I have written a number of times about New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). (Here, here, and here for example.) This statute, which was largely ignored after it was enacted in 1981, became increasingly popular in recent years as part of so-called no injury class actions. (So-called mostly by defense counsel, not plaintiff's counsel.) Its popularity may now have come to an end, however, because the New Jersey Supreme Court recently issued its opinion in the highly-anticipated case, Spade v. Select Comfort Corp., which answered two questions certified to it by the U.S. Circuit Court of Appeals for the Third Circuit, one of which appears to hamper, at the very least, the ability of plaintiffs to sue for alleged violations of the act.
By way of brief background, the TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. It provides:
No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract . . . or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.
To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract containing a provision that violated a legal right of the consumer or a responsibility of the seller; and (4) that it was an "aggrieved consumer." Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, and reasonable attorneys' fees and court costs.
The questions certified to the Supreme Court in Spade arose out of two cases that had been consolidated by the district court. Each involved plaintiffs who ordered furniture pursuant to contracts that violated certain regulations promulgated by New Jersey's Division of Consumer Affairs. The regulations require, among other things, that furniture sellers deliver furniture to customers by or before the promised delivery date or provide written notice that they will not be able to do so. Sellers must also provide notice to the purchaser that if the delivery is late, the consumer has the option of canceling the order and receiving a full refund, or agreeing to accept delivery at a specified later date. The regulations also prohibit sellers from including certain language in their contracts, such as "all sales final," "no cancellations," and "no refunds." In Spade, plaintiffs alleged that the contracts they entered into with defendants did not contain language required by these regulations, contained language prohibited by these regulations, or both. Notably, however, plaintiffs received their furniture deliveries on time.
Plaintiffs brought putative class actions against defendants on behalf of themselves and all similarly situated individuals. Defendants each moved to dismiss the respective plaintiff's complaints and, after consolidating the two cases, the district court granted both motions. In doing so, it held that neither plaintiff was an "aggrieved consumer" because neither "suffered the effects of a violation of the regulation at issue." Simply put, both received their furniture on time therefore neither was aggrieved.
Plaintiffs appealed to the Third Circuit, which certified two questions to the Supreme Court: (1) whether a violation of the furniture delivery regulations alone constitutes a violation of a clearly established right or responsibility of the seller under TCCWNA ; and (2) whether a consumer who receives a contract that does not comply with these regulations, but who has not suffered any adverse consequences as a result, is an "aggrieved consumer" under TCCWNA. The Supreme Court answered the first question in the affirmative and the second question in the negative. This post focuses on the second question because it appears to have wider reaching consequences.
On appeal, plaintiffs, and several amici supporting their position, argued for a broad definition of "aggrieved consumer," which would have included any consumer who was offered or entered into a contract that violated the furniture delivery regulations. Defendants, and the amici that supported their position, argued that to be an "aggrieved consumer," a plaintiff must "demonstrate an adverse consequence caused by an unlawful provision in a contract or other writing." The Supreme Court sided with defendants.
The Supreme Court acknowledged that the TCCWNA did not define "aggrieved consumer." But it found "ample evidence of the Legislature's intent in the TCCWNA's plain language to resolve [the] question" certified to it by the Third Circuit. Specifically, it looked at two different sections of the act -- the provision defining conduct barred by the TCCWNA and the remedial provision. In the former, the legislature used "the word 'consumer' unmodified by the term 'aggrieved.'" The Supreme Court noted that, in this section, the legislature chose "expansive language to describe the consumers and potential customers whom the statute was enacted to protect." In the latter, the legislature "chose a more precise term: 'aggrieved consumer.'" Based on this word choice, the Supreme Court concluded: "The Legislature clearly intended to differentiate between 'consumers and prospective consumers' -- the broad category of people whom the Legislature seeks to shield from offending provision -- and 'aggrieved consumers' entitled to a remedy under the TCCWNA." Stated differently, the remedial provision "distinguishes consumers who have suffered harm because of a violation of [the TCCWNA] from those who have merely been exposed to unlawful language in a contract or writing, to no effect." .
Based on this statutory interpretation, and additional support from dictionary definitions of the word "aggrieved," the Supreme Court held that an "aggrieved consumer" is one who has been harmed by a violation of the TCCWNA. But it also held that this "harm [is] not limited to injury compensable by money damages." It drew this conclusion from the remedial provision in the act, which allows for a civil penalty of "not less than $100," actual damages, or both. Thus, the Supreme Court held that the act "contemplates that a consumer may be entitled to a remedy notwithstanding the absence of proof of monetary damages." In its opinion, the Supreme Court provided a number of examples of conduct that might cause harm to a consumer but might not be a basis for a damage claim:
If, for example, a furniture seller fails to timely deliver a consumer’s furniture, and the consumer would have sought a refund had he or she not been deterred by the “no refunds” language prohibited by [the furniture delivery regulations], that consumer may be an “aggrieved consumer” entitled to a civil penalty under [the TCCWNA]. If an untimely delivery and misleading “no refunds” language leave a consumer without furniture needed for a family gathering, the consumer may be an “aggrieved consumer” for purposes of [the TCCWNA].
Plaintiffs in Spade did not fall into either of these categories, therefore neither was an "aggrieved consumer" under the TCCWNA.
It also seems unlikely that, even outside the furniture delivery context, many consumers would fit into the narrow category of individuals who are entitled to a remedy for a violation of the TCCWNA without having suffered any harm compensable by money damages. Even if there were, it also seems that the individual facts and issues associated with such claims would make them unsuitable for certification as a class action. For these reasons, among others, many are viewing the Supreme Court's decision in Spade as the death knell, or close to it, for consumer class actions based on the TCCWNA.