Rejecting Tele Aid, the Third Circuit in Maniscalco v. Brother Holds that the Laws of Consumers’ Home States Apply in Nationwide Class Actions

On March 8, 2013, the United States Court of Appeals for the Third Circuit issued its precedential decision in Maniscalco v. Brother International Corp., which significantly restricts the ability of out-of state plaintiffs to use the New Jersey Consumer Fraud Act (“NJCFA”) to pursue nationwide class actions in New Jersey against New Jersey based companies.

In Maniscalco, plaintiffs claimed that Brother’s multi-function series of printers caused economic loss to them, and all purchasers nationwide, because of alleged “defects” that Brother failed to disclose. Brother moved for summary judgment on all of plaintiffs’ varied omissions-based defect theories under the NJCFA, arguing first that under New Jersey’s choice of law rules, the laws of the plaintiffs’ home states would apply — not the NJCFA, but even if New Jersey law was applicable, there was no evidence in the record to support their claims. The District Court agreed, holding that “Plaintiffs have not set forth any facts pointing to a decision to omit or conceal a material fact concerning the [alleged defects,]” and certainly no facts pointing to any unlawful acts in New Jersey. Therefore, the Court found that the plaintiffs’ home states, not New Jersey, had the “most significant relationship” with plaintiffs’ claims. And consequently, under New Jersey’s choice-of-law rules (i.e., the “most significant relationship test” as set forth in the RESTATEMENT (SECOND) OF CONFLICT OF LAWS, Section 148(2)), the NJCFA did not apply to plaintiffs’ claims.

In affirming summary judgment dismissing the NJCFA claim, the Third Circuit sided with a majority of district courts that have interpreted RESTATEMENT § 148(2) as applying the laws of purchasers’ home states in consumer fraud cases and specifically rejected a contrary interpretation advocated by In re Mercedes-Benz Tele Aid Contract Litigation. In Tele Aid, although finding that three of the § 148(2) factors weighed in favor of applying the laws of the purchasers’ home states, the Court found that New Jersey had a greater interest in the litigation because that was the state from which the alleged omissions and misrepresentations “emanated,” and New Jersey’s interest in deterring fraudulent conduct by New Jersey corporations was paramount. The Third Circuit rejected this interpretation, finding that New Jersey had no interest in “opening the floodgates to nation-wide consumer fraud class actions by out-of-state plaintiffs involving transactions with no connection to New Jersey other than the location of the defendant’s headquarters.”