ROBERT WILSON, Individually et al. v. GENERAL MOTORS CORPORATION, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0943-03T50943-03T5

ROBERT WILSON, Individually

and On Behalf of All Others

Similarly Situated,

Plaintiff-Appellant,

v.

GENERAL MOTORS CORPORATION,

GENERAL MOTORS OF CANADA, LTD.,

FORD MOTOR COMPANY, FORD MOTOR

COMPANY OF CANADA, LTD., TOYOTA

MOTOR CORPORATION, TOYOTA MOTOR

SALES, U.S.A., INC., TOYOTA

CANADA, INC., HONDA MOTOR

COMPANY, LTD., AMERICAN HONDA

MOTOR COMPANY, INC., HONDA

CANADA, INC., DAIMLERCHRYSLER

AKTIENGESELLSCHAFT, DAIMLERCHRYSLER

CANADA, INC., MERCEDES-BENZ CANADA,

INC., NISSAN MOTOR COMPANY, LTD.,

NISSAN NORTH AMERICA, INC.,

NISSAN CANADA, INC., BMW OF NORTH

AMERICA, INC., BMW CANADA, NATIONAL

AUTOMOBILE DEALERS ASSOCIATION,

CANADIAN AUTOMOBILE DEALERS ASSOCIATION,

Defendants-Respondents.

_________________________________________________

 
Argued By Telephone January 25, 2005 - Decided:

Before Judges A. A. Rodr guez, Weissbard and Hoens.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-1287-03.

Donna Siegel Moffa argued the cause for appellant (Trujillo, Rodriguez & Richards, attorneys; Ms. Moffa, on the brief;

William P. Butterfield (Finkelstein, Thompson & Longhran) of the Washington, D.C., bar, admitted pro hac vice, on the brief; Bart Cohen (Berger & Montague) of the Pennsylvania bar, admitted pro hac vice, on the brief; Michael D. Hausfeld, Daniel A. Small, and Justine J. Kaiser (Cohen, Milstein, Hausfeld & Toll) of the Washington, D.C., bar, admitted pro hac vice, on the brief; Marc H. Edelson (Hoffman & Edelson) of the Pennsylvania bar, admitted pro hac vice, on the brief; Ira Neil Richards (Trujillo Rodriguez & Richards) of the Pennsylvania bar, admitted pro hac vice, on the brief).

Daniel L. Goldberg (Bingham McCutchen), of the Massachusetts Bar, admitted pro hac vice, argued the cause for respondent BMW of North America, LLC (Obermayer, Rebmann, Maxwell & Hippel, attorneys; Mr. Goldberg and Daniel S. Savrin (Bingham McCutchen) of the Massachusetts bar, admitted pro hac vice, of counsel; Gregory D. Saputelli and Steven A. Haber, on the brief).

Lavin, Coleman, O'Neil, Ricci, Finarelli & Gray; Richard C. Godfrey and David J. Zott (Kirkland & Ellis) of the Illinois bar, admitted pro hac vice, attorneys for respondents General Motors Corporation and General Motors of Canada, Ltd. (Mr. Godfrey and Mr. Zott, of counsel; Joseph E. O'Neil, on the brief).

Campbell Campbell Edwards & Conroy; Margaret M. Zwisler and William R. Sherman (Howrey Simon Arnold & White) of the Washington D.C., bar, admitted pro hac vice, attorneys for respondents Ford Motor Company and Ford Motor Company of Canada, Ltd. (Ms. Zwisler and Mr. Sherman, of counsel; Bryan D. McElvaine, on the brief).

Krovatin & Associates; Robert Van Nest and Ragesh Tangri (Keker & Van Nest) of the California bar, admitted pro hac vice, attorneys for respondent American Honda Motor Co., Inc. (Mr. Van Nest and Mr. Tangri, of counsel; Gerald Krovatin, on the brief).

Cooper, Rose & English; Peter Sullivan (Gibson Dunn & Crutcher) of the California bar, admitted pro hac vice, attorneys for respondent Nissan North America, Inc. (Mr. Sullivan, of counsel; Peter M. Burke, on the brief).

Marshall, Dennehey, Warner, Coleman & Goggin; Steven A. Newborn, James C. Egan, Jr., and Kirsten Lockhart (Weil, Gotshal & Manges) of the Washington, D.C., bar, admitted pro hac vice, attorneys for respondents DaimlerChrysler Canada, Inc., and Mercedes-Benz Canada, Inc. (Mr. Newborn, Mr. Egan and Ms. Lockhart, of counsel; Kevin M. McKeon, on the brief).

Gibbons, Del Deo, Dolan, Griffinger & Vecchione; Michael R. Lazerwitz (Cleary, Gottlieb, Steen & Hamilton) of the Washington, D.C., bar, admitted pro hac vice, attorneys for respondents Toyota Motor Sales, U.S.A., Inc., and Toyota Canada, Inc. (Mr. Lazerwitz, of counsel; Guy V. Amoresano, on the brief).

Connell Foley; David U. Fierst and Glenn A. Mitchell (Stein, Mitchell & Mezines) of the Washington, D.C., bar, admitted pro hac vice, attorneys for respondent National Automobile Dealers Association (Mr. Fierst and Mr. Mitchell, of counsel; Brian G. Steller, on the brief).

McCarter & English; Deborah Garza (Fried, Frank, Harris, Shriver & Jacobson) of the Washington, D.C., bar, admitted pro hac vice, attorneys for respondent Canadian Automobile Dealers Association (Ms. Garza, of counsel; Richard B. Harper, on the brief).

PER CURIAM

Plaintiff, Robert Wilson, proceeding individually and on behalf of a putative class of others similarly situated, appeals from the October 2003 order dismissing the consumer fraud allegations in his complaint for failure to state a claim on which relief may be granted. We affirm.

The following facts are relevant to the issues we address on appeal. In February 2003, plaintiff filed a complaint, seeking to represent a class of consumers, in which he asserted that defendants, all manufacturers of new cars, and their American and Canadian trade associations had engaged in a conspiracy to fix prices for new cars sold or leased in the United States, causing the prices in this country to be higher than prices for the vehicles when sold or leased in Canada.

Plaintiff's complaint, which was filed in Camden County, was one of four similar complaints, two others of which were filed in Camden and one of which was venued in Burlington County. By orders entered in August and October 2003, the four complaints were consolidated, with the Wilson complaint being designated as the Master Complaint. Collectively, the complaints asserted two causes of action, namely, that the defendants had violated the New Jersey's Antitrust Act, N.J.S.A. 56:9-1 to -19, and that defendants' acts in furtherance of their antitrust conspiracy constituted "unfair and unconscionable practices" in violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20.

Although the factual allegations in the complaints are not identical, they are sufficiently similar that we need not describe them individually. Rather, for purposes of our analysis, we will focus on the description of the facts set forth in Wilson, which was designated by the court as the Master Complaint.

In Wilson, plaintiff asserted that the adoption of the North American Free Trade Agreement ("NAFTA") eliminated many of the tariffs and duties previously imposed on goods passing between the United States and Canada, among other countries. As a result, emissions standards in both Canada and the United States were, in the wording of the complaint, "harmonized" so that "the only differences between new cars made for sale in Canada and those made for sale in the United States are their speedometers and odometers (Canadian cars record kilometers, while United States odometers record miles) and, in some instances, minor differences in daytime running lamps." According to the complaint, new car prices in Canada had historically been significantly lower than the prices for the same vehicles when sold in the United States. Because of NAFTA, however, that price differential became significant to the manufacturers. As a result, according to the complaint, defendants devised a conspiracy to respond to NAFTA's anticipated effect on prices. Plaintiffs summarized the conspiracy as follows:

1. Beginning at least as early as 2001, [d]efendants conspired by entering into a series of agreements pursuant to which they initiated a course of conduct to prevent new cars they sold to dealers in Canada from being exported to the United States. Generally, new car prices in Canada are 10-30% lower than prices for the same cars in the United States.

2. The effect of the conspiracy was to maintain new car prices in the United States at levels that are significantly higher than prices charged in Canada for the same cars, and to maintain the prices for new cars in the United States at supra-competitive levels. As a result of this conduct, all cars manufactured by the Manufacturing Defendants (defined below) and sold or leased as new in New Jersey and throughout the United States during the relevant time period were sold or leased at artificially inflated prices.

The complaint described the specific anticompetitive acts in which defendants engaged to implement their overall conspiracy to be the following:

3. To implement this conspiracy, the Manufacturing Defendants, among other things, sought and obtained agreement from their United States dealers to:

a. Not honor new car warranties on cars imported from Canada; and

b. Not install properly calibrated imperial measure speedometers and odometers in cars imported from Canada which had metric speedometers and odometers.

4. Additionally, the Manufacturing Defendants sought and obtained agreements from their Canadian dealers to:

a. Utilize "No Export" agreements that require a customer to pay a substantial penalty of 10 to 50% of the car's value, in the event the car is taken into the United States for use or resale within a specified period of time; and

b. Conduct "due diligence" investigations of prospective buyers to identify potential exporters of new automobiles and not to sell an automobile to those identified as potential exporters.

5. The Manufacturing Defendants also took measures to enforce these agreements, including:

a. Penalizing Canadian dealers who sold cars that were then taken into the United States through "chargebacks." These chargebacks took the form of either a preset "liquidated damages" amount or some percentage of the value of the car, which in either case amounts to several thousand dollars;

b. Threatening to withhold or limit inventory of popular styles and colors of automobiles to offending Canadian dealers;

c. Threatening to terminate the dealerships of Canadian dealers who refuse to comply;

d. Refusing to provide U.S. purchasers of new Canadian cars with information regarding recalls;

e. Creating and exchanging "blacklists" of persons who purchased cars for export into the United States, and

f. Attempting to persuade authorized parts dealers not to provide odometer packages to convert from kilometers to miles.

6. Defendants, the National Automobile Dealers Association ("NADA") and the Canadian Automobile Dealers Association ("CADA"), aided and facilitated this conspiracy by sponsoring meetings to facilitate the exchange of information among Defendant Manufacturers; by promoting the development of an industry-wide checklist of practices Canadian dealers could employ to stop export sales and by assisting the manufacturers in enforcing the agreements described above. These actions of the Defendants constitute a violation of the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-2 et seq.

More particularly, the complaint identified the following specific acts and practices which served as the basis for the causes of action:

43. . . . created and shared "blacklists" of persons known to export new cars from Canada to the United States for re-sale[;]

. . . prohibited their Canadian dealers from selling new cars to entities on the blacklist. . . .

44. . . . instituted "chargeback" provisions as part of their dealer franchise agreements: [so that] if a car made for sale in Canada became registered in the United States, the Canadian dealer who initially sold the car was required to pay the manufacturer a pre-determined amount . . . .

45. . . . periodically tracking every car's unique Vehicle Identification Number ("VIN") [and conducting] . . . "audit sweeps" to check VIN numbers on United States dealers' lots to determine if cars made for sale in Canada had been exported and were being re-sold in the United States.

46. . . . required their Canadian dealers to have buyers execute "No Export" agreements at the time of sale . . . [that] required the buyer to pay the selling Canadian dealer a substantial penalty, . . . in the event the car was subsequently transferred to the United States within a specified period of time.

47. . . . communicated through CADA to prevent new-car exports from Canada to the United States: (i) threatened their respective Canadian dealers with stricter enforcement of chargeback provisions; (ii) reinforced their requirements for Canadian dealers to condition sales on consumers' entry into "No Export" agreements; (iii) used the same language and terms in "No Export" agreements as those used by competitors and importing U.S. dealers; (iv) imposed car allocation restrictions on exporting Canadian dealers; (v) pursued termination of Canadian dealerships found to export; and (vi) required Canadian dealers to conduct "due diligence" investigations of prospective buyers to root out United States citizens and other potential exporters.

. . . .

60. Beginning at least as early as January 1, 2001, the means and methods used by Defendants to implement the combination and conspiracy have included the following:

a. Defendants agreed to implement industry-wide policies such as chargebacks and No-Export agreements;

b. Defendants agreed to require their United States dealers to stop honoring service warranties on cars exported from Canada to the United States;

c. Defendants created and shared "blacklists" of dealers and exporters who allowed cars bought in Canada to be sent to the United States;

d. CADA and NADA facilitated coordinated action and "industry-wide" agreements among Defendants and co-conspirators to prevent export of new cars from Canada to the United States; and

e. Defendants implemented substantially identical measures and policies regarding the export of new cars from Canada to the United States with the purpose and effect of restricting inter-brand competition in the United States and preserving and stabilizing price levels for new cars in the United States.

The complaint further asserts that the Manufacturing Defendants imposed restrictions on their dealers based in the United States in order to enforce their anticompetitive agreements as follows:

74. In furtherance of this conspiracy, Manufacturing Defendants required their U.S. dealers:

a. Not to honor new car warranties on cars imported from Canada;

b. Not to provide recall information relating to new cars imported from Canada; and

c. Not to install properly calibrated imperial measure speedometers and odometers in cars imported from Canada which had metric speedometers and odometers.

After the complaints were consolidated, defendants moved for dismissal in lieu of filing answers, asserting that the complaints failed to state a claim on which relief could be granted. See R. 4:6-2(e). The essence of the motions was that the antitrust allegations sought a remedy that was barred by operation of federal law and that the Consumer Fraud Act could not be used to create a remedy, coextensive with the antitrust remedy, in the absence of repealer legislation. For reasons he set forth on the record, the motion judge agreed.

Although plaintiffs do not appeal from the dismissal of their antitrust claims, an explanation of those claims and the reasons why plaintiffs do not have a viable antitrust cause of action theory is essential for a complete understanding of the result we reach on appeal. The New Jersey Antitrust Act expressly provides that it "shall be construed in harmony with ruling judicial interpretations of comparable Federal antitrust statutes." N.J.S.A. 56:9-18. One of the best known and certainly one of the most influential of all interpretations of federal antitrust law is the 1977 Illinois Brick decision of the United States Supreme Court. See Illinois Brick Co. v. Illinois, 431 U.S. 720, 97 S. Ct. 2061, 52 L. Ed. 2d 707 (1977). In Illinois Brick, the Court considered the scope of section 4 of the Clayton Act, 15 U.S.C. 15, which permits "any person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws" to sue for treble damages. Ibid. In short, Illinois Brick bars antitrust suits, under this section of the Clayton Act, that are filed by so-called "indirect purchasers." Illinois Brick, supra, 431 U.S. at 730, 97 S. Ct. at 2066-67, 52 L. Ed. 2d at 715. This doctrine, in turn, was explicitly derived from the Supreme Court's earlier decision in Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S. Ct. 2224, 20 L. Ed. 2d 1231 (1968). In that earlier precedent, the Supreme Court had held that a defendant sued for antitrust violations by a direct purchaser of its product could not assert as a defense that the direct purchaser passed on the increased costs occasioned by the anticompetitive acts to an indirect purchaser. Id. at 488, 88 S. Ct. at 2228, 20 L. Ed. 2d at 1238.

In Illinois Brick the Supreme Court held that the Hanover Shoe decision mandated that indirect purchasers be precluded from maintaining private rights of action for damages based on antitrust violations. In reaching this conclusion, the Court reasoned that indirect purchaser suits "would create a serious risk of multiple liability for defendants," Illinois Brick, supra, 431 U.S. at 730, 97 S. Ct. at 2067, 52 L. Ed. 2d at 715, and that the problems of proof, the resulting complexities of enforcement and the decreased effectiveness of antitrust suits, which were the basis for the Hanover Shoe decision, would apply equally if indirect purchasers suits were allowed under the Clayton Act. Id. at 731-32, 97 S. Ct. at 2067, 52 L. Ed. 2d at 716 (citing Hanover Shoe, supra, 392 U.S. at 493, 88 S. Ct. at 2231, 20 L. Ed. 2d at 1241).

Balancing these concerns, the Supreme Court concluded that by allowing antitrust suits only to be filed by direct purchasers, more effective enforcement of antitrust laws would be achieved. Id. at 734, 97 S. Ct. at 2069, 52 L. Ed. 2d at 718. In particular, the Court expressed a concern that any other result would lead to "[t]he apportionment of the recovery throughout the distribution chain [and] would increase the overall costs of recovery by injecting extremely complex issues into the case; at the same time such an apportionment would reduce the benefits to each plaintiff by dividing the potential recovery among a much larger group." Id. at 745, 97 S. Ct. at 2074, 52 L. Ed. 2d at 724. In Illinois Brick, the Supreme Court concluded that Congress's "legislative purpose in creating a group of 'private attorneys general' to enforce the antitrust laws . . . is better served by holding direct purchasers to be injured to the full extent of the overcharge paid by them than by attempting to apportion the overcharge among all that may have absorbed a part of it." Id. at 746, 97 S. Ct. at 2075, 52 L. Ed. 2d at 725 (internal citation omitted). In recent years, the United States Supreme Court has reaffirmed the indirect purchaser bar and has reiterated its importance as part of the overall mechanism utilized to achieve "vigorous enforcement of the antitrust laws." Kansas v. Utilicorp United, Inc., 497 U.S. 199, 214, 110 S. Ct. 2807, 2815, 111 L. Ed. 2d 169, 184 (1990).

Notwithstanding the Illinois Brick doctrine, many states have adopted legislation, referred to as Illinois Brick repealers, that expressly allows indirect purchaser suits as a part of the system of antitrust enforcement in those states. New Jersey's antitrust statute, unlike these other states' laws, however, continues to require specifically that our antitrust enforcement be "in harmony" with the federal statute and with its interpretation in the federal courts. N.J.S.A. 56:9-18. Our Legislature has not altered the requirement that our antitrust scheme remain consistent with the federal one and, in particular, has not adopted an Illinois Brick repealer. On the contrary, as we have recently noted:

Not only has our Legislature not enacted a repealer amendment in response to Illinois Brick, but when an attempt was made, the bill was never reported out of committee. (Assembly Bill No. 4629, March 11, 1991). The bill proposed to amend N.J.S.A. 56:9-12 of the [Antitrust Act] to allow recovery to "[a]ny person who shall be injured directly or indirectly in his business or property by reason of a violation of the provisions of this act." The statement accompanying the bill expressly referenced the Illinois Brick holding and stated it was intended to 'clarify that under the [Act], indirect purchasers of goods and services are permitted to seek damages in antitrust cases. The bill would create a presumption that in the absence of a preponderance of evidence to the contrary, the final indirect purchaser of goods and services is the party actually injured in the antitrust violation.' [Statement to Assembly Bill No. 4629 (March 11, 1991).]

[Sickles, supra, 379 N.J. Super. at 110-11.]

It is against this background and in the context of our understanding of the Legislature's intention respecting Illinois Brick that we consider the issues on appeal.

As we have noted, plaintiffs do not appeal from the motion judge's decision dismissing their antitrust claims. Rather, they have apparently conceded that, because they are indirect purchasers, in the absence of repealer legislation, the antitrust allegations of their complaint fail to state a claim on which relief may be granted. Instead, they have limited their appeal to their assertion that the judge erred when he concluded that the complaint also failed to state a claim for relief pursuant to the Consumer Fraud Act. We turn, therefore, to those allegations and to that analysis.

Plaintiffs' complaints asserted that the same factual allegations that gave rise to the antitrust claims also formed the basis for relief under the Consumer Fraud Act because the acts complained of constituted unconscionable commercial practices sufficient to support relief. In addressing these allegations, the motion judge concluded that the factual assertions supported only an antitrust cause of action and therefore could not withstand the R. 4:6-2(e) analysis. He reasoned as follows:

[I] conclude that the Consumer Fraud Act does not permit plaintiffs to recover for the alleged conduct, because the phrase unconscionable commercial practice I find is not sufficiently broad to include the type of conduct here. There is no deception in the sense used in the Act or false pretense or false promise or misrepresentation or concealment, suppression or omissions of material facts with respect to the purchasers.

It is typical, alleged typical, anti-competitive conduct for which a remedy is provided under the Anti-Trust Statutes, Federal and/or State. For those reasons the motion to dismiss Plaintiff's complaint for failure to state a claim would be granted.

It is from this aspect of the order that plaintiffs appeal, contending that the judge erred in his understanding of the meaning and scope of the Consumer Fraud Act.

We first note that this is an appeal from an order granting a motion to dismiss for failure to state a claim upon which relief may be granted. See R. 4:6-2(e). A motion for failure to state a claim requires the judge to search the pleading in depth and with liberality in order to determine whether a cause of action is suggested. Printing Mart-Morristown v. Sharp Electronics Corp., 116 N.J. 739, 746 (1989). In addressing any motion to dismiss for failure to state a claim, the court must "accept as true all factual assertions in the complaint." Smith v. SBC Communications, Inc., 178 N.J. 265, 268-69 (2004). Moreover, in doing so, every reasonable inference to be drawn from the factual assertions must be accorded to the plaintiff. Id. at 282. We have specifically considered the effect of such a motion in the context of a Consumer Fraud Act complaint. See New Jersey Citizen Action v. Schering Plough Corp., 367 N.J. Super. 8, 13 (App. Div.), certif. denied, 178 N.J. 249 (2003). In particular, we have recently commented that a motion for failure to state a claim in the context of the Consumer Fraud Act should be approached "with hesitation." Id. at 13 (citing Seidenberg v. Summit Bank, 348 N.J. Super. 243, 249-50 (App. Div. 2002)(other citations omitted)).

As a part of their appeal, plaintiffs assert that the judge erred by not reading the term "unconscionable commercial practice" broadly enough to include the antitrust practices in which defendants engaged and that he erred in concluding that the Consumer Fraud Act cannot provide supplemental protection to that afforded by the Antitrust Act. We disagree with both aspects of plaintiffs' analysis.

When the judge considered defendants' motion, he did not have the benefit of two decisions published since that time, which the parties have briefed and which we have considered. See Sickles, supra, 379 N.J. Super. at 115-17; Island Mortgages v. 3M, 373 N.J. Super. 172 (Law Div. 2004). Rather, he was presented with two unpublished Law Division decisions, which reached opposite conclusions on the question of whether allegations of antitrust violations raised by an indirect purchaser, and therefore barred by Illinois Brick, could instead be used to support a claim under the Consumer Fraud Act. In considering the question, the judge was persuaded that where the allegations of the complaint sounded only in antitrust or anticompetitive acts and did not identify any other practices which might be understood to be unconscionable commercial practices, there can be no Consumer Fraud Act cause of action. That is to say, he concluded that acts in furtherance of an antitrust conspiracy, including price fixing and related acts designed to achieve the anticompetitive purposes or to enforce compliance with the conspiracy, fall solely within the ambit of the Antitrust Act, and cannot also support relief as unconscionable practices that may be remedied under the Consumer Fraud Act. It is from this reasoning that plaintiffs have appealed.

We begin our analysis of the issue raised on appeal with a brief discussion of decisions published in the time since the judge granted defendants' motion to dismiss. Most significant to our analysis is the Sickles decision, to which we have referred previously for its discussion of Illinois Brick and New Jersey's Antitrust Act. See Sickles, supra, 379 N.J. Super. at 109-11. There, we considered whether a complaint that asserted acts comprising an anticompetitive conspiracy in the carbon black industry and that were alleged to have caused an increase in the prices of tires that were charged to consumers, could support either a claim under the Antitrust Act or the Consumer Fraud Act. We concluded that, because plaintiffs were indirect purchasers of the carbon black, they were barred, under the Illinois Brick doctrine, from pursuing a claim under the Antitrust Act. Id. at 113-15.

In Sickles, we also considered whether, in the context of claims that were barred under Illinois Brick, plaintiffs could nonetheless sustain a cause of action under the Consumer Fraud Act. In doing so, we analyzed the meaning of the term "unconscionable commercial practice" as it is used in the Consumer Fraud Act, tracing the history of the term in the legislation and in the decisions of our Supreme Court. We concluded that the term, as it has developed, includes an element of deception that is central to our understanding of this concept. Id. at 115-16. In analyzing the Sickles complaint, we first noted that the pleading was "bereft of any allegation of deception," id. at 116, the result of which was that it could not state a claim for relief under the Consumer Fraud Act. Significantly, however, we also concluded that if the sole theory of the complaint were that defendants had engaged in anticompetitive acts, and if the complaint sought to equate the barred antitrust remedy with a parallel action under the Consumer Fraud Act, it would fail. Addressing this question as a matter of standing, we held in Sickles:

The [Consumer Fraud Act] was enacted to help eradicate consumer fraud, not to "advance public policy in favor of competition and prevent practices which deprive consumers of the benefit of competitive markets" which is the "overriding purpose of the New Jersey Antitrust Act." Ideal Dairy Farms, Inc. v. Farmland Dairy Farms, Inc., 282 N.J. Super. 140, 175 (App. Div.), certif. denied, 141 N.J. 99 (1995). Plaintiff alleges only that defendants' price-fixing and monopolistic conduct resulted in higher-priced tires. Thus, for us to permit an indirect purchaser, such as plaintiff, to recast his antitrust claim as a consumer fraud violation would undermine the standing requirements of the [Antitrust Act] and would "essentially permit an end run around the policies allowing only direct purchasers to recover under the Antitrust Act." Abbott Labs, Inc. v. Segura, 907 S.W.2d 503, 506 (Texas 1995); see also Blewett v. Abbott Labs, 938 P.2d 842 (1997), review denied, 950 P.2d 475 (1998)(denying an indirect purchaser standing to recover for antitrust conduct through a lawsuit under its consumer fraud act). Cf. Mack v. Bristol-Myers Squibb Co., 673 So. 2d 100 (Fla. Dist. Ct. App. 1996), review dismissed, 689 So. 2d 1068 (1977)(permitting indirect purchasers to sue under Florida's consumer protection statute which contained language protecting consumers from "unfair methods of competition" in addition to unconscionable, deceptive and unfair acts).

[Id. at 116-17.]

The Law Division judge in Island Mortgages, supra, reached the same conclusion. That judge, whose reasoning we found persuasive in Sickles, see 379 N.J. Super. at 111-12, concluded that a putative class of plaintiffs who claimed that anticompetitive acts had restricted their access to lower-priced transparent tape failed to identify the type of practice designed to mislead that is the hallmark of an unconscionable act. See Island Mortgages, supra, 373 N.J. Super. at 176-77. Both Sickles and Island Mortgages are consistent with our Supreme Court's interpretation of the meaning of the term "unconscionable commercial practice" as well. See, e.g., Cox v. Sears Roebuck & Co., 138 N.J. 2, 24 (1994); Chattin v. Cape May Greene, 124 N.J. 520, 521 (1991); Meshinsky v. Nichols Yacht Sales, Inc., 110 N.J. 464, 475 (1988) (quoting Rova Farms Resort v. Investors Ins. Co., 65 N.J 474, 483-84 (1974)). Applying all of these precedents to the issues raised on appeal, we are compelled to agree with the reasoning expressed not only by the motion judge in this matter, but with the more recently published decisions in Sickles and Island Mortgages to like effect.

There can be no doubt about the general broad purposes of the Consumer Fraud Act. See Lemelledo v. Beneficial Management Corp. of Am., 150 N.J. 255, 272 (1997). As our Supreme Court has recently concluded, however, where that statute conflicts with the scope and purpose of another act, it may be required to yield. Id. at 264, 270; see Perez v. Rent-A-Center, Inc., 186 N.J. 188, 220 (2006). Because the only acts and practices included in the complaint are anti-competitive acts in furtherance of an antitrust conspiracy, because there is no act alleged that constitutes a deception or includes any type of misleading behavior directed at these plaintiffs, because all of the acts complained of affect plaintiffs only in their status as indirect consumers, we conclude that their complaint cannot state a claim for relief under the Consumer Fraud Act. To conclude to the contrary, as we found in Sickles, would be to create an "end run" around the plain intention of the Legislature embodied in the Antitrust Act. See Sickles, supra, 379 N.J. Super. at 117 (quoting Abbott Labs, supra, 907 S.W. 2d at 506).

The heart of plaintiffs' argument is that the reference to "unconscionable commercial practice" in the Consumer Fraud Act is part of a disjunctive list of prohibited acts for which the Act affords a remedy. Relying on our decision in D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11 (App. Div. 1985), plaintiffs assert that the Law Division judge erred in concluding that some element of "misleading" or "deceptive" practices was required under the Act and that its absence in plaintiffs' complaint was fatal to the cause of action. We do not read D'Ercole so broadly, particularly in light of apparently contrary reasoning from our Supreme Court, see Lemelledo, supra, 150 N.J. at 266; Daaleman v. Elizabethtown Gas Co., 77 N.J. 267, 271 (1978), and the directly contrary conclusion we reached in Sickles, supra, 379 N.J. Super. at 115. Moreover, even were we to read the statutory reference in the disjunctive, we would not interpret it as plaintiffs suggest. To agree with plaintiffs' reading would create a conflict between the Consumer Fraud Act remedy and the Antitrust Act's enforcement principles in light of our Legislature's rejection of an Illinois Brick repealer.

Carefully read, the complaint rests only on allegations that are traditional anticompetitive behaviors that plaintiffs argue affect them indirectly. They have identified no acts undertaken by defendants except for those in furtherance of the antitrust conspiracy. Each of the acts by defendants that were explicitly directed at dealers, including conspiracy, refusal to sell to dealers in Canada who might export cars to the United States, instituting chargebacks, requiring agreements not to export and terminating dealerships of uncooperative dealers, are allegations of antitrust activities with an indirect effect on plaintiffs, recovery for which is barred under Illinois Brick. Even the few factual allegations that are not directed solely at the dealers, including tracking VIN numbers, causing domestic dealers to refuse to honor warranties or to install imperial measure odometers and speedometers, or refusing to provide recall information to domestic purchasers of Canadian vehicles, are acts in furtherance of the conspiracy and are only acts that affect plaintiffs indirectly. The complaints simply do not include any facts that constitute an unconscionable commercial practice apart from the antitrust conspiracy and the acts undertaken in furtherance thereof.

However expansively we may understand the term "unconscionable commercial practice" as it is used in the Consumer Fraud Act, the heart of plaintiffs' appeal asks us to read that language to effect a repealer of Illinois Brick. Plaintiffs suggest that factual allegations that sound only in antitrust violations can support a claim by indirect purchasers through use of the Consumer Fraud Act where the Legislature has specifically rejected such a cause of action under the Antitrust Act itself. In doing so, plaintiffs ask us to accomplish by judicial analysis of the Consumer Fraud Act a result which our Legislature has expressly rejected. We decline to do so.

 
Affirmed.

_________________________________________________

RODR GUEZ, A. A., P.J.A.D., dissenting.

I respectfully dissent from that part of the majority opinion that concludes that "the complaints simply do not include any facts that constitute an unconscionable commercial practice apart from the antitrust conspiracy and the acts undertaken in furtherance thereof." I would reverse the dismissal of the complaint and remand to the Law Division.

On a motion to dismiss an action for failure to state a claim upon which relief can be granted, pursuant to Rule 4:6-2(e), the trial court must "accept as true all factual assertions in the complaint." Smith v. SBC Comm'ns, Inc., 178 N.J. 265, 268-69 (2004). Every reasonable inference should be accorded the plaintiff, and the motion should be rarely granted. Id. at 282. The judge must "search the complaint with liberality and indulgence to determine whether a cause of action is even suggested, however vaguely." New Jersey Citizen Action v. Schering-Plough Corp., 367 N.J. Super. 8, 13 (App. Div.), certif. denied, 178 N.J. 249 (2003). "Dismissal on this ground, in the CFA context, is therefore appropriately approached with hesitation." Ibid. At this posture of the case, the courts are not concerned with plaintiffs' ability to prove the facts alleged in the complaint. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). The court's role in deciding a Rule 4:6-2(e) motion is to determine whether, indulgently read, "'the fundament of a cause of action may be gleaned'" from the pleadings, ibid. (quoting Di Cristofaro v. Laurel Grove Mem. Park, 43 N.J. Super. 244, 252 (App. Div. 1957), "giving plaintiff the benefit of all reasonable factual inferences that those allegations support." F.G. v. MacDonell, 150 N.J. 550, 556 (1997); Sickles v. Cabot Corp., 379 N.J. Super. 100, 116 (App. Div.), certif. denied, 185 N.J. 297 (2005). The court must dismiss a complaint if it fails to articulate a legal basis entitling the claimant to relief. Sickles, supra, 379 N.J. Super. at 106; Camden County Energy Recovery Assocs., L.P. v. New Jersey Dept. Envtl. Prot., 320 N.J. Super. 59, 64-65 (App. Div. 1999) aff'd, 170 N.J. 246 (2001).

Our standard of review is the same. We are "limited to examining the legal sufficiency of the facts alleged on the face of the complaint." Glukowsky v. Equity One, Inc., 360 N.J. Super. 1, 43 (App. Div. 2003), rev'd on other grounds, 180 N.J. 49 (2004). "We must not concern ourselves with the plaintiff's ability to prove those allegations." Ibid.

Here, the motion judge did not apply that standard. Rather, he looked beyond the statement of the claim and decided that defendants were entitled to prevail as a matter of law. In short, the judge turned a R. 4:6-2(e) motion into one for summary judgment. The majority makes the same mistake. This procedure bypassed the process of discovery, and that is precisely why plaintiffs are entitled to a reversal.

Applying the Rule 4:6-2(e) standard, I conclude that plaintiffs have alleged the fundamentals of a consumer fraud cause of action, i.e., that independently of the price-fixing conspiracy, defendants have engaged in conduct that violates the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20 (CFA). The CFA provides in part:

The act, use or employment by any person of any unconscionable commercial practice, deception, fraud, false pretense, false promise, misrepresentation, or the knowing, concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale or advertisement of any merchandise or real estate, or with the subsequent performance of such person as aforesaid, whether or not any person has in fact been misled, deceived or damaged thereby, is declared to be an unlawful practice . . . .

[N.J.S.A. 56:8-2.]

In 1971, N.J.S.A. 56:8-2 was amended to add "unconscionable commercial practice" to the list of prohibited conduct, L. 1971 c. 247, although our Supreme Court had previously inferred an unconscionability prohibition. Kugler v. Romain, 58 N.J. 522, 544 (1971); D'Ercole Sales v. Fruehauf Corp., 206 N.J. Super. 11, 24 (App. Div. 1985). Therefore, an "unconscionable commercial practice" is to be construed as conduct similar to but not identical to the other statutorily prescribed conduct, i.e., "deception," "fraud," "false pretense," "false promise," "misrepresentation," etc.

The standard of conduct demanded by the "unconscionable commercial practice" clause is "good faith, honesty in fact and observance of fair dealing." Assocs. Home Equity Servs. v. Troup, 343 N.J. Super. 254, 278 (App. Div. 2001) (quoting Kugler, supra, 58 N.J. at 544). That issue must be determined on a "case-by-case basis," Assocs. Home, supra, 343 N.J. Super. at 278; Perth Amboy Iron Works v. Am. Home Assurance Co., 226 N.J. Super. 200, 211 (App. Div. 1988), aff'd o.b. 118 N.J. 249 (1990). When disputed, it is a jury question.

The aim of the CFA is to safeguard consumers against "sharp practices and dealings in the marketing of merchandise and real estate whereby the consumer could be victimized by being lured into a purchase through fraudulent, deceptive or other similar kinds of selling or advertising practices." D'Ercole, supra, 206 N.J. Super. at 23. Accord Lemelledo v. Benefical Mgmt. Corp., 150 N.J. 255, 263 (1997); Leon v. Rite Aid Corp., 340 N.J. Super. 462, 467 (App. Div. 2001). Therefore, the CFA is to be broadly and liberally construed in order to effect its remedial purpose of rooting out consumer fraud. Lemelledo, supra, 150 N.J. at 264; Leon, supra, 340 N.J. Super. at 468. That rule of liberal construction extends as well to the meaning of "unconscionable commercial practice," which is not defined in the CFA. Assocs. Home, supra, 343 N.J. Super. at 278. The CFA's history demonstrates a legislative intent to expand its scope toward increased consumer protection. Gennari v. Weichart Co. Realtors, 148 N.J. 582, 604 (1997). In Fenwick v. Kay American Jeep, Inc., 72 N.J. 372, 378 (1977), the Supreme Court had identified "capacity to mislead" as the defining characteristic of "unconscionable commercial practice."

In Sickles, supra, 379 N.J. Super. at 116, we noted that there is nothing inherently misleading about monopolistic conduct or price-fixing scheme. Ibid. As the majority notes, in Sickles we explained that:

Plaintiff's complaint [was] bereft of any allegation that defendants used deception, fraud or misrepresentation or concealed material facts concerning the sale of carbon black to the putative class of consumers. Plaintiff [did] not allege that defendant carbon black manufacturers made any misrepresentations to him, fraudulently concealed any carbon black pricing information from him, or had communication or contact of any kind with him.

[Ibid.]

This case is distinguishable on the facts from Sickles.

Here, the complaint makes the following allegations:

3. To implement this conspiracy, the Manufacturing Defendants, among other things, sought and obtained agreement from their United States dealers to:

a. Not honor new car warranties on cars imported from Canada; and

b. Not install properly calibrated imperial measure speedometers and odometers in cars imported from Canada which had metric speedometers and odometers.

. . . .

5. The Manufacturing Defendants also took measures to enforce these agreements, including: . . .

d. Refusing to provide U.S. purchasers of new Canadian cars with information regarding recalls.

In my opinion, these allegations suggest the fundamentals of a CFA cause of action, which is independent of the price-fixing, antitrust violation. That is sufficient to meet the R. 4:6-2(e) standard.

Thus, the motion to dismiss should have been denied with respect to CFA claims alleging: (1) failure to "honor new car warranties on cars imported from Canada;" (2) failure to "install properly calibrated imperial measure speedometers and odometers in cars imported from Canada;" and (3) refusal "to provide U.S. purchasers of new Canadian cars with information regarding recalls." I agree with the majority that plaintiffs cannot assert a CFA cause of action based on defendants' alleged conspiratorial conduct that falls solely within the ambit of the New Jersey Antitrust Act, N.J.S.A. 56:9-1 to -19. In my view, the CFA claims noted above may be pursued without creating a conflict between the Antitrust Act and the CFA. There is nothing in our jurisprudence that prevents the harmonizing of both remedial statutes to afford their protection where applicable.

 

The original complaint identified plaintiff as "Richard" Wilson. Because the notice of appeal and the briefs filed on plaintiff's behalf have identified him instead by the name "Robert" Wilson, we have elected to utilize this designation.

The Manufacturing Defendants are: General Motors Corporation, General Motors of Canada, LTD., Ford Motor Company, Ford Motor Company of Canada, LTD., Toyota Motor Corporation, Toyota Motor Sales, U.S.A., Inc., Toyota Canada, Inc., Honda Motor Company, LTD., American Honda Motor Company, Inc., Honda Canada, Inc., Daimlerchrysler Aktiengesellschaft, Daimlerchrysler Corporation, Daimlerchrysler Canada, Inc., Mercedes-Benz Canada, Inc., Nissan Motor Company, LTD., Nissan North America, Inc., Nissan Canada, Inc., BMW of North America, Inc. and BMW Canada.

The trade association defendants are: National Automobile Dealers Association (NADA) and Canadian Automobile Dealers Association (CADA).

The four complaints had the following captions: (1) Wilson v. General Motors Corp., et al., Superior Court of New Jersey, Law Division, Camden County, Docket No. L-1287-03 (hereinafter, "the Wilson complaint"); (2) Kaufman v. General Motors Corp., et al., Superior Court of New Jersey, Law Division, Camden County, Docket No. L-2170-03 (hereinafter, "the Kaufman complaint"); (3) Williams v. General Motors Corp., et al., Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1978-03 (hereinafter, "the Williams complaint"); and (4) Tatte v. General Motors Corp., et al., Superior Court of New Jersey, Law Division, Camden County, Docket No. L-4421-03 (hereinafter, "the Tatte complaint"). The venue of the Williams action, originally filed in Burlington County, was transferred to Camden County, see R. 4:3-3(a)(3), and all four of the complaints were consolidated in Camden County, see R. 4:38-1(a), utilizing the Wilson action as the lead case, under Consolidated Docket Number CAM-L-1287-03.

Technically, only the Williams and Tatte complaints raised the violation of the Antitrust Act as a separately-denominated cause of action. In contrast, the Wilson and Kaufman complaints asserted a single cause of action, based on the Consumer Fraud Act. In those complaints, however, plaintiffs included a general allegation that defendants' acts were a conspiracy in violation of the Antitrust Act and that the violation of that statute also constituted an unconscionable practice within the contemplation of the Consumer Fraud Act, along with the separately-pleaded cause of action based on a traditional description of the Consumer Fraud Act's elements. The motion judge addressed the consolidated complaints as if they raised these allegations as two counts for relief, granting defendants' motion for dismissal as to each. Although plaintiffs do not appeal from the dismissal of the Antitrust Act count, the relationship between the Consumer Fraud Act allegations and the antitrust claims cannot be overlooked.

Much of the history relating to Illinois Brick and its relevance to antitrust actions here in New Jersey is discussed in our recent opinion in Sickles v. Cabot Corp., 379 N.J. Super. 100 (App. Div.), certif. denied, 185 N.J. 297 (2005). The motion judge here did not have the benefit of the decision in Sickles, which was published after his October 3, 2003 order, and which counsel for the parties to this appeal called to our attention pursuant to R. 2:6-11(d). We summarize the salient aspects of Illinois Brick and its relationship to the issues that are raised in this appeal for the purpose of clarity, particularly in light of the significance of that body of law and its relevance to plaintiffs' abandonment of their private antitrust remedy, both of which bear upon the question posed on appeal as to the viability of a proposed cause of action, based on the same allegations of anticompetitive behavior, pursuant to the Consumer Fraud Act.

A complete list of these jurisdictions can be found in our decision in Sickles, supra, 379 N.J. Super. at 109 n.1.

The two decisions relied upon by the parties were Kieffer v. Mylan Labs, Inc., No. BER-L-365-99-EM (Law Div. 1999), and Cement Masons Local Union No. 699 v. Mylan Labs, Inc., No. MER-L-431-99 (Law Div. 2000). We decline, in light of R. 1:36-3, to further address these unpublished decisions. Instead, we rely, consistent with the applicable rule, on published precedents and on our own analysis of the judge's reasoning.

We note as well that the judge was aware of a related multidistrict litigation complaint then pending in federal court and that he declined to await the outcome of a similar motion that had been filed in that matter. Although that motion has since been decided and the parties have called it to our attention, see In re New Motor Vehicles Canadian Export Antitrust Litigation, 350 F. Supp. 2d 160 (D. Me. 2004), we need not address it in light of the fact that the federal judge's dismissal of the New Jersey claims was based on his analysis of our Antitrust Act. His comments about our Consumer Fraud Act are not relevant to our analysis.

(continued)

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June 29, 2006