29 A.3d 361
N.J. Super. Ct. App. Div.2011Background
- PHCS sues Netsmart for breach of contract, bad faith, rescission, and CFA claim related to a complex software system for Princeton House.
- Princeton House issued a RFP; Netsmart submitted a 149-page response and negotiations followed, with PHCS involvement through its consultant and counsel.
- System expanded to include eMar; contract finalized December 21, 2006 for installation, integration, testing, and training.
- Significant delays in implementation led Princeton House to declare Netsmart in default and terminate on July 8, 2008.
- Trial court granted partial summary judgment on PHCS’s CFA standing and applicability; on appeal, issue narrowed to CFA as to sale of merchandise.
- Appellate Division holds the contract is not a sale of merchandise and CFA does not apply to this commercial, negotiated contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CFA applies to a negotiated corporate software contract | PHCS argues goods/services fall under CFA as merchandise sold to public. | Netsmart contends contract is not a sale of merchandise to the general public. | Not applicable; CFA does not cover this contract. |
| Whether PHCS has standing to sue under CFA for corporate contract | PHCS as a corporation may recover under CFA for its loss. | CFA should require sale of merchandise to the public; standing alone is insufficient for this contract. | PHCS lacks CFA standing for this contract. |
| Whether the nature of the transaction qualifies as 'merchandise' sale under CFA | Software and services are within CFA's 'goods and services' scope. | This is a heavily negotiated, custom, corporate transaction, not a mass-market sale of merchandise. | Transaction does not constitute a sale of merchandise to the public. |
Key Cases Cited
- Finderne Mgmt. Co. v. Barrett, 402 N.J. Super. 546 (App. Div. 2008) (determines 'merchandise' public-at-large concept under CFA)
- Papergraphics Int'l, Inc. v. Correa, 389 N.J. Super. 8 (App. Div. 2006) (case-by-case analysis of CFA applicability based on transaction nature)
- Kugler v. Romain, 58 N.J. 522 (1971) (CFA directed at deception in mass-distributed consumer goods)
- Hundred E. Credit Corp. v. Eric Schuster Corp., 212 N.J. Super. 350 (App. Div. 1986) (corporate entities can be CFA plaintiffs)
- D'Ercole Sales, Inc. v. Fruehauf Corp., 206 N.J. Super. 11 (App. Div. 1985) (CFA applicability to corporate transactions)
- Dreier Co. v. Unitronix Corp., 218 N.J. Super. 260 (App. Div. 1986) (contractual context of CFA concerns)
- Coastal Grp., Inc. v. Dryvit Sys., Inc., 274 N.J. Super. 171 (App. Div. 1994) (preliminary CFA considerations for business entities)
- 539 Absecon Boulevard, L.L.C. v. Shan Enters. Ltd. P'ship, 406 N.J. Super. 242 (App. Div. 2009) (CFA applicability to service-like and product-like offerings)