The Appellate Division’s opinion in Dugan will undoubtedly hinder future plaintiffs who seek certification in New Jersey consumer class action cases.
Defending against consumer class actions in New Jersey just got a little bit easier. In Dugan v. TGI Fridays, Inc., the Appellate Division of the New Jersey Superior Court recently reversed class certification of claims that had been brought under the Consumer Fraud Act (CFA) and the Truth in Consumer Contract Warranty and Notice Act (TCCWNA). The Appellate Division held that class certification was improper because the plaintiffs had failed to show that they could prove the causation element of their claims with common proof.
Trial Court’s Decision
The case arose from several restaurant outings during which the plaintiffs placed drink orders at various TGI Fridays (TGIF) restaurants. The plaintiffs claimed that TGIF violated the CFA and TCCWNA by failing to list the prices for beer, mixed drinks and soda on its restaurant menus. By their plain terms, the CFA requires retailers to disclose the price of merchandise, and the TCCWNA prohibits retailers from suppressing material facts in connection with the sale of merchandise. The plaintiffs sought to recover damages from TGIF measured as the difference between the price they paid for each beverage and the price each beverage was actually worth.
Following a lengthy period of discovery, the trial court granted the plaintiffs’ motion for class certification. The court defined the class to include all customers who purchased an unpriced beer, mixed drink or soda from any one of 14 company-owned TGIF restaurants over a more than 10-year period. Notably, the court held that individual class members did not need to show that they had relied on a TGIF menu when ordering their drinks.
Appellate Division’s Reversal
On appeal, TGIF argued that class certification was improper because the plaintiffs had failed to establish that questions of fact common to the class predominated over questions affecting individual class members. TGIF contended that the trial court should not have certified the class because the plaintiffs had failed to show that they could use classwide evidence to prove that each class member had read the menu before purchasing an unpriced beverage. TGIF asserted that class members who never received a menu were incapable of establishing a causal connection between the alleged violation (i.e., the restaurant’s failure to list the beverage price in the menu) and their alleged loss (i.e., the amount the class member overpaid for the beverage).
The Appellate Division agreed and reversed class certification. In its March 24, 2016 opinion, the Appellate Division began by examining the elements of the plaintiffs’ claims, pointing out that both the CFA and the TCCWNA require a consumer to show that a defendant’s unlawful conduct caused a plaintiff’s loss. The Appellate Division then determined that the trial court erred by finding that common issues of fact predominated with respect to whether class members suffered a loss that was caused by the restaurant’s failure to list beverage prices in the menu. The Appellate Division determined that the trial court’s finding was inappropriate because many class members may have chosen to purchase a beverage for any number of reasons that had nothing to do with the lack of menu pricing.
In reaching its decision, the Appellate Division found the trial court’s analysis deficient for several reasons. For example, the Appellate Division explained that the trial court’s class definition improperly included customers who never received a menu. If a customer had never looked at the menu, TGIF’s failure to list the price in the menu would not have caused the customer to sustain a loss (because the customer’s decision to purchase the beverage would not have been driven by the pricing information the menu contained). Likewise, the Appellate Division explained that the class definition improperly included customers who knew the price of the beverage when they placed their order. If a customer had asked a waiter for the price of the beverage when placing his order, TGIF’s failure to list the price in the menu would not have caused the customer to sustain a loss (because the customer would have known the price before purchasing his beverage).
The plaintiffs tried to avoid a reversal of the trial court’s holding by relying on the restaurant’s policies. They argued that they could prove the causation element of their claims using common evidence because TGIF had a policy of instructing its servers to hand opened menus to all customers. In rejecting this argument, the Appellate Division reasoned that the plaintiffs had no way of demonstrating that the servers always followed the policy. The Appellate Division theorized that there may have been instances in which a server accidentally forgot to provide the menu or a customer told the server he did not want a menu. In the end, the Appellate Division concluded that class certification was not warranted because individualized inquiries would be necessary to determine whether each class member reviewed a menu that lacked beverage pricing.
The Appellate Division’s opinion in Dugan will undoubtedly hinder future plaintiffs who seek certification in New Jersey consumer class action cases. The Appellate Division reaffirmed the notion that certifying courts must rigorously analyze the evidence to determine whether the class certification requirements have been satisfied. In applying the rigorous analysis standard here, the Appellate Division refused to allow the plaintiffs to rely merely on a restaurant policy that required servers to provide customers with menus. The Appellate Division demanded more, insisting on evidence that every class member actually received and reviewed a menu. Because the plaintiffs were unable to produce such evidence without having the case devolve into a series of mini trials, the Appellate Division found the court erred by allowing the plaintiffs to maintain a class action to pursue their claims.
In many consumer class action cases, defendants attack the plaintiffs’ ability to satisfy the class certification standards by contending that the plaintiffs are unable to derive a method for proving causation with common proof. Defendants can now make it even more challenging for plaintiffs by citing the Appellate Division’s holding in Dugan and insisting that the trial court carefully scrutinize the plaintiffs’ evidence at the class certification stage. Although the Dugan decision by no means eliminates the risk of being targeted in a class action, it should function as a serious obstacle that plaintiffs will need to overcome before obtaining class certification.