Plaintiffs Target Online Retailers’ Website Terms & Conditions in Consumer Class Actions Brought Under New Jersey Consumer Protection Law

In recent months Plaintiffs’ lawyers have seized upon developing case law concerning a New Jersey consumer protection statute to target a wide-range of retailers that sell their products to consumers online. Plaintiffs’ consumer class actions claim companies’ website terms and conditions, disclaimers, advertisements, consumer contracts, and boilerplate statements violate the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14. Recent decisions broadly interpret the TCCWNA, and in 2013, the New Jersey Supreme Court held that the TCCWNA extends to terms and conditions on commercial websites. Given the wide breadth of the statute’s application, and no requirement that plaintiffs show actual harm or ascertainable loss in order to recover, the uptick in consumer class actions brought pursuant to TCCWNA is likely to continue.

The TCCWNA is a consumer-friendly statute designed to erase contract language in the fine print that clearly violates a consumer’s right, even those provisions which are legally invalid or unenforceable but serve to deter consumers from enforcing their rights. The TCCWNA prohibits sellers from “offer[ing] to any consumer or prospective consumer or enter[ing] into any written consumer contract or giv[ing] or display[ing] any written consumer warranty, notice or sign” in the course of business that includes any provision that violates a “clearly established legal right” of a consumer or responsibility of a seller under New Jersey state or federal law. The TCCWNA’s broad definition of “consumer” encompasses a variety of users of e-commerce retail and service-based companies, regardless of whether the user exposed to the “warranty, notice or sign” suffered any actual harm or economic loss.

Plaintiffs have alleged violations of the TCCWNA based on exculpatory provisions seeking to limit liability, provisions purporting to waive attorney’s fees, and provisions mandating that consumers waive the right to sue and submit to arbitration. By way of example, in Martinez v. Burlington Stores Inc., Case No. 1:16-cv-02064 (D. N.J.), the prospective class claims that online terms and conditions used by Burlington Stores run afoul of TCCWNA. The Complaint alleges that Burlington Stores Inc. features “Terms of Use” on its website which state that the company is not legally responsible for the sale of dangerous or substandard products through its website. The Complaint also alleges that the language also disclaims responsibility for other harms that might be suffered by consumers using the website, such as online fraud or hacking. The Martinez plaintiffs argue that this disclaimer of responsibility violates the TCCWNA, and seek to certify a class of all consumers who entered into or were displayed the Terms of Use during the applicable statute of limitations – six years under the statute. The Complaint requests awards of at least $100 per person for each violation of the statute, and also that the company be ordered to terminate the referenced language.

The TCCWNA features no requirement that plaintiffs show actual harm or ascertainable loss in order to recover, unlike claims under the New Jersey Consumer Fraud Act. The TCCWNA also permits an award of $100 in statutory damages for each violation, which plaintiffs in recent consumer class actions argue includes each visit to the defendants’ websites. Moreover, the Act does not require that there be a contractual relationship between the consumer and the seller – only that the seller “offer” or “display” the notice or sign in question. TCCWNA violations also entitle plaintiffs to statutory and actual damages, injunctive relief, and attorney’s fees.

While the consumer bears the burden of proving that a certain right is one “clearly established” by law in New Jersey, companies should assess the substance of their online terms and conditions before facing costly litigation. Careful drafting and review of a company’s online consumer notices and terms of use may circumvent liability under the TCCWNA and the negative press and costliness of a consumer class action suit. The series of case law below provides a standard for companies hoping to draft compliant terms and conditions, though many recently filed cases may further define the parameters of the Act in the coming months.

• Lending company’s arbitration agreement did not violate the Act because it constituted a voluntary waiver of the consumer’s right to a jury trial, not a violation of that right. See Salvadori v. Option One Mortg. Corp., 420 F.Supp. 2d 349 (D.N.J. 2006).
• A clearly established legal right is one that falls “squarely within prohibited conduct under state or federal law.” McGarvey v. Penske Auto Group, Inc., 486 Fed. Appx. 276, 281 (3rd Cir. 2012) (recognizing examples of “clearly established” rights that cannot be violated under the Act, such as a complete waiver of damages resulting from a seller’s negligence).
• The absence of “clear and unambiguous language that the plaintiff is waiving her right to sue or go to court to secure relief” rendered the arbitration agreement unenforceable, potentially giving rise to a TCCWNA claim. See Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306, 315-16 (N.J. 2014), cert. denied, 135 S. Ct. 2804 (2015).
• Plaintiff’s TCCWNA claim was sufficient to survive a motion to dismiss where the plaintiff alleged that a provision of defendant’s service contract required that consumers waive attorney’s fees and split costs. See Johnson v. Wynn’s Extended Care, Inc., No. 15-cv-1343, 2015 WL 8781374, at *1 (3d Cir. Dec. 15, 2015).
• Provisions in the Insurance and Liability portions of defendant’s Rental Agreement did not violate the TCCWNA where it excluded certain types of insurance “where permitted by law;” provided charges for the greater of stated amounts or “the maximum amount permitted by law;” and released from liability the defendant from certain damages “unless provided by law” because the Agreement specifically stipulated it was governed only by New Jersey law. See Walters v. Dream Cars Nat., LLC, 2016 WL 890783 *1-2 (N.J. Super. Ct. Law Div. 2016).

Companies conducting business in New Jersey or reaching out to consumers in the state must be cognizant of the changing landscape created by the TCCWNA. The new parameters drawn by the TCCWNA should encourage companies to take an audit of their own terms and conditions and check for any overly broad provisions that fail to specify which provisions are void in New Jersey. In conducting this audit, companies must review and likely revise their terms and conditions, social media presence, form contracts, and other consumer-facing communications with the TCCWNA in mind.

In particular, exculpatory provisions seeking to limit sellers’ liability, provisions purporting to waive attorney’s fees and shift costs, and provisions mandating that consumers submit to arbitration should be carefully reviewed and modified to the extent they compel consumers to waive or limit certain rights in violation of New Jersey law. While many companies do business nationwide and want to offer a single agreement for all consumers, and therefore state that certain provisions apply “to the extent permitted by applicable law,” this tack may not be advisable where New Jersey consumers are involved, in light of the TCCWNA jurisprudence. Companies should also ensure that their websites’ terms of use have a clear arbitration clause and class action waiver and that the terms of use have been properly acknowledged by consumers.