Strict Liability for Violations of Consumer Fraud Act Regulations

For years after the adoption of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”), it was unclear whether a violation of a regulation promulgated under the authority of the CFA gave rise to liability in the absence of intent.  On this date 34 years ago, however, the Supreme Court of New Jersey, in a characteristically concise opinion by Justice Sullivan, unanimously held that intent was not required.  The case was Fenwick v. Kay American Jeep, Inc., 72 N.J. 372 (1977).  The plaintiff was Millicent H. Fenwick, then the Director of the New Jersey Division of Consumer Affairs (“the Division”), but later a Republican Congresswoman from New Jersey and the model for the character of Lacey Davenport in the Doonesbury comic strip.

Two car dealers had advertised used cars but had not included the vehicles’ odometer readings in the advertisements.  That violated a CFA regulation that made it an unlawful practice to fail to disclose the mileage readings in a used car ad.

The Division brought administrative proceedings against the dealers and Friedman Associates, the ad agency that prepared and placed the advertisements.  The hearing officer found both the dealers and Friedman Associates guilty of violating the CFA odometer disclosure regulation even though Friedman Associates said that the dealers had provided the mileage information but it had been left out of the advertising due to “human error.”  Nominal fines and costs were imposed.

Only Friedman Associates, which had also received several prior warnings that its advertising violated CFA regulations, appealed.  The Appellate Division voted 2-1 to reverse the Division’s decision.  The Division then appealed as of right to the Supreme Court, which reversed, agreeing with the dissenting Appellate Division judge that intent is not an element of a violation of a CFA regulation.  The Court reinstated the Division’s ruling.

Justice Sullivan noted that the language of the CFA itself limits the requirement of intent to cases of “concealment, suppression or omission of any material fact.”  The Court then stated, in language that has become seminal in the CFA context, that “[t]he capacity to mislead is the prime ingredient of deception or an unconscionable commercial practice.  Intent is not an essential element.  Since consumer protection is the ultimate goal, the standards of conduct established by the Act and implementing regulations must be met regardless of intent except when the Act specifically provides otherwise.”

Accordingly, the violation of the odometer disclosure regulation was a strict liability offense.  Justice Sullivan dismissed the argument of Friedman Associates that this result violated due process as “legally frivolous.”

A contrary decision would have paralyzed efforts to enforce the CFA, in violation of the Legislature’s intent to give broad protections to consumers.  Both consumers and honest businesspeople, whom the Court had noted in 1972 also benefit from the suppression of dishonest competition, should be grateful today, and every day, for the persistence of Millicent Fenwick, and for the decision of the Court in this case.