“Legal Gymnastics” and “Undisclosed Legerdemain” Do Not Help the Defendant in a Consumer Fraud Case

Dugan v. TGI Friday’s, 2011 WL 5041391 (App. Div. Oct. 25, 2011). Plaintiff bought a beer at the bar of a TGI Friday’s restaurant and was charged $2.00. She then moved to a table, ordered another of the same beer, and was charged $3.59. Plaintiff sued Friday’s under the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”), and the Truth in Consumer Contract, Notice and Warranty Act, N.J.S.A. 56:12-14 to -18 (“TCCWNA”). Though her complaint was a “spartan” one, according to the Appellate Division’s opinion, her grievance was that Friday’s fails to post the price of beverages such as beer, and that Friday’s baited and switched, and failed to sell beverages at an advertised price.

After Friday’s answered the complaint and there was some discovery, Friday’s moved to dismiss the complaint for failure to state a claim. Even though a motion to dismiss does not consider material beyond the pleadings, both sides submitted evidence that went outside the pleadings. Though the Law Division judge did not exclude the extraneous material, the parties and the Law Division, as well as the Appellate Division (Judges Fuentes, Graves and Harris), treated the proceedings as a motion to dismiss.

The Law Division denied the motion. Friday’s sought leave to appeal, which the Appellate Division denied. Friday’s moved for leave to appeal to the Supreme Court. That Court granted leave and remanded the case to the Appellate Division for full consideration. Applying the extremely liberal standard of review for a motion to dismiss, the Appellate Division affirmed the ruling below and allowed the complaint to stand.

Friday’s’ primary argument was that the sale of alcoholic beverages is governed by the Alcoholic Beverage Control Act, N.J.S.A. 33:1-1 to -97 (“ABCA”), and that suing under the CFA would conflict with the ABCA’s goals. The panel rejected that argument. Though the ABCA does regulate the sale of alcoholic beverages, a provision of the CFA, N.J.S.A. 56:8-2.5 requires price disclosure, and Friday’s could not point to any inconsistency between that CFA sectiuon and the ABCA or its regulations. In fact, the panel concluded that the ABCA and CFA have “complementary” goals.

Friday’s then engaged in what the panel called “legal gymnastics” to try to convince the Appellate Division that beer was not “merchandise” covered by the CFA, specifically by N.J.S.A. 56:8-2.5, which makes it unlawful to sell “merchandise” unless the “total selling price” is “plainly marked” with a tag, sign or the like. Friday’s cited the later-adopted Unit Price Disclosure Act, N.J.S.A. 56:8-21 to -25, which Friday’s asserted “trumps [plaintiff’s] claim.”

The panel found that argument “implausible” and contrary to the broad and ever-expanding coverage of the CFA. Had the Legislature intended to exempt alcoholic beverages at restaurants from the definition of “merchandise,” it would have done so “in plain language without the necessity of an advanced degree in either logic or linguistics.”

The panel also rejected Friday’s contention that plaintiff had not shown an “ascertainable loss,” as required by the CFA, N.J.S.A. 56:8-19. The difference between the $2.00 beer at the bar, and the same beer, for $3.59, at a table, sufficed at this stage.

Finally, in a parallel to its “merchandise” argument regarding the CFA, Friday’s asserted that the beverages were not a “property or service” under the TCCWNA, which applies only to “consumers” and defines a “consumer” as “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.” TGIF claimed, without explanation, that beverages were not a “property or service,” but were instead a “consumable good or comestible.” The panel labeled the attempt to exempt consumables from “property or service” as “undisclosed legerdemain” that was not worthy of discussion in a written opinion.

The appellate courts are not usually so emphatic in dismissing a party’s position. Some of Friday’s’ arguments were so obviously overreaching that they angered the court.