HOFFMAN v. LIQUID HEALTH INC. et al
Filing
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OPINION. Signed by Judge Stanley R. Chesler on 7/2/14. (DD, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
HAROLD M. HOFFMAN, individually and on
behalf of those similarly situated,
Plaintiff,
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v.
LIQUID HEALTH INC., and ALEX ABREU,
Defendants.
Civ. No. 14-01838 (SRC)
OPINION
CHESLER, District Judge
This matter comes before the Court upon the motions filed by Defendants Liquid Health
Inc. and Alex Abreu (“Liquid Health” and “Abreu” and, collectively, “Defendants”). Abreu
moves to dismiss for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure
(12)(b)(2). [Docket Entry 14]. Liquid Health moves for judgment on the pleadings under
Federal Rule of Civil Procedure 12(c). [Docket Entry 12]. Plaintiff pro se Harold M. Hoffman
(“Plaintiff”) has opposed [Docket Entries 18 & 19], and the Court has opted to rule on the papers
submitted, and without oral argument, pursuant to Federal Rule of Civil Procedure 78. For the
reasons detailed below, this Court grants Abreu’s motion to dismiss for lack of personal
jurisdiction, and grants in part and denies in part Liquid Health’s motion for judgment on the
pleadings. 1
1
The Court notes that Abreu also argues that the Complaint fails to state a claim against him and
must therefore be dismissed under Federal Rule of Civil Procedure 12(b)(6). Because the Court
can dispose of the claims against Abreu on jurisdictional grounds, it need not address this
alternative argument.
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BACKGROUND
The class action Complaint, which alleges violations of the New Jersey Consumer Fraud
Act, common law fraud, and unjust enrichment, was originally filed in state court and removed
to this Court under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d). Plaintiff
claims that Liquid Health and its officer, Abreu, advertised a dietary supplement for dogs, known
as K9 Glucosamine, while misrepresenting the product’s ingredients. The company advertised
that the product contained 1,200 mg of chondroitin sulfate (“Chrondroitin”) per ounce, an
ingredient that maintains the health and resiliency of a dog’s joints and connective tissues. 2
Plaintiff asserts that according to an “independent, reliable, laboratory analysis, each fluid ounce
of Defendants’ K9 Glucosamine contains only 16% of the claimed and promised concentration
of Chondroitin.” (Complaint at 2). Plaintiff claims that he “read, saw, and/or heard Defendants’
advertising” before he purchased thirty-two ounces of the product for forty dollars in January
2004. (Complaint at 2). He states that he used the product for his dog for over one month and
alleged that the product “delivered no benefit.” (Complaint at 2).
Shortly after removal, Plaintiff submitted a letter questioning subject matter jurisdiction,
and moved for class certification. On April 4, 2014, this Court dismissed Plaintiff’s motion for
class certification without prejudice, to give Defendants an opportunity to obtain discovery. See
ECF No. 10. On April 11, 2014, Defendants filed the instant motions.
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Plaintiff alleges, in most of his complaint, that Liquid Health advertised that its product
contained 1,200 mg of Chondroitin per fluid ounce. (Complaint at 2, 5). In one paragraph of the
complaint, however, Plaintiff states that the company advertised that the product contained 1,600
mg of Chondroitin per ounce. (Complaint at 4). The Court assumes that Plaintiff made a
typographical error and the company advertised that the product contained 1,200 mg of
Chondroitin.
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DISCUSSION
I.
Abreu’s Motion to Dismiss for Lack of Personal Jurisdiction
Abreu moves to dismiss the claims against him for lack of personal jurisdiction pursuant
to Federal Rule of Civil Procedure 12(b)(2). He argues that in contrast to Plaintiff’s claims, he is
not an officer or director at Liquid Health, but simply the company’s web designer.
Furthermore, Abreu argues that he lives in California and has never been to New Jersey, does not
own, use, lease, or possess any real property in New Jersey, has never paid taxes in New Jersey,
does not have a bank account or any other known assets in New Jersey, and has never worked in
New Jersey. (ECF No. 14-1, at 6).
The Federal Rules of Civil Procedure provide that a district court may exercise personal
jurisdiction over a non-resident defendant to the extent permitted under state law. Fed. R. Civ. P.
4(k)(1). A district court exercising diversity jurisdiction over a case must, therefore, look to the
forum state’s long-arm statute in analyzing whether there is personal jurisdiction over a nonresident defendant. Sunbelt Corp. v. Noble, Denton & Assocs., 5 F.3d 28, 31 (3d Cir. 1993).
New Jersey’s long-arm statute permits the exercise of personal jurisdiction “to the fullest limits
of due process.” IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir. 1998). The
Fourteenth Amendment’s Due Process Clause requires that the defendant “has certain minimum
contacts with [the forum] such that the maintenance of the suit does not offend traditional
notions of fair play and substantial justice.” Control Screening LLC v. Technological
Application & Prod. Co. (Tecapro), HCMC-Vietnam, 687 F.3d 163, 167 (3d Cir. 2012) (quoting
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)) (internal quotation marks and
citation omitted). Where, as here, a defendant has raised the defense of lack of personal
jurisdiction, “the plaintiff bears the burden to prove, by a preponderance of evidence, facts
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sufficient to establish personal jurisdiction.” Carteret Sav. Bank, F.A. v. Shushan, 954 F.2d 141,
146 (3d Cir. 1992) (citing Time Share Vacation v. Atlantic Resorts, Ltd., 735 F.2d 61, 65 (3d Cir.
1984)).
Personal jurisdiction may be exercised under either a general or specific jurisdiction
theory. Remick v. Manfredy, 238 F.3d 248, 255 (3d Cir. 2001). A court may exercise general
jurisdiction over the defendant if the defendant has maintained “continuous and systematic”
contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,
416 (1984). To establish general jurisdiction the plaintiff must show that the defendant has
“significantly more than mere minimum contacts” with the forum state. Provident Nat’l Bank v.
Cal. Fedv Sav. & Loan Ass’n, 819 F.2d 434, 437 (3d Cir. 1987). Therefore, “general jurisdiction
requires a ‘very high threshold of business activity.’” Ameripay, LLC v. Ameripay Payroll. Ltd.,
334 F. Supp. 2d 629, 633 (D.N.J. 2004) (quoting Compagnie des Bauxites de Guinea v. Ins. Co.
of N. America, 651 F.2d 877, 892 n.2 (3d Cir. 1981) (finding that a “daily presence” in the forum
and activities such as weekly advertising, regular solicitation of business, substantial product
sales, and the maintenance of a telephone number in the forum meet the threshold). The facts
required to establish general jurisdiction must be “extensive and persuasive.” Reliance Steel
Prods. Co. v. Watson, Ess, Marshall & Enggas, 675 F.2d 587, 589 (3d Cir. 1982).
Specific jurisdiction, on the other hand, is invoked when a claim is related to or arises of
out the defendant’s contacts with the forum. Dollar Sav. Bank v. First Sec. Bank of Utah, N.A.,
746 F.2d 208, 211 (3d Cir. 1984). A court must first determine whether the defendant had the
minimum contacts with the forum necessary for the defendant to have “reasonably anticipate[d]
being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297
(1980) (citations omitted). The plaintiff must prove that (1) the defendant purposefully directed
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his activities at the forum; (2) the litigation arises out of or relates to at least one of those
contacts; and (3) the exercise of jurisdiction otherwise comports with traditional notions of fair
play and substantial justice. O’Connor v. Sandy Lane Hotel Co., Ltd., 496 F.3d 312, 317 (3d Cir.
2007).
In light of these well-established standards, this Court finds that it lacks general
jurisdiction over Abreu. Although Plaintiff suggests that Abreu was more than just a web
designer, Plaintiff lacks “extensive and persuasive” evidence that Abreu has reached the high
threshold of conducting business in New Jersey to establish general jurisdiction. In Plaintiff’s
response brief, Plaintiff argues that Abreu owns Liquid Health’s website and it would be “highly
unusual for a corporate entity’s domain address, a highly valuable corporate asset, to be owned
by an employee.” (ECF No. 19, at 2). Plaintiff also states that that the corporate defendant’s
registered agent for service of process is someone with the last name Abreu and that “[i]t would
seem highly unusual for a corporation to designate as its registered agent an apparent family
member of its ‘web designer.’” (ECF No. 19, at 2).
Even taking these assertions at face value, they lend little credence to Plaintiff’s argument
that this Court can exercise jurisdiction over Abreu consistent with due process. The fact that
Abreu owns the company’s website is not persuasive evidence that Abreu controls the business
operations of Liquid Health. Similarly, the fact that Abreu has the same last name as the
company’s registered agent for service of process is far from extensive evidence of Abreu’s
business ownership. Plaintiff cites Allen v. V & A Bros., Inc., 208 N.J. 114 (2011), in arguing
that owners and employees of corporations can be held individually liable for Consumer Fraud
Act violations that are directly attributable to acts undertaken by them through the corporate
entity. Nevertheless, that case dealt with individual liability and did not approach the topic of
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personal jurisdiction. “Jurisdiction over an employee does not automatically follow from
jurisdiction over the corporation which employs him . . . Each defendant’s contacts with the
forum State must be assessed individually.” Virginia St. Fidelco, L.L.C. v. Orbis Products
Corp., CIV.A. 11-2057 (SRC), 2012 WL 3018296, at *1 (D.N.J. July 24, 2012). Given that
Abreu lacks continuous and systematic contacts with New Jersey, this Court lacks general
jurisdiction.
Abreu also does not have minimum contacts in New Jersey sufficient to give rise to
specific jurisdiction. Abreu would not have reasonably anticipated being haled into court in New
Jersey, considering he owns no property or assets in New Jersey, pays no taxes in New Jersey,
and indeed has never been to New Jersey. Plaintiff does not claim that Abreu has any other
connection to New Jersey. Because the record demonstrates that Abreu has no contacts with the
forum state, specific jurisdiction fails under well-worn due process standards. This Court lacks
personal jurisdiction over Abreu and therefore Plaintiff’s claims against Abreu are dismissed
with prejudice. Fed R. Civ. P. 12(b)(2).
II.
Liquid Health’s Motion for Judgment on the Pleadings
A.
Legal Standards
Liquid Health moves for judgment on the pleadings under Federal Rule of Civil
Procedure 12(c). Under Rule 12(c), “[a]fter the pleadings are closed – but early enough not to
delay trial – a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). If the
moving party claims, as here, that a complaint fails to state a claim upon which relief may be
granted, the court applies the same standards as those applied in a Rule 12(b)(6) motion in its
review of a 12(c) motion. See Turbe v. Government of Virgin Islands, 938 F.2d 427, 428 (3d Cir.
1991).
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A complaint will survive a motion under 12(b)(6) only if it states “sufficient factual
allegations, accepted as true, to ‘state a claim for relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 554, 570 (2007)).
“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing
Twombly, 550 U.S. at 556). “The Supreme Court’s Twombly formulation of the pleading
standard can be summed up thus: stating a claim requires a complaint with enough factual matter
(taken as true) to suggest the required element. This does not impose a probability requirement
at the pleading stage, but instead simply calls for enough facts to raise a reasonable expectation
that discovery will reveal evidence of the necessary element.” Phillips v. County of Allegheny,
515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). While the Court must
construe the complaint in light most favorable to the plaintiff, it need not accept a “legal
conclusion couched as factual allegation.” Baraka v. McGreevey, 481 F.3d 187, 195 (3d Cir.
2007); see also Iqbal, 556 U.S. at 679 (“While legal conclusions can provide the framework of a
complaint, they must be supported by factual allegations.”). “Threadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do not suffice.” Iqbal, 556 U.S.
at 678.
Moreover, a Plaintiff alleging fraud, including both the common law variety and violation
of New Jersey’s Consumer Fraud Act (“CFA”), must meet the heightened pleading requirement
of Federal Rule of Civil Procedure 9(b). Frederico v. Home Depot, 507 F.3d 188, 200-03 (3d.
Cir. 2007). Rule 9(b) states: “In alleging fraud or mistake, a party must state with particularity
the circumstances constituting fraud or mistake.” As interpreted and applied by the Third
Circuit, Rule 9(b) requires “plaintiffs to plead ‘the who, what, when, where, and how: the first
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paragraph of any newspaper story.’” In re Advanta Corp. Sec. Litig., 180 F.3d 525, 534 (3d Cir.
1999) (quoting DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990)); see also Frederico,
507 F.3d at 200 (holding that Rule 9(b) requires a party alleging fraud to state the circumstances
of the alleged fraud “with sufficient particularity to place the defendant on notice of the ‘precise
misconduct with which [it is] charged.’” (internal quotation omitted)). Rule 9(b)’s requirements
are relaxed in instances where the factual information required to satisfy the rule is solely within
the knowledge of the defendant. See In re Rockefeller Ctr. Props. Sec. Litig., 311 F.3d 198, 216
(3d Cir. 2002) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir.
1997)).
B.
New Jersey CFA Claims
Counts One through Five of Plaintiff’s complaint allege that Liquid Health violated the
New Jersey Consumer Fraud Act because the company’s product contained only sixteen percent
of the concentration of Chondroitin that the company advertised. Plaintiff argues that the Liquid
Health misrepresented the product formulation by grossly exaggerating the amount of its key
ingredient.
The CFA was enacted by the New Jersey legislature in 1960 to address rampant
consumer complaints about fraudulent practices in the marketplace and to deter such conduct by
merchants. Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234, 245 (2005) (citing Furst v.
Einstein Moomjy, Inc., 182 N.J. 1, 11 (2004)). In 1971, the CFA was amended to authorize
private actions by injured parties. Gennari v. Weichart Co., 148 N.J. 582, 604 (1997). The
amended CFA states: “Any person who suffers an ascertainable loss of moneys or property, real
or personal, as a result of the use or employment by another person of any method, act, or
practice declared unlawful under this act . . . may bring an action or assert a counterclaim
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therefore in any court of competent jurisdiction.” N.J.S.A. § 56:8-19. A CFA plaintiff must
plead three prima facie elements: “(1) unlawful conduct by defendant; (2) an ascertainable loss
by plaintiff; and (3) a causal relationship between the unlawful conduct and the ascertainable
loss.” Bosland v. Warnock Dodge, Inc., 197 N.J. 543, 557 (2009).
1.
Unlawful Conduct
A defendant’s unlawful conduct must be made “in connection” with the sale or
advertisement of a product or service, Castro v. NYT Television, 370 N.J. Super. 282, 294 (App.
Div. 2004), and must have the “capacity to mislead.” Cox v. Sears Roebuck & Co., 138 N.J. 2,
17 (1994) (citing Fenwick v. Kay Am. Jeep, Inc., 72 N.J. 372, 378 (1977)). There are three types
of unlawful practices: affirmative acts, knowing omissions, and violations of state regulations.
Vukovich v. Haifa, No. 03–737(FLW), 2007 WL 655597, at *9 (D.N.J. Feb. 27, 2007). The CFA
“distinguishes between wrongs committed by affirmative acts and wrongs committed by a failure
to act.” Leon v. Rite Aid Corp., 340 N.J. Super. 462, 469 (App. Div. 2001). If a plaintiff alleges
that the defendant’s unlawful act was an omission, the plaintiff must show that the defendant
knowingly concealed a material fact with the intention that the consumer rely on the
concealment. Judge v. Blackfin Yacht Corp., 357 N.J. Super. 418, 426 (App. Div. 2003)
(internal citation omitted). In contrast, when a plaintiff alleges, as here, that the defendant’s
unlawful act was an affirmative misrepresentation, the plaintiff is not required to show
defendant’s intent or even actual deceit or fraud. Cox, 138 N.J. at 17-18; Leon, 340 N.J. Super.
at 469. “One who makes an affirmative misrepresentation is liable even in the absence of
knowledge of the falsity of the misrepresentation, negligence, or the intent to deceive.” Gennari,
148 N.J. at 605.
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Plaintiff sufficiently pleads the first prong of the CFA by claiming that Liquid Health
misrepresented the amount of Chondroitin contained in the product – a misrepresentation that
occurred “in connection” with the sale of the product. (Complaint at 2). This misrepresentation
had the “capacity to mislead,” because Plaintiff purchased the product with the belief that the
claimed concentration of Chondroitin would be “effective in maintaining the health and
resiliency of a dog’s joints and connective tissues.” (Complaint at 5). Plaintiff need not prove
that Liquid Health knew or intended for its affirmative misrepresentation. Thus, Plaintiff’s
allegation of the misrepresentation is sufficient to show that Liquid Health committed an
unlawful act. 3
2.
Ascertainable Loss
Under the second element of the CFA, a plaintiff must demonstrate an “ascertainable
loss,” defined as “a cognizable and calculable claim of loss due to the alleged CFA violation.”
Theidemann, 183 N.J. at 249. Ascertainable loss occurs “when a consumer receives less than
what was promised.” Union Ink Co. v. AT &T Corp, 352 N.J. Super. 617, 646 (App. Div. 2002);
see also Miller v. Am. Family Publishers, 284 N.J. Super. 67, 90-91 (Ch. Div. 1995) (“For their
money, they received something less than and different from what they reasonably expected in
view of defendant’s presentations. This is all that is required to establish ascertainable loss.”);
see also Talalai v. Cooper Tire & Rubber Co., 360 N.J. Super. 547, 564 (Law Div. 2001)
(“Whenever a consumer has received something other than what he bargained for, he has
3
Plaintiff adds in his opposition brief that Chondroitin is an “expensive” product subject to
manipulation by “unscrupulous merchants”; thus, Liquid Health “can effectively shave [its]
product expenses by misrepresenting concentration [sic] of Chondroitin.” (See ECF No. 18, at 1
n.1). Plaintiff does not explain why he believes this assertion is relevant. To the extent,
however, that this statement is to be read as an indication of Liquid Health’s motivation to
misrepresent the concentration of Chondroitin in K9 Glucosamine, the Court cannot credit it in
connection with the instant motion – these sort of “after-the-fact allegations” are of no utility in
response to a motion raising a failure to state a claim defense. See Frederico, 507 F.3d at 201.
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suffered a loss of money or property. . . . When the product fails to measure up [to reasonable
expectations based on the representations made], the consumer has been injured; he has suffered
a loss. [H]e has lost the benefits of the product which he was led to believe he had purchased.”).
In cases involving alleged misrepresentations, “either out-of-pocket loss or a demonstration of
loss in value will suffice to meet the ascertainable loss hurdle.” Theidemann, 183 N.J. at 248.
“The precise amount of loss need not be known, it need only be measurable.” Dzielak v.
Whirlpool Corp., Civ. No. 12-0089 (KM), 2014 WL 275 8746, at *20 (D.N.J. June 16, 2014)
(citing Talalai, 360 N.J. Super. at 563); Thiedemann, 183 N.J. at 248 (finding implicit in the term
“ascertainable” some modicum of measurability or quantity of what was lost due to the
defendants’ unlawful conduct).
Here, Plaintiff sufficiently pleads an ascertainable loss. Liquid Health argues that a mere
purchase of a product is not enough to show an ascertainable loss under the CFA. Nevertheless,
in cases involving misrepresentation, either an out-of-pocket loss or loss in value is considered
an ascertainable loss. Plaintiff adequately pleads that for the amount of money he spent, he
received something far less than and far different from what he reasonably expected because the
product contained a minute amount of the advertised ingredient. Plaintiff provides specific
numbers – he paid forty dollars for thirty-two ounces of 1,200 mg of Chondroitin per ounce,
when indeed he received only sixteen percent of the Chondroitin promised. Plaintiff’s claims of
ascertainable loss would have been insufficient “absent any specific information concerning the
price of the Products or the price of any comparable products. . . .” Lieberson v. Johnson and
Johnson Consumer Cos., 865 F. Supp. 2d 529, 541 (D.N.J. 2011). Here, however, Plaintiff
includes the price of the product. Therefore, Plaintiff’s ascertainable loss is measurable.
Dzielak, 2014 WL 275 8746, at *20 (denying motion to dismiss CFA claim where plaintiffs
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alleged facts “that would allow the Court to quantify a difference in value”). Plaintiff received a
product with a measurable amount less of Chondroitin than what he bargained for, and therefore
has suffered an ascertainable loss.
Liquid Health refers to two cases, Mason v. Coca-Cola Co., 774 F. Supp. 2d 699 (D.N.J.
2011) and Solo v. Bed Bath & Beyond, Inc., CIV. 06-1908 (SRC), 2007 WL 1237825 (D.N.J.
Apr. 26, 2007), to argue that Plaintiff did not experience an ascertainable loss. In Mason, the
plaintiffs claimed that Coca-Cola violated the CFA because they advertised “Diet Coke with
Vitamins and Minerals,” misleading consumers to believe that the product was healthy and
contained nutritional value. See 774 F. Supp. 2d at 703. That case, however, is distinguishable –
there, the product’s label listed the ingredients and the amount of the ingredients that were
indeed contained in the product. Id. at 703-04. The court therefore concluded that “[w]hen the
plaintiffs purchased Diet Coke Plus, they received a beverage that contained the ingredients
listed on its label.” Id. at 704. Here, the label suggests that the product contained 1,200 mg of
Chondroitin per fluid ounce and according to the Complaint, the product only contained sixteen
percent of that amount. Plaintiff here purchased a product that did not contain the ingredients
listed on the label, unlike the consumers in the Mason case.
In Solo, the plaintiff claimed that Bed Bath & Beyond violated the CFA because it
advertised linens with a thread count of 1000, when the linens actually had a thread count of 492.
2007 WL 1237825, at *3. This Court held that the plaintiff failed to “plead specific facts setting
forth and defining the ascertainable loss suffered.” Id. The plaintiff made “broad and
conclusory allegations,” by stating in his complaint that “Plaintiff and the proposed Class and
Subclass Members have suffered an ascertainable loss in that they purchased linens that were of
lower quality and less valuable than the linens they were promised.” Id. This Court held that
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plaintiff needed to more specifically estimate how the sheets were of lesser value, “i.e., that the
sheets he received were worth an amount of money less than the sheets he was promised, or that
he experienced a measurable out-of-pocket loss because of his purchase.” Id. Because a
consumer could still use the sheets for their intended purpose, the plaintiff needed to specifically
plead how the inaccurate thread count made the linens worth less. Importantly, this court also
held that the plaintiff failed to plead that the advertisement of the thread count was the reason
why individuals purchased the product. Id. at *4.
Solo is inapposite for two reasons. First, Plaintiff here adequately alleges how the
product purchased was worth less than advertised because the product lacked the concentration
of Chondroitin that would make the product effective in strengthening joints and connective
tissue. The wide disparity between the amount of Chondroitin listed (1,200 mg per ounce) and
the amount that the product actually contained (sixteen percent of 1,200 mg, or 192 mg) makes
the product ineffective in a way that the linens were not in Solo. By providing numerical detail,
the Plaintiff here does not simply assert that the product was “less valuable” but gives a specific
estimate of an eighty-four percent loss in efficacy for the money spent, i.e., value. Moreover,
unlike the consumers who could still benefit from the product in Solo despite the inaccurate
thread count, here it is plausible based on the facts alleged that consumers would not be able to
use K9 Glucosamine for their pets’ benefit with the small amount of Chondroitin that the product
allegedly contains.
Furthermore, unlike in Solo, the Plaintiff here alleges that he and other consumers bought
the product specifically because of advertisements that the product contained 1,200 mg of
Chondroitin per ounce. Plaintiff asserts that he and members of the class saw, read, or heard
Liquid Health’s advertisements and made “purchases from Defendant based upon Defendant’s
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specific claims and representations of product formulation.” (Complaint at 7). Liquid Health did
not misrepresent peripheral aspects of the product, but misrepresented an ingredient that is
central to the product’s appeal to consumers. The concentration of Chondroitin is a fundamental
reason that people would purchase the product. Given that Plaintiff alleges that K9 Glucosamine
is substantially less valuable and in fact ineffective without the listed amount of Chondroitin, this
Court finds that Plaintiff plausibly pleads an ascertainable loss.
3.
Causal Relationship Between the Unlawful Conduct and the
Ascertainable Loss
The third element of the CFA requires a plaintiff to show a causal nexus between the
defendant’s misrepresentation and the loss plaintiffs may have suffered. Dewey v. Volkswagen
AG, 558 F. Supp. 2d 505, 526 (D.N.J. 2008). The CFA does not require a plaintiff to
demonstrate that he actually relied upon the misrepresentation or omission. Francis E. Parker
Mem’l Home, Inc. v. Georgia-Pac. LLC, 945 F. Supp. 2d 543, 558 (D.N.J. 2013) (citing Int’l
Union of Operating Engineers Local No. 68 Welfare Fund v. Merck & Co., Inc., 192 N.J. 372,
391 (2007)). However, a plaintiff must demonstrate that the ascertainable loss was suffered “as a
result of” the defendant’s unlawful conduct. N.J.S.A. § 56:8-19. Thus, a CFA class can include
persons who “saw the challenged advertisements” and “would not have purchased the [product]
but for the challenged advertisements.” Gross v. Johnson Consumer Pharm ., 303 N.J. Super.
336, 346 (App. Div. 1997).
Here, Plaintiff argues that he and “members of the putative Class relied on Defendant’s
false claims and misrepresentations and would not have paid as much, if at all, for Defendant’s
K9 Glucosamine.” (Complaint at 5-6). Plaintiff therefore asserts the promised amount of
Chondroitin was the but-for cause of his purchase. Liquid Health’s argument that “Mr. Hoffman
purchased K9 Glucosamine for the sole purpose of filing this pro se, putative class action
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lawsuit” is unpersuasive. The Court assumes the truth of all well-pleaded factual allegations at
the motion to dismiss stage, notwithstanding Plaintiff’s history as an active litigant. Here, there
is a sufficient causal connection between Liquid Health’s affirmative misrepresentation and
Plaintiff’s ascertainable loss alleged.
4.
Liquid Health’s Rule 9(b) Arguments
Rule 9(b) is not an impediment to the CFA claims here. In this Complaint, Plaintiff has
indeed pleaded the first paragraph of a newspaper story, including the “who, what, when, where,
and how.” Plaintiff provides sufficiently detailed circumstances of the fraud: Liquid Health
misrepresented its product’s Chondroitin content over six years, inducing consumers across the
country to buy the product for forty dollars per thirty-two ounces. Plaintiff claims that he knows
of the misrepresentation from independent laboratory analysis and the fact that the product
delivered no benefit to his dog after using it for one month. (Complaint at 2). 4 By providing the
numerical difference between the label and the amount of ingredients in the product, Plaintiff
demonstrates that Liquid Health grossly misrepresented the amount of Chondroitin contained in
the product. In Plaintiff’s words, Liquid Health’s “labeled promise that each fluid ounce of
4
Liquid Health refers to previous cases in which the court dismissed Mr. Hoffman’s class
actions because he did not plead that he used the product, did not show how the product gave
him less than what was promised, or did not plead that the product was defective. See Mov. Br.
at 12-13; Hoffman v. Cogent Solutions Group., LLC, CIV.A. 13-00079 (SDW), 2013 WL
6623890 (D.N.J. Dec. 16, 2013); Hoffman v. Nutraceutical Corp., CIV.A. 12-5803 (ES), 2013
WL 2650611 (D.N.J. June 10, 2013); Hoffman v. Macy’s Inc., A-6131-08T3, 2011 WL 6585
(N.J. Super. Ct. App. Div. June 28, 2010); Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105
(App. Div. Jan. 30, 2009); Hoffman v. Palo Alto Laboratories, Inc.,A-3402-07T1, 2009 WL
62947 (N.J. Super. Ct. App. Div. Jan. 12, 2009). Here, unlike in his previous complaints,
Plaintiff asserts that he used the product, claims that the product contains far less of the promised
ingredients, and states that the product was ineffective. Therefore, Liquid Health’s argument
regarding Plaintiff’s previous filings cannot be extended to the instant Complaint.
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Defendant’s product contains 1,200 mg of chondroitin sulfate is a lie.” (ECF No. 22). Liquid
Health cannot therefore say that it has no idea what it did that was allegedly fraudulent. While
Liquid Health highlights that Plaintiff gives few details about his lab experiment, Plaintiff raises
enough specific facts to put Liquid Health on notice of the misconduct alleged. See Frederico,
570 F.3d at 200. The Court is unaware of any authority that requires plaintiffs to plead with
specificity how they discovered the alleged fraud.
Liquid Health also argues that Plaintiff’s claim must be dismissed under Rule 9(b)
because the claim is brought against both itself and Abreu, without specifying the unlawful
actions of each Defendant. (Mov. Br. at 17). In order to meet the heightened pleading standards
of Rule 9(b), “a plaintiff must plead fraud with particularity with respect to each defendant,
thereby informing each defendant of the nature of its alleged participation in the fraud.”
Naporano Iron & Metal Co. v. Am. Crane Corp., 79 F. Supp. 2d 494, 511 (D.N.J. 1999).
Nevertheless, “the requirements of Rule 9(b) may be relaxed where factual information is
exclusively within the opposing party’s knowledge or control.” Id. at 511 n.27.
In this case, Plaintiff alleges that Liquid Health grossly misrepresented the amount of a
key ingredient in its product. (Complaint at 2). The Court finds such an allegation provides
Liquid Health, the entity Defendant, with sufficient notice to satisfy the strictures of Rule 9(b).
The Court cannot expect the Plaintiff to know (or plead) details regarding who in that entity
mixed Plaintiff’s batch of supplement, or who wrote the label that included an allegedly
misrepresented description of that supplement’s ingredients. A defendant cannot invoke
“collectivized allegations” as talisman every time a CFA plaintiff makes fraud allegations
regarding more than one defendant. Here, the alleged fraud has been pleaded with particularity
as to Defendant Liquid Health, and it cannot be said that the Complaint “vaguely attributes the
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alleged fraudulent statements to ‘defendants,’” the evil this Court’s distaste for generalized
allegations aims to address. See Naporano, 79 F. Supp. 2d at 511 (quoting Eli Lilly v. Roussel
Corp., 23 F. Supp. 2d 460, 492 (D.N.J. 1999)).
Finally, the Court acknowledges an overarching theme permeating Defendants’ briefing –
namely, that because Plaintiff has filed numerous other pro se consumer fraud cases which have
been dismissed, the instant Complaint should be immediately suspect. (See, e.g., Reply Br. at 2
(“All parties here and this Court know Mr. Hoffman’s history as a prolific pro se class action
plaintiff.”)). The fact that other of Plaintiff’s complaints have been insufficiently pleaded,
however, has no bearing on whether the instant Complaint passes muster. This Complaint, like
all other lawsuits in federal court, is entitled to an independent evaluation of its merits. As with
all motions to dismiss, the Court is required to analyze the facts pleaded and the reasonable
inferences to be drawn therefrom in the context of the governing legal framework. If Liquid
Health is in fact selling its K9 Glucosamine product and misrepresenting the amount of a key
ingredient to the degree alleged in the Complaint, Plaintiff was plausibly defrauded under the
CFA when he purchased that product. The Rule 12(c) motion will be denied as to the CFA
claims.
C.
Common Law Fraud
In order to plead a common law fraud claim in New Jersey, a plaintiff must demonstrate
“(1) a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by
the defendant of its falsity; (3) an intention that the other person rely on it; (4) reasonable
reliance thereon by the other person; and (5) resulting damages.” Banco Popular N. Am. v.
Gandi, 184 N.J. 161, 172-73 (2005) (quoting Gennari, 148 N.J. at 610). In comparison to a
CFA claim, a common law fraud claim “involves a more onerous standard. . .” Rait v. Sears,
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Roebuck & Co., CIV. A. 08-2461 (JLL), 2009 WL 250309, at *5 (D.N.J. Feb. 3, 2009). A
plaintiff alleging a common law fraud claim must demonstrate that the defendant knowingly and
intentionally made a misrepresentation, whereas a CFA plaintiff need not plead so. Compare
Gennari, 148 N.J. at 605 (holding that a plaintiff can sufficiently plead an affirmative
misrepresentation in violation of the CFA without allegations regarding defendant’s intent or
knowledge), with Banco Popular, 184 N.J. at 172-73 (holding that for a common law fraud claim
to succeed, the defendant must know of its material misrepresentation and intend that individuals
rely on it).
Furthermore, “common law fraud requires proof of reliance while consumer fraud
requires only proof of a causal nexus between the concealment of the material fact and the loss.”
Gotthelf v. Toyota Motor Sales, U.S.A., Inc., CIV.A. 11-4429 (JLL), 2012 WL 1574301, at *17
(D.N.J. May 3, 2012) (quoting Zorba Contractors, Inc. v. Housing Authority, City of Newark,
362 N.J. Super. 124, 139 (App. Div. 2003)), aff’d, 525 F. App’x 94 (3d Cir. 2013). The plaintiff
must show actual detrimental reliance on defendant’s fraudulent activity. See Ross v. Panteris &
Panteris, LLP, CIV. 12-6096 (FSH), 2013 WL 5739145, at *12-13 (D.N.J. Oct. 22, 2013);
Balthazar v. Atl. City Med. Ctr., 279 F. Supp. 2d 574, 590 (D.N.J. 2003) aff’d, 137 F. App’x 482
(3d Cir. 2005); Kaufman v. i-Stat Corp., 165 N.J. 94, 109 (2000).
Here, Plaintiff does not adequately plead common law fraud. Plaintiff simply asserts that
Liquid Health “deliberately and knowingly engaged in concealment” without any factual
allegations to support such a statement. (See Complaint at 16-17). Moreover, Plaintiff
concludes that Liquid Health intended that the class rely upon the misrepresentation, without
pleading more. (Complaint at 16). In other words, Plaintiff pleads the “knowledge or belief”
and “reasonable reliance” elements of common law fraud in a purely conclusory fashion, with no
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facts to substantiate his claims. These allegations cannot be credited in opposition to Liquid
Health’s motion. Iqbal, 556 U.S. at 678 (“A pleading that offers labels and conclusions or a
formulaic recitation of the elements of a cause of action will not do. Nor does a complaint
suffice if it tenders naked assertions devoid of further factual enhancement.”). Because Plaintiff
offers no additional facts beyond those pleaded in support of his CFA claims, this Court grants
Liquid Health’s motion for judgment on the pleadings regarding common law fraud. See Dewey,
558 F. Supp. 2d at 528 (denying motion to dismiss CFA claim but dismissing common law fraud
claim where plaintiffs “offer[ed] no additional facts [regarding common law fraud] beyond those
discussed . . . in the context of [the] CFA claims”). This dismissal will be without prejudice. See
Phillips, 515 F.3d at 236 (“if a complaint is vulnerable to a 12(b)(6) dismissal, a district court
must permit a curative amendment, unless an amendment would be inequitable or futile”).
D.
Unjust enrichment
To establish unjust enrichment, “a plaintiff must show both that defendant received a
benefit and that retention of the benefit would be unjust.” VRG Corp. v. GKN Realty Corp., 135
N.J. 539, 554 (1994). A plaintiff must also allege that he “expected remuneration from the
defendant at the time it performed or conferred a benefit on defendant and that the failure of
remuneration enriched defendant beyond its contractual rights.” Id. Unjust enrichment,
however, “is not an independent theory of liability, but is the basis for a claim of quasicontractual liability.” MK Strategies, LLC v. Ann Taylor Stores Corp., 567 F. Supp. 2d 729, 733
(D.N.J. 2008) (citing Nat’l Amusements, Inc. v. N.J. Turnpike Auth., 619 A.2d 262, 267 (Law
Div. 1992), aff’d, 275 N.J. Super. 134 (App. Div. 1994)). In fact, “the role of unjust enrichment
in the law of torts is limited for the most part to its use as a justification for other torts such as
fraud or conversion.” Castro, 370 N.J. Super. at 299.
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Thus, “under New Jersey law, an indirect purchaser cannot succeed on a claim for unjust
enrichment.” Weske v. Samsung Elecs. Am., Inc., CIV. 2:10-4811 (WJM), 2012 WL 833003, at
*7 (D.N.J. Mar. 12, 2012). “When an individual purchases a consumer product from a thirdparty store and not the manufacturer, the purchaser has not conferred a benefit directly to the
manufacturer such that the manufacturer could be found to have been unjustly enriched.” Id.;
see also Hughes v. Panasonic Consumer Electronics, Co., 10-846 SDW, 2011 WL 2976839, at
*27 (D.N.J. July 21, 2011) (dismissing unjust enrichment claim on Rule 12(b)(6) motion where
plaintiffs in purported class action purchased allegedly defective product from third-party
sellers).
Here, an unjust enrichment claim cannot be tacked onto Plaintiff’s fraud claim. Plaintiff
does not assert that a quasi-contractual relationship exists and therefore a claim for unjust
enrichment is not appropriate. Furthermore, Plaintiff does not establish a direct relationship with
Liquid Health because Plaintiff does not allege whether he purchased the product directly from
Liquid Health or from a third-party seller. Accordingly, this Court grants Liquid Health’s
motion for judgment on the pleadings regarding unjust enrichment. Because any leave to amend
this claim would be futile, the dismissal will be with prejudice. Phillips, 515 F.3d at 236.
CONCLUSION
For all of the foregoing reasons, the Court will grant the motion to dismiss filed by
Defendant Alex Abreu and grant in part and deny in part the motion for judgment on the
pleadings filed by Defendant Liquid Health Inc. All claims against Abreu are dismissed for lack
of personal jurisdiction. The motion for judgment on the pleadings is denied as to the CFA
claim, and granted as to the other claims. The common law fraud claim against Liquid Health
will be dismissed without prejudice, and the unjust enrichment claim against Liquid Health will
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be dismissed with prejudice. Plaintiff shall have leave to file an Amended Complaint consistent
with this Opinion within thirty (30) days of the date of entry of the accompanying Order. Should
Plaintiff fail to file an amended pleading in that time, the common law fraud claim will be
dismissed with prejudice.
s/ Stanley R. Chesler
STANLEY R. CHESLER
United States District Judge
Dated: July 2, 2014
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