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President of Corporation Personally Liable under NJCFA

The New Jersey Appellate Division recently found that a claim under the New Jersey Consumer Fraud Act can go forward against the President and Chief Executive officer of a landscaping company.  In Lanza v. Secret Gardens Landscaping, Inc. (A-2613-07), the Plaintiff, Noreen Lanza, obtained a proposal from Secret Gardens for remodeling and landscaping work on her property. The total price of this work quoted to Lanza was $35,000. She signed the proposal, and Secret Gardens performed the work.  After completion of performance, Lanza filed suit against Secret Gardens and its President, Brent Stephens. She asserted claims for breach of contract and negligence as well as various claims under the New Jersey Consumer Fraud Act.  The fraud claim arose from a representation on Secret Gardens' website that it was "EP Henry Certified," which was untrue.  It had also, in violation of the home improvement section of the Consumer Fraud Act, failed to submit a contract that contained a start and end date for performance or a description of the work and principal products and materials to be used.

The trial court found that Stephens had no personal liability for any acts of Secret Gardens, including its alleged violations of the CFA and dismissed the claims against him.  The Appellate Division reversed this decision, stating that New Jersey "case law has long recognized that a corporate officer or employee who participates personally in a violation of the CFA or its implementing regulations may be held individually liable for the violation."   The court found that there was undisputed evidence that Stephens had participated personally in the alleged violations of the CFA committed in connection with the execution and performance of the home improvement contract between plaintiff and Secret Gardens.  In fact, Stephens himself testified at his deposition that he was the one who prepared the contract submitted to plaintiff, inspected the work as it was being performed, and discussed the change orders with plaintiff.  The Court found that these actions by Stephens constituted the primary grounds for plaintiff's CFA claims and, therefore, Stephens would be liable for any violations of the CFA in which he participated personally.   This provided the only source of recovery for Lanza, as Secret Gardens, Inc. filed bankruptcy during the pendency of the litigation.

This decision further broadens the already powerful New Jersey Consumer Fraud Act by permitting aggrieved consumers the opportunity to obtain a recovery from officers and executives of corporations that may have no assets, file bankruptcy and/or have no insurance.  New Jersey's Consumer Fraud Act has long been one of the most powerful tools of product consumers, and with this clear reinforcement of the law, the citizens of New Jersey are further protected from unfair trade practices.

Full post as published by New Jersey Law Blog on November 04, 2008 (boomark / email).