The plaintiffs in this case, William and Vivan Allen, filed suit against V. and A. Brothers Inc., and the company’s owners and employees individually, for breach of contract related to unsatisfactory landscaping work and regulatory violations of the Consumer Fraud Act (CFA). The judge entered partial summary judgment against V. and A. Brothers but dismissed the claims against the individual defendants. Although plaintiffs prevailed on the remaining issues at trial against V. and A. Brothers, they appealed the dismissal of their CFA claims against the individual defendants. The Appellate Division reversed the trial court’s dismissal of the claims against the individuals and remanded the case. The defendants appealed to the Supreme Court, challenging the appellate court’s basis for imposing individual liability.
In an amicus curiae brief to the New Jersey Supreme Court, NJCJI argued that the Appellate Division’s decision improperly eliminated long-standing protections against liability granted to corporate employees and shareholders under common-law and the state’s Business Corporations Act. NJCJI argued that the appellate court should have applied the “participation theory,” which imposes individual liability only after a fact-based analysis proves the officer’s direct involvement with the tort committed by the corporation. Disregarding the traditional tests for determining individual liability puts the personal assets of New Jersey employees, corporate officers, and shareholders at risk, which will discourage businesses from doing business in this state.
The New Jersey Supreme Court agreed with NJCJI that participation theory would be an appropriate test for determining individual liability for claims brought under the CFA. The case was remanded to the trial court for further proceedings.