The New Jersey Supreme Court issued a notable decision this week in Sun Chemical Corporation v. Fike Corporation and Suppression Systems, Inc.
The decision came in response to a certified question from the Third Circuit, asking whether “a Consumer Fraud Act claim can be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act.” Justice Solomon wrote for a unanimous Court, though Justices Patterson and Timpone did not participate.
The Court held that claims involving malfunctioning products were not necessarily subsumed by the PLA, drawing a line between harm caused by the product, and harm resulting from fraud and misrepresentation. Irrespective of the nature of the damages, a CFA claim alleging “express or affirmative misrepresentations” may be brought in the same action as a PLA claim premised upon product manufacturing, warning, or design defects.
The case involved an “explosion isolation and suppression system” purchased by ink manufacturer Sun Chemical to prevent and contain potential explosions in their dust collection system.
On the first day the Suppression System was operational, a fire occurred in the dust collection system. An alarm on the system activated but was not audible. An explosion then occurred in the dust collection system, injuring employees and causing damage to the Sun Chemical facility.
Sun Chemical brought a complaint under the CFA alleging that Fike had made several affirmative misrepresentations about the system: that it would prevent explosions; that it would have an audible alarm; that it complied with industry standards; and that the system had never failed.
The District Court held the claims are governed by the PLA, and that the plaintiff may not avoid its application by “artfully crafting its claims under the CFA.” On appeal, the Third Circuit certified clarifying questions to the New Jersey Supreme Court.
Sun Chemical argued that even the physical damage to property was not governed by the PLA because it was not caused by actual product defects – they were the result of Fike’s misrepresentations.
In reaching its decision, the Court distinguished the facts of Sun Chemical from the kinds of claims at issue in In re Lead Paint Litigation, as well as Sinclair v. Merck & Co., which involved Vioxx.
The Court noted that the harms alleged in Lead Paint – physical damage to property and personal injury – as well as the failure to warn of those harms, were of the type intended to be addressed by the PLA. Similarly, in Sinclair, the Court noted, the “heart” of plaintiffs’ case was the “potential for harm caused by the drug”, an allegation that “clearly falls within” the scope of the PLA.
So claims premised on “a product’s manufacturing, warning, or design defect” must be brought under the PLA, and “CFA claims for the same conduct are precluded.” But claims for “deceptive, fraudulent, misleading, and other unconscionable commercial practices” may be brought under the CFA. It is not “the nature of the plaintiff’s damages” that determines whether the cause of action falls under the CFA or PLA, but “the theory of liability underlying the claim.”
NJCJI will be hosting a webinar with Gavin Rooney of Lowenstein Sandler and Jeff Jacobson of Faegre Drinker to discuss the implications of this decision in greater detail. Please contact Alida Kass if you would be interested in participating in this event.