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N.J. considers a consumer bill that only car dealers love

One lawyer said the proposed legislation would "castrate" the state's consumer protection law. It applies only to car dealers, who back the measure.

The Cherry Hill Chrysler Dodge Jeep Ram dealership at the Cherry Hill Triplex on Rt. 70 in Cherry Hill, NJ on September 30, 2018.
The Cherry Hill Chrysler Dodge Jeep Ram dealership at the Cherry Hill Triplex on Rt. 70 in Cherry Hill, NJ on September 30, 2018.Read moreELIZABETH ROBERTSON / Staff Photographer

A bill that quietly passed the New Jersey Senate in July would drastically curtail legal remedies for consumers suing car dealers.

The bill, backed by South Jersey Democrats and legislative leaders, would slash attorneys' fees in consumer fraud cases against auto retailers, including those brought by the state attorney general. It would also make it harder for consumers to win triple damages.

The Attorney General's Division of Consumer Affairs rarely comments on pending legislation, but an agency spokesperson said, "The division has serious concerns about how certain provisions of this bill would adversely impact consumers."

One beneficiary would be a company owned by Charles Foulke Jr., whose Cherry Hill-based Foulke Management Corp. has run into legal trouble over its alleged business practices and is fighting a consumer fraud lawsuit now before the New Jersey Supreme Court.

Foulke, 86, and his son, Charles III, 57, have donated or lent hundreds of thousands of dollars to support New Jersey Democrats, and have longstanding ties to South Jersey power broker George E. Norcross III and his ally, Senate President Stephen Sweeney (D., Gloucester).

Messages left with Foulke's business went unreturned.

Laura Ruccolo, a lawyer for Foulke's company, did not respond to emailed questions. When reached by phone, she said, "I have nothing to say to you. I don't even know what you're talking about," before hanging up.

Unsurprisingly, the bill is backed by car dealers and opposed by trial lawyers and consumer groups. But neutral observers are struck by how the measure singles out car dealers.

"It just seems like it's creating a carve-out for auto dealers," said Jacob Hale Russell, a Rutgers-Camden business law professor who studies consumer protection. "Whenever it's about one random industry, it feels more like the product of lobbying and political capture than it does the product of a reasoned debate about what's best for consumers and sellers in the state."

Supporters of the bill, which lawmakers plan to rewrite, say it would rein in exorbitant legal fees for lawyers who pursue frivolous claims against car dealers.

The bill is an "attempt to balance competing interests between business owners and plaintiff's lawyers," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers (NJ CAR). "Plaintiff's lawyers don't like it, because it eliminates the opportunity to make a big payday, even when consumers get very little."

Current state law requires courts to award treble damages and "reasonable" attorneys' fees to victims who suffer provable losses in consumer fraud cases.

The bill would allow courts to award treble damages only for "egregious" violations — which are undefined —  in cases against car dealers. It would also cap awards for attorneys' fees at $1,000 or one-third of the damages awarded to a victim, including in cases brought by the attorney general. Both treble damages and attorneys fees would be at the court's discretion.

Foulke has been selling cars for five decades, and operates eight franchises in South Jersey, according to NJ CAR. They are in Cherry Hill (Dodge-Chrysler-Jeep, Kia, and Mitsubishi, as well as Mall Chevrolet), Maple Shade (Alfa Romeo-Fiat), Pleasantville (Atlantic Chrysler-Jeep-Volkswagen), Mount Ephraim (Chrysler-Dodge-Ram) and Turnersville (Chrysler-Jeep).

His company has had two settlements with the state in the last 17 years. In 2001, Foulke Management agreed to pay a $40,000 penalty to settle an investigation into whether the dealerships violated consumer protection laws.

In 2009, Foulke Management reached a $750,000 settlement with the attorney general, which accused Foulke of violating the 2001 agreement and deceiving customers by not honoring advertised promotions.

Since 2006, 461 consumer complaints have been filed against Foulke's businesses with the state, including 72 allegations now under review by Division of Consumer Affairs. The state's top five dealership groups — measured by 2017 sales of new vehicles — all had fewer complaints during that period, with the closest being Middlesex County-based Sansone Auto Network's 245.

Lester Glenn in Ocean County, which like Foulke Management has eight stores, had 41 complaints.

The Foulkes are longtime supporters of New Jersey Democrats, notably in 2017, when Sweeney faced an onslaught of negative ads financed by the state's largest teachers' union during his reelection campaign. The candidates and outside groups spent a combined $18.7 million, making it the most expensive state legislative campaign in New Jersey, and likely U.S., history, the state's campaign-finance regulator said.

Sweeney, then the state's highest-ranking elected Democrat, had angered the union by collaborating with former Republican Gov. Chris Christie on issues like pension and health benefits.

An independent political action committee called General Majority PAC helped protect Sweeney by raising money from associates and friends of Norcross, the insurance executive.

Those associates — including the Foulkes — co-signed a line of credit that was used to fund General Majority's election activities, Politico was the first to report earlier this year. General Majority, which legally cannot coordinate with campaigns, contributed $2.6 million to another super PAC that spent millions in support of Sweeney.

Norcross has no official role with General Majority, but he raises money for the PAC.

Ezra Reese, a lawyer for General Majority, said in a statement that the Foulkes each made $250,000 loans, "which were repaid."

There's no evidence that the loans are connected to the legislation.

The Foulkes have known the Sweeney and Norcross families for decades, people who know them say, and are also close to State Sen. James Beach (D., Camden), one of the bill's sponsors.

Assembly Majority Leader Lou Greenwald (D., Camden), another bill sponsor, said he sold cars for Foulke years ago, but hasn't spoken to him about the bill. Greenwald's late mother, Maria Barnaby Greenwald, who was mayor of Cherry Hill, was a longtime friend of the elder Foulke.

Assembly Speaker Craig Coughlin (D., Middlesex), the chamber's highest-ranking member, is also sponsoring the bill.

Car dealers and trial lawyers are longtime contributors to both parties. Political action committees affiliated with the dealers have contributed about $1 million since 2010. The trial lawyers' PAC gave about $420,000 over that period.

Lawmakers introduced the bill in June in the midst of a budget brawl between legislative leaders and Gov. Murphy. The Senate voted by 29-5 to pass the bill during a rare Sunday session on July 1 — 17 days after it was introduced.

A spokesman for Sweeney, who decides which bills the state Senate considers, declined comment.

In the Assembly, Greenwald said the bill won't advance in its current form.

"We're rewriting it so we can find common language that helps to clarify and make sure that consumers are protected, but not to promote frivolous claims. That's the balance we're trying to walk," Greenwald said.

Appleton, the NJ CAR president, pointed to three cases in New Jersey in which consumers won a relatively small amount in damages, but attorneys earned tens of thousands of dollars.

In one Middlesex County case, the trial court awarded a consumer $650 in damages and $99,250 in attorneys' fees. An appellate panel later voided the award of legal fees because, among other reasons, it found the trial judge didn't properly analyze the hourly rates attorneys sought.

Lawyers and consumer advocates say capping attorneys' fees would gut the consumer fraud act's protections against car dealers and make it difficult for poorer victims to find legal representation.

"It takes away the power of the consumer to fight smaller consumer frauds," said John Keefe, president of the New Jersey State Bar Association.

A pending lawsuit against Foulke Management illustrates the issue.

Janelle Goffe sued Foulke's company in 2016, claiming the dealer attempted a bait-and-switch and refused to refund a $250 deposit. She said a salesperson told her she was approved for financing a 2013 Buick Verano and would pay $390 per month after a $1,000 down payment and a trade-in. She paid $250 that day, with the remaining $750 due two weeks later.

When she returned with the $750, she was told the financing was not approved and she'd have to return the Buick unless she paid $3,000 down and $400 per month, her complaint says. She instead took her old car back, but claims the dealership refused to return her $250 until after she filed a lawsuit seeking treble damages and attorneys' fees.

In April, an appellate panel reversed a trial judge's decision to toss out the case because of an arbitration clause in the contract she signed. Goffe claims she never received a copy of the contract, and the appellate panel ruled that sales contracts are unenforceable if they are not provided to consumers.

The state Supreme Court has decided to review the case.

The New Jersey bill would make it a "conclusive presumption" that a consumer received a copy of a contract if they sign a document acknowledging receipt. That the bill was introduced just 51 days after the appellate ruling is a sign that Foulke may have pushed for the legislation, said Henry Wolfe of the New Jersey Association for Justice, a PAC for lawyers and associated fields, which is lobbying against the bill.

"That's too much of a coincidence," Wolfe said. "Foulke Management and their attorney left a calling card."

Beach's office did not respond to requests for comment.

Charles Riley, Goffe's lawyer, said the proposed legislation would "castrate" the state's consumer protection law. Riley, who is campaigning against the bill, says he has represented clients in at least 15 lawsuits against Foulke's businesses, including four that are pending.