A real sense of measurable harm must be experienced in order to assert the need for damages. The U.S. District Court of New Jersey ruled against plaintiffs bringing a claim under the New Jersey Consumer Fraud Act (“CFA”), and under common law fraud in Hoffman v. Nutraceutical Corp., U.S. District Court of New Jersey, Civil Action No.: 12-5803 (ES). Nutraceutical Corp. (“Nutraceutical”) filed a motion to dismiss the complaint brought by Hoffman, individually and on behalf of those similarly situated (collectively, “Hoffman” or “Plaintiff”), claiming that Nutraceutical violated the CFA and did not follow common law fraud laws in a class action suit against Nutraceutical. Nutraceutical’s motion to dismiss went unanswered by plaintiff and the District Court ruled in favor of the moving party.
Hoffman alleged that Nutraceutical advertised KAL Glucosamine Chondroitin MSM (“Product”) as being “pure, unadulterated and of the highest quality.” Hoffman claimed that there was a contaminant within the product – 1.7 micrograms of lead – that would be consumed in daily use and this went against the assurance conveyed by Nutraceutical that the product was pure. Lead was not listed on the labeling. Defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) for plaintiff’s failure to state a claim upon which a court can grant relief. The crux of plaintiff’s problem with the complaint was the issue of damages, because plaintiff did not suffer any damages, as it was not determined whether there was lead in the product he purchased. The District Court explained for a complaint to not be dismissed, it “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcraft v. Iqbal, 556 U.S. 662, 678 (2009). The factual allegations are to be viewed as true when considering whether to dismiss a complaint and all reasonable inferences must be viewed in favor of the non-moving party (in this case, plaintiff).
The District Court held “the spoiled and contaminated product delivered by Defendant to consumers, lacked the purity and beneficial qualities promised by Defendant.” The court explained in order to have a cognizable CFA claim, plaintiff must allege: (1) an unlawful practice by a defendant; (2) ascertainable loss by the plaintiff; and (3) a causal nexus between the unlawful practice and ascertainable loss plaintiff suffered. Unlawful practices “typically involve . . . an affirmative act of fraud and can arise from an affirmative act, an omission, or a violation of an administrative regulation.” Adamson v. Ortho-McNeil Pharm., Inc., 463 F. Supp. 2d 496, 501 (D.N.J. 2006). Furthermore, the unlawful action must have a strong connection to the reason why the plaintiff made the purchase in the first place. The ascertainable loss is interpreted as something that can be calculated directly in relation to the unlawful practice by defendant. This can include something called a loss due to the “benefit of the bargain.” This means the consumer was misled into buying the product sold by the defendant and the product proved to be worth less than the paid for amount because of a harmful flaw with the product that should not be there. Of course, the “causal nexus” is just an elegant way of saying the misrepresentation or hiding of the harmful thing that should not be in the product was the direct cause of the harm complained of – and need for litigation.
The court held plaintiff failed to show a cause of action because no ascertainable loss could be determined. “Plainitff merely alleged that some of Defendant’s product contained 1.7 micrograms of lead in it. . . . Plaintiff failed to show that the alleged lead in Defendant’s product caused it to be worth less than was promised. Plaintiff failed to show that the product he used actually contained lead. Moreover . . . the presence of 1.7 micrograms of lead in the product [does not necessarily amount to a] misrepresentation that is contrary to the product being [what it was advertised as.]”
Furthermore, in order to succeed in an action brought under common law fraud in New Jersey, a plaintiff must show: (1) an important misrepresentation that is a fact; (2) a belief by the defendant that its claims were false; (3) defendant’s intention that a buyer would rely on the factual misrepresentation; and (4) a reasonable reliance of the buyer on the misrepresentation; and (5) damages that result. Again, the court found Hoffman failed to identify what the damages were because of the same reasons enumerated earlier. The court took special note to state “Plaintiff does not even allege that the product that he personally purchased, and used, contained lead.”
Put quite simply, without damages that a person can somehow find a reasonable way to measure, there is no claim under either the CFA or an action based in common law fraud.