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news | Individuals Can Be Liable Under NJ’s Consumer Fraud Act
Individuals Can Be Liable Under NJ’s Consumer Fraud Act
In an opinion by the Appellate Division this past October, individuals performing contracting services to the public have reason to be fearful. The Appellate Division imposed individual liability upon the CEO of a landscaping firm for his participation in Consumer Fraud Act (CFA) violations.
In Lanza v. Secret Gardens Landscaping, LLC, the consumer claimed that the landscaper she hired had violated the CFA, a broad remedial act designed to protect consumers from the nefarious practices of merchants and service providers. Lanza complained that her landscaper had misrepresented its expertise on its website, failed to give her written change orders, failed to provide her with a written description of all work to be performed and materials to be used, and did not provide a completion date for the work. She sued not only the landscaping company, but its CEO too.
The trial court dismissed the claims asserted against the CEO finding that the law concerning limited liability companies shielded an owner from personal liability unless he was acting outside the scope of employment or there was fraud or injustice. The trial court found none of those conditions applied. The landscaping company had filed a petition for bankruptcy, so the trial court dismissed the claims against the bankrupt company leaving Lanza to pursue her claims against it in bankruptcy court. Lanza appealed.
The appellate court reversed instructing that individuals may be liable for their own participation in violations of the CFA, notwithstanding the shield of corporate ownership. Based on the CEO’s participation in preparing the contract for the work, personally discussing the change orders with the homeowner, and supervising the work done at the property, the appellate court found that the CEO had participated in the alleged violations of the CFA. As such, even though the contract was through his limited liability company, the CEO could be held personally liable for the violation and for Lanza’s damages.
This decision reminds contractors and other suppliers of goods and services to the public to be cautious. Obtaining legal advice about the format and content of proposals, contracts and practices may prevent CFA problems.
For more information about the implications of the Consumer Fraud Act on your business, please contact us online or call Greg Schwartz at 908.735.2377.
11/17/2008