SUB CLAIMS IT BOUGHT LAMBBORGHINI AND GOT BROKEN BICYCLE FROM ADT - CLAIM DISMISSED
New Jersey jeweler decided that insurance was too expensive so decided to invest in a "state of art" alarm system from ADT, supported by a radio manufactured by Honeywell and two safes [because one big one was too expensive]. Two burglary losses later and the jeweler allegedly lost 5 million dollars. He apparently had enough money to hire a lawyer and our buddy Jeff Zwirn as his expert. In 2014 I reported that ADT and Honeywell had prevailed in their summary judgment motions. You can read that decision on my website at https://www.kirschenbaumesq.com/article/pdf/003261-jacobsen-diamond-ctr-llc-v-adt-sec-servs.pdf
Though ADT and Honeywell had prevailed on their motions the case proceeded against the safe company, and after the trial [safe company prevailed and case dismissed] the Plaintiff was permitted to appeal the trial results and the ADT and Honeywell motions for summary judgment. The Appellate Court did an exhaustive review and analysis; it's worth reading the case in its entirety, and you can find it on my website under NJ leading cases, here: https://www.kirschenbaumesq.com/article/superior-court-of-nj-app-div-jacobsen-diamond-center-llc-d-b-a-elite-diamond-center-diamond-by-amanda-jewelry-llc-d-b-a-elite-diamond-center-and-george-fahmy-plaintiffs-appellants-v-adt-security-services-inc-et-al-argued-5-9-16-dec-7-15-16
The Plaintiff pressed two issues, that the limitation of liability provisions should not be enforced and that ADT had violated the NJ consumer frauds statute in a number of ways.
The Court flatly rejected the attack against the limitation of liability provision, re-stating the public policy issues that alarm companies should not be subjected to subscriber losses. The Court held:
"the limitation of liability clause is a reasonable measure within this particular industry to contain an alarm system supplier's exposure from the losses caused by thefts or other criminal acts. Synnex noted that such a limitation clause “simply allocates responsibility to the buyer of an alarm system to maintain insurance coverage, and the buyer is in the best position to know the value of its property and to insure against any loss ..."
Regarding insurance, the Court noted that:
"The responsibility of maintaining insurance coverage was expressly allocated to plaintiff. Yet plaintiff opted not to procure any such insurance. There is no compelling policy reason to place the responsibility for customer losses due to theft or burglary upon ADT simply because its customer failed to take other measures within its control to manage a known risk."
The Court also astutely noted that:
"Plaintiff also contends that the ADT contracts are “voidable” because he entered into them as a result of ADT's alleged “misrepresentations, concealment or failure to disclose.” However, plaintiff is not seeking to void the ADT contracts, but instead to collect damages for ADT breaching them. He has shown no persuasive reason to leave the contract generally intact but then excise only the limitation of liability clause."
Regarding the Consumer Fraud complaint, the Court noted:
"Plaintiff contends that ADT misrepresented the quality of the alarm system it sold to him. He further contends that ADT violated the consumer laws in selling him an inferior system, after Honeywell had advised that the Velocita network was going to be discontinued." The Court continued:
"The trial court ruled that plaintiff failed to establish a prima facie case for a CFA action against ADT because (1) ADT's statements that the system was “state of the art” amount to “opinion or sales talk,” rather than an actionable “material representation,” and (2) plaintiff's claims regarding the deficiencies in the alarm system showed “nothing more than an unmet contractual expectation.” We agree with both of these determinations."
The Court found that any claims that Plaintiff had with any merit were essentially breach of contract issues, not fraud and not within the Consumer Fraud statute. The relevant parts of the decision regarding ADT and Honeywell are below.
I will point out one matter that you should be mindful of. Without its contract ADT may very well have had a different experience and outcome. Another thing that you should be mindful of, if you get sued in a case like this the defense cost is likely to bankrupt you. For sure you won't have a good night sleep for years while it's pending. I'll end today's article with something I got by email just today and decided not to use of an article. Alarm Guy wrote that his church was about to sign a one page contract for a fire alarm system and the Alarm Guy asked me if it was "strange" and what I thought. I wrote him back that the alarm company was obviously owned by an idiot; that the failure to use a contract with any protective - or other - terms would not hurt the church, so that if he didn't mind doing business with an idiot then go for it. For you guys that still don't use our contracts maybe I can sell you a hammer and you can hit yourself in the head. The time to visit our website and order contracts is right now.
Here's part of the decision: JACOBSEN DIAMOND CENTER, LLC, d/b/a Elite Diamond Center, Diamond by Amanda Jewelry, lLC, d/b/a Elite Diamond Center, and George Fahmy, Plaintiffs–Appellants, v. ADT SECURITY SERVICES, INC., et al.
*7 Plaintiff next challenges the trial court's decisions granting summary judgment respectively to ADT and Honeywell. We evaluate these arguments through the lens of well-settled principles.
A court should grant summary judgment “forthwith” when “the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law.” R. 4:46–2(c). Under this well-known standard, “a court should deny a summary judgment motion only where the party opposing the motion has come forward with evidence that creates a ‘genuine issue as to any material fact challenged.’ “ Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529 (1995). The non-moving party “cannot defeat a motion for summary judgment merely by pointing to any fact in dispute” if it is not material. Ibid. This court applies on appeal the same standards as the trial court when reviewing its decision. W.J.A. v. D.A., 210 N.J. 229, 237–38 (2012).
Guided by these criteria, we consider the entry of summary judgment in favor of, first, ADT, and then, Honeywell, in light of these standards.
Plaintiff's arguments with respect to ADT largely focus on two separate points: (1) the trial court's enforcement of a $1,000 limitation of liability clause contained in ADT's form contract, and (2) the dismissal of plaintiff's consumer fraud claims against ADT. Neither challenge is persuasive.
The limitation of liability issue is governed by this court's precedential decision in Synnex Corp. v. ADT Security Services, Inc., 394 N.J.Super. 577, 580–81 (App.Div.2007), upholding an ADT limitation clause identical to the one at issue here. We held in Synnex that the clause was enforceable and did not violate public policy. We reached that conclusion by applying not only case law from our own state enforcing such exculpatory clauses in contracts for the sale of fire and burglar alarm systems, but also similar case law from several other jurisdictions. Id. at 588–89.
Plaintiff attempts to distinguish Synnex based on certain aspects of that case not present here, such as the fact that the alarm in Synnex was installed in a warehouse rather than a storefront; the plaintiff in Synnex was a large information technology products distributor that might have had enough bargaining power to negotiate better contract terms with ADT; and Synnex was a subrogation case in which the insured property owner received millions in recovery from its own carrier. None of these asserted factual differences compels a different result in this case.
As we held in Synnex, the limitation of liability clause is a reasonable measure within this particular industry to contain an alarm system supplier's exposure from the losses caused by thefts or other criminal acts. Synnex noted that such a limitation clause “simply allocates responsibility to the buyer of an alarm system to maintain insurance coverage, and the buyer is in the best position to know the value of its property and to insure against any loss.” Id. at 580–81.
*8 The responsibility of maintaining insurance coverage was expressly allocated to plaintiff. Yet plaintiff opted not to procure any such insurance. There is no compelling policy reason to place the responsibility for customer losses due to theft or burglary upon ADT simply because its customer failed to take other measures within its control to manage a known risk.
Plaintiff also contends that the ADT contracts are “voidable” because he entered into them as a result of ADT's alleged “misrepresentations, concealment or failure to disclose.” However, plaintiff is not seeking to void the ADT contracts, but instead to collect damages for ADT breaching them. He has shown no persuasive reason to leave the contract generally intact but then excise only the limitation of liability clause.
Plaintiff's claims of misrepresentation are wholly unrelated to the limitation clause. They cannot serve to relieve plaintiff of specific and unrelated contract provisions that plaintiff finds unduly onerous. See, e.g., Abel Holding Co. v. Am. Dist. Tel. Co., 138 N.J.Super. 137, 155 (Law Div.1975) (noting that “he mere fact that a contract is somewhat harsh or unfair in its operation does not excuse performance, and the ... performance of promises agreed upon by parties may only be excused for reasons which the law deems just”), aff'd, 147 N.J.Super. 263, 267 (App.Div.1977).
In addition, the trial court did not err in granting summary judgment to ADT and dismissing plaintiff's CFA claims against that defendant. Plaintiff contends that ADT misrepresented the quality of the alarm system it sold to him. He further contends that ADT violated the consumer laws in selling him an inferior system, after Honeywell had advised that the Velocita network was going to be discontinued.
The trial court ruled that plaintiff failed to establish a prima facie case for a CFA action against ADT because (1) ADT's statements that the system was “state of the art” amount to “opinion or sales talk,” rather than an actionable “material representation,” and (2) plaintiff's claims regarding the deficiencies in the alarm system showed “nothing more than an unmet contractual expectation.” We agree with both of these determinations.
The CFA includes in its definition of a “person” protected by the statute “any natural person or his legal representative, partnership, corporation, company, trust, business entity or association[.]” N.J.S.A. 56:8–1(d). “ business entity can be, and frequently is, a consumer in the ordinary meaning of that term” and can enforce a consumer's rights under the CFA. Hundred E. Credit Corp. v. Eric Schuster Corp., 212 N.J.Super. 350, 355–56 (App.Div.), certif. denied, 107 N.J. 60 (1986). Hence, plaintiff potentially qualifies as a “person” under the statute, even though he himself is a businessman.
However, “notwithstanding a broad and liberal reading of the statute, the CFA does not cover every sale in the marketplace.” Papergraphics Int'l, Inc. v. Correa, 389 N.J.Super. 8, 13 (App.Div.2006). The applicability of the CFA “hinges on the nature of a transaction, requiring a case by case analysis.” Ibid.
*9 A breach of contract is not, alone, a violation of the CFA. Cox v. Sears Roebuck & Co., 138 N.J. 2, 18 (1994). For instance, sloppy workmanship in the performance of a contract does not ordinarily amount to a consumer fraud. Roberts v. Cowgill, 316 N.J.Super. 33, 37 (App.Div.1998).
In the analogous context of a common-law fraud claim, our Supreme Court has explained that “to be actionable, fraud must relate to a present or pre-existing fact and cannot ordinarily be predicated on representations which involve things to be done in the future.” Anderson v. Modica, 4 N.J. 383, 391–92 (1950). Thus, if a party makes a promise, contracts to perform it, and then fails to do so, “uch failure to perform is merely a breach of contract which may give rise to an action on the contract.” Id. at 392; see also Barry by Ross v. N.J. State Highway Auth., 245 N.J.Super. 302, 310 (Ch. Div.1990) (applying Anderson in a CFA context).
The Court likewise observed in this regard that any breach of contract is, in some sense, “unfair to the non-breaching party,” but it is only where “substantial aggravating circumstances” are present that a CFA violation exists and a remedy trebling actual damages can be justified. Cox, supra, 138 N.J. at 18 (citing D'Ercole Sales v. Fruehauf Corp., 206 N.J.Super. 11, 31 (App.Div.1985)).
Here, plaintiff failed to sufficiently identify “substantial aggravating circumstances” that, if proven, would make ADT's conduct a form of consumer fraud and not simply a breach of contract. Essentially, plaintiff argues that ADT made material representations as to the nature and quality of the system that it delivered in 2006, and improperly and deceptively replaced the original two-way radio with an inferior radio in 2010. In the second amended complaint, plaintiff recited a litany of allegations that, if proven, might establish a prima facie case under the CFA. However, a review of the actual evidence in this record concerning the statements and conduct of ADT reveals that most of the allegations are unsupported. Those that have some support are, fundamentally, allegations of failed contractual commitments rather than of consumer fraud.
Plaintiff contends that ADT is liable for consumer fraud for allegedly promising a “state of the art” security system. Plaintiff's other allegations of the misrepresentation essentially boil down to contentions regarding what was promised to plaintiff when he purchased the alarm system in 2006 and whether the system as delivered met those promises, and the replacement of the original two-way radio in 2010. Neither of these suffice to support plaintiff's CFA claims against ADT.
As to the “state of the art” issue, the trial judge held that “haracterizing something as state of the art constitutes opinion or sales talk, which cannot support a fraud claim, citing Rodio v. Smith, 123 N.J. 345, 354 (1991) (holding the slogan, “You're in good hands with Allstate” to be mere puffery). Plaintiff argues that the judge's ruling was error and that other CFA cases support his position that ADT's “state of the art” claim was a material misrepresentation.
*10 None of the cases that plaintiff cites on this point, however, address the use of the phrase “state of the art” or any other general phrase or sales slogan. To the contrary, the cases he cites all deal with much clearer and specific factual representations.2 Rather than supporting plaintiff's argument, these cited cases actually support the conclusion that a statement must be specific and susceptible of objective verification to be actionable under the CFA. That is not so here.
With respect to other statements or conduct at the time of the sale of the alarm system, plaintiff alleged that ADT violated the CFA by (1) knowingly concealing the future shutdown of the Velocita network, (2) misrepresenting that the alarm system constituted “the full range of protection, equipment and services” available, (3) “representing that the rear door was not set with a time delay when it in fact was,” and (4) misrepresenting that the system “would meet UL AA Two–Way Security System Standards.” The trial court did not err in deeming these contentions insufficient to get to a jury.
As to the question of whether knowingly concealing the future shutdown of the Velocita network could be a CFA violation, plaintiff relies on Hundred East Credit Corp., supra, 212 N.J.Super. at 357. He contends that Hundred East Credit is “a similar business CFA case” in which a CFA violation was found where a business was “led to believe that parts would remain available for the product purchased, when in fact they would be discontinued [.]” However, that case presented very different facts from the present matter. In Hundred East Credit, there was evidence to support the trial judge's findings that (1) the defendant knew but did not disclose, when it sold the plaintiff additional parts to expand the capacity of a “P–350 line” computer purchased two years before, that the P–350 line would be discontinued later that same year, (2) the discontinuance rendered the plaintiff “unable to accomplish the objectives which motivated its purchases in the first instance,” and (3) the sale of the peripherals to the plaintiff was part of “an organized, systemic plan” by the defendant “to liquidate the inventory of P–350 line computers so as to avoid sustaining a loss of profits on these items.” Id. at 353–54, 357.
Here, by contrast, plaintiff has no competent proofs from which a factfinder could reasonably conclude that ADT knew, when it sold plaintiff the alarm system in 2006, that four years later the Velocita network would cease to support the Honeywell radio it had included in that system. Moreover, even assuming that plaintiff's proofs had created such a triable fact question as to what ADT knew about the Velocita network in 2006, he failed to show either that ADT's behavior was in any way organized and systematic or, more significantly, that the alarm system he purchased from ADT was “unable to accomplish the objectives which motivated its purchase” because of the later Velocita network problems.
*11 To the contrary, ADT promptly notified plaintiff of the forthcoming Velocita network discontinuation in 2010 and proposed to replace the original two-way radio with a functionally-equivalent radio that would have communicated with a central station every few minutes. There is no dispute that such radios existed and were readily available or that, had one been installed in 2010, plaintiff's alarm system would have continued to operate as it did before the original two-way radio was replaced. Thus, unlike the situation in Hundred East Credit Corp., ADT was not marketing—and plaintiff was not purchasing—a system that would shortly become totally useless and beyond repair.
Plaintiff further alleges that ADT misrepresented that the alarm system constituted “the full range of protection, equipment and services” available. Arguably, such a representation could be deemed more than puffery, as it could be understood to be more specific and ascertainable than the phrase “state of the art.” However, neither plaintiff nor his experts specified what the “full range” would include, or exactly how the ADT alarm system was deficient. Plaintiff cannot appropriately rely on this allegation to establish a CFA claim against ADT, as there is no evidence that anyone from ADT actually made such a representation. Plaintiff's testimony does not attribute these words to any ADT representative, or attest that he was told, in substance, that he was purchasing every possible protection that was available from ADT. Thus, plaintiff cannot escape summary judgment on the CFA claim based on an alleged “full range of protection” statement.
Plaintiff additionally contends that “ADT set the rear door on a delay trigger, despite this door not being used and the customer requesting that it be set on an instant trigger.” In his reply brief, plaintiff again contends that he informed ADT that the rear door was never used and “ADT represented” that rear door would be set on an instant trigger. However, in support of this proposition, plaintiff cites only to testimony from an ADT witness who essentially stated that a door that is not used for ingress or egress is typically not set on a time delay, without adding anything about the specific door at issue. Plaintiff's own testimony does not indicate that he advised ADT that the rear door was never used, or asked that it be set on an instant trigger. He testified that the rear door had a push bar lock, which was required by the fire department, and that on one occasion he was advised by the fire department that he had to clear snow away from the rear door. Thus, plaintiff's proofs do not establish actionable misrepresentation or concealment in communications by ADT related to the rear door.
As to the final issue concerning the system's pre-installation, plaintiff alleges that ADT misrepresented that the system “would meet UL AA Two–Way Security System Standards.” There is no dispute that the contract for the alarm system stated that a UL certificate was to be issued upon completion. This, together with plaintiff's testimony that he insisted on including radio backup in the alarm system, is likely sufficient evidence to support a conclusion by a trier of fact that ADT did contractually promise plaintiff that the alarm system “would meet UL AA Two–Way Security System Standards.” However, plaintiff fails to show that this UL-related promise was an actionable misrepresentation under the consumer fraud laws.
*12 Plaintiff argues that “the fact that a UL certificated system was promised but not delivered is unquestionable.” As plaintiff put it in his deposition, he felt that he “paid for a Lamborghini” but received “a broken bicycle” from ADT. If there were sufficient evidence to prove that ADT had actually engaged in this type of a bait and switch practice, plaintiff might have a viable CFA claim.
However, close examination of plaintiff's proofs reveals that, while there is certainly evidence to support the conclusion that the alarm system no longer met “UL AA Two–Way Security System Standards” after the original two-way radio was replaced in 2010, there is insufficient evidence to support a conclusion that the system did not meet those standards from 2006 before the time of that replacement.
In his statement of supplemental material facts, plaintiff included a number of references to UL standards, but he did not explain how the as-installed alarm system failed to meet those standards. When asked at his deposition about specifics regarding what ADT did wrong, plaintiff replied, “I have no idea. I think this question shouldn't be asked of me because I'm not a professional.”
Jeffrey D. Zwirn, plaintiff's “alarm expert and certified fraud examiner,” opined that a “state of the art” system would have been better in several respects. But Zwirn did not opine that the as-installed alarm system failed to meet any particular UL standards. To the contrary, in explaining that the installation of the replacement radio in 2010 “grossly violated UL standards” by using “less expensive and inferior technology” that did not meet “UL AA Two–Way Line Security Requirements,” Zwirn suggested that the technology before the replacement was installed actually did meet those requirements.
Prior to the installation of the replacement radio, the alleged problems with the alarm system were that (1) the DVR recorder was not set to automatically reboot following a power outage, and (2) the motion sensors did not trigger when the safe was removed during the first burglary. However, while Zwirn opined that an alarm system could have been installed that lacked these problems, he did not state that a system meeting “UL AA Two–Way Security System Standards” would necessarily have avoided them.
Indeed, there is evidence in the record that ADT did not provide plaintiff with the actual UL certificate referenced in the ADT contracts. That certificate would have served as evidence that the alarm system met “UL requirements for installation, operation and maintenance.” However, the burden was on plaintiff to establish that ADT failed to deliver what it had promised, not on ADT to prove otherwise.
Accordingly, as to ADT's alleged misrepresentations and alleged misconduct prior to the replacement of the original two-way radio, we conclude that plaintiff failed to establish a prima facie and triable case of any CFA violation.
Our analysis regarding the replacement radio presents a closer question, but we agree with the trial court that the record presents no viable CFA claim there either. Granting plaintiff all favorable inferences from the evidence, we acknowledge there is a fact question as to whether ADT was obliged to replace the original two-way radio with one that would have been its functional equivalent and whether ADT met that obligation. This again, however, is essentially a contract dispute rather than a CFA claim.
*13 If ADT promised to maintain the alarm system to a specified standard and failed to do so, “uch failure to perform is merely a breach of contract which may give rise to an action on the contract.” Anderson, supra, 4 N.J. at 392. Plaintiff was free to pursue a claim for breach of contract, but he elected not to do so for self-evident practical reasons because of the limited damages of $1,000 available.
The evidence does not support plaintiff's suggestion of intentional deceit by ADT concerning the replacement radio. Plaintiff does not dispute that ADT proposed in August 2010 to replace the original two-way radio, with another, functionally-equivalent Honeywell radio or that the reason this replacement was not made at that time was that plaintiff refused to pay the cost of the replacement. Similarly, there is no dispute that ADT ultimately provided the replacement radio at no cost to plaintiff. Nor is it disputed that both the service ticket plaintiff signed and the boxes left in plaintiff's possession accurately identified that replacement radio. The evidence shows that ADT did not, as plaintiff contends, hide any details of the replacement equipment that was actually installed or provide him with fraudulent documents.
Plaintiff's allegation that ADT referred to the replacement radio using the term “upgrade” is also insufficient to establish a misrepresentation. The term “upgrade” appears only in an internal ADT memorandum. There is no evidence that the concept of an “upgrade” was ever communicated to plaintiff.
In sum, even granting all inferences in plaintiff's favor, he failed to present substantial aggravating circumstances that are needed to show a CFA violation as opposed to a simple breach of contract. The dispute between the parties concerning what equipment ADT was obliged to provide and which party was responsible to bear the cost of it concerns, fundamentally, the parties' performance of ongoing contractual obligations. The dispute most appropriately resolved in the context of a breach of contract action rather than a CFA claim. Since plaintiff did not pursue a contract theory against ADT once the $1,000 damages limitation was upheld, summary judgment was warranted.
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