Opinion ID: 676040
Heading Depth: 2
Heading Rank: 1

Heading: An Overall View

Text: 15 The district court's jurisdiction was based upon 28 U.S.C. Sec. 1332. Plaintiff J & R Ice Cream is a citizen of Florida, with its principal place of business in that state, the defendants CSI and CSLC are citizens of New Jersey with their principal places of business in that state, and the amount in controversy exceeds $50,000. 3 Our jurisdiction is based on 28 U.S.C. Sec. 636(c)(3) and 28 U.S.C. Sec. 1291 inasmuch as this is an appeal from a final order of judgment in a trial presided over by a magistrate judge pursuant to 28 U.S.C. Sec. 636(c)(1). 16 California Smoothie challenges the jury's verdict on six grounds: (1) that the court erred in admitting testimony by unrelated former California Smoothie franchisees as to misrepresentations California Smoothie made to them; (2) that the court erred in applying the New Jersey Consumer Fraud Act to the sale and acquisition of a franchise; (3) that the proof that California Smoothie falsely represented that it had acquired expertise in selecting profitable locations for franchises and that it had utilized that expertise in selecting the Pompano mall site did not establish a violation of the Consumer Fraud Act; (4) that the evidence did not support the jury's finding that California Smoothie represented to Baugher and Rossetti that they could expect gross sales of $250,000 and likely in excess of $300,000; 4 (5) that the court erred in admitting parol evidence of one of the three misrepresentations allegedly made by California Smoothie; and (6) that the court erred in concluding that California Smoothie had a duty to select a franchise site and negotiate a lease for Baugher and Rossetti. 17 For reasons which we set forth below, we conclude that the district court abused its discretion by permitting J & R Ice Cream to introduce the testimony by former California Smoothie franchisees who were unrelated to J & R Ice Cream and its founders. Moreover, we find that the introduction of this evidence was prejudicial with regard to the Consumer Fraud Act count, a conclusion that standing alone would require a new trial on that count. 18 However, as we noted above, California Smoothie argues that the Consumer Fraud Act does not apply to the sale and acquisition of a franchise. We agree. Therefore, we will not remand for a new trial on the Consumer Fraud Act count. Rather, we will remand the matter for entry of a judgment for California Smoothie on that count. Nevertheless, we will remand this case to the district court for a hearing to determine whether J & R Ice Cream is entitled to a new trial on its equitable fraud claim, as J & R Ice Cream contended at oral argument before us that it only abandoned this cause of action after learning that the district court would not entertain motions for summary judgment and after it reasonably concluded that California Smoothie did not intend to challenge the Consumer Fraud Act's applicability to this case. 5 If the district court agrees with these factual contentions, it may deem it appropriate to reinstate the equitable fraud claim. We will reinstate the jury's verdict against California Smoothie on the negligence count, as the testimony by former California Smoothie franchisees did not taint the judgment on this count, and the district court was correct in concluding that California Smoothie had a duty to select a franchise site and negotiate a lease for Baugher and Rossetti. 19 In its cross-appeal, J & R Ice Cream challenges the district court's denial of prejudgment interest on the Consumer Fraud Act damages and the court's decision to strike the jury's award of negligence damages because they were duplicative of the Consumer Fraud Act damages. In light of our decision that the district court's admission of testimony by former franchisees requires reversal of the Consumer Fraud Act judgment and that the Consumer Fraud Act is inapplicable to the sale and acquisition of a franchise, we need not reach these claims and we will dismiss the cross-appeal as moot. 6 20 Instead, we will vacate the district court's order striking the negligence damages and remand with instructions to reinstate the negligence damages, enter a judgment for them, and award prejudgment interest on these damages. We follow this course because the district court concluded that the damages awarded on the negligence claim against California Smoothie duplicated the damages awarded on the Consumer Fraud Act claim against California Smoothie. It reached this conclusion as it reasoned that the damages which would proximately flow from a misrepresentation as to expertise in site selection and failure to utilize that expertise properly [are] the same damages which would flow from a negligence claim based on California Smoothie's alleged negligence in selecting the site. See supp. app. at 519. For this reason, the district court refused to enter judgment on the $55,000 awarded by the jury on the negligence count. Id. at 520; app. at 42-43 (order of judgment). Thus, the negligence damages should be reinstated because, based on our decision, they no longer are duplicative. 7 21 Prejudgment interest should be allowed on the judgment on the negligence claim pursuant to N.J.Ct.R. 4:42-11(b) which provides that prejudgment interest shall be awarded in all but exceptional circumstances. In reaching this conclusion, we have considered the district court's reasoning in disallowing interest on the Consumer Fraud Act judgment: 22 [u]nder the circumstances where a treble damage award is made to a prevailing plaintiff, ... to additionally award prejudgment interest would in effect provide such a windfall and double recovery and this does indeed constitute exceptional circumstances. 23 As noted by counsel for plaintiff, the purpose behind the rule is twofold; to encourage settlement and to make the plaintiff whole. In the situation where treble damages are awardable, the treble damages [are] more than adequate to make a plaintiff whole; and indeed the prospect of treble recovery is also more than adequate to make a defendant focus on settlement and encourage settlement. 24 See supp. app. at 522. But based on our decision that J & R Ice Cream is no longer entitled to treble damages, the district court's reasoning is no longer applicable. Thus, J & R Ice Cream is entitled to prejudgment interest on the negligence damages pursuant to the ordinary application of N.J.Ct.R. 4:42-11(b).