Earlier this year, we predicted an explosion of “gotcha” class actions targeting website terms of use and other customer-facing documents under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act ("TCCWNA"). It turns out that “explosion” was an understatement, as nearly 50 putative class actions and countless demand letters have been served on retailers and other businesses this year. Many if not most of the plaintiffs in these cases do not even allege that they read the documents they are challenging, let alone that they suffered any harm as a result of their language. In recent weeks, however, several courts have pushed back on this trend by finding that such claims are inconsistent with the plain language of TCCWNA, which requires that plaintiffs be both “consumers” and “aggrieved.”

Plaintiffs Must Be "Aggrieved"

In Russell v. Croscill Home, the District of New Jersey recently dismissed a putative class action brought by a plaintiff who had purchased a tea-light holder through a website that had terms and conditions that allegedly violated TCCWNA. As in many of the cases that have been filed this year, the plaintiff did not allege that he had read the terms and conditions on the website, that the product was defective, or that he had sustained any injuries or suffered any actual harm. See Tr. of Oral Op., Russell v. Croscill Home, LLC, No. 16-1190 (D.N.J. Oct. 11, 2016) (“Tr. of Oral Op.”) at 8:25-9:6. In other words, he alleged a bare statutory violation and nothing more. The defendant moved to dismiss in part because the plaintiff had not alleged any facts that showed that he was an “aggrieved consumer” as required by Section 17 of TCCWNA. The court agreed and dismissed the case.

The court began by observing that “the plain language of the statute controls.” Id. at 8:21-24; 9:20-22. TCCWNA has five sections: Section 14, which is its title; Sections 15 and 16, which are the two operative provisions that regulate the contents of certain consumer contracts, warranties, notices, and signs; Section 17, which creates a limited private right of action; and Section 18, which states that Section 17’s private right of action does not limit other rights of action. The wording of Section 17 is critical because it provides that, even if a defendant has violated Section 15 or 16 of TCCWNA, a plaintiff does not have a private right of action unless he was “aggrieved” by that violation:

Any person who violates the provisions of this act shall be liable to the aggrieved consumer for a civil penalty of not less than $100.00….

N.J.S.A. 56:12-17 (emphasis added). The court found that the plain language of Section 17 requires a plaintiff to “show that he is an ‘aggrieved’ consumer in order to seek monetary damages of $100.” Tr. of Oral Op. at 8:22-24. Because the plaintiff had not alleged “any losses stemming from the terms and conditions of the defendant’s website,” he was “not an aggrieved consumer” who had a right of action. Id. at 9:13-23.

The court’s conclusion is consistent with the plain meaning of the word “aggrieved,” which has long been understood as meaning “[h]aving suffered loss or injury,” see Black’s Law Dictionary (5th Ed. 1979), and which New Jersey courts have consistently construed as requiring some measure of concrete harm. See Howard Sav. Inst. v. Peep, 170 A.2d 39, 41 (N.J. 1961); see also Ex parte Van Winkle, 70 A.2d 167, 174 (N.J. 1950) (“aggrieved person” who can take chancery appeal is one “whose personal or pecuniary interests or property rights, have been injuriously affected” (citations omitted)); United Prop. Owners Ass’n of Belmar v. Borough of Belmar, 777 A.2d 950, 974-75 (N.J. Super. Ct. App. Div. 2001) (“aggrieved person” under Fair Housing Act must have been or is about to be injured by discriminatory practice); Advanced Dev. Grp. LLC v. Bd. of Adjustments of N. Bergen, Nos. A-4576-12T2, A-1275-13T2, 2015 WL 3511942, at *4-5 (2015 N.J. Super. Ct. Div. June 5, 2015) (per curiam). It is also consistent with prior federal and state court decisions that have carefully considered the language of Section 17 and held that a plaintiff cannot state a claim unless the defendant violated TCCWNA and the plaintiff was aggrieved by the violation. See Cameron v. Monkey Joe’s Big Nut Co., No. BUR-L-2201-07, 2008 WL 6084192 (N.J. Super. Ct. Law Div. Aug. 4, 2008); Oral Op. Tr., Wenger v. Bob’s Discount Furniture, Inc., No. 14-7707 (D.N.J. Feb. 29, 2016) at 14:4-15:6.

Plaintiffs Must Be "Consumers"

Similarly, in Smerling v. Harrah’s Entertainment, Inc., No. A-4937-13T3, 2016 WL 4717997 (N.J. Super. Ct. App. Div. Sept. 9, 2016) (per curiam), the New Jersey Superior Court Appellate Division recently rejected a TCCWNA claim challenging the wording of a casino’s coupons and emphasized that courts may not ignore the plain language of TCCWNA simply because it is a “remedial statute.” The plaintiff in Smerling tried to redeem a $15.00 “Birthday Cash” coupon in the middle of the night (outside of specified redemption hours) and was told to return after 6 a.m. (within the specified redemption hours) to redeem her coupon. Rather than doing so, she filed a putative class action and alleged that the coupon violated TCCWNA by making the “Birthday Cash” coupons redeemable only at certain times. Discovery revealed that similar coupons had been sent to 320,000 people, out of which 80,000 redeemed them and only one—the plaintiff—tried to redeem them during off-hours. Id. at *2. The trial court nonetheless certified a class (which was later narrowed), granted summary judgment in favor of the class, and entered judgment in the amount of $100 per class member.

Harrah’s appealed, arguing that TCCWNA did not apply because the plaintiff was not a “consumer” and the Birthday Cash was not a “consumer contract.” The plaintiff responded by arguing that “the expenditure of the effort necessary to redeem the Birthday Cash offer [was] sufficient to qualify [plaintiff] as a ‘consumer’ under TCCWNA.” Id. at *4. The Appellate Division disagreed and reversed.

Like the district court in Russell, the Appellate Division began and ended with the plain language of Section 15 of TCCWNA, which it called “‘the best indicator’ of legislative intent.” Id. at *3. Section 15 provides, in pertinent part, as follows:

No seller, lessor, creditor, lender or bailee shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign after the effective date of this act which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed. Consumer means any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes. . . .

N.J.S.A. 56:12-15 (emphasis added). In short, Section 15 requires that a plaintiff be a “consumer,” i.e., that she allege that she bought, leased, borrowed, or bailed something from the defendant for personal, family or household purposes. Id.

The Appellate Division flatly rejected the plaintiff’s attempt to expand the scope of the statute by arguing that class members had “bought” a coupon merely by “traveling to Harrah’s to redeem it,” which would render the “consumer” requirement “virtually meaningless.” Smerling, 2016 WL 4717997, at *4. It observed that, though TCCWNA is a remedial statute, its remedial nature “is not threatened by applying the plain language of the statute to the threshold determination of whether a party is a consumer under the Act.” Id. It then held that the plain meaning of the term "buy" requires that the plaintiff actually pay for a product or service, either with cash or credit. Id. Because neither the plaintiff nor anyone else had paid anything for the coupons, she was not a “consumer,” the coupon was not a “consumer contract,” and as a result the statute simply “did not apply to [plaintiff’s] claims….” Id.; see also Shah v. Am. Express Co., No. 09-0622, 2009 WL 3234594, at *3 (D.N.J. Sept. 30, 2009) (“TCCWNA creates a violation where a creditor in the course of its business offers a consumer or prospective consumer any notice which violates any federal or state law provisions. However, liability under TCCWNA only attaches for the creditor when there are actual ‘aggrieved’ consumers.”); Baker v. Inter Nat’l Bank, No. 08-5668, 2012 WL 174956, at *9-10 (D.N.J. Jan. 19, 2012) (dismissing claim because plaintiff had not purchased gift card and thus was not an “aggrieved consumer”); Boyko v. Am. Int’l Grp., Inc., No. 08-2214, 2009 WL 5194431, at *5 & n.3 (dismissing claim because defendant debt collector was not a “seller, lessor, lender, or bailee,” and “Plaintiff is not a ‘consumer’ vis-à-vis [the defendant].”).

The Takeaway

The Russell and Smerling decisions are significant because they both rejected attempts to expand TCCWNA beyond its plain language, and both required plaintiffs to allege facts that, if proven, would show that they are “consumers” who had been “aggrieved.” Businesses should nevertheless continue to monitor the rapid evolution of the TCCWNA landscape; because the likelihood of having to defend one of these “gotcha” class actions can be mitigated by making mostly modest changes to terms and conditions, terms of use, privacy policies, and other customer-facing documents, business should continue to review and revise those documents to make them less attractive to an increasingly aggressive plaintiffs’ bar.