidence at the class certification stage.
Substantively, approximately 400 involved property owners satisfied numerosity for class certification. The appellate court noted the “low bar” for commonality was satisfied with common issues of whether the members’ properties were contaminated, whether defendants contributed to the contamination being exacerbated, and whether the contamination caused a diminution in value to the class members’ properties. Potential variances in sources of contamination by third parties or extent of contamination were insufficient to defeat commonality. Likewise, the court rejected defendants’ challenge to typicality that common evidence was insufficient to demonstrate causation between the alleged injuries caused by the different defendants and the diminution in value, if any, across the different properties. The appellate court was satisfied that typicality was met through named plaintiffs and putative class members being impacted by the defendants’ same unlawful conduct; plaintiffs did not need to produce proof of damages to show typicality. Representation was met because, while the named plaintiffs were not actively seeking to sell their homes, the trial court did not abuse his discretion in finding the representative plaintiffs had a common interest in maximizing recovery for all impacted class members.
Predominance and superiority were met notwithstanding defendants’ claims that a property-by-property inquire was required to assess damages, if any, and allocate as to four distinct defendants. The appellate court found a proper exercise of discretion by the trial court with the claims arising from a “common nucleus of operative facts” and would involve common proof concerning the four defendants’ operations and practices creating the contamination. Superiority was satisfied with plaintiffs asserting it would not be economically feasible for class members to pursue individual claims as well as considering judicial economy.
Last, the certification was proper as the class was sufficiently identifiable based upon objective components such as members receiving regulatory notices and proximity to an area of identified contamination.
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CONSUMER PROTECTION/SPOLIATION
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Hatfield v. FCA US LLC
, Docket No. A-3194-18T2 (App. Div. June 3, 2020) (per curiam)
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In this Lemon Law case, the New Jersey Appellate Division reversed the dismissal of plaintiff’s complaint with prejudice for alleged spoliation of evidence, plaintiff’s vehicle. Plaintiff purchased a 2013 Fiat 500 Sport from the defendant manufacturer with a three year warranty but began having problems with the vehicle the month after purchase. An inspection of the vehicle was conducted by plaintiff’s expert with a defense expert present. Plaintiff then sold the Fiat back to the dealership, who in turn sold it to a third party. The trial court granted defendant’s subsequent motion to dismiss, finding plaintiff deprived defendant of the opportunity to inspect the vehicle independently, and plaintiff appealed. In vacating and remanding the trial court’s decision, the Appellate Court cited
Robertet Flavors, Inc. v. Tri-Form Constr., Inc
. (2010), holding when selecting an appropriate remedy for spoliation, courts must be guided by the goals to make whole, as nearly as possible, the litigant whose cause of action has been impaired by the absence of crucial evidence, punish the wrongdoer and deter others from such conduct. In view of the Supreme Court’s view that dismissal with prejudice should be a remedy of last resort, the Appellate Division held the trial court overlooked key evidence: whether spoliation occurred; plaintiff’s theory of liability; why defendant’s expert was unable to render an opinion based on the same data from plaintiff’s expert opinion; why defendant’s expert’s inspection would have undermined plaintiff’s expert’s opinion; whether defendant contributed to spoliation by waiting until the end of discovery to inspect the vehicle; and that defendant failed to notify the dealership not to resell it or find out who purchased the vehicle.
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DAMAGES AWARD/CONSTRUCTION CONTRACT DISPUTE
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Petric & Assoc., Inc. v. CCA Civil, Inc.
, Docket No. A-3571-17T2 (App. Div. June 8, 2020) (per curiam)
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Defendant appealed from a jury verdict that awarded plaintiff $1.85 million in damages for fraud, breach of contract, violation of the Prompt Payment Act (“PPA”),
N.J.S.A.
2A:30A-1 to -2, and punitive damages. The jury found that defendant fraudulently induced plaintiff to enter into a contract to install temporary shielding and work platforms on the Pulaski Skyway without informing plaintiff of the existence of high voltage wiring that would have altered plaintiff's decision to enter into the contract on the agreed terms, and also placed plaintiff's employees at significant risk of harm. In an unpublished decision, the Appellate Division affirmed the trial court’s denial of summary judgment and affirmed the jury verdict finding defendant liable for fraud and breach of contract and the corresponding compensatory and punitive damages awarded. However, it reversed the verdict finding a violation of the PPA.
As to the PPA claim, the Appellate Division noted that the subcontract permitted defendant to withhold funds from plaintiff “to ensure payment of [plaintiff]’s obligations,” such as the unions and vendors, and that, based on a plain reading of the PPA, because the parties “agreed in writing” on the conditions by which defendant would disburse payments to plaintiff, defendant’s failure to disburse funds to plaintiff was governed by the subcontract, not the PPA. There was insufficient evidence to support a jury verdict for plaintiff under the statute. The trial court was to reconsider the fee award to consider the extent to which plaintiff’s unsuccessful PPA claim was related to the successful ones and recalculate any fee award.
As to the other claims, the appellate court found plaintiff’s fraud claim was extraneous to the parties’ subcontract and that the trial court properly permitted the claim to survive summary judgment as the defendant had a duty to disclose the latent wire interference.
As to breach of contract, defendant argued “the [s]ubcontract unambiguously provided that, in exchange for extra work, [plaintiff] was only entitled to as much compensation as . . . the NJDOT was willing to pay”. The Appellate Division found that a rider to the contract overrode the cited subcontract provisions and that a genuine issue of material fact existed as to whether compensation to plaintiff was, as proscribed by the rider “unreasonably withheld and . . . given in a timely manner.”
As to punitive damages, the Appellate Division rejected the argument they were improper due to a lack of evidence of “’actual malice’ or ‘wanton and willful disregard’” per the New Jersey Punitive Damages Act,
N.J.S.A
. 2A:15-5.12. The Appellate Division noted: (i) there was evidence that defendant committed fraud, (ii) defendant’s representatives knew that plaintiff was facing financial troubles when they induced plaintiff to enter the contract to perform life-threatening work without informing of the voltage and location of the wires at issue, and (iii) sufficient evidence existed that defendant failed to timely pay plaintiff under the contract and subcontract.
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Falk v. Donovan,
Docket No. A-4236-18T4 (App. Div. May 22, 2020) (per curiam)
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In an unpublished decision, the New Jersey Appellate Division reversed an order finding that a plaintiff was entitled to underinsured motorist (“UIM”) benefits under an auto insurance policy up to the policy limits of $500,000.
The underlying matter arose from a rear end motor vehicle accident where both drivers were operating vehicles owned by other individuals. Defendant’s vehicle had insurance coverage with bodily injury limits of $100,000 under a policy issued by High Point Property & Casualty Insurance. Plaintiff was insured under an auto policy issued by Allstate Insurance Company, which provided uninsured motorist (“UM”) and UIM coverage with policy limits of $100,000. Plaintiff was driving her fiancé’s car which was insured by USAA with coverage up to $500,000. Plaintiff filed suit against the other driver and the owner of the other car. Later amended added a claim against Allstate for UIM coverage and a claim against USAA for UIM coverage.
USAA filed a motion for summary judgment arguing plaintiff was not entitled to UIM coverage and if plaintiff was a covered person, then the step-down provision in the policy applied and reduced her maximum recovery of UIM benefits to the amount of UIM coverage available under her Allstate policy. The trial court determined that the relevant provisions of the USAA policy were ambiguous and plaintiff was covered person. The court further found that the step-down provision in the policy was expressly limited to UM coverage and concluded plaintiff was entitled to UIM coverage up to $500,000. Plaintiff and USAA consented to the entry of final judgment awarding plaintiff $400,000 in UIM benefits. The judgment preserved USAA’s right to appeal. USAA appealed arguing that the motion judge erred by finding plaintiff was entitled to UIM coverage.
The Appellate Division concluded the term UM as used in the amendment must be interpreted in light of the other policy provisions, which apply to both UM and UIM coverage, so plaintiff could not reasonably expect that the step-down provision would not apply to UIM coverage. Therefore, the court held that the other insurance provision of the USAA policy applied to plaintiff’s UIM coverage and that coverage was limited to the $100,000 provided under her Allstate policy. Because plaintiff’s UIM coverage under the USAA policy was not greater than the $100,000 coverage available to her under Donovan’s policy, she was not entitled to any UIM benefits under the USAA policy.
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O
berdorf v. Amazon.com Inc.
, Case No. 18-1041 (3d Cir. June 2, 2020) (certification of question of law)
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Plaintiff appealed from an order of the United States District Court for the Middle District of Pennsylvania granting Amazon.com, Inc.’s (“Amazon”) motion for summary judgment. Plaintiff purchased a dog collar on Amazon from a third-party vendor who stored, packaged, and shipped the product itself. The D-ring on the collar broke while the dog was being walked and hit plaintiff in the face and eyeglasses causing permanent blindness in one eye. Neither plaintiff nor Amazon could locate either the vendor or the manufacturer of the dog collar. Amazon was granted summary judgment by the District Court finding Amazon was not strictly liable to plaintiff under the Restatement (Second) of Torts § 402A. Plaintiff appealed. Following an en banc hearing, the Third Circuit was unable to determine what analysis to conduct to determine whether Amazon was covered by § 402A and, by extension, predict how the Pennsylvania Supreme Court would rule in the case. Thus, the Third Circuit certified a question of law to the Pennsylvania Supreme Court of whether an e-commerce business is strictly liable for a defective product purchased on its platform from a third-party vendor where the e-commerce business neither owned nor possessed the product at issue.
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Kavanaugh v. County of Somerset
, Docket No. A-0583-18T3 (App. Div. May 28, 2020) (per curiam)
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In this tragic case, the New Jersey Appellate Division concluded that plaintiff could not proceed to a jury trial based upon speculation and innuendo that defendant was the driver in a hit and run accident that killed plaintiff’s husband. The authorities had never charged anyone, including the defendant, with the death of plaintiff’s husband. In granting summary judgment to the defendant, the trial court found that “Plaintiff failed to marshal adequate competent evidence that could reasonably establish defendant was the driver of the vehicle that struck and killed her spouse.” On appeal, plaintiff contended that she presented sufficient circumstantial proof as defendant made inconsistent statements about his whereabouts at the time of the fatal accident. Defendant argued that he was not the driver of the vehicle that struck the defendant, no eyewitnesses identified him personally as the driver of the vehicle, and that no charges were brought against him once the police investigation concluded. The appellate court agreed with the trial court in that plaintiff’s claim was merely speculative, based on circumstantial evidence, and failed to create a material factual issue to survive summary judgment.
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