Understanding the Goal of the NJ Consumer Fraud Act

Every law is supposed to have a goal. The CFA is no different. Its goal is to promote honesty and fair dealing between sellers and buyers, service providers and customers and protect consumers from sales fraud of all types, from fraud in car sales, to fraudulent sales of consumer goods to deceptive practices. Sounds reasonable on its face, doesn’t it? The purpose of this website is to help consumers, businessmen, businesswomen, and small entrepreneurs who may be impacted by the laws reach.

The CFA seeks to eliminate or at least significantly reduce deceptive commercial and/or fraudulent transactions committed by unethical and/or deceitful merchants, individuals and businesses and protecting consumers by eliminating unconscionable practices and dealings in the marketing of merchandise and real estate by contractors.

In its enabling legislation and in the numerous cases that have been brought under the Act, it has been stated many times that the CFA seeks to:

  • Stop commercial sales and advertising practices which by design are intended to induce customers to purchase merchandise or real estate by unlawful practice(s) that may include acts of commission and also acts of omission, meaning silence or failure to disclose.
  • Promote the disclosure of relevant and meaningful information to enable consumers to make informed decision(s) when selecting and then purchasing products and services.
  • Award money damages to prevent unconscionable commercial practices in connection with the sale or advertisement of merchandise, products, services, and real estate.
  • Compel merchants and sales people to adopt practices that minimize the opportunity to engage in consumer fraud by requiring the use of written agreements.
  • Adopt regulations that implement the CFA upon companies, businesses, and individuals doing business in New Jersey.

When you are a consumer, the law can be a powerful weapon for good if you have the unfortunate experience of working with an unethical contractor or a deceptive merchant.

Liability of Corporate and LLC Officers, Employees to Claims of Consumer Fraud

Let’s Explore What “Corporate Veil-Piercing” or Tort Participation Means Under the CFA

New Jersey law does not exempt corporate officers, even corporate employees who personally participate in consumer fraud. Published case law has held corporations/company officers, LLC members and employees each liable for CFA violations depending upon the facts of the case. New Jersey courts will apply the “corporate veil-piercing” or the “tort participation theory” to impose liability on officers, managing members or employees for various tort and contract claims. Thus, the CFA states that all those who take part in the fraudulent scheme companies and businesses can be held personally liable from owners all the way down to employees.

The takeaway is that “an individual may be held personally liable to a consumer fraud victim if he or she participates and/or had sufficient involvement in the commission of a Consumer Fraud violation.” A corporate/LLC employee’s individual liability for a CFA violation depends on the claimed violation and the employee’s particular acts.

To determine if a corporate officer, managing member(s) of an LLC or an employee(s) is liable for consumer fraud, New Jersey courts use the participation theory of liability. To be personally liable, the officer, managing member or employee must have sufficient personal involvement in the allegations of consumer fraud. The law applies the statutory definition of a “person” under N.J.S.A. 56:8-1(d) to include any officer, member or employee who personally engages in or consented to the commission of an unlawful act.

Many individuals who incorporate as a corporation, LLC or limited partnership think that they are shielded from personal legal liability in the conduct of their business. Sadly, they are mistaken. There are many circumstances under which they can be held personally liable. I have written extensively on the subject of “Piercing the Corporate Veil”, you can learn more by going to our blog page on this topic, Piercing the Corporate Veil. If you’re being threatened as an owner, employee or corporate officer by an individual under the Consumer Fraud Act and are anxious about your legal exposure, then please call Frederick P. Niemann, Esq. toll-free at (855) 376-5291 or email him fniemann@hnlawfirm.com. He welcomes your inquiries.

Fredrick P. Niemann Esq.



Consumer Fraud Act Attorney Serving These New Jersey Counties:

Atlantic County, Bergen County, Burlington County, Camden County, Cape May County, Cumberland County, Essex County,
Gloucester County, Hudson County, Hunterdon County, Mercer County, Middlesex County, Monmouth County,
Morris County, Ocean County, Passaic County, Salem County, Somerset County, Sussex County, Union County, Warren County