Cox v. Sears 138 NJ 2 (1994), New Jersey Law on Ascertainable Loss or Measurable Loss under the Consumer Fraud Act

One of the leading cases under New Jersey law setting forth the rights and the obligations of claimants under the New Jersey Consumer Fraud Act is Cox vs. Sears, decided by the New Jersey Supreme Court in 1994.

In Cox vs. Sears the plaintiff, a homeowner, contracted with Sears to make improvements on his kitchen. Sears or a subcontractor completed the repairs in a shoddy manner, failed to get appropriate permits, failed to rewire the kitchen as required under the contract, and otherwise failed to perform on the contract. The plaintiff sued Sears for breach of contract and consumer fraud and Sears counter sued for breach of contract.The contract price was about $7000. The amount of repairs for the kitchen was approximately $6,800. The plaintiff never paid Sears any money and had an expert opinion about the cost to replace the kitchen and the repair of the kitchen was about $,6000.

The case was tried to conclusion and the jury determined that the defendant Sears had committed an act of consumer fraud and had breached the contract. The jury awarded compensatory damages of about $6800. Ultimately, the trial court overruled the jury verdict, holding that the plaintiff had not sustained any damages which were required under the Consumer Fraud Act because the plaintiff had paid an amount to repair the kitchen which was less than the contract amount entered into with Sears initially. Thus, since the plaintiff had not sustained any “benefit of the bargain” losses, he had not sustained an ascertainable loss and obtained the kitchen he originally wanted. The plaintiff also made a claim that a lien on the property ruined his credit, for which he sustained an ascertainable loss.

The Appellate Division upheld the trial court’s decision that the plaintiff could not recover under the New Jersey Consumer Fraud Act, and thus could not sustain a claim for consumer fraud because there was no ascertainable loss. The Appellate Division also determined that the defendant, Sears, had not violated the New Jersey Consumer Fraud Act but in fact had breached the contract between the parties. The Appellate Division specifically noted that “Cox had been living with the kitchen since Sears installed it and that the entire transaction had cost the plaintiff nothing.” For this, Sears had never demanded payment from the plaintiff and thus it reasoned to allow the plaintiff to recover three times the cost of completing the renovations would distort the Consumer Fraud Act beyond recognition.

There was a dissent in the Appellate Division, which ultimately provided a right of appeal to the Supreme Court. The dissenter felt that the Appellate Division had usurped the province of the jury and had misinterpreted the Consumer Fraud Act and damage principles. The dissenter held that the jury had correctly calculated the contract damages because the verdict awarded the plaintiff, approximately $6800, would have put the plaintiff in the position had he received the appropriate work from Sears. The dissenter felt that the jury award provided the plaintiff with the kitchen he would have received from a proper performance of the Sears renovation contract. On the issue of whether or not the plaintiff had sustained an ascertainable loss, the dissenter rejected the majority’s conclusion that the plaintiff had not sustained a loss, indicating that a charge on the credit card is a legal obligation amounting to a loss. Ultimately, the Supreme Court did determine that the Appellate Division was incorrect and reinstated the jury verdict and added attorney’s fees and costs.

The Supreme Court at length attempted to explain that the New Jersey Consumer Fraud Act should be liberally construed since it is remedial legislation and is required to be liberally construed in favor of consumers. Further, the Supreme Court held that the Division of Consumer Affairs has enacted extensive regulations consistent with the appropriate authorities to deal with practices susceptible to consumer fraud violations such as those under the home improvement contract. The regulations are not supposed to be exclusive or exhaustive deceptive practices.

The New Jersey Supreme Court went through the list of bases that a potential defendant can violate the New Jersey Consumer Fraud Act, including affirmative misrepresentations, material omissions and regulation violations. With material omissions, the plaintiff must show the defendant acted with knowledge, and intent is an essential element. With regard to the third prong of the New Jersey Consumer Fraud Act, regulation violations, the party subject to the regulations is assumed to be familiar with them so that any violation of the regulation, regardless of intent or more culpability, constitutes a violation of the Act.

The court held that the regulations which were in place were meant to prevent precisely the poor quality of work that was characterized by Sears’ performance in the case of Cox vs. Sears and to protect the consumers. This was of significant importance because the court held that this was true despite the sloppy workmanship falling short of unconscionable commercial practice. The Supreme Court relied heavily on the plaintiff’s expert, who introduced substantial evidence that the kitchen had been rewired incorrectly, creating a dangerous condition. And by failing to rewire the kitchen, Sears breached the contract and its poor performance created several concealed hazardous defects that could constitute substantial aggravating circumstances, warranting a jury’s finding of consumer fraud or unconscionable commercial practice.

After the court addressed the issue of liability, it turned to damages to determine what was actionable under the New Jersey Consumer Fraud Act. The court spent time delineating a breach of contract case from a consumer fraud case, indicating that there was a different analysis for each claim. It stated “although one purpose of the legislation is clearly remedial in that it seeks to compensate a victim’s loss, the Act also punishes the wrongdoer by awarding a victim treble damages, attorney’s fees, filing fees and costs. In that sense, the Act serves as a deterrent. Therefore, in determining whether the plaintiff has established a loss under the Act, we are guarded by, but not bound by, strict contract principles.”

Ultimately, the court concluded that the record was satisfactory and that the court felt that Sears’ failure to comply with the Home Improvement Practices Regulations visited an ascertainable loss upon the plaintiff since the purpose of the regulations was to protect the consumer from hazardous shoddy work as existed in this case.

The court indicated that, had the applicable permits been obtained before Sears commenced the work, there would have been periodic inspections of the renovations. An inspector would have detected any of the substandard electrical wiring and Sears could not have continued. And since these inspections did not occur, the condition was not remedied by the local inspectors.

With regard to the Appellate Division’s suggestion that because Cox did not spend any money to repair or finish the work he incurred no loss, was contrary to the Act’s clearly remedial purpose. The court stated that traditionally to demonstrate a loss, a victim must simply supply an estimate of the damages calculated within a reasonable degree of certainty and the victim is not required to actually spend the money for repairs before becoming entitled to make a claim under the Act.

The court felt that the Appellate Division’s analysis and conclusion was that since Cox had kept the kitchen that there had been no loss. The Supreme Court felt that the plaintiff had no choice except to keep and use the kitchen since it was in his house. The Supreme Court also noted that the kitchen that he had before or prior to the renovations was a normal and safe kitchen, unlike the one which he currently had. Additionally, the plaintiff had incurred legal obligation by virtue of his contract with Sears and the debt was presentably collectible prior to the lawsuit.

The Supreme Court concluded that inappropriate debt or lien against a consumer for a plaintiff may constitute a loss under the Act before the consumer is obligated to pay indebtedness, arising out of conduct that violates the Act. The court also affirmed the statutory law that stated that the plaintiff was entitled to an award of counsel fees and costs even if the victim cannot show an ascertainable loss under the Act. The fundamental remedial purpose of the Act dictates that the plaintiff would be able to pursue consumer fraud actions without experiencing financial hardship.

Ultimately, the Supreme Court reversed the Appellate Division and remanded to the trial court for entry of a judgment for consumer fraud with triple damages against the defendant Sears.

This leading New Jersey Consumer Fraud Act case is important in understanding claims under the Consumer Fraud Act both in and out of the home and improvement contract realm. The plaintiff needs to demonstrate that the defendant had violated the New Jersey Consumer Fraud Act which has resulted in an ascertainable loss. The plaintiff then needs to demonstrate that there is an actual ascertainable loss but no out-of-pocket expenditures are required.

The importance the reason in this case cannot be understated. This case is the starting point of any analysis of ascertainable loss under New Jersey law. Any lawsuit started where consumer fraud is alleged must involve the analysis of this case to determine the concept of ascertainable loss.

While the court has described the concept of ascertainable loss is really the concept of measurable loss. In order for a loss to be pursued under New Jersey law it must be ascertainable which the court has defined is measurable. In order for you to ascertain a loss as part of a lawsuit must be able to measure it in some way. The loss does not have to be a specific dollar amount. Their only must be a way to measure. As an example, in cases where it is alleged that there is a cost to repair, there is no requirement that the repair must have been completed. The requirement will is only that the cost must be measurable. It is also required that there is a nexus tween the loss and the alleged improper actions.

This is why the best term under New Jersey law to use a lawsuit would be measurable loss rather than ascertainable loss. If you can measure your loss you consume for your loss. There is a very old phrase, a nonlegal phrase, they can be used best describe the analysis of New Jersey law. No harm no foul. If there has been an active consumer fraud, there must be at least a measurable loss. The harm must be measurable in some way, it does not have to be exact, it does not have to be perfect, it does not have to be actually expended. It must only be measurable.

New Jersey courts have said that an individual who has a claim under the New Jersey Consumer Fraud Act is acting as a private attorney general pursuant to statutory authorization. The court also said that without this loss you cannot not pursue a claim. Thus, the no harm no foul rule. If you are pursuing a claim under the act needed to determine the harm, as without the harm not to pursue a claim.

Sometimes you need an expert and sometimes you don’t need an expert. You might be able to argue that the cost to repair is your element of damage in your complaint. However, at a certain point you might need an expert to demonstrate what that cost to repair is as far as what your losses. So stating it improving it again are two separate things. You can state be measurable loss to pursue a claim in your complaint. However, you must prove an ascertainable or measurable loss for jury to pursue a claim.

One issue is contemplated as far as stating a claim, and one issue is evidence or a proof issue as far as pursuing a claim in court. They are very different issues. Just because the law says you have a claim doesn’t mean you approve the claim. This is a basic understanding or misunderstanding as to the state of New Jersey. You might have a claim, but you might not be able to prove it. Again, this is more complicated analysis, but it is still the state of the law in New Jersey. When do you need an expert to prove it measurable loss? This depends on the facts in your specific case and that the law as applied to the facts in your specific case. This is why you need an experienced consumer attorney or consumer litigator or an attorney that is handled a significant amount of consumer claims to pursue one of your claims under the New Jersey Consumer Fraud Act.

As an example let us say you have purchased the vehicle with prior damage which you claim is the basis of your loss. The measurable or ascertainable loss is the reduction in value or the cost to repair.

Now you are a trial on this specific complaint. The fact that you have an ascertainable or measurable loss does not mean that you have proved an ascertainable or measurable loss. If you have spent the money to repair the vehicle that is one consideration. That could be your measurable loss. However, what if you have not spent the money to repair the vehicle or you have not sold at a loss. Arguably, under certain circumstances, you will be required to produce an expert to demonstrate the reduction in value or the cost to repair. This is certainly not set in stone and depends on the facts in the case. But you need to look at the specific law and the specific facts of each case and you need a consumer attorney in New Jersey to make an analysis of the appropriate facts in the appropriate law to see if there is a claim.

The New Jersey Supreme Court has said that there is a claim however must be proved. You have the opportunity but you need to move forward and prove it.

The ascertainable loss requirement is the basis for any claim her and any claim that a consumer might make under NJ Law for compensable damages in New Jersey.

Hire an experienced lawyer for consumer fraud.