JODI SHAW VS. BRIAN SHAND (L-0408-16, SUSSEX COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5686-17T1
JODI SHAW and THOMAS SHAW,
APPROVED FOR PUBLICATION
Plaintiffs-Appellants,
August 15, 2019
v. APPELLATE DIVISION
BRIAN SHAND and ALL POINTS
HOME INSPECTION AND
SERVICES,
Respondents-Defendants.
_______________________________
Argued January 14, 2019 – Decided August 15, 2019
Before Judges Sabatino, Haas and Mitterhoff
(Judge Sabatino, concurring).
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Sussex County,
Docket No. L-0408-16.
Linda A. Peoples argued the cause for appellants
(Horlacher & Peoples, LLP, attorneys; Linda A.
Peoples, of counsel and on the briefs).
Wendy B. Shepps argued the cause for respondents
(Mound, Cotton, Wollan & Greengrass LLP,
attorneys; Wendy B. Shepps, on the briefs).
Jeffrey A. Koziar, Deputy Attorney General, argued
the cause for amicus curiae Office of the Attorney
General (Gurbir S. Grewal, Attorney General,
attorney; Jason W. Rockwell, Assistant Attorney
General, of counsel; Jeffrey A. Koziar, on the brief).
The opinion of the court was delivered by
MITTERHOFF, J.S.C. (temporarily assigned).
This interlocutory appeal arises from the trial court's June 11, 2018 order
entering partial summary judgment dismissing plaintiffs Jodi and Thomas
Shaw's claims under the Consumer Fraud Act ("CFA"), N.J.S.A. 56:8-1 to -
210. Plaintiffs challenge the court's finding that home inspectors are "learned
professionals" and therefore excluded from CFA liability.
The narrow issue before us is whether semi-professionals such as home
inspectors should be deemed to be learned professionals. Because this case
necessarily required us to interpret the scope of the "learned professional"
exception to the CFA, which is a statute that is enforced by the Attorney
General's office, and also because home inspectors are regulated by the
Attorney General's Division of Consumer Affairs, we invited that office to
participate as amicus curiae. We issued that invitation in order to discern both
on a narrow basis the agency's view whether home inspectors should be
deemed "learned professionals," and on a broader basis how and when the
"learned professional" exception should be applied by courts to exempt
individuals from CFA liability.
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Considering the CFA's remedial purpose and applying well-established
canons of statutory construction, we conclude that the judicially created
learned professional exception must be narrowly construed to exempt CFA
liability only as to those professionals who have historically been recognized
as "learned" based on the requirement of extensive learning or erudition. To
the extent our prior decisions, including Plemmons v. Blue Chip Insurance
Services, Inc., 387 N.J. Super. 551 (App. Div. 2006), have applied the learned
professional exception to "semi-professionals" who are regulated by a separate
regulatory scheme, we are constrained, upon further review, to depart from
that reasoning as inconsistent with the Supreme Court's decision in Lemelledo
v. Beneficial Management Corp. of America, 150 N.J. 255 (1997). As the
Court explicitly held in Lemelledo, the existence of a separate regulatory
scheme will "overcome the presumption that the CFA applies to a covered
activity" only when "a direct and unavoidable conflict exists between
application of the CFA and application of the other regulatory scheme or
schemes." 150 N.J. at 270.
Our decision comports with the Attorney General's persuasive
interpretation of the CFA and addresses the Attorney General's policy concern
that an expansive interpretation of the learned professional exception unduly
curtails the authority of the Attorney General and the Division of Consumer
A-5686-17T1
3
Affairs to protect New Jersey consumers and limits the redress available to
private litigants.
Accordingly, because home inspectors are not historically recognized
learned professionals and because no direct and unavoidable conflict exists
between the CFA and the regulations governing home inspectors, we conclude
that the CFA applies to the activities of licensed home inspectors. Therefore,
we reverse the trial court's summary judgment dismissal of the CFA claim
against defendants and remand for further proceedings.
I.
A.
In April or May of 2015, plaintiff Thomas Shaw contracted to purchase a
property located on Overlook Court in Hampton Township. Prior to
purchasing the home, plaintiffs hired defendant 1 to conduct an inspection of
the property. Karen Kleinman, plaintiffs' real estate broker, contacted
defendant and requested he conduct a home inspection of plaintiffs' property.
In response, defendant had Thomas Shaw sign a one-page pre-inspection
agreement setting forth the terms of the inspection. That same day, defend ant
1
Defendant Brian Shand is the sole owner of co-defendant All Points Home
Inspection and Services. We refer to Shand and All Points as "defendant."
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inspected the property, and on May 13, 2015, he emailed his report to Jodi
Shaw. Plaintiffs paid defendant $350 for the inspection.
Defendant's report concluded that "[t]his structure appears to be very
well built utilizing quality materials and professional workmanship. It is in
need of only typical maintenance and upgrading." In June 2015, plaintiffs
proceeded with the purchase of the property, allegedly in reliance upon
defendant's report, for the sum of $318,000. Plaintiffs allege that "[u]pon
occupying the [p]roperty in June 2015, the Shaws quickly learned that the
house was in fact in poor condition, requiring a great deal of major repairs."
These allegedly required repairs include: "replacement of the roof that leaked
and was at the end of its useful life, the repair of their front deck/porch which
collapsed when they moved in, the replacement of the driveway and
replacement of windows and sliding glass doors to address leaks, drafts and rot
from the leaks." Plaintiffs allege they have "been forced to expend tens of
thousands of dollars" on repairs and "must still, at a minimum," spend an
estimated tens of thousands of dollars on a mold issue in the home.
At his deposition, defendant acknowledged that he had observed some
problems with the home that he did not include in his report.
Defendant testified at his deposition that he became licensed as a home
inspector in January 2015. In order to become licensed, defendant had to
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attend "hours of schooling," though he did not recall how many offh and.
Defendant also did not recall the name of the school he attended. In addition,
defendant had to serve forty hours of apprenticeship with a licensed home
inspector. Finally, in order to become licensed, defendant had to take a State-
mandated test. After successfully completing the schooling and apprenticeship
and passing the test, defendant became a licensed home inspector. Defendant's
inspection of plaintiffs' home was his first assignment as a licensed inspector.
Defendant allowed his home-inspector license to expire in April 2017; he now
works as a painter, which does not require a license. 2
In their July 2016 complaint against defendant, plaintiffs alleged claims
sounding in negligence, violations of the CFA, common law fraud, and breach
of contract. After the parties filed cross-motions for summary judgment, the
trial court issued two orders supported by a written statement of reasons. The
first order, which granted, in part, defendant's motion for summary judgment
2
Defendant also holds a license issued by the Department of Labor in 1982 as
a carpenter. In order to receive his carpenter's license, he underwent an
apprenticeship and on-the-job training. That license, unlike the home
inspector's license, does not need to be renewed.
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by dismissing with prejudice plaintiffs' CFA claims, is the only order at issue
in this appeal.3
In dismissing the CFA claims against defendant, the trial court noted
that "[t]here is no binding authority specifically addressing whether home
inspectors should be considered semi-professionals exempt from the CFA."
The court observed that two unreported Law Division decisions 4 reasoned that
"they should be [considered learned professionals] because they are regulated
under N.J.A.C. 13:40[-1] et seq." The court found that our decision in Herner
v. Housemaster of America, Inc., 349 N.J. Super. 89 (App. Div. 2002), which
held that a home inspector was liable under the CFA, did not compel a
conclusion in this case that the "learned professionals" exclusion does not
apply. First, the court found Herner was factually distinguishable because in
that case the inspector's reports were deliberately skewed in order to please the
3
The order under review also dismissed plaintiffs' common law negligence
claims. That finding is not at issue in this interlocutory appeal. Nor are the
issues addressed in the second order before us.
4
We do not cite and will not discuss those non-precedential opinions. See R.
1:36-3.
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realtor, avoid "killing deals," and have real estate agents continue to
recommend the home inspector. 5
Second, the trial court found that Herner did not address the semi-
professional exception issue. The court reasoned,
Although the Home Inspection Licensing Act
(N.J.S.A. 45:8-61 through 76), became effective July
8, 1998, the regulations implementing N.J.S.A. 45:8-
61 et seq. were not implemented until 2006, after the
decision in Herner. See 33 N.J.R. 1318(a) N.J.A.C.
13:40 et seq. These code sections highly regulate the
home inspection profession, such as further specifying
the requirements for initial licensure as a home
inspector, including an approved course of study of
180 hours, as prescribed by the Board, 40 hours of
unpaid field-based inspections in the presence of and
under the direct supervision of a licensed home
inspector, maintaining an errors and omissions policy
in the minimum amount of $500,000 per occurrence,
passing the Home Inspector Examination, and an
application fee. N.J.A.C. 13:40-15.6. These are the
regulations that [the unpublished opinions] cite to
show that home inspectors are semi-professionals.
Unlike Herner, which was decided before the 2006
regulations, both of the unpublished cases were
decided after the 2006 regulations implementing
N.J.S.A. 45:8-61 et seq. Although the unpublished
cases are not binding on the court and are not cited as
authority by the court, because home inspectors have
5
We do not find this factual distinction, which speaks only to the degree of
the CFA violation in Herner as compared to this case, relevant to the issue
whether home inspectors are learned professionals. Presumably learned
professionals are exempt from CFA liability irrespective of the relative
egregiousness of their alleged conduct.
A-5686-17T1
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become regulated since the Herner decision, they
should be treated as semi-professionals exempt from
the Consumer Fraud Act. [6]
Citing our decision in Plemmons, the court concluded that defendant's
status as a semi-professional exempts him from liability under the CFA.
Accordingly, the court granted defendant's motion for summary judgment
dismissing plaintiffs' CFA claims with prejudice.
Thereafter, we granted plaintiffs' motion for interlocutory review,
limited to the issue whether home inspectors are "learned professionals"
exempt from CFA liability. As we have noted, the Attorney General accepted
our invitation to participate in this appeal as amicus curiae.
B.
On appeal, plaintiffs contend the trial court erred in finding that home
inspectors are learned professionals. In that regard, plaintiffs primarily rely on
Herner, which they assert is directly on point. Alternatively, plaintiffs urge us
to find that because a home inspection is a service that is rendered in
connection with the sale of real estate, defendant's liability is supported by the
1976 amendment to the CFA adding 'the sale or advertisement of . . . real
6
We agree with the Attorney General that the trial court's reliance on the fact
that the home inspector regulations were promulgated after Herner is
unpersuasive, as the Home Inspection Professional Licensing Act became
effective in 1998, four years before the Herner decision.
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estate" to the provision of N.J.S.A. 56:8-2. See Papergraphics Intern., Inc. v.
Correa, 389 N.J. Super. 8, 12 n.1 (App. Div. 2006) ("The holding in Neveroski
was abrogated by the 1976 statutory amendment adding 'the sale or
advertisement of . . . real estate' to the provision of N.J.S.A. 56:8 -2."
(alteration in original)); Arroyo v. Arnold-Baker & Assocs., Inc., 206 N.J.
Super. 294, 296-97 (Law Div. 1985) (holding that the amendment to add the
sale or advertisement of real estate to the CFA made real estate brokers, agents
and salespersons subject to the CFA).
Defendant argues that the trial court correctly analyzed and applied our
decision in Plemmons and correctly concluded that home inspectors are
"learned professionals" exempt from CFA liability because they are subject to
regulation by the Home Inspector Advisory Committee. 7
The Attorney General urges us to reject the extension of the so-called
"learned professional" exception to encompass "semi-professionals" such as
home inspectors. The Attorney General notes that the unwarranted expansion
of the "learned professional" exception to semi-professionals lacks any support
in the plain text or purpose of the CFA. To adopt the trial court's reasoning,
the Attorney General argues, would unduly limit the CFA, which the
7
Defendant also raises a number of alleged procedural deficiencies and
substantive arguments that are not pertinent to the issue before us and
therefore will not be addressed.
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Legislature intended to be one of the nation's strongest consumer protection
laws. The trial court's broad interpretation of the exception, the Attorney
General argues, significantly curtails the authority of the Attorney General and
the Division of Consumer Affairs ("Division") to protect New Jersey
consumers and limits the redress available to private litigants.
Contrary to the decision below, the Attorney General argues that the fact
that home inspectors are subject to other statutory and regulatory requirements,
which are enforced by a professional board located within the Division, does
not excuse them from compliance with the CFA. In that regard, the Attorney
General notes that the Legislature made clear that the rights, remedies and
prohibitions of the CFA are "cumulative of any other statutory right, remedy or
prohibition." N.J.S.A. 56:8-2.13. The Attorney General argues that as the
Supreme Court held in Lemelledo, another statutory scheme will displace the
CFA only when "a direct and unavoidable conflict exists between the
application of the CFA and application of the other regulatory scheme or
schemes." 150 N.J. at 270. In this case, the Attorney General avers that
because there is no "direct and unavoidable conflict" between the CFA and the
statutes and regulations specific to home inspectors, the trial court erred in
concluding that the home inspector regulations preclude the application of the
CFA to home inspectors.
A-5686-17T1
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The trial court reached its result, the Attorney General asserts, by
expanding the judicially created "learned professional" exception to the CFA
well beyond the narrow parameters in Macedo v. Dello Russo, 178 N.J. 340
(2004). The expansion of the "learned professional" exception to home
inspectors – who are not even required to have a college degree – stretches the
exception far beyond its limited origin. 8 The Attorney General argues that the
exception (which itself lacks a basis in the statutory text) should be limited to
the narrow class of professionals identified in Macedo as exempt from the
CFA for historical reasons: physicians, attorneys, and similar learned
professionals who were not permitted to advertise at all when the Legislature
enacted the 1960 precursor to the CFA, creating liability for fraud in
advertising. Nothing in Macedo, the Attorney General argues, requires or even
supports a CFA exemption for home inspectors on the ground that a licensure
regime for home inspectors was established decades later.
II.
A.
Whether licensed semi-professionals such as home inspectors are
entitled to the judicially created "learned professional" immunity turns on the
8
With respect to educational requirements, an individual need have only a
high school degree or its equivalent to become a licensed home inspector.
N.J.S.A. 45:8-68(b).
A-5686-17T1
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statutory interpretation of two statutes: the CFA and the Home Inspection
Professional Licensing Act ("HIPLA"), N.J.S.A. 45:8-61 to -81. We review
these issues of statutory construction de novo. Cashin v. Bello, 223 N.J. 328,
335 (2015). In considering whether the Legislature intended to exempt home
inspectors and other "semi-professionals" from liability under the CFA, we
adhere to well-established principles of statutory interpretation.
"The Legislature's intent is the paramount goal when interpreting a
statute and, generally, the best indicator of that intent is the statutory
language." DiProspero v. Penn, 183 N.J. 477, 492 (2005). In considering the
statutory language, "an appellate court must read words 'with[in] their context'
and give them 'their generally accepted meaning.'" Cashin, 223 N.J. at 335
(alteration in original) (quoting N.J.S.A. 1:1-1); see also DiProspero, 183 N.J.
at 492 ("We ascribe to the statutory words their ordinary meaning and
significance, and read them in context with related provisions so as to give
sense to the legislation as a whole." (citations omitted)).
When a statute's plain language lends to only one interpretation, a court
should not consider "extrinsic interpretative aids." DiProspero, 183 N.J. at 492
(quoting Lozano v. Frank DeLuca Const., 178 N.J. 513, 522 (2004)). "On the
other hand, if there is ambiguity in the statutory language that leads to more
than one plausible interpretation, we may turn to extrinsic evidence, 'including
A-5686-17T1
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legislative history, committee reports, and contemporaneous construction.'"
Id. at 492-93 (quoting Cherry Hill Manor Assocs. v. Faugno, 182 N.J. 64, 75
(2004)).
B.
The Attorney General argues that there is nothing in the text or the
purpose of the CFA that would support a blanket exception for semi-
professionals based solely on the existence of a separate regulatory scheme
that also regulates the subject industry. We agree.
At the outset, the CFA does not explicitly provide an exception for or
even mention learned professionals. Moreover, the CFA is designed to
prohibit unlawful conduct or practices, defined as:
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
....
[N.J.S.A. 56:8-2.]
The stated purpose of the act is "to prevent deception, fraud, or falsity,
whether by acts of commission or omission, in connection with the sale or
A-5686-17T1
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advertisement of merchandise and real estate." Fenwick v. Kay American
Jeep, Inc., 72 N.J. 372, 376-77 (1977). The CFA defines "merchandise" as
"any objects, wares, goods, commodities, services or anything offered, directly
or indirectly to the public for sale." N.J.S.A. 56:8-1(c) (emphasis added). The
services of a home inspector fall squarely within the definition of merchandise
under the act.
The CFA
has three main purposes: to compensate the victim for
his or her actual loss; to punish the wrongdoer through
the award of treble damages; and by way of the
counsel fee provision, to attract competent counsel to
counteract the community scourge of fraud by
providing an incentive for an attorney to take a case
involving a minor loss to the individual.
[Real v. Radir Wheels Inc., 198 N.J. 511, 520-21
(2009) (quoting Lettenmaier v. Lake Constr., Inc., 162
N.J. 134, 139 (1999)).]
"Although initially designed to combat 'sharp practices and dealings' that
lured customers into purchases through fraudulent or deceptive means, the
CFA is no longer aimed solely at 'shifty, fast-talking and deceptive
merchant[s].'" Suarez v. Eastern Int'l Coll., 428 N.J. Super. 10, 31 (App. Div.
2012) (alteration in original) (quoting Cox v. Sears Roebuck & Co., 138 N.J.
2, 16 (1994)). The CFA's remedial goal "is to establish 'a broad business
ethic,' promoting a standard of conduct that contemplates 'good faith, honesty
A-5686-17T1
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in fact and observance of fair dealing.'" Ibid. (quoting Mechinsky v. Nichols
Yacht Sales, Inc. 110 N.J. 464, 472 (1988)). Accordingly, liability under the
act will lie even if the prohibited conduct is committed in good faith. Ibid.
As originally enacted, the Attorney General had exclusive authority to
enforce the CFA. Thiedemann v. Mercedes-Benz USA, LLC, 183 N.J. 234,
245 (2005). In 1971, however, the Legislature amended the CFA to provide
for a private cause of action to "[a]ny person who suffers any ascertainable
loss of moneys or property, real or personal," as a result of a deceptive
practice. N.J.S.A. 56:8-19. If successful, the private litigant can recover
treble damages, attorney's fees, and costs. Ibid. The Legislature has expressly
provided that the "rights, remedies and prohibitions" created by the CFA are
"in addition to and cumulative of any other right, remedy or prohibition
accorded by the common law or statutes of this State." N.J.S.A. 56:8-2.13.
The CFA "evinces a clear legislative intent that its provisions be applied
broadly in order to accomplish its remedial purpose, namely, to root out
consumer fraud." Lemelledo, 150 N.J. at 264; see also Czar, Inc. v. Heath, 198
N.J. 195, 208-09 (2009) (rejecting "crabbed" approach to the CFA in favor of a
faithful adherence to the CFA's broad remedial purposes); Cox, 138 N.J. at 15
(holding that the CFA must be construed liberally in favor of consumers).
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Furthermore, it is well-established that "where the purpose of legislation
is remedial and humanitarian, any exemption must be narrowly construed,
giving due regard to the plain meaning of the language and the legislative
intent." Serv. Armament Co. v. Hyland, 70 N.J. 550, 559 (1976) (citing
Phillips v. Walling, 324 U.S. 490, 493 (1945)); see also Nini v. Mercer Cty.
Cmty. Coll., 202 N.J. 98, 112 (2010) ("[A]n interpretation that throws contract
employees into the over-seventy exception at once narrows what should be the
expansive coverage of remedial legislation like the [New Jersey Law Against
Discrimination], and expands an exception in contravention of applicable
principles of statutory construction."); Young v. Schering Corp., 141 N.J. 16,
29 (1995) ("As an exception to the general remedial scheme of [the New
Jersey Conscientious Employee Protection Act], the waiver provision must b e
construed narrowly."); Marx v. Friendly Ice Cream Corp., 380 N.J. Super. 302,
310 (App. Div. 2005) ("Based upon the Legislature's remedial purpose in
enacting a minimum wage law, we have held that all exemptions to N.J.S.A.
34:11-56a4 should be construed narrowly and that the employer has the
obligation to prove that an employee meets the criteria for exemption."). As
the United States Supreme Court has explained, "[t]o extend an exemption to
other than those plainly and unmistakably within its terms and spirit is to abuse
A-5686-17T1
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the interpretative process and to frustrate the announced will of the people."
Phillips, 324 U.S. at 493.
Thus, broadly construing the reach of the CFA as a remedial statute, and
narrowly construing any exceptions to the CFA, we agree with the Attorney
General that there is nothing in the text or the purpose of the CFA that
supports an exemption for fraudulent or unconscionable activities of semi -
professionals such as home inspectors.
C.
In 1997, the Supreme Court in Lemelledo specifically addressed the
issue of whether a comprehensive statutory scheme regulating a class of
individuals or entities would place that class beyond the reach of the CFA.
150 N.J. at 266. Lemelledo was a class action brought against a commercial
lender who engaged in the practice of "loan packing," which increases the
principal amount of the loan with loan-related services, such as credit
insurance, that the borrower does not want. Id. at 259-60. The trial court
dismissed the complaint for failure to state a claim under which relief can be
granted. Id. at 262. The Supreme Court disagreed and reinstated the plaintiff's
CFA claims. Id. at 275.
The Court observed that although the CFA "vests the Attorney General
with jurisdiction to enforce its provisions through a variety of mechanisms,
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N.J.S.A. 56:8-3 to -8, -11, -15 to -18 & -20," the Act also expressly "provides
individual consumers with a private cause of action to recover refunds, 56:8-
2.11 to -2.12, and treble damages for violations, whether in good faith or
otherwise, N.J.S.A. 56:8-19." Id. at 264. In that regard, the Court observed
that the plain language of the CFA declares that "[t]he rights, remedies and
prohibitions accorded by the provisions of this act are hereby declared to be in
addition to and cumulative of any other right, remedy or prohibition accorded
by the common law or statutes of this State." Ibid. (quoting N.J.S.A. 56:8-
2.13)
The Court rejected the defendant's argument that no CFA liability could
attach because neither the CFA nor its implementing regulations had
specifically included sales of insurance, reasoning that "the CFA could not
possibly enumerate all, or even most, of the areas and practices that it covers
without severely retarding its broad remedial power to root out fraud in its
myriad, nefarious manifestations." Id. at 265. The Court concluded that
"[b]ecause the broad language of the CFA appears to include both lending and
insurance-sales practices, . . . its terms also include the sale of insurance in
conjunction with lending, that is, loan packing." Id. at 266.
The Court also found, however, that its conclusion that the CFA's
language encompassed loan packing did "not automatically resolve the issue of
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the CFA as a basis for remedial relief." Id. at 266. "Instead, a court must look
to whether a 'real possibility’ of conflict would exist if the CFA were to apply
to a particular practice, regardless of the number of agencies with regulatory
jurisdiction over that practice." Id. at 268. The Court reasoned that in light of
the "strong and sweeping legislative remedial purpose" of the CFA and the
expectation that consumers will act as private attorneys general, there is a
presumption that the CFA applies to the covered practice at issue. Ibid. To
find that non-consumer statutes and regulations preempt the CFA, a court must
determine that "a direct and unavoidable conflict exists between application of
the CFA and application of the other regulatory scheme or schemes." Id. at
270 (emphasis added). The court "must be convinced that the other source or
sources of regulation deal specifically, concretely, and pervasively with the
particular activity, implying a legislative intent not to subject parties to
multiple regulations that, as applied, will work at cross-purposes." Ibid. The
Court further "stress[ed] that the conflict must be patent and sharp, and must
not simply constitute the mere possibility of incompatibility." Ibid. The Court
explained,
If the hurdle for rebutting the basic assumption of
applicability of the CFA to covered conduct is too
easily overcome, the statute's remedial measures may
be rendered impotent as primary weapons in
combatting clear forms of fraud simply because those
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fraudulent practices happen also to be covered by
some other statute or regulation.
[Ibid.]
III.
A.
With the foregoing statutory and common law background in mind, we
now turn to a review of the origin and evolution of the "learned professional"
exception to CFA liability.
Originally, and historically, the word "profession" was
applied only to law, medicine and theology or
divinity, and these were known as the three "learned
professions," and it has frequently been said that
formerly these were known as "the professions."
[Plaza Bottle Shop, Inc. v. Al Torstrick Insurance
Agency, 712 S.W.2d 349, 351 (Ky. Ct. App. 1986)
(quoting 72 C.J.S. Professions §§ 4-5 (1951)).]
See also Webster's Unabridged Dictionary of the English Language 1095
(2001) (defining "learned profession" as "any of the three professions,
theology, law and medicine, commonly held to require highly advanced
learning"). It is indisputable that a home inspector, who requires only a high
school diploma or its equivalent, is not a learned professional in the historic
sense.
As the Attorney General notes, the learned professional exemption to
CFA liability is an atextual, judicially created doctrine. The seed of the
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judicially created "learned professional" exception to CFA liability was first
planted in Neveroski v. Blair, 141 N.J. Super. 365 (App. Div. 1976). The
central issue in Neveroski was whether real estate sales fell within the CFA's
definition of "merchandise." See id. at 375-76.9 In finding that the CFA's
reference to "merchandise" did not encompass the sale of real estate, we noted
that in 1967 a bill was introduced expanding the definition of "merchandise" to
include "any objects, wares, goods, commodities, real estate, securities,
services, or anything offered directly or indirectly to the public for sale." Id. at
377 (quoting A. 715 (1967)). The bill as adopted, however, was amended to
delete the words "real estate, securities." Ibid. We found the deletion of "real
estate" and "securities" represented a meaningful act on the part of the
Legislature "eliminating these two areas of commercial activity from the
purview of the statute." Id. at 378.10
9
In Neveroski, there was substantial evidence that Blue Ribbon concealed
from the plaintiffs the fact that the home they were purchasing had extensive
termite damage. Id. at 375. Thus, we observed that "[o]ur review of the
record satisfies us that if the act encompasses within its ambit deceptive,
unconscionable or fraudulent acts in connection with the sale of real estate,
there is sufficient credible evidence to sustain a violation thereof by Blue
Ribbon." Id. at 376.
10
We recognized, however, that "a possible alternative construction to the
effect that the deletion was made because of an assumption that the express
words were unnecessary in view of the catch-all phrase 'or anything offered,
directly or indirectly, to the public for sale.'" Ibid. That alternative
(continued)
A-5686-17T1
22
[I]t is our considered opinion that the entire thrust of
the Consumer Fraud Act is pointed to goods and
services sold to consumers in the popular sense. Such
consumers purchase products from retail sellers of
merchandise consisting of personal property of all
kinds or contracts for services of various types
brought to their attention by advertising or other sales
techniques. The legislative language throughout the
statute and the evils sought to be eliminated point to
an intent to protect the consumer in the context of the
ordinary meaning of that term in the market place.
[Ibid.]
In addition, under the doctrine of ejusdem generis, 11 we found that real
estate was "wholly foreign to any of the listed examples specifically referred to
in the definition." Id. at 379.
A real estate broker is in a far different category from
the purveyors of products or services or other
activities. He is in a semi-professional status subject
to testing, licensing, regulations and penalties through
other legislative provisions. Although not on the same
plane as other professionals such as lawyers,
physicians, dentists, accountants or engineers, the
nature of his activity is recognized as something
beyond the ordinary commercial seller of goods or
services – an activity beyond the pale of the act under
consideration.
(continued)
construction appears to be in line with the Attorney General's position that
pursuant to Lemelledo the CFA presumptively applies.
11
Of the same kind or class. See Black's Law Dictionary 654 (11th ed. 2019).
A-5686-17T1
23
Certainly no one would argue that a member of any of
the learned professions is subject to the provisions of
the Consumer Fraud Act despite the fact that he
renders "services" to the public. And although the
literal language may be construed to include
professional services, it would be ludicrous to
construe the legislation with that broad a sweep in
view of the fact that the nature of the services does not
fall into the category of consumerism.
Similarly, in the absence of clear and explicit
language in the statute, a broker who negotiates the
sale of real estate and thereby renders "services" is
nevertheless outside the scope of persons sought to be
covered by the Act.
[Id. at 379-80 (emphasis added) (citation omitted).]
Pertinent to the issues before us on this appeal, in Neveroski we
recognized that semi-professionals are not on the same plane as other
professions historically recognized as being "learned professions." Id. at 379.
In addition, our focus in Neveroski was on the "nature of the services," not the
extent to which a particular semi-professional was otherwise regulated. Ibid.
Two months before the Neveroski decision was issued, the Legislature
amended the CFA to include the use of any of the prohibited acts "in
connection with the sale or advertisement of any merchandise or real estate."
Id. at 377 n.3. Neveroski acknowledged the statutory amendment in footnote 3
to the opinion. In that footnote, it notes that the Governor issued a statement
in connection with the passage of the bill asserting that the amendment was not
A-5686-17T1
24
meant to change the law because "real estate was included in the legislation as
it existed prior to the amendment." Ibid. Despite the Legislature's abrogation
of Neveroski's holding, subsequent decisions of this court have seemingly
accorded its semi-professional exemption precedential weight.
In 2004, in Macedo, the New Jersey Supreme Court held in a short per
curiam opinion that the CFA did not apply to a physician's advertisements.
178 N.J. at 346. The Court concluded that the Legislature "obviously" did not
intend the CFA "to encompass advertising by professionals when it enacted the
CFA in 1960 because advertising by physicians because such advertising was
not permitted for another two decades." Id. at 343. The Court explained that
advertising by professionals did not begin in earnest until after 1977, when the
United States Supreme Court ruled that a blanket ban on attorney advertising
violated the First Amendment. Ibid. (citing Bates v. State Bar of Arizona, 433
U.S. 350, 383 (1977)). The Court also noted that the Legislature has not
amended the CFA to include advertising by learned professionals. Id. at 344.12
The Supreme Court thus held that "advertisements by learned professionals in
respect of the rendering of professional services are insulated from the CFA
12
The Court implicitly approved our holding in Vort v. Hollander, 257 N.J.
Super. 56, 62 (App. Div. 1992), that attorney's services are beyond the reach of
the CFA.
A-5686-17T1
25
but subject to comprehensive regulation by the relevant regulatory bodies and
to any common-law remedies that otherwise may apply." Id. at 346.
Far from overruling Lemelledo, however, the Court in Macedo expressly
reaffirmed its prior holding that, absent a direct and unavoidable conflict, a
separate regulatory scheme does not render the CFA inapplicable:
Nothing in Lemelledo suggests a contrary conclusion.
There, in addressing loan-packing, we held that the
mere existence of an alternative regulatory scheme by
the Department of Banking and Insurance, did not
automatically eliminate the applicability of the CFA.
Instead, we held that a direct conflict between the
schemes would be required in order to conclude that
the Legislature did not intend the CFA to apply.
Lemelledo would be dispositive here if the issue
presented was whether the separate regulatory scheme
governing physicians preempts the application of the
CFA. It is entirely irrelevant to the threshold question
of whether the CFA applies to learned professionals in
the first instance.
[Id. at 345 (citation omitted) (emphasis added).]
Thus, the "learned professional" exception recognized in Macedo, like
the "semi-professional" exception in Neveroksi, focused on the "nature of the
services" provided to support its conclusion that learned professionals are not
A-5686-17T1
26
subject to CFA liability. 13 No Supreme Court decision has revisited the
learned professional doctrine since the Court decided Macedo.14
Thirty years after Neveroski, the issue whether the "learned
professional" immunity recognized in Macedo should be extended to semi-
professionals resurfaced in Plemmons, 387 N.J. Super. at 556. 15 In Plemmons,
we "conclude[d] that an insurance broker is a semi-professional, who is subject
to testing, licensing and regulation under other statutory provisions, and
therefore is excluded from liability under the CFA for the performance of
brokerage services." Ibid.
In so holding, we differentiated that case from Lemelledo, because
Lemelledo "did not include a CFA claim against . . . [a] party who could be
characterized as 'professional' or 'semi-professional.'" Id. at 563. In deciding
insurance brokers were learned professionals, the court noted that they must be
licensed, pass an examination, meet application requirements, comply with
13
Macedo did not, however, extend the exception to semi-professionals or
licensed professionals.
14
The Court has twice commented, in dicta, on the learned professional
exception, but resolved both of those cases on other grounds. See
Manahawkin Convalescent v. O'Neill, 217 N.J. 99, 123-24 (2014); Lee v. First
Union Nat. Bank, 199 N.J. 251, 263-64 (2009).
15
In Plemmons, we addressed a number of issues in addition to whether
insurance brokers were learned professionals. Those separate rulings are not
affected by our decision today.
A-5686-17T1
27
standards of conduct that delineate "unfair trade practices" and other
requirements, and overall are "subject to testing, licensing and regulation
comparable to real estate brokers, and thus are exempt from liability under the
CFA[.]" Id. at 564-65.
Thus, in Plemmons, we did not apply the "nature of the services"
analysis that formed the basis for the "semi-professional" exemption in
Neveroski and the "learned professional" exemption in Macedo. Instead, the
basis of the semi-professional exception in Plemmons rested on the existence
of a separate regulatory scheme that could possibly conflict with allegations in
a CFA action. See ibid. Plemmons thus paved the way for subsequent
decisions, including the trial court's decision in this case, holding that the mere
existence of a separate regulatory scheme would automatically preempt
application of the CFA. See, e.g., Atlantic Ambulance Corp. v. Cullum, 451
N.J. Super. 247, 257-58 (App. Div. 2017) (holding that ambulance service
providers excluded from liability under the CFA for services rendered
consistent with their professional license because they are regulated by the
Department of Health). But see Manahawkin, 217 N.J. at 124 (in which the
Supreme Court expressed "serious doubt" that the nursing home's billing and
collection function, which was at issue in the case, "would qualify for the
learned professionals exception to the CFA").
A-5686-17T1
28
As the Attorney General points out, however, the standard in Plemmons
cannot be squared, on further reflection, with the Supreme Court's holding in
Lemelledo, a holding that was reaffirmed by the Supreme Court in Macedo.
That Lemelledo did not involve services by a licensed professional is an empty
distinction; once we define a "learned professional" as any licensed
professional subject to a separate regulatory scheme, the mere existence of a
separate regulatory scheme will automatically preempt the CFA without any
showing of a direct and unavoidable conflict. Lemelledo is a Supreme Court
decision that remains the applicable standard for preemption.
Significantly, the Attorney General takes the position that Lemelledo,
and not Plemmons, sets forth the appropriate standard for evaluating whether a
separate regulatory scheme preempts the CFA. The Attorney General notes
that the Plemmons standard unduly hinders the State's effective enforcement of
the CFA and unjustifiably immunizes large categories of the public from their
commission of fraud and other unconscionable conduct.
Although we are not ultimately bound by an agency's statutory
interpretation, "[g]enerally, courts afford substantial deference to an agency's
interpretation of a statute that it is charged with enforcing." Univ. Cottage
Club of Princeton N.J. Corp. v. Dep't of Envtl. Prot., 191 N.J. 38, 48 (2007);
see also Merin v. Maglaki, 126 N.J. 430, 436-37 (1992) ("We give substantial
A-5686-17T1
29
deference to the interpretation of the agency charged with enforcing an act.
The agency's interpretation will prevail provided it is not plainly
unreasonable.").
Accordingly, although we are not bound by the Attorney General's
interpretation of the CFA, "it is nonetheless entitled to a degree of deference,
in recognition of the Attorney General's special role as the sole legal adviser to
most agencies of State Government," including the Division of Consumer
Affairs. Quarto v. Adams, 395 N.J. Super. 502, 513 (App. Div. 2007) (citing
N.J.S.A. 52:17A-4(e)); see also Peper v. Princeton Univ. Bd. of Trs., 77 N.J.
55, 70 (1978); Bd. of Educ. of W. Windsor-Plainsboro Reg'l Sch. Dist. v. Bd.
of Educ. of Delran, 361 N.J. Super. 488, 493-94 (App. Div. 2003).
The Division of Consumer Affairs is responsible not only for enforcing
the CFA but, in addition, under the Uniform Enforcement Act ("UEA"),
N.J.S.A. 45:1-14 to -27, the Attorney General and the Director of the Division
of Consumer Affairs are also responsible for ensuring that the HIPLA and its
implementing regulations are enforced in a manner consistent with applicable
law. N.J.S.A. 45:1-17 and -18. Both the CFA and the UEA are remedial
statutes intended to protect the public. See Cox, 138 N.J. at 15 (noting that the
CFA is "remedial legislation"); N.J.S.A. 45:1-14 (providing that the UEA "is
deemed remedial, and the provisions hereof should be afforded a liberal
A-5686-17T1
30
construction"). Because the Attorney General is charged with enforcing both
the CFA and the HIPLA, we find his opinion particularly persuasive in this
case.
Moreover, unless plainly unreasonable, we defer to both the Attorney
General's and the Division's persuasive interpretation of these laws. See, e.g.,
N.J. Tpk. Auth. v. AFSCME, Council 73, 150 N.J. 331, 351 (1997) ("We have
consistently accorded substantial deference to the interpretation of the agency
charged with enforcing an act." (internal quotation marks omitted)); Merin,126
N.J. at 436-37 (giving "substantial deference" to the Insurance Commissioner's
interpretation of an anti-fraud statute); In re Johnny Popper, Inc., 413 N.J.
Super. 580, 589 (App. Div. 2010) (recognizing the expertise of the Division,
which is charged with the responsibility of enforcing the CFA); Degnan v.
Nordmark & Hood Presentations, Inc., 177 N.J. Super. 186, 192 (App. Div.
1981) (giving "due deference" to the Division's interpretation of the Charitable
Fund Razing Act of 1971 and its determination that the defendants were
professional fund raisers within the meaning of the statute).
Finally, we defer to the Attorney General's and the Division's
interpretation of the relevant authorities "[e]ven though this appeal does not
arise from a final agency determination" and the agency's position is instead
A-5686-17T1
31
set forth in an amicus brief. U.S. Bank, N.A. v. Hough, 210 N.J. 187, 200
(2012).
We agree with the Attorney General that the learned professional
doctrine, as interpreted, threatens to become the exception that swallows the
rule, in contravention of the canon of statutory interpretation that requires that
exceptions to a remedial statute are to be narrowly construed. We also agree
with the Attorney General's argument that, to the extent the Supreme Court
continues to recognize a "learned professional" doctrine, ideally that doctrine
should be narrowly construed to include only those professions who have
historically been recognized as "learned" based on the requirement of
extensive learning or erudition.
We are unpersuaded that the Legislature acquiesced in all semi-
professional CFA immunity. As the Supreme Court observed in Lemelledo,
Defendant places great significance on the failure of
the CFA and its implementing regulations specifically
to include insurance. That omission, however, is far
from determinative. Given that "[t]he fertility of
human invention in devising new schemes of fraud is
so great . . . . ," Kugler v. Roman 58 N.J. 522, 543 n.4
(1971), the CFA could not possibly enumerate all, or
even most, of the areas and practices that it covers
without severely retarding its broad remedial power to
root out fraud in its myriad, nefarious manifestations.
See Federal Trade Comm'n v. Sperry & Hutchinson
Co., 405 U.S. 233, 240 (1972) ("Even if all known
unfair practices were specifically defined and
prohibited, it would be at once necessary to begin over
A-5686-17T1
32
again[, constituting] . . . an endless task.") (citation
and quotations omitted).
[150 N.J. at 265-66 (alterations in original).]
Although Macedo relied in part on legislative acquiescence to the
judicially created rule that "learned professionals [are] beyond the reach of the
Act so long as they are operating in their professional capacities[,]" 178 N.J. at
346-47, it did not disturb Lemelledo's directive that the CFA presumptively
applies to a covered activity absent a direct and unavoidable conflict with
other regulatory schemes. Lemelledo, 150 N.J. at 270. To require the
Legislature to amend the CFA each time case law extends the learned
professional exception to a class of regulated semi-professionals not only
unduly expands Macedo's specific holding, but also unnecessarily frustrates
the Legislature's express, remedial intention that the CFA provide cumulative
remedies. As the Court noted in Lemelledo:
In the modern administrative state, regulation is
frequently complementary, overlapping, and
comprehensive. Absent a nearly irreconcilable
conflict, to allow one remedial statute to preempt
another or to co-opt a broad field of regulatory
concern, simply because the two statutes regulate the
same activity, would defeat the purposes giving rise to
the need for regulation.
[Id. at 271.]
A-5686-17T1
33
Giving due deference to the Attorney General's concern that a wide-ranging
interpretation of the learned profession exception would unfairly restrict the
ability of private litigants and the Division to seek redress for fraudulent
commercial practices, we find no reason to depart from Lemelledo's distinct
holdings in the context of licensed semi-professionals.
For these reasons, we hold that home inspectors and other licensed semi-
professionals are not learned professionals simply because they are otherwise
regulated, and that they remain subject to CFA liability absent a finding that "a
direct and unavoidable conflict exists between application of the CFA and
application of the other regulatory scheme or schemes." Id. at 270 (emphasis
added).
B.
Of course, pursuant to Lemelledo, any defendant may assert a
preemption defense if the facts so warrant. Lemelledo itself recognized there
may be situations where the allegations in a CFA complaint and compliance
with a separate regulatory scheme may pose an irresolvable conflict. See id. at
274. The issue of any such alleged unavoidable conflict must be determined
on a case-by-case basis, comparing the plaintiff's factual allegations with the
specific statutes and regulations that govern the defendant. In that vein,
although defendant did not identify in this case any specific conflict between
A-5686-17T1
34
plaintiffs' complaint and the HIPLA, for completeness we will now analyze
whether anything in plaintiffs' complaint gives rise to a direct and unavoidable
conflict with the home inspector statute or regulations.
In that regard, we "must be convinced that the other source or sources of
regulation deal specifically, concretely, and pervasively with the particular
activity, implying a legislative intent not to subject parties to multiple
regulations that, as applied, will work at cross-purposes." Id. at 270. In order
to find preemption, "the conflict must be patent and sharp, and must not simply
constitute the mere possibility of incompatibility." Ibid.
The Legislature passed the HIPLA, N.J.S.A. 45:8-61 to -81, in 1997.
The HIPLA created a Home Inspection Advisory Committee ("Committee")
within the Division, under the State Board of Professional Engineers and Land
Surveyors. N.J.S.A. 45:8-63. The act sets forth, among other things: (1) the
powers and duties of the Committee, N.J.S.A. 45:8-66; (2) the licensure
requirements for home inspectors, N.J.S.A. 45:8-69; and (3) the grounds for
denying, suspending, or revoking a home inspector license, N.J.S.A. 45:8 -74.
The act appears to provide a private right of action, N.J.S.A. 45:8-76.1, but
does not specifically provide for civil penalties, consumer restitution, or
reimbursement of attorneys' fees and costs.
A-5686-17T1
35
The HIPLA does not provide any enforcement provision, therefore the
Attorney General rests upon the relevant provisions of the UEA, N.J.S.A.
45:1-14 to -27, to provide its enforcement authority. These provisions
empower the Division with uniform investigative and enforcement powers for
home inspectors, N.J.S.A. 45:1-17 and -18, as the Committee is located within
the Division, and provide for civil penalties up to $10,000 for the first
violation and $20,000 for subsequent violations, N.J.S.A. 45:1-22(b) and -
25(a). N.J.S.A. 45:1-22(d) provides for consumer restitution up to the amount
received by the licensee, and N.J.S.A. 45:1-25(d) provides for cost
reimbursement for use of the State, including attorneys' fees. Under the UEA,
the Attorney General retains authority to ensure that all such professional and
occupational boards are acting in a manner consistent with applicable law.
N.J.S.A. 45:1-17(c).
The Home Inspector Regulations, N.J.A.C. 13:40-15.1 to -15.23, were
promulgated by the Division in 2006 pursuant to the HIPLA. The regulations
set forth: (1) the requirements for initial licensure as a home inspector,
N.J.A.C. 13:40-15.6; (2) the insurance requirements for home inspectors,
N.J.A.C. 13:40-15.8; (3) continuing education requirements, N.J.A.C. 13:40-
15.14; (4) pre-inspection agreement requirements, N.J.A.C. 13:40-15.15; (5)
detailed standards of practice for home inspectors including requirements for
A-5686-17T1
36
the home inspection report, N.J.A.C. 13:40-15.16; (6) requirements of
advertising by home inspectors, N.J.A.C. 13:40-15.18; (7) prohibited practices
by home inspectors, N.J.A.C. 13:40-15.19; and (8) the grounds for suspending,
revoking or refusing to renew a home inspector's license, N.J.A.C. 13:40 -
15.20.
Among the prohibited practices enumerated in N.J.A.C. 13:40-15.19(a)
are:
13. Engage in the use of advertising which contains
any statement, claim or format which is false,
fraudulent, misleading or deceptive;
....
20. Perform any act or omission involving
dishonesty, fraud, or misrepresentation with the intent
to benefit a licensee or other person or with the intent
to substantially injure another person;
21. Perform any act or omission involving
dishonesty, fraud, or misrepresentation in the
performance of a home inspection or the preparation
of a home inspection report;
....
23. Fail or refuse, without good cause, to exercise
due diligence in preparing a home inspection report,
delivering a report to the client, or responding to an
inquiry from the client.
Considering these provisions, we address the issue whether there is a
conflict as defined by Lemelledo. In that regard, the Supreme Court in
A-5686-17T1
37
Lemelledo set forth a stringent standard that is akin to federal preemption of
state laws.
At the outset, there is no express preemption established by either the
CFA or the HIPLA. Cf. Gordon v. United Continental Holding, Inc. 73
F. Supp. 3d 472, 479-80 (D.N.J. 2014) (finding that the Airline Deregulation
Act of 1978 by its terms, 49 U.S.C. § 4171(b)(1), expressly preempted the
plaintiffs' CFA claims). To the contrary, the CFA provides that the remedies
under the act are "cumulative of any other statutory right, remedy or
prohibition." N.J.S.A. 56:8-2.13.
In an analogous context, in Union Ink Co. v. AT&T Corp., 352 N.J.
Super. 617, 638-42 (App. Div. 2002), we held that the plain language of the
Communications Act defeated the defendants' CFA preemption argument. The
plaintiffs alleged that AT&T fraudulently misrepresented that it utilized "the
largest digital network in America" and that the quality and reliability of its
service would be as good as their conventional land line service. Id. at 625. In
rejecting the defendants' claim of preemption, we noted that the
Communications Act provided that
no state or local government shall have any authority
to regulate the entry of the rates charged by any
commercial mobile service or any private mobile
service, except that this paragraph shall not prohibit a
State from regulating other terms and conditions of
commercial mobile services.
A-5686-17T1
38
[Id. at 628 (emphasis added) (quoting 47 U.S.C. § 332
(c)(3)(A)).]
We held that the plaintiffs' claims fell under the "other terms and
conditions" rubric of the statute and were therefore not barred. See id. at 638,
643. Similarly, the CFA contains an express reservation of litigants' rights
under other statutory and common law provisions, N.J.SA. 56:8-2.13, and the
HIPLA contains no provision evincing an intent to fully occupy the field of
home inspector regulation.
Having found no express preemption, we address whether the HIPLA
and its implementing regulations would support implied preemption of
plaintiffs' CFA claim. The question whether a statute is preempted is a fact-
sensitive endeavor. R.F. v. Abbott Labs, 162 N.J. 596, 619 (1999).
Preemption "is not to be lightly presumed." Ibid. (quoting Turner v. First
Union Nat'l Bank, 162 N.J. 75, 87 (1999)). The party asserting preemption
bears the burden of establishing its entitlement to the defense. Id. at 645
(citing Franklin Tower One, L.L.C. v. N.M., 157 N.J. 602, 615-16 (1999)).
There are three types of implied preemption: (1) field
preemption, "where the scheme of federal law and
regulation is 'so pervasive as to make reasonable the
inference that Congress left no room for the states to
supplement it;'" (2) conflict preemption, where there is
a conflict between federal and state law, rendering
"'compliance with both federal and state regulations
. . . a physical impossibility;'" and (3) preemption
where "state law impedes the achievement of a federal
A-5686-17T1
39
objective;" in this case, even if federal and state law
are "not mutually exclusive . . . preemption will be
found if state law 'stands as an obstacle to the
accomplishment and execution of the full purposes
and objectives of Congress.'" As with the three
general types of preemption, these categories are not
perfectly distinct, and in practice often overlap.
[Id. at 620 (alterations in original) (citations omitted).]
Thus, the issues are: (1) whether the HIPLA's regulation of home
inspectors is so pervasive as to render CFA liability inapplicable; (2) whether
there is conflict between the CFA and the HIPLA that renders compliance with
both a physical impossibility; and (3) whether the application of the CFA to
home inspectors would impede the achievement of the HIPLA's objectives.
Daaleman v. Elizabethtown Gas Co., 77 N.J. 267 (1978), is often cited
as a case where the Supreme Court held that a regulatory scheme preempted a
CFA claim. Daaleman was a class action against Elizabethtown Gas Co.
("Elizabethtown"), a privately owned public utility corporation operating under
the jurisdiction of the Board of Public Utility Commissioners of the State of
New Jersey ("PUC") pursuant to the Public Utilities Act. 77 N.J. at 268-70.
Although Elizabethtown's rates were fixed by PUC, an administrative order
allowed utilities such as Elizabethtown to include in its tariff a Purchased Gas
Adjustment Clause allowing it to make automatic adjustments in its customer
billings to account for variations in the cost of purchasing and storing gas. Id.
A-5686-17T1
40
at 270 (citing N.J.A.C. 14:11-1.13). PUC required Elizabethtown to submit
detailed statements of any cost figures and adjustments to its tariff pursuant to
the order. Ibid. The Daaleman class action alleged Elizabethtown
overcharged customers under the Purchased Gas Adjustment Cause. Ibid.
Under those unique facts, the Supreme Court held that plaintiffs' CFA
action was preempted by the PUC regulations. Id. at 271. In that regard, the
Court reasoned that
a Purchased Gas Adjustment Clause is a tariff
mechanism, permitted under PUC's administrative
order. Application of the clause involves
interpretation of the PUC administrative order and
regulations. Its use is subject to PUC supervision and
control. Misuse of this type of clause, whether
intentional or otherwise, and the remedies therefor are
matters as to which PUC has been vested with
exclusive jurisdiction.
[Ibid. (emphasis added).]
The Court held that were Elizabethtown's use of the Purchased Gas
Adjustment Clause be subject to challenge under the CFA, "separate state
agencies would have the right to exercise concurrent jurisdiction and control
over Elizabethtown's billings, with a real possibility of conflicting
determinations, rulings and regulations affecting the identical subject matter."
Id. at 272.
A-5686-17T1
41
Significantly, Justice Pashman's concurring opinion in Daaleman notes
that Elizabethtown's immunity is limited to matters involving rate setting. Id.
at 274 (Pashman, J., concurring). In that regard, Justice Pashman clarified that
"a regulated utility may nevertheless be covered by [the CFA] when it engages
in commercial activity not governed by the comprehensive scheme of PUC rate
regulation." Ibid.
There is no valid reason why a utility, simply by
reason of the fact that it is subject to regulation of its
rates in the public interest, should be exempt from the
Act if it should commit fraud in connection with the
marketing of merchandise. To take a currently
obvious example, the telephone company's persistent
efforts to convince consumers to purchase
"personalized," custom-designed phones are no
different from the attempts of any other manufacturer
to effectively advertise and sell its products.
Suppliers of fuel will often sell related equipment,
such as oil burners, fuel tanks or gas and electric
ranges in connection with their regulated activity.
Conduct of this type should not be exempt from
N.J.S.A. 56:8-2 merely because of the fortuitous
circumstance that the vendor involved is a utility
subject to PUC regulation on unrelated matters. If a
utility engages in practices of the type proscribed by
the Consumer Fraud Act, N.J.S.A. 56:8-2, it should be
subject to the same penalties as any other vendor.
[Ibid.]
Thus, Daaleman did not accord blanket CFA immunity to Elizabethtown, but
only immunity from claims related to rate-setting.
A-5686-17T1
42
Turning to the facts in this case, plaintiffs allege defendant failed to
disclose in his report significant problems of which he was aware, and that as a
result plaintiffs have sustained substantial economic loss. Although the
allegations essentially mirror the violation enumerated in N.J.A.C. 13:40 -
15.19(a)(21), they cannot be said to conflict with the regulation; rather the
CFA action is supplemental to and in furtherance of the remedies of the
HIPLA, as the Legislature intended. In that regard, as in this case, a violation
of the regulation may permissibly be presented as evidence (although no t
conclusive) that the home inspector also violated the CFA. See Reyes v.
Egner, 404 N.J. Super. 433, 458 (App. Div. 2009) (discussing "established
precedents treating statutory or regulatory violations as non-dispositive proof
of negligence"), aff'd, 201 N.J. 417 (2010).
Moreover, there is no provision in the statute and regulations that
provides the committee with the comprehensive oversight of a home
inspector's conduct, as was the case in public utility rate-setting cases such as
Daaleman. In that regard, home inspectors do not submit documentation of
their work, such as their reports, to the Committee for review. Nor does the
agency inspect home inspectors' work on a routine basis or set their rates.
Beyond this, as the Attorney General notes, the scope of the Home
Inspector Regulations is not as broad as the CFA. For example, while the
A-5686-17T1
43
Home Inspector Regulations address the advertising of home inspector
services, N.J.A.C. 13:40-15.18 and -15.19(a)(13), they do not expressly cover
the sale of such services. Thus, language in a home inspection contract
requiring the consumer to waive his or her rights under federal or state law
might be found to be unconscionable or deceptive under the CFA with no
similar prohibition in the Home Inspector Regulations.
In addition, as to a private litigant, the CFA provides for greater
potential monetary recovery in the form of treble damages, N.J.S.A. 56:8-19,
as compared with the UEA, which would appear to limit restitution to
reimbursement of the $350 plaintiffs paid for the inspection, N.J.S.A. 45:1-
22(d). Thus, recovery under the CFA would not conflict, but be supplemental
to and complementary to, the remedies afforded to the State under the HIPLA.
In that regard, there is no mechanism under the HIPLA to make plaintiffs
whole. In cases where damages are limited, this would create a disincentive
for attorneys to pursue claims against unscrupulous home inspectors – which is
the precise reason the Legislature amended the statute to create a private cause
of action in the first place.
In short, there is simply no evidence that the HIPLA's regulation of
home inspectors is so pervasive as to render CFA liability inapplicable; no
evidence of a conflict between the CFA and the HIPLA that renders
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compliance with both a physical impossibility; and no evidence that the
application of the CFA to home inspectors would impede the achievement of
the HIPLA's objectives. Thus, we discern no conflict, let alone a direct and
unavoidable conflict, that would bar plaintiffs' claims.
C.
In summary, considering the CFA's remedial intent and that exceptions
to remedial statutes must be narrowly construed, we decline to extend the
learned professional exception to licensed home inspectors simply because
they are regulated by the HIPLA. Giving due deference to the Attorney
General's and Division's authority to enforce the CFA, we discern no reason to
disagree with the Attorney General that the learned professional exception
should be limited only to historically recognized learned professionals, such as
doctors, as recognized in Macedo.
We similarly agree with the Attorney General that Lemelledo sets forth
the appropriate test by which to evaluate whether the existence of a separate
regulatory scheme exempts a class of semi-professionals from the CFA's
sweeping reach. Applying Lemelledo's test in this case, we have uncovered no
direct and unavoidable conflict between the CFA and the HIPLA, and find that
defendant has not overcome the presumption that the CFA applies to his
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services as a licensed home inspector. We thus reverse the trial court's
dismissal of plaintiffs' CFA claims.
Reversed and remanded for further proceedings consistent with this
opinion. We do not retain jurisdiction.
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___________________________________
SABATINO, P.J.A.D., concurring.
For the reasons expressed in Judge Mitterhoff's well-crafted opinion, I
join with my colleagues in reversing the trial court's determination that the
defendant home inspector is exempt from liability under the Consumer Fraud
Act ("CFA").
In doing so, I recognize that thirteen years ago I served on the appellate
panel in Plemmons v. Blue Chip Insurance Services, Inc., 387 N.J. Super. 551
(App. Div. 2006), which held that an insurance broker is a regulated "semi-
professional" who is excluded from liability under the CFA.
Unlike in Plemmons, in the present case our court has the benefit of the
advocacy of the Attorney General, who persuasively argues as amicus curiae
why the semi-professional distinction is problematic and appears to clash with
legislative intent and the limited Supreme Court precedent that exists on the
subject. The Attorney General also raises substantial policy considerations
from his unique perspective as both an enforcer of the CFA and as overseer of
the Division that regulates home inspectors.
With all due respect, I've changed my mind. 1
1
See, e.g., Olds v. Donnelly, 150 N.J. 424, 440-42 (1997) (in which Justice
Pollock explained why the Court was departing from an approach of one of its
(continued)
Even if, hypothetically, the "semi-professional" distinction were
doctrinally preserved (which we are not advocating), the licensure
requirements for insurance brokers – and their associated fiduciary duties –
appear to me to be more stringent than those governing home inspectors.
Comparatively, the grounds for a blanket occupational exemption from the
CFA's anti-fraud provisions are weaker. I say that without intending to
diminish the importance of the work done by qualified professional home
inspectors, who certainly provide a valuable service to home buyers and
sellers.
Of course, as the majority opinion points out, if there is a direct clash
between the CFA and the regulatory scheme, limitations of preemption can
pertain. But no such clash has been identified here.
That said, this case may well present a suitable opportunity for the Court
to provide helpful updated guidance on the contours of the learned
professional doctrine. In any event, nothing in this opinion prevents the
Legislature from adopting amendments that clarify the statutory scheme.
(continued)
previous decisions "[o]n further consideration," because experience had shown
the approach had not fulfilled expectations).
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