Court Weighs Consumer Fraud Suits Against eBay Posters

The New Jersey Supreme Court is poised to decide whether ordinary people who lie about the wares they sell on Internet auction sites like eBay can be held liable under the state's Consumer Fraud Act, with its awesome treble-damages remedy.

A pro-purchaser ruling could spell trouble for average folks who exaggerate a little too much when hawking merchandise online, through classified ads or even at garage sales.

A case before the court in January stemmed from Montville, NJ, resident Richard Conklin's representation that the 1970 Corvette convertible he posted for sale on eBay in 2002 was “in good condition.” The successful bidder, Lyle Real of Missouri, paid $13,651 for the car, but when it was shipped to him he found it to be undriveable, and he spent an estimated $40,000 to restore it.

Real sued Conklin and Radir Wheels Inc., Conklin's wholly owned corporation that had held title to the car. Real alleged breach of contract, common-law fraud, negligent misrepresentation and violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -166 (“CFA”).

After a bench trial in Morris County, Superior Court Judge Charles Villanueva found in Real's favor and set compensatory damages of $8,651. Because he found Conklin liable under the CFA, he trebled the damages to $25,953 and awarded $29,950 in counsel fees and $6,544 in costs.

Last year, Appellate Division Judges Howard Kestin, Harvey Weissbard and Ronald Graves reversed as to CFA liability, saying Conklin was not acting as a “dealer,” as defined by prior court rulings that generally limit the law's application to retail and wholesale sellers.

At the arguments, Real's attorney, Michael Halbfish of Woodbridge, NJ's Tunney & Halbfish, said the statute is applicable to “any person” who commits an act of fraud in the sale of a product. “Mr. Conklin violated the Consumer Fraud Act by committing an affirmative act that constituted fraud,” said Halbfish. “The plain language of the statute and the intent of the Legislature is clear in this case.”

Justice Jaynee LaVecchia asked whether it should make any difference if Conklin, who described himself during the trial as a farmer, was actually engaged in the business of selling cars.

“Our position is that the court does not have to find Mr. Conklin was a dealer to hold him liable” under the CFA, Halbfish replied. Even so, “he was a dealer,” Halbfish said. He noted that Conklin sold multiple vehicles through Radir Wheels until the Division of Motor Vehicles issued a stop order because he did not have the requisite permission to be a dealership.

Justice Barry Albin asked whether single home sellers could be held liable under the Act if they overinflate their homes' attributes. Under the current law, Halbfish conceded, they could not be.

Albin asked why eBay posters like Conklin should be treated differently.

“Because Mr. Conklin was more than just a casual seller,” Halbfish said. “And the rule [on home sellers] should be changed.”

Justice Robert Rivera-Soto asked, “Was it the Legislature's intent to cast such a wide net, given the substantial penalties?”

“I do think it was the intent of the Legislature to cast a wide net,” Halbfish said. “Innocent parties should be protected.”

“But are they entitled to the additional remedies the [A]ct imposes?” Rivera-Soto asked.

Halbfish said yes, since the Act serves as a deterrent and increases the abilities of plaintiffs to retain competent counsel, given that the Act allows for treble damages and counsel fees.

Both Rivera-Soto and Albin asked whether the Act would apply to their aged aunts who may want to sell their old chest of drawers at a garage sale or through classified ads hinting about a pedigree that did not actually exist.

Halbfish said the situation was different in this case. “Here we had affirmative acts,” to wit: Conklin intentionally lied about the condition of the car in order to inflate the amount hopeful buyers would be willing to bid, he said.

Conklin's lawyer, Denville's Clifford Weininger, said the Legislature never intended for “any person” to apply to nonretail or nonwholesale sellers.

“But it's in the statute,” said Albin.

Weininger responded with the hypothetical situation in which his wife includes their children's old bedroom sets in a garage sale. Under Halbfish's view, Weininger said, his wife should be concerned about possibly being held liable under the Act. “It's going to be a concern of mine,” he said.

Why, asked Albin, was the phrase “any person” in the statute?

“I can't answer that,” Weininger replied.

“Then how do we read it out of the statute?” asked Albin.

“The court's done that for individual sellers of real estate,” Weininger responded. “The court has said the CFA does not apply to them.”

The Act, he said, was only meant to apply to “dealers” and “merchants.”

But Rivera-Soto said one of the purposes of the Act was to encourage people to tell the truth and that when misrepresentations are made “you can't shift the burden to the buyer and say, 'You should have figured that out.'”

Weininger said the Legislature intended Real's relief to lie in the remedy of a common-law fraud claim.

“Here, you clearly have clear and convincing evidence of common-law fraud,” he said.

The case is Real v. Radir Wheels Inc. et al., A-26-08.

The New Jersey Supreme Court is poised to decide whether ordinary people who lie about the wares they sell on Internet auction sites like eBay can be held liable under the state's Consumer Fraud Act, with its awesome treble-damages remedy.

A pro-purchaser ruling could spell trouble for average folks who exaggerate a little too much when hawking merchandise online, through classified ads or even at garage sales.

A case before the court in January stemmed from Montville, NJ, resident Richard Conklin's representation that the 1970 Corvette convertible he posted for sale on eBay in 2002 was “in good condition.” The successful bidder, Lyle Real of Missouri, paid $13,651 for the car, but when it was shipped to him he found it to be undriveable, and he spent an estimated $40,000 to restore it.

Real sued Conklin and Radir Wheels Inc., Conklin's wholly owned corporation that had held title to the car. Real alleged breach of contract, common-law fraud, negligent misrepresentation and violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -166 (“CFA”).

After a bench trial in Morris County, Superior Court Judge Charles Villanueva found in Real's favor and set compensatory damages of $8,651. Because he found Conklin liable under the CFA, he trebled the damages to $25,953 and awarded $29,950 in counsel fees and $6,544 in costs.

Last year, Appellate Division Judges Howard Kestin, Harvey Weissbard and Ronald Graves reversed as to CFA liability, saying Conklin was not acting as a “dealer,” as defined by prior court rulings that generally limit the law's application to retail and wholesale sellers.

At the arguments, Real's attorney, Michael Halbfish of Woodbridge, NJ's Tunney & Halbfish, said the statute is applicable to “any person” who commits an act of fraud in the sale of a product. “Mr. Conklin violated the Consumer Fraud Act by committing an affirmative act that constituted fraud,” said Halbfish. “The plain language of the statute and the intent of the Legislature is clear in this case.”

Justice Jaynee LaVecchia asked whether it should make any difference if Conklin, who described himself during the trial as a farmer, was actually engaged in the business of selling cars.

“Our position is that the court does not have to find Mr. Conklin was a dealer to hold him liable” under the CFA, Halbfish replied. Even so, “he was a dealer,” Halbfish said. He noted that Conklin sold multiple vehicles through Radir Wheels until the Division of Motor Vehicles issued a stop order because he did not have the requisite permission to be a dealership.

Justice Barry Albin asked whether single home sellers could be held liable under the Act if they overinflate their homes' attributes. Under the current law, Halbfish conceded, they could not be.

Albin asked why eBay posters like Conklin should be treated differently.

“Because Mr. Conklin was more than just a casual seller,” Halbfish said. “And the rule [on home sellers] should be changed.”

Justice Robert Rivera-Soto asked, “Was it the Legislature's intent to cast such a wide net, given the substantial penalties?”

“I do think it was the intent of the Legislature to cast a wide net,” Halbfish said. “Innocent parties should be protected.”

“But are they entitled to the additional remedies the [A]ct imposes?” Rivera-Soto asked.

Halbfish said yes, since the Act serves as a deterrent and increases the abilities of plaintiffs to retain competent counsel, given that the Act allows for treble damages and counsel fees.

Both Rivera-Soto and Albin asked whether the Act would apply to their aged aunts who may want to sell their old chest of drawers at a garage sale or through classified ads hinting about a pedigree that did not actually exist.

Halbfish said the situation was different in this case. “Here we had affirmative acts,” to wit: Conklin intentionally lied about the condition of the car in order to inflate the amount hopeful buyers would be willing to bid, he said.

Conklin's lawyer, Denville's Clifford Weininger, said the Legislature never intended for “any person” to apply to nonretail or nonwholesale sellers.

“But it's in the statute,” said Albin.

Weininger responded with the hypothetical situation in which his wife includes their children's old bedroom sets in a garage sale. Under Halbfish's view, Weininger said, his wife should be concerned about possibly being held liable under the Act. “It's going to be a concern of mine,” he said.

Why, asked Albin, was the phrase “any person” in the statute?

“I can't answer that,” Weininger replied.

“Then how do we read it out of the statute?” asked Albin.

“The court's done that for individual sellers of real estate,” Weininger responded. “The court has said the CFA does not apply to them.”

The Act, he said, was only meant to apply to “dealers” and “merchants.”

But Rivera-Soto said one of the purposes of the Act was to encourage people to tell the truth and that when misrepresentations are made “you can't shift the burden to the buyer and say, 'You should have figured that out.'”

Weininger said the Legislature intended Real's relief to lie in the remedy of a common-law fraud claim.

“Here, you clearly have clear and convincing evidence of common-law fraud,” he said.

The case is Real v. Radir Wheels Inc. et al., A-26-08.