DELANEY v. ENTERPRISE RENT-A-CAR

Superior Court of New Jersey

January 10, 2003

Bruce D. Greenberg, Esq.
Lite, DePalma, Greenberg & Rivas
Two Gateway Center- 12th Floor
Newark, NJ 07102

Vincent E. Gentile, Esq.
Drinker, Biddle & Shanley
P.O. Box 627
Princeton, NJ 08542

Re: DELANEY v. ENTERPRISE RENT-A-CAR (Docket No. OCN-L-1160-01)

Dear Counsel:

Please accept this letter as the disposition of the motion filed by the plaintiff seeking certification of a class action and the motion filed by the defendants with respect to the issue of the statute of limitation.

The plaintiffs seek certification of a class action consisting of individuals who purchased insurance products in the State of New Jersey from or through Enterprise Rent-A-Car Company, INC., ELRAC, INC., or any of its affiliates, subsidiaries, at any time from April 1, 1988 to December 19, 2002, excluding the period of July 31, 1993 through August 1, 1999.

On November 1, 1999 plaintiff Michael Delaney entered into a leasing agreement with Enterprise Rent-A-Car Company. At the time of entering into the leasing agreement the defendants provided to the public an option of purchasing three particular items. The first is supplemental liability protection (SLP), personal accident insurance (PAI), and collision damage waiver (CDW).

Supplemental liability protection and personal accident insurance are insurance products, underwritten by a third party insurance carrier and sold by Enterprise to potential renters. Collision damage waiver transfers the risk of loss for damage to the rental vehicle from the customer to Enterprise.

Plaintiff complains that the insurance products were sold without proper license to sell the same and that the defendants rental agreement is uniformly deceptive with the purpose to intimidate the customer into purchasing one or more unnecessary products.

Based upon these complaints, Michael Delaney has sued the defendant Enterprise Rent-A-Car Company, INC., ELRAC, Inc, and any and all affiliates and subsidiaries, individually and on behalf of similarly situated customers. The plaintiff alleges six causes of action citing (1) an illegal contract; (2) common law fraud; (3) unfair and deceptive practices in violation of Consumer Fraud Act. N.J. S.A. 56:8-1 et seq; (4) negligence; (5) unjust enrichment; and (6) breach of contract.

The plaintiff asserts that at the time that the other members of the class entered into a leasing agreement with the defendants, the plaintiff was not informed that the defendant sold insurance without being licensed or registered as required by New Jersey Law during the entire class period. In addition, plaintiff claimed that he was led through defendant's contract and marketing techniques to purchase one or more insurance products that were not necessary. In addition to class certification, the plaintiff seeks declaration that the defendant's sale of insurance without a license to be illegal thereby voiding the contract's compensatory damages; punitive damages; attorney's fees and cost of suit.

In opposing class action certification, the defendant argues that each class member's Consumer Fraud Act claim depends on whether the defendant's alleged omission was material to their rental transaction and caused them to purchase the optional product resulting in ascertainable loss. Defendants suggest that each class member's claim depends on his or her individual decision to purchase the product and the facts surrounding his or her own coverage options. In addition, the defendants suggest that since plaintiff's cause of action does not involve alleged misrepresentations about the nature of the product being sold, it requires or involves individual decisions. And thus any claim for fraud or breach of contract would require a separate and distinct analysis of each individual claim.

Disposition of this matter starts with the review of the provisions of Rule 4:32-1. The Rule is divided into 4 particular areas of consideration. They are as follows: numerosity, commonality, typicality, and adequate representation. In The Matter of Cadillac v. 8-6-4 Class Action, 93 N.J. 412 (1983). In addition, the class representative must demonstrate that it fulfills one of the three alternative requirements of Rule 4:31-1(b). Carroll v. Cellco Partnership, 313 N.J. Super 488 (App. Div. 1998).

Prerequisites

1. Numerosity

The first prerequisite is numerosity, namely that the class is "so numerous that joinder of all members is impractical." Here the plaintiffs are seeking to certify as a class all of the individuals who purchase insurance products in the State of New Jersey from the defendant from April 1, 1988 through December, 2000 excluding a certain period of time. It has been suggested to the Court that defendants have sold collision damage waiver provisions in 1,299,136 contracts. It also sold personal accident insurance to 963,601 New Jersey Rentals and sold supplemental liability protection to 267,271 customers between the period of January, 1996 and November, 2001. The fact that the members of the class are numerous is obvious and, therefore, would meet the criteria of the Rule.

2. Commonality

The second prerequisite is commonality, namely the presence of questions of law or fact common to the class. All of the factual legal questions in the class need not be identical for all of the proposed class members. A single common question will satisfy this requirement, Baby Neal v. Casey, 43F.3rd 48(3rd Cir. 1994).

As noticed by the plaintiff, questions common to the claims of all class members in this particular case include whether or not defendant sold insurance products without the appropriate license; whether the defendant misrepresented to the potential customer that it did not provide insurance coverage; whether the defendant had an obligation to advise a customer that the insurance product that it offered for purchase was duplicative of the customer's existing personal auto insurance policy or other existing coverage. And finally the question as to whether or not the defendant misrepresented or failed to disclose that the provisions for collision damage waiver that it had marketed to the customer was duplicative of any existing personal automobile insurance they had or other existing coverage. While it very well may be true that individual purchasers may have made a conscious determination to obtain such coverage knowing full well of the existence of their own personal coverage this does not take away from the common law fraud or deceptive commercial practice under the Consumer Fraud Act of New Jersey. Thus, the existence of these common questions is sufficient to meet the requirement of this provision of the Rule.

3. Typicality

Typicality focuses on the proposed class representative. To meet the requirement of typicality, the claim of the class members and class representatives must arise from the same event or practice or course of conduct and must be based on the same legal theory. Baby Neal v. Casey, Supra.

In this case the class representative is typically of the proposed class members in that they all purchased insurance products from the defendant during the period in question. The legal theories to support a claim for common law fraud or fraud under the Consumer Fraud Act are the same. As noted by the defendant, there may be factual differences on an individual basis but that is not sufficient to defeat typicality. Accordingly, this requirement has been met.

4. Adequacy of Representation

The Rule provides that the representative party or parties will fairly and adequately protect the interest of the class. This requirement is met if (1) the plaintiff's attorney is qualified, experienced, and generally able to conduct the proper litigation, and (2) plaintiffs' interest are not antagonistic to those of the class members. Delgozzo v. Kenny, 266 N.J. Supra 169 (app. Div. 1993). The plaintiff's attorney has represented to this Court a certification which indicates that they are experienced in handling class action cases having a basis in contract. The adequacy of the plaintiff's counsel has not been challenged. And finally, there is nothing in the record that would indicate that plaintiff has an interest that is antagonistic to any class member. Thus, the fourth requirement of the first part of the Rule has been met.

Plaintiff has moved for class action certification under Rule 4:32-1(b)(c). To sustain certification under this provision of the Rule, the Court must find both predominance and superiority, namely that the "question of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." I am obligated to weigh the common issues against individual issues. Carroll v.Cellco Partnerships, Supra 499. The common nucleus of operative facts are present. They are whether or not insurance products were sold without a license and whether or not there was an obligation by the defendant to disclose to the consumer that the products being sold may be duplicative of existing insurance coverage that they have. These two particular allegations in and of themselves is an attempt to address a common grievance and therefore would qualify under the provisions of Rule 4;32-1(b)(3).

Thus for the reasons contained within my opinion, I will authorize the certification of this matter as a class action.

The Statute of Limitation

I am called upon by the defendant to address the issue of the statute of limitation and how it applies to this particular case.

The defendants suggest that because this is an action for economic loss it is governed by the six year statute of limitation as found in the provisions of N.J.S.A. 2a:14-1. Thus, plaintiff suggests to the Court that any claim arising prior to April 5, 1995 is time barred. Furthermore, the defendants suggest to the Court that the discovery rule would not be applicable under the circumstances of this case because the individual purchasers would have, or should have, known of their ability to decline to optional protection products that they were being sold at the time they entered into the contract.

The plaintiff agrees with the general proposition that the six year statute of limitation is applicable. However, they suggest to the Court that the discovery rule exception would apply and secondly that the statue of limitation should be tolled due to the fraudulent concealment by the defendants.

This particular complaint consists of six causes of action, as I have previously noted. Count one, Count two, and Count three are basic fraud claims either arising out of common law fraud or under the New Jersey Consumer Fraud Act. Count four alleges a breach of contract of good faith and fair dealing. Count five is a count for negligence and Count six is a contract count based upon the theory of unjust enrichment.

An action for fraud accrues when the fraudulent act occurs. It is only when said plaintiff does not and cannot know the facts, that an actionable claim arises. Lynch v. Rubacky, 85 N.J. 65 (1991). It has been held that the presence of fraud will toll the statute of limitation. B.F. Hirsch v. Enright Refinery Co., 577 F. Supp. 339 (D. NJ. 1983). Thus, with respect to claims arising under common law fraud or the Consumer Fraud Act, which is contained within the first three counts of the complaint, the statue of limitation would be tooled during any period of time that an act of fraud was committed. Therefore, these particular three counts would remain as a viable claim so long as the plaintiff establishes the time frame in which fraud was committed and this would correspond to the period in which the statue of limitation would be tolled.

With respect to the fourth, fifth and sixth counts of the complaint, since they do not allege a fraud claim but rather sound in negligence and in breach of contract, the six year statute of limitation would be applicable subject to determination as to whether or not the discovery rule would be applicable. The discovery rule focuses on an injured party's knowledge concerning the origin and existence of his injuries as it relates to the conduct of another person. Such knowledge involves two key elements, that is injury and fault. The limitation period begins to run when a plaintiff knows or should know the facts underlying those elements, not necessarily when a plaintiff learns the legal effect of those facts. Thus, the discovery rule encompasses two types of plaintiffs: those who do not become aware of their injury until the statute of limitation has expired, and those who are aware of their injury but do not know it may be attributable to the fault of another. Grunwald v. Bronkesh, 131 N.J. 483 (1993).

In the case at bar, there is nothing special in the relationship between the plaintiffs and the defendants as there is in a medical malpractice case or a legal malpractice case that would require the application of the discovery rule to a simple auto rental agreement. Thus, any claim for breach of a contract or for negligence or a contract claim are limited from April 5, 1995 to the present.

Mr. Greenberg is to prepare an order that is consistent with the Court's ruling on both the statute of limitation and the class certification.

Very truly yours,

EDWARD M. OLES, J.S.C.

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