May Corporate Actors Be Held Personally Liable Under the Consumer Fraud Act?

In Allen v. V&A Brothers, Inc, A-30 SEPT.TERM 2010, 2011 WL 2637270 (N.J. July 7, 2011), the Court considered whether an individual could have personal liability for a violation of the the Consumer Fraud Act (“CFA”) by his company. In that case, the Allens hired V&A Brothers to build a pool and later discovered the workmanship was defective.  Id. In response, the Allens filed several claims against the vendor. One alleged a violation of the CFA for failure to execute a written contract.

The reason that failure was significant was that the CFA requires “[a]ll home improvement contracts for a purchase price in excess of $500.00, and all changes in the terms and conditions thereof [to] be in writing.” N.J.S.A. 13:45A-16.2.  In Allen, there was no written contract at all.  Id.  Due to the failure to satisfy this requirement of the CFA, the New Jersey Supreme Court unanimously affirmed the lower court’s ruling and held that a corporation’s principal officers as well as their employees may be held personally liable under the CFA. Id. As a result, the corporate officers were liable for $390,000 in CFA damages, so long as the individual played a part in breaking the rules. Therefore, generally speaking, principals, who are the policy-setters for an organization, carry a greater exposure to personal liability than do employees.

In light of this decision, individuals associated with an entity that violates the CFA may be held liable even though the CFA claim is based only on a rule violation (such as a failure to provide a written contract) rather than actual fraud.

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© 2011 Nissenbaum Law Group, LLC