Does a CFA Claimant Need to Plead "But For" Causation?

New Jersey courts appear to be trending toward requiring Consumer Fraud Act (CFA) claimants to plead “but for” causation to survive dismissal. On Aug. 23, Judge Anne E. Thompson of the U.S. District Court for the District of New Jersey dismissed a class action CFA claim Rudel Corporation filed against Heartland Payment Systems, a credit and debit processor. See Rudel Corp. v. Heartland Payment Systems, No. 16-2229, 2016 WL 4472944 (D.N.J. Aug. 23, 2016). According to the complaint in Rudel, the plaintiff operated a restaurant and used Heartland to process credit card transactions. In spring 2014, Heartland sent a letter to Rudel and other clients announcing a new program through which Heartland would charge a lower rate on American Express transactions. Several months later, Heartland indicated on Rudel’s monthly account statement that it had incorrectly calculated the rates for the new American Express program and had to adjust the rates. Allegedly, Heartland also retroactively charged the increased rate.

Rudel filed a class action complaint alleging several claims, including a violation of the CFA. Under the CFA, a consumer must allege: (1) unlawful conduct by the defendant; (2) an ascertainable loss by the plaintiff; and (3) a causal connection between the unlawful conduct and ascertainable loss. According to Rudel, it adequately pleaded causation in that “Defendant reneged on its false promise of a lower rate for American Express transactions, and Plaintiff therefore paid ‘bogus’ retroactive and prospective fees.” Id. at *5. Judge Thompson disagreed, however, holding that:

[T]he conduct that the CFA seeks to punish is not simply charging more fees, it is the fraudulent “bait and switch” that Plaintiff highlighted as the unlawful conduct at issue. Plaintiff does not plead that Defendant’s “bait and switch” caused its loss. Plaintiff was a customer of Defendant before and after the allegedly false promise, and did not apparently change its conduct in any way because of the promise. Other merchants who previously did not accept American Express may have started to accept American Express because of Defendant’s promise, but not Plaintiff ….

Plaintiff does not allege that it only started accepting American Express after the letter announcing a lower rate, or that it encouraged its customers to use American Express more after the letter, or that it continued to use Defendant’s services because of the letter. Rather, it appears that Plaintiff accepted American Express via Defendant’s services before the letter was sent.