In Spade v. Select Comfort Corp., 2018 N.J. LEXIS 483 (2018), the New Jersey Supreme Court provided insight on interpreting elements of the Truth-in-Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12-14 to -18 (TCCWNA), and definitively laid to rest any claim that TCCWNA is a “strict liability” statute.

As we’ve previously reported, over the past couple of years, there’s been a surge of class actions against brick-and-mortar retailers and online businesses alleging that a written consumer contract, including the terms and conditions of sale or the website itself, did not comply with TCCWNA and, thus, statutory penalties of $100 per violation per class member are warranted. The plaintiffs’ side class-action bar has taken this to mean that every consumer exposed to a contract, warranty, or notice with an allegedly unlawful provision is automatically entitled to $100, even if the consumer suffered absolutely no loss or harm. That theory is now dead.

TCCWNA prohibits sellers from entering into a written consumer contract providing a consumer warranty or displaying a notice or sign that includes “any provision that violates any clearly established legal right of a consumer or responsibility of a seller… as established by a State or Federal law.”i In order to demonstrate a violation of TCCWNA, a plaintiff must establish that:(1) the defendant was a “seller, lessor, creditor, lender or bailee or assignee of any of the aforesaid”; (2) the defendant offered or entered into a “written consumer contract or [gave] or display[ed] any written consumer warranty, notice or sign”; (3) at the time that the written consumer contract is signed or the written consumer warranty, notice or sign is displayed, that writing contains a 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; and (4) that the plaintiff is an “aggrieved consumer.”ii TCCWNA creates civil liability to “aggrieved” consumers for actual damages or statutory damages of $100 per violation and also provides for attorney’s fees and costs.iii

Because there was no clear guidance on the language of the statute, the Third Circuit Court of Appeals certified two distinct questions to the New Jersey Supreme Court regarding the scope of TCCWNA. Spade provides much needed clarity to (1) what constitutes a “clearly established legal right” of a consumer and (2) what constitutes an “aggrieved consumer” under TCCWNA.

With respect to the first question, the issue before the Court was whether a violation of administrative regulations enacted pursuant to the Consumer Fraud Act can be a basis for a “clearly established legal right” to demonstrate a violation of TCCWNA. The Court determined that nothing in TCCWNA’s plain language or legislative history suggests that language in a contract or other writing that violates a regulation cannot be the source of a “clearly established legal right.”iv The Court reasoned that if the Legislature wanted to limit “clearly established legal right” to State or Federal statutes, it could have easily done so in the language of N.J.S.A. 56:12-15.v Thus, administrative regulations are indeed a source of “clearly established legal right” or “responsibility of a seller” for a cause of action under TCCWNA.vi Businesses should ensure that their consumer contracts comply with applicable regulations.

The second – and perhaps most critical – issue before the Court was whether a consumer who is exposed to a contract, warranty, or notice that is not in compliance with TCCWNA, but has suffered no monetary loss or adverse consequence as a result, is nonetheless an “aggrieved consumer” under TCCWNA. Because TCCWNA does not define “aggrieved consumer,” the question was an issue of first impression before the Court. The Court examined both the plain language of the statute and the Legislature’s intent. The Court stated that “aggrieved consumer” must mean something different than “consumer” because TCCWNA defines “consumer” yet uses the term “aggrieved consumer” when discussing those entitled to a remedy under TCCWNA.vii The Court concluded that an “aggrieved consumer” is a consumer who has been harmed by a violation of TCCWNA.viii That harm isn’t necessarily limited to compensable monetary damages but includes other adverse harm resulting from a TCCWNA violation. The Court provided the example of a consumer who was anticipating a timely furniture delivery for a family gathering but did not receive the furniture in a timely manner and may have been deterred from seeking recourse based on language in a consumer contract that does not comply with TCCWNA.ix

Based on this interpretation, a consumer who has been exposed to a contract, warranty, or notice that violates TCCWNA, but did not otherwise incur any monetary damage or suffer other adverse consequence as result is not an “aggrieved consumer.” Simply alleging exposure to a consumer contract, warranty, or notice that may not be in compliance with TCCWNA is no longer enough to maintain a cause of action.

The New Jersey Supreme Court’s decision brings clarity and reason to this statute, which had begun to run amok, threatening innocent merchants with multi-million dollar penalties despite not a single consumer being harmed. Now it’s clear: to pursue a TCCWNA claim, a consumer must have suffered some harm beyond exposure to an allegedly improper contract, warranty, or notice.

i See N.J.S.A. 56:12-15.