Businesses in New Jersey are facing an influx of consumer class actions over common terms of service based on a plaintiff-friendly interpretation of a 36-year-old state statute.

Last December a panel of the Third Circuit Court of Appeals released an unpublished opinion interpreting New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). That law, found at N.J.S.A. Section 56: 12-14, states that a seller may not enter into a written contract that "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 consumer contract is signed or the warranty, notice or sign is given or displayed."

A federal district court judge dismissed a plaintiff's TCCWNA suit challenging the terms and conditions of a "Used Vehicle Service Contract" that included a prohibition on recovering attorneys' fees. But the panel reversed in Johnson v. Wynn's Extended Care, Inc., because "the New Jersey Supreme Court has clearly held that clauses preventing the recovery of attorney's fees and costs, when mandated by statute, are unconscionable," including such a provision violated the state statute. The plaintiff was not required to establish any actual harm in order to recover the statutory damages: a $100-per-offense penalty, plus attorneys' fees.

With the low threshold set by the Third Circuit, New Jersey plaintiffs have responded with class action lawsuits, with more than a dozen suits already filed in 2016. The cases are based on documents ranging from sales contracts to website terms and conditions.

To read the decision in Johnson v. Wynn's Extended Care, Inc., click here.

Why it matters: In light of the consumer-friendly interpretation by the court, New Jersey businesses should review their terms and conditions and consider eliminating provisions that could violate "any clearly established legal right of a consumer," such as a prohibition on attorneys' fees or consequential damages.