Does a CFA Claimant Need to Plead “But for” Causation?

Seth J. Lapidow and Ethan M. Simon

New Jersey courts appear to be trending toward requiring Consumer Fraud Act (CFA) claimants to plead “but for” causation to survive dismissal. On Aug. 23, Judge Anne E. Thompson of the U.S. District Court for the District of New Jersey dismissed a class action CFA claim Rudel Corporation filed against Heartland Payment Systems, a credit and debit processor. See Rudel Corp. v. Heartland Payment Systems, No. 16-2229, 2016 WL 4472944 (D.N.J. Aug. 23, 2016). According to the complaint in Rudel, the plaintiff operated a restaurant and used Heartland to process credit card transactions. In spring 2014, Heartland sent a letter to Rudel and other clients announcing a new program through which Heartland would charge a lower rate on American Express transactions. Several months later, Heartland indicated on Rudel’s monthly account statement that it had incorrectly calculated the rates for the new American Express program and had to adjust the rates. Allegedly, Heartland also retroactively charged the increased rate.

Rudel filed a class action complaint alleging several claims, including a violation of the CFA. Under the CFA, a consumer must allege: (1) unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection between the unlawful conduct and ascertainable loss. According to Rudel, it adequately pleaded causation in that “Defendant reneged on its false promise of a lower rate for American Express transactions, and Plaintiff therefore paid ‘bogus’ retroactive and prospective fees.” Id. at *5. Judge Thompson disagreed, however, holding that:

[T]he conduct that the CFA seeks to punish is not simply charging more fees, it is the fraudulent “bait and switch” that Plaintiff highlighted as the unlawful conduct at issue. Plaintiff does not plead that Defendant’s “bait and switch” caused its loss. Plaintiff was a customer of Defendant before and after the allegedly false promise, and did not apparently change its conduct in any way because of the promise. Other merchants who previously did not accept American Express may have started to accept American Express because of Defendant’s promise, but not Plaintiff….

Plaintiff does not allege that it only started accepting American Express after the letter announcing a lower rate, or that it encouraged its customers to use American Express more after the letter, or that it continued to use Defendant’s services because of the letter. Rather, it appears that Plaintiff accepted American Express via Defendant’s services before the letter was sent.

Id. (internal citations and quotations omitted). Because the plaintiff failed to “plead a causal link between its loss and Defendant’s allegedly duplicitous behavior,” the court dismissed the CFA claim. Id.

Other courts in the District of New Jersey appear to agree with the proposition that a plaintiff cannot adequately plead causation if he suffers a loss irrespective of the defendant’s conduct. In Kendall v. Cubesmart, No. 15-6098 (FLOW) (LHG), 2016 WL 1597245 (D.N.J. Apr. 21, 2016), the plaintiff alleged that a storage facility operator engaged in unlawful conduct under the CFA by renewing the plaintiff’s storage lease without updating the typeface of the lease’s $5,000 storage limitation clause, as required by New Jersey law. The plaintiff further alleged that his ascertainable loss was the value of his personal property and moving costs. Id. at *12. The court held that even assuming the defendant engaged in unlawful conduct, “Plaintiff does not allege that he would not have stored the property in the rental unit until after August 2013 had the Lease been properly updated,” and that “Plaintiff would have incurred the[] moving costs regardless of whether the Lease was updated or not.” Id. The court thus dismissed the CFA claim on the same basis as Judge Thompson did in Rudel: the allegedly unlawful conduct did not change the plaintiff’s behavior.

A recent opinion by the Appellate Division is in accord. In Dugan v. TGI Fridays, 445 N.J. Super. 59 (App. Div. 2016), appeal granted, 2016 WL 4598908 (N.J. July 26, 2016), restaurant patrons filed a class action CFA claim against TGI Friday’s alleging that they overpaid for beverages as a result of Friday’s failure to list drink prices on some of its restaurants’ menus. Addressing the predominance component of class certification, the Appellate Division concluded that “a patron may have chosen to purchase a particular beverage on a specific date for any number of reasons that have nothing to do with the lack of menu pricing.” Id. at 76. Accordingly, the court found predominance lacking with respect to causation under the CFA. Id. at 77.

There is one recent outlier, however. In Eberhart v. LG Electronics USA, — F. Supp. 3d —, No. 15-1761, 2016 WL 3014400 (D.N.J. May 24, 2016), the court did not require the plaintiff to plead “but for” causation to sustain his CFA claim. There, the plaintiff sought to purchase a television with a minimum refresh rate of 120 Hz. Based on LG’s allegedly deceptive marketing tactics, the plaintiff purchased an LG television believing that it exceeded his minimum specifications, but that was actually only 120 Hz. The court found that the plaintiff adequately pleaded causation because “while Plaintiff indicated that he desired a television with at least 120 Hz, he thought that the set he purchased from LG far exceeded this minimum.” Id. at *3. In support of its determination, the court provided the following analogy:

The situation is akin to a consumer who indicates that he had wanted an automobile with a mileage of at least twenty-five miles per gallon and then purchased a car he believed received forty-five miles per gallon. The manufacturer is not then immune if it demonstrates that the vehicle obtained twenty-five miles per gallon, for such argument fails to account for the difference in the premium paid for a more fuel efficient vehicle (i.e., one that obtained forty-five miles per gallon).

The court’s application of causation under the CFA in Eberhart is inconsistent with that in Dugan, Kendall and Rudel. When evaluating causation in those cases, the courts considered whether the plaintiffs changed their conduct because of the allegedly offending activity and required the plaintiffs to allege or prove as such to maintain their lawsuits. See, e.g., Rudel, 2016 WL 4472944, at *5. In Eberhart, however, the court did not so consider or require, even though the plaintiff there did allege that he would not have purchased the television had LG not engaged in its allegedly unlawful marketing tactics.

Eberhart thus muddies the waters of causation under the CFA, and the Third Circuit has not issued any recent opinions clarifying this issue. But see Indian Brand Farms v. Novartis Crop Protection, 617 F.3d 207, 220-21 (3d Cir. 2010) (affirming summary judgment against CFA plaintiff when plaintiff did not “directly rely[]” on the defendant’s misrepresentations and the plaintiff purchased and used the product at issue before it could have “indirectly relied” on the misrepresentations). Under Eberhart, the plaintiff need only plead that he thought he was getting a different product from the one advertised. He does not need to allege-as Rudel appears to require-that he would not have purchased the product “but for” the allegedly unlawful advertisement. However, given the weight and number of other recent decisions, courts should require CFA claimants to plead, and eventually prove, that the unlawful conduct somehow caused them to act in a certain way or change their behavior to their detriment. Were courts not to impose this requirement, plaintiffs would be able to bring CFA suits in which there is no meaningful causal relationship between the unlawful conduct and ascertainable loss.

“Does a CFA Claimant Need to Plead “But for” Causation?,” by Seth J. Lapidow and Ethan M. Simon was published in the New Jersey Law Journal on December 5, 2016.

Reprinted with permission from the December 5, 2016 edition of the New Jersey Law Journal © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, or visit

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