HIGHLIGHTS:

  • State and federal courts in New Jersey continue to review carefully how far the Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA) should be extrapolated in order to sustain claims with no adverse impact or affect.
  • The New Jersey Supreme Court is now evaluating several critical TCCWNA legal issues which will likely impact these claims materially going forward.
  • Retailers must continue to analyze consumer communications (notices, warranties, contracts, terms and conditions, and the like), including their entire website content, to ensure that they are compliant with existing TCCWNA law.

In recent years, the New Jersey Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 et seq., has been employed by plaintiffs in putative class actions to avoid the ascertainable loss and causation requirements attached to the New Jersey Consumer Fraud Act in order to recover significant windfall claims from local, regional, and national retailers in matters where the consumer has not been damaged much less adversely impacted or affected. Retailers, however, have fought back. The state and federal courts in New Jersey continue to review carefully how far TCCWNA should be extrapolated in order to sustain claims with no adverse impact or affect. And, the New Jersey Supreme Court is now evaluating several critical TCCWNA legal issues which will likely impact these claims materially going forward.

Favorable Trends Limiting the Scope of TCCWNA Continued to Emerge in 2016 and 2017

By late 2015, New Jersey federal courts had commenced a more critical review of TCCWNA claims whereby consumers were required to plead more in order to sustain a claim. State courts, however, remained less critical of plaintiff's allegations in the TCCWNA context. In 2016 and 2017, federal courts continued their aggressive review of TCCWNA claims such that more and more TCCWNA claims, where no adverse impact was sustained by the consumer, were dismissed. And, an emerging trend occurred in state courts, which equally reviewed TCCWNA claims with a far more critical eye resulting in more dismissals at the state level.

In January 2016, the New Jersey Superior Court, Law Division, continued a trend of limiting the scope of TCCWNA when consumers failed to establish evidence of deception. In early January, the Court stated that the purpose of TCCWNA is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties.1 The Court held that provisions containing flexible language such as "unless prohibited by law" do not deceive or create confusion as to the rights and responsibilities of the consumer.2 In late January, the Court further clarified that consumers must set forth some proof that the provisions of a consumer contract may mislead the consumer.3 The Court found that the key to determining whether TCCWNA applies is the presence of deception or the lack thereof. The Court held that "facts demonstrating potential for the consumer to be misled or deceived must be in place for the TCCWNA to be relevant."

In March 2016, the Law Division further limited the scope of TCCWNA by requiring a consumer to demonstrate that contractual provisions at issue violated a clearly established right.4 The Court held that the existence of limiting phrases such as "where permitted by law" or "unless prohibited by law" do not constitute proof of intent to deceive the consumer or obscure the consumer's rights, responsibilities or remedies, which is necessary to sustain a TCCWNA claim.

The U.S. District Court for the District of New Jersey, consistent with earlier opinions from the Court, continued to limit the scope of TCCWNA by requiring that a plaintiff be an "aggrieved" consumer in order to sustain a claim.5 The Court dismissed a TCCWNA claim because the consumer failed to allege that he utilized the vendor's services at issue, and thus, he was not considered an aggrieved consumer under TCCWNA.

In 2017, the District Court further limited the scope of TCCWNA where the consumer purchased a product from a vendor's website but did not assent to alleged violative terms of use displayed on the website.6 The District Court also held that the consumer had not been harmed by the terms displayed on the vendor's website, and thus, the plaintiff was not an aggrieved consumer under TCCWNA, which is necessary to sustain a claim.

In October 2017, the New Jersey Supreme Court handed down a decision which further confirmed two requirements for consumers seeking relief under TCCWNA. In Dugan, the consumers brought class action claims to recover damages under TCCWNA for alleged unlawful practices related to the disclosure of prices for beverages. Specifically, the consumers alleged that the defendant restaurants offered menus that failed to list the price of the beverages and that the defendant restaurants charged the consumers different prices for the same type, volume and brand of beverage. The Court, in denying class certification, held that a consumer seeking a remedy under TCCWNA must be an "aggrieved consumer" and the defendant must violate a "clearly established legal right."

The Court held that the "aggrieved consumer" requirement mandated that the consumer receive the menus in question. This is significant because it further enforced the requirement that a defendant must provide the consumer with a writing before TCCWNA can apply. Consumers could not point merely to the existence of an allegedly violative writing. Instead, the consumer must affirmatively set forth facts establishing that the defendant presented the writing to the consumer seeking relief to satisfy the "aggrieved consumer" requirement.

The Court also took a hard look at whether the defendant restaurants violated a "clearly established legal right" and concluded that no New Jersey law that prohibited restaurants from offering food or beverages without listing the prices of such items in their menus. The Court's holding is significant because it plainly limits the reach of TCCWNA to consumer rights and vendor responsibilities that have been clearly established, either by prior case law or enforcement actions taken by the Attorney General.

In recognition of the grossly unfair impacts TCCWNA claims could pose for retailers, the New Jersey Supreme Court stated that "[n]othing in the legislative history of the TCCWNA, which focuses on sellers' inclusion of legally invalid or unenforceable provisions in consumer contracts, suggests that when the Legislature enacted the statute, it intended to impose billion-dollar penalties..." This comment and the Dugan decision in general strengthens a retailer's ability to defend against claims where no adverse impact is felt.

Critical New Jersey Supreme Court Ruling on TCCWNA Is Pending

In February 2016, the U.S. District Court for the District of New Jersey dismissed two separate purported class actions involving alleged TCCWNA violations against Bob's Discount Furniture and Select Comfort.8 The District Court confirmed that, in order to sustain a TCCWNA claim, a prospective plaintiff must be "aggrieved" such that he or she has suffered the "effects of a violation" of the TCCWNA, or that the plaintiff's "personal, pecuniary, or property rights have been adversely affected by another person's actions." The District Court rejected the plaintiffs' arguments that technical violations, without any aggrievement, can result in automatic liability. The plaintiffs in both actions appealed to the U.S. Court of Appeals for the Third Circuit, where the matters were fully briefed.

In late 2016, the Third Circuit certified two unresolved questions of law concerning TCCWNA to the New Jersey Supreme Court. And, on April 4, 2017, the New Jersey Supreme Court granted the petition for certification of the following questions: 1) "[i]s a consumer who receives a contract that does not comply with the Delivery of Household Furniture and Furnishing Regulation . . . but has not suffered any adverse consequences from the noncompliance, an "aggrieved consumer" under [TCCWNA]?" and 2) "[d]oes a violation of the Furniture Delivery Regulations alone constitute a violation of a clearly established right or responsibility of the seller under TCCWNA and thus provide a basis for relief under TCCWNA?"

Briefing finished in mid-2017 with the New Jersey Supreme Court hearing nearly three hours of oral argument in early November.9 The appellee/retailers argued, among other arguments, that: 1) TCCWNA's express language requires that a plaintiff be "aggrieved," and 2) "aggrieved" means more than just incurring an alleged facial violation of the Act, rather, the consumer must be adversely affected, impacted and/or deceived. Indeed, the retailers asked the New Jersey Supreme Court to answer both certified questions in the negative because TCCWNA was simply not designed to compensate nonaggrieved consumers based on alleged hyper-technical violations. As the Court concluded in Dugan, TCCWNA should not be employed to fuel the recent spate of class action claims, where consumers seek to extract tens of millions of dollars (if not more) from retailers, based upon technical "gotcha" violations without any allegations of adverse effect or impact.

Where TCCWNA Is Headed in 2018

It is believed that more than 25 TCCWNA cases in both state and federal courts are currently stayed or in "inactive status" as a result of the New Jersey Supreme Court's review of the certified questions. The impact of the New Jersey Supreme Court's decision is obvious. The result will not only greatly inform the cases currently on hold, it will have a far broader impact to confirm how far TCCWNA can be stretched to embolden class claims without any real impact felt by the consumers or, more importantly, to limit TCCWNA's intended reach to claims where actual adverse effect, impact or deception occurs.

Now aware of the unintended purposes that TCCWNA has been used by aggressive class counsel, where no impact has been suffered by consumers, the New Jersey Legislature is taking a second look at the statute. This effort confirms a recognition of the unintended consequences for which TCCWNA has been employed – as a weapon to otherwise hurt retailers who act in good faith and work diligently to comply with the law. To this end, the Legislature is considering an amendment that would disallow class certification of TCCWNA claims where there is no ascertainable loss incurred. This requirement is consistent with other consumer statutes in New Jersey, including the Consumer Fraud Act and Plain Language Act that place limitations on a consumer's recovery.10 Further, the proposed amendment contemplates that the consumer not only be "aggrieved" but that, if aggrieved, and, if the loss is less than $250, the consumer must first request reimbursement from the seller in writing and wait 35 days before a TCCWNA action is allowed.

Retailers must continue to analyze consumer communications (notices, warranties, contracts, terms and conditions, and the like), including their entire website content, to ensure that they are compliant with existing TCCWNA law. To the extent that a demand is received, counsel should be consulted to ensure the best approach is taken to defend these expensive claims (including whether to respond in the first place given that several plaintiff's firms send hundreds of demands at a time). In addition, consumers can lend their vocal support to ongoing legislative efforts in New Jersey to incorporate critical amendments to TCCWNA to help curtail the overzealous and inappropriate expansion of TCCWNA.