Wade Clark Mulcahy LLP

Individual defendants can be held personally liable under the New Jersey Consumer Fraud Act (“CFA”).  The New Jersey Supreme Court has explained under what circumstances the owners and employees of a corporation may be individually liable for CFA violations that are directly attributable to acts undertaken by them through the corporate entity.  Allen v. V & A Bros., 208 N.J. 114, 117, 26 A.3d 430, 432 (2011).

In 2002, plaintiffs purchased a home in Princeton Township that was in need of landscaping. The scope of that work included building a retaining wall and creating a level area on the property where the pool could be installed. Plaintiff contracted with V and A Brothers, Inc. to level the property and build the retaining wall.

While constructing the retaining wall, V&A Bros did not obtain final approval to substitute the type of backfill used to support the wall.

The construction of the retaining wall required the use of backfill to support the wall. Plaintiffs assert that V and A Brothers, Inc. did not use the specified backfill, but instead substituted an inferior grade of fill that defendants trucked to plaintiffs' property from one of defendants' other construction sites.

The trial court granted a motion to dismiss the complaint against the individual defendants. Reasoning that the CFA did not create a direct cause of action against the individuals, the court instead applied a traditional veil-piercing approach to plaintiffs' claims against the individuals.

The Appellate Division reversed the trial court’s order dismissing the claims against the individual defendants finding support for individual liability in the statutory language of the CFA.

The Supreme Court of New Jersey granted defendants’ petition for certification in which they challenged the conclusions of the appellate panel as to the basis for imposing individual liability. 

They conclude that, “focusing first on the statute's definition of person, N.J.S.A. 56:8–1(d), there can be no doubt that the CFA broadly contemplates imposition of individual liability. The very breadth of the definition itself lends strong support to the proposition that, the CFA permits the imposition of individual liability upon one whose acts are part of a violation by a corporation.” 

The more complicated question raised in Allen, was whether an employee or officer of a corporation may also be liable individually when the basis for the CFA claim is a regulatory violation rather than an affirmative act or knowing misrepresentation.

The Supreme Court found this to be a more fact sensitive determination and used this example for instruction.  “A distinction can be drawn between the principals of a corporation and its employees. However, if the employee unilaterally concludes that an inferior product should be used in place of one specified in a contract and does so without the knowledge of the homeowner, there is little reason to construe the CFA to limit liability to the corporate employer and permit that employee to escape bearing some individual liability.