Title: Furst v. Einstein Moomjy, Inc.

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). Plaintiff purchased the carpet at issue in this appeal from defendants at a clearance sale. Plaintiff paid $1,199.00 for the carpet, which the sales tag stated was a reduction from the "regular price" of $5,775. After plaintiff complained that the carpet was damaged and smaller than indicated on the invoice, defendants offered either a refund of the sale price of $1,199.00 or a similar carpet at an additional price. Defendants refused plaintiff's demand for delivery of an undamaged identical carpet at the size he ordered and at the price he paid. Plaintiff's complaint alleged, among other things, violations of New Jersey's Consumer Fraud Act (Act). The trial court entered summary judgment, finding that defendants violated the Act in the sale of the carpet. Defendants did not contest that ruling in their appeal. Instead, defendants contested the court's determination that plaintiff's "ascertainable loss" under the Act was the benefit of his bargain, i.e., the fair market or replacement value of the carpet. Because plaintiff intended to prove market value by, among other things, introducing the carpet's sales tag, defendants moved to restrict the proofs plaintiff could offer to establish the replacement value, arguing that the regular price on the sales sticker did not suggest replacement value. The court granted defendants' motion to bar plaintiff's evidence, including the sales tag. In light of plaintiff's inability to prove replacement value, the trial court limited damages to the purchase price of the carpet, $1,199.00, trebled under the Act. The court also denied defendants' request for a plenary hearing on plaintiff's attorney-fee application and awarded plaintiff attorneys' fees totaling $28,050.00 plus $1,055.55 in costs. On appeal, defendants contended that the trial court erred in awarding excess attorneys' fees and by failing to conduct a plenary hearing to determine the reasonableness of those fees. Plaintiff filed a cross-appeal, arguing that the trial court erred by barring his proofs of replacement value. The Appellate Division agreed with the trial court that the ascertainable loss was the replacement value of the carpet, but it held that the sales tag was sufficient evidence of replacement value to raise a triable issue. In particular, the panel held that the sales tag could be used as evidence of the carpet's market value without the need to produce expert testimony. The panel also found that the trial court did not properly explain its reasons or reference the standards set forth in Rendine v. Pantzer, 141 N.J. 292 (1995), in awarding attorneys' fees. The panel ordered a remand, but it found no need for a plenary hearing and stated that after the parties submitted detailed certifications they could present their positions in court. HELD : When a merchant violates New Jersey's Consumer Fraud Act by delivering defecting goods and then refusing to provide conforming goods, the consumer's ascertainable loss is the replacement value of the goods. In proving replacement value, plaintiff is entitled to the rebuttable presumption that the regular price advertised on the sales tag is the replacement value of the carpet. 1. The Legislature passed the Consumer Fraud Act to give consumers relief from fraudulent practices in the marketplace and to deter merchants from employing those practices. Under the Act, it is a deceptive practice for a merchant to deliver household furnishings that are damaged or that are not the exact size, style, color or condition indicated on the sales contract, and for the merchant to refuse to offer the consumer the choice of a refund or delivery at a later date. Here, defendants offered the plaintiff a refund or the option of receiving conforming goods at an additional price, which is a deceptive practice in violation of N.J.A.C. 13:45A-5.1. (Pp. 7 8). 2. In quantifying plaintiff's damages under the Act, the Court must determine his ascertainable loss, pursuant to N.J.S.A. 56:8-19. Because there exists neither plain meaning nor legislative history for that term, the Court looks to the clear objectives of the Act, informed by well-established remedies available in typical breach-of-contract cases. Among the remedies available under the Act to address unfair practices are treble damages, reasonable attorneys' fees, and costs of suit. Their purpose is not only to make whole the victim's loss, but also to punish the wrongdoer and to deter others from engaging in similar practices. Reviewing basic principles of contract law, including that an innocent party in a breach-of-contract case must be given the benefit of his bargain and be placed in as good a position as he would have been in had the contract been performed, the Court concludes that the replacement cost, trebled, is the proper measure of damages under the Act. (Pp. 8 12). 3. In proving ascertainable loss, the merchant's sales tag was admissible as a statement of a party-opponent, N.J.R.E. 803(b)(1) and (b)(4), providing it contained information relevant to the case. The description of the carpet included on the sales tag in this case was relevant for the purpose of identifying the item for replacement value. The final marked-down price the price paid for the carpet is relevant as one possible measure of damages. The Court finds that the regular price on the sales ticket is evidence that tends to establish replacement value. Under both federal and state regulations, a product's regular price must bear some relationship to what the merchant considered to be the market value of the merchandise in the recent, regular course of his business. Merchants draw consumers into their stores by holding sales events that promise the regular value of a product at a reduced price. Merchants commit no wrong by profiting from consumers' craving to shop smartly, provided they do not place the value of the products they sell in a false light. Further, because merchants can be expected to know the value of the merchandize they place for sales to the public, it is only fair to place the burden on them to come forward with contrary evidence of replacement value. Accordingly, the Court holds that there will be a rebuttable presumption that the regular price on the sales sticker is the replacement value of the carpet. The burden will then shift to defendants to produce alternative evidence of replacement value. If defendants present such evidence, the presumption will disappear and the trier of fact will decide the issue based on all the evidence with the burden of persuasion resting with plaintiff. If defendants present no evidence to refute plaintiff's prima facie case, judgment will be entered in plaintiff's favor. Plaintiff is not restricted in his proofs to the sales sticker, however, and may call witnesses and produce other evidence. Because other evidential issues concerning proof of replacement value were raised before the Appellate Division but not decided, the matter is remanded initially to the Appellate Division for resolution of those issues, and then to the trial court for a trial on damages. (Pp. 12 21). 4. In respect of defendants' challenge to the award of attorneys' fees, the Court agrees with the Appellate Division that the trial court failed to explicitly apply the standards set forth in Rendine. Therefore, the award is vacated and the matter is remanded to the trial court for an analysis of the Rendine factors, as described by the Court in this opinion, and for a statement of the court's reasons on the record for awarding a particular fee. (Pp. 21 26). 5. In respect of defendants' request to challenge the fees in a plenary hearing, the Court holds that a plenary hearing should be conducted only when the certifications of counsel raise material factual disputes that can be solved solely by the taking of testimony. The Court expects such hearings to be rare occurrences. Fee applications should be sufficiently detailed to allow a trial court to determine the nature of the work performed and by whom, the reasonableness of the hourly rate, the hours expended, and whether the litigation involved great risk or novel issues. Here, on remand, the Court advises that sufficient information should be contained in the attorneys' certifications to permit the trial court to resolve the issues. A plenary hearing should be a last resort. (Pp. 26 30). The judgment of the Appellate Division is AFFIRMED, and the matter is REMANDED in accordance with this opinion. CHIEF JUSTICE PORITZ and ASSOCIATE JUSTICES LaVECCHIA, ZAZZALI, WALLACE, and RIVERA-SOTO join in JUSTICE ALBIN's opinion. JUSTICE LONG did not participate. Plaintiff-Respondent, v. EINSTEIN MOOMJY, INC., The Carpet Department Store, and WALTER MOOMJY, Defendants-Appellants. Argued September 13, 2004 Decided November 15, 2004 On certification to the Superior Court, Appellate Division. Bruce H. Nagel argued the cause for appellants (Nagel Rice & Mazie, attorneys). Leon Grauer argued the cause for respondent. JUSTICE ALBIN delivered the opinion of the Court. In this case, defendants, a carpet department store and its president, sold plaintiff-customer a defective carpet at a warehouse clearance sale in violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20. The trial court determined that plaintiff s ascertainable loss was the replacement value of the carpet, not the purchase price. The court, however, found that plaintiff did not offer sufficient evidence establishing replacement value to warrant a jury trial and, therefore, the ascertainable loss was simply the price paid by plaintiff. Although the Appellate Division agreed that replacement value was the proper measure of damages, it held that the regular price on the marked-down sales sticker was proof sufficient to justify a damages trial. Last, the Appellate Division found that the trial court did not adequately state its reasons for its award of attorneys fees to plaintiff. We affirm the Appellate Division decision. Plaintiff s ascertainable loss in this consumer fraud action is the carpet s replacement value. Moreover, at a new damages trial, plaintiff will be entitled to a rebuttable presumption that the regular price on the marked-down sales sticker represents the carpet s replacement value. On remand, at a new hearing to determine plaintiff s reasonable attorneys fees, the trial court will give its reasons for its fee award with reference to the governing case law. [Bruce L. Alford & Abhijit Biswas, The Effects of Discount Level, Price Consciousness and Sale Proneness on Consumers Price Perception and Behavioral Intention, 55 J. Bus. Res. 775, 775 (2002).] Merchants draw consumers into their stores by holding sales events such as warehouse clearance days that promise the regular value of a product at a reduced price. Sales stickers with slashed prices play to the consumers commonsense desire to buy at a reduced price rather than the regular price. Larry D. Compeau & Dhruv Grewal, Comparative Price Advertising: An Integrative Review, 17 J. Pub. Pol y & Marketing 257, 257 (1998) ( Advertisers often appeal to [the] desire to get a deal by comparing the offering price (e.g., sale price) with some higher reference price (e.g., regular price), thereby making the offered price more attractive. ). The consumer, surely, would not think that he is getting a bargain if the product he purchases is worth no more than the price he paid. Merchants commit no wrong by profiting from consumers craving to shop smartly, provided they do not place the value of the products they sell in a false light. N.J.A.C. 13:45A-9.2(a)(9) (making unlawful false or misleading representations of facts concerning . . . amounts of price reductions ); see also Compeau & Grewal, supra, 17 J. Pub. Pol y & Marketing at 257 (observing that comparative price advertising is a powerful advertising tool, with a strong opportunity for deception, that requires careful management and monitoring ). In this case, the sales tag represented to plaintiff that the retailer was giving plaintiff a deal, a carpet at a price greatly reduced from the advertised regular price. The law places on plaintiff the burden of proving damages the replacement value of the carpet. We must determine the weight to be accorded the regular price on the sales sticker in proving replacement value. In deciding that issue, we cannot disregard the vast disparity in economic power and industry knowledge between retailers and an ordinary consumer. The ordinary consumer may be the victim of a deceptive marketing practice that involves a relatively minor loss. The consumer will not have easy access to proof of replacement value without retaining an expert witness or a retailer in the industry to testify to the market value of the merchandise. Marshalling such proofs can be an onerous and expensive undertaking. On the other hand, retailers such as defendants in this case who are in the business of selling carpets can be expected to know the value of the merchandise they place for sale to the public. In such circumstances, it is only fair to place the burden on the retailer, whose use of the sales sticker induced the purchase, to come forward with contrary evidence of replacement value. We will not require an overly burdensome procedure for a consumer to place before the trier of fact the issue of replacement value. The strong remedial policy undergirding the Consumer Fraud Act leads us to conclude that the regular price advertised on the sales sticker is a relevant benchmark from which to impute replacement value. See Cox, supra, 138 N.J. at 15. Accordingly, there will be a rebuttable presumption that the regular price on the sales sticker is the replacement value of the carpet. The burden then will shift to defendants to produce alternative evidence of replacement value. If defendants present such evidence, the presumption concerning replacement value will disappear, and the trier of fact will decide the issue based on all the evidence with the burden of persuasion resting with plaintiff. If defendants present no evidence of replacement value to refute plaintiff s prima facie case, judgment will be entered in plaintiff s favor. See footnote 9 Plaintiff is not restricted in the presentation of his proofs to the sales sticker and may call witnesses and produce other evidence to prove replacement value.See footnote 10 We caution plaintiff that the regular price is only evidence not conclusive proof of replacement value. In shifting the burden of production of evidence to defendants, we acknowledge that the retailer is in a superior position to present proof of the product s market value. In keeping the burden of persuasion with plaintiff, we adhere to the traditional manner in which damages must be proven. We note one additional policy basis in support of a rebuttable presumption that regular price is the equivalent of replacement value. We are mindful that misleading advertising is a deceptive commercial practice. Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977). It is a deceptive practice under the Act for a retailer to artificially inflate the price for an item of merchandise for the purpose of advertising the item at a large reduction. N.J.A.C. 13:45A-9.2(a)(9). In this case, there is a significant disparity between the regular price ($5,775) and the sale price ($1,199). Plaintiff has not argued that the regular price advertised by defendants was an inflated number, and we do not suggest that defendants have done so here. However, we believe that an unscrupulous merchant might pause before inflating a regular price on a sales sticker if that price was evidence of replacement value. Therefore, the rebuttable presumption that regular price equals replacement value may deter some merchants who might otherwise inflate the regular price to make the sale more appealing to the public. See Cox, supra, 138 N.J. at 21 (observing that the Act serves as a deterrent ). We remand to the Appellate Division the remaining evidential issues raised by plaintiff in his direct appeal that were not addressed in the panel s opinion. After that ruling, a trial on damages will proceed consistent with the procedures outlined above. Those factors must inform the calculation of the reasonableness of a fee award in this and every case. In setting the lodestar, a trial court first must determine the reasonableness of the rates proposed by prevailing counsel in support of the fee application. Rendine, supra, 141 N.J. at 335. In that regard, the court should evaluate the rate of the prevailing attorney in comparison to rates for similar services by lawyers of reasonably comparable skill, experience, and reputation in the community. Id. at 337 (quoting Rode v. Dellarciprete, 892 F.2d 1177, 1183 (3d Cir. 1990)). Second, a trial court must determine whether the time expended in pursuit of the interests to be vindicated, the underlying statutory objectives, and recoverable damages is equivalent to the time competent counsel reasonably would have expended to achieve a comparable result . . . . Id. at 336. The court must not include excessive and unnecessary hours spent on the case in calculating the lodestar. Id. at 335-36 (noting that it is not time actually expended but time reasonably expended that matters and that [h]ours that are not properly billed to one s client also are not properly billed to one s adversary ) (quoting Copeland v. Marshall, 641 F.2d 880, 891 (D.C. Cir. 1980)). Whether the hours the prevailing attorney devoted to any part of a case are excessive ultimately requires a consideration of what is reasonable under the circumstances. Third, a trial court should decrease the lodestar if the prevailing party achieved limited success in relation to the relief he had sought. Id. at 336; see also Hensley v. Eckerhart, 461 U.S. 424, 436-37, 103 S. Ct. 1933, 1941, 76 L. Ed. 2d 40, 52 (1983) (noting that important factor is degree of success obtained ). However, there need not be proportionality between the damages recovered and the attorney-fee award itself. Rendine, supra, 141 N.J. at 336 (adopting Justice Brennan s reasoning in his plurality opinion in City of Riverside v. Rivera, 477 U.S. 561, 106 S. Ct. 2686, 91 L. Ed. 2d 466 (1986)); see also Szczepanski v. Newcomb Med. Ctr., 141 N.J. 346, 366 (1995) (declining to construe New Jersey s fee-shifting statutes to require proportionality between damages recovered and counsel-fee awards even if the litigation . . . vindicates no rights other than those of the plaintiff ). Fourth, when the prevailing attorney has entered into a contingent-fee arrangement, a trial court should decide whether that attorney is entitled to a fee enhancement. Rendine, supra, 141 N.J. at 338. In determining and calculating a fee enhancement, the court should consider the result achieved, the risks involved, and the relative likelihood of success in the undertaking. Id. at 340-41 (noting that the legal risks facing a case may be so apparent and significant that they will constitute an economic disincentive independent of that created by the basic contingency in payment ) (quoting Pennsylvania v. Delaware Valley Citizens Council for Clean Air, 483 U.S. 711, 751, 107 S. Ct. 3078, 3100, 97 L. Ed. 2d 585, 614 (1987) (Blackmun, J., dissenting)). See footnote 11 Defendants argue that the award of attorneys fees was excessively disproportionate to the damages awarded to plaintiff. The Legislature undoubtedly was aware that in consumer fraud cases involving minor losses, attorneys fees frequently would exceed the damages suffered. Nevertheless, the Legislature intended plaintiffs to have access to the court system to pursue relatively small claims against deceptive retailers. In that respect, the provision for attorneys fees is one of the deterrent aspects of the legislation, and therefore, fraudulent retailers should beware. The trial court failed to acknowledge explicitly the principles outlined here and more fully developed in Rendine, supra, in rendering its attorney-fee award. The court relied merely on the representations in plaintiff s attorney-fee petition without further analysis or explanation. Therefore, we vacate the award of attorneys fees and remand for proceedings in accordance with this opinion. HENRY F. FURST, Plaintiff-Respondent, v. EINSTEIN MOOMJY, INC., The Carpet Department Store, and WALTER MOOMJY, Defendants-Appellants. DECIDED November 15, 2004 Chief Justice Poritz PRESIDING OPINION BY Justice Albin CONCURRING/DISSENTING OPINIONS BY DISSENTING OPINION BY a price at which he never offered the article at all; . . . [or] feature[s] a price which was not used in the regular course of his business, or which was not used in the recent past but at some remote period in the past, without making disclosure of that fact; . . . [or employs] a price that was not openly offered to the public, or that was not maintained for a reasonable length of time, but was immediately reduced. [16 C.F.R. 233.1.]