The Limited “Refund” Remedy Under the New Jersey Consumer Fraud Act Does Not Apply to Violations of the Home Improvement Practices or Home Improvement Contractor Registration Regulations

The New Jersey Consumer Fraud Act (“CFA”) provides powerful remedies that can be used by aggrieved parties to a construction contract. While the treble damages and attorneys’ fees remedies have traditionally received greater attention by parties and the courts, the CFA also references a refund remedy in N.J.S.A. §§ 56:8-2.11, -2.12 that aggrieved consumers have relied upon to seek refunds of amounts paid under construction contracts that violated the CFA, particularly where they had not been able to demonstrate an ascertainable loss entitling them to treble damages. However, the recent Appellate Division decision in Logatto v. Lipsky effectively eliminates the availability of the refund remedy in virtually all CFA cases, including cases arising out of construction contracts, as well as those involving alleged violations of the Home Improvement Practices and Home Improvement Contractor Registration regulations.

The refund remedy provision requires “a refund of all moneys acquired by means of any practice declared herein to be unlawful” in private and enforcement actions by the Division of Consumer Affairs. Although not the subject of many published decisions, the refund remedy had been held applicable to CFA cases involving construction disputes in Artistic Lawn & Landscape Co., Inc. v. Smith.

In Logatto, homeowners asserted CFA claims against a general contractor, alleging that the contractor had committed technical violations of the Home Improvement Practices regulations by failing to have a signed contract or written change orders. The trial court did not allow the homeowners to pursue a refund remedy. On appeal, the Appellate Division affirmed, noting that the refund remedy was adopted in 1979 as part of a separate act within the CFA that made it unlawful to misrepresent the identity of food in menus or advertisements of eating establishments. Because the refund remedy statute used the word “herein,” the Court held that the refund remedy is only available in CFA cases involving such claims.

While it certainly has broader implications with respect to other claims under the CFA, the Logatto decision is significant to construction disputes involving CFA claims because such cases often involve technical violations of the Home Improvement Practices or Home Improvement Contractor Registration regulations where parties are unable to obtain treble damages because they could not establish an ascertainable loss. As the Logatto decision made clear, the alternative remedy of a refund will not apply to such cases, and, as such, the consumers will likely have no recourse under the CFA for any damages.

Damian V. Santomauro is a Director in the Gibbons Business & Commercial Litigation Department.

 

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