Any company that makes sales through the Internet to New Jersey consumers should be aware of a recent trend in consumer class actions based on New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (the “TCCWNA”), N.J.S.A. 56:1214, et seq. The plaintiff’s bar is attracted to the TCCWNA as a basis for consumer class actions because, like many other statutes underlying consumer class actions1, it provides for statutory damages and attorneys’ fees to consumers even in the absence of actual financial loss or injury.2 In addition, the statute provides no exception for a seller’s good faith compliance and expressly applies to consumers and “prospective” consumers. With such a broad definition of potential plaintiffs and the broad reach of an online sales platform, the minimum statutory award of $100 per TCCWNA violation can quickly become excessive when aggregated in a class action setting.
The New Jersey TCCWNA
The TCCWNA is a consumer protection statute providing an extremely broad private right of action if a seller’s writing, including online terms and conditions, includes a provision that violates any “clearly established legal right of a consumer or responsibility of a seller” under New Jersey or federal law:
No seller, lessor, creditor, lender or bailee shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign after the effective date of this act which includes any 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 at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed. Consumer means any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes…
N.J.S.A. § 56:1215. As noted, the TCCWNA applies to both consumers and “prospective consumers” and does not require a contractual relationship with the seller, but only that the seller “offer” or “display” the offending “warranty, notice or sign.” The New Jersey Supreme Court has held that the statute extends to terms and conditions on commercial websites. Shelton v Restaurant.com, Inc., 214 N.J. 419, 44142 (N.J. 2013). This is significant because nearly every business involved in online commerce includes disclaimers, limitations of liability, and other terms in its website’s terms and conditions, exposing the seller to a potential class action. Cause for concern should be heightened by the New Jersey Supreme Court’s statement that TCCWNA “is a remedial statute, entitled to a broad interpretation.” Id.
Among the website clauses commonly targeted as the predicate “offending” terms, are limitations of liability provisions purporting to hold the seller harmless from most, if not all, damages incurred by the consumer. Plaintiffs’ lawyers have alleged that such clauses violate the TCCWNA because they violate New Jersey law prohibiting such limitations. There is caselaw to support that position. Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500, 511 (D.N.J. 2014); Vaz v. Sweet Ventures, Inc., 2011 N.J. Super. Unpub. LEXIS 3189, *1 (Law Div. July 12, 2011). Plaintiffs’ lawyers have also targeted indemnity provisions that are likewise common among online terms and conditions as predicate “offending” terms under the TCCWNA.
Often, online retailers try to protect against violating the law of a particular state by including generic savings clauses stating that a particular clause will not be effective if it is contrary to the law of the state in question. With respect to the TCCWNA, however, the statute specifically restricts sellers from relying on general statements about potentially void provisions:
No consumer contract, notice or sign shall state that any of its provisions is or may be void, unenforceable or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey…
N.J.S.A. § 56:1216. In other words, the savings clause itself is arguably a violation of the TCCWNA, according to at least one decision interpreting the statute. Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500, 511 (D.N.J. 2014).
Protect Your Business From Becoming a Target
Because of its potentially broad application, and statutory damages of $100 to any aggrieved consumer (and, as noted, one can be aggrieved without having been damaged), the TCCWNA is getting increased attention from the class action Plaintiffs’ bar. Nevertheless, online retailers may have defenses or defensive strategies. For example, some courts have dismissed or stayed similar class actions based only on statutory damages pending the Spokeodecision referenced below.3 Other defenses may exist on the merits, depending on the particular website term identified as the predicate “offending” term. What is more, online retailers have the ability before being targeted in a TCCWNA class action to review and revise their online terms and conditions to comply with New Jersey law, and also include arbitration/class action waiver clauses to discourage such litigation.