Locke Lord QuickStudy: Businesses Take Note: New Jersey State and Federal Courts to Address the Uncertain Consumer Protection Landscape of TCCWNA

Locke Lord LLP
August 1, 2016

Companies doing business in New Jersey—through traditional brick-and-mortar operations or internet sales—must be mindful of the State’s changing consumer protection landscape thanks to a series of recent and anticipated judicial decisions from its state and federal benches interpreting New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14, et seq. 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” that “violates any clearly established legal right of a consumer.” N.J.S.A. 56:12-15. Courts in New Jersey are now feeling the pressure of a recent onslaught of TCCWNA cases and struggling to reach consensus on how and in what circumstances liability under the statute—particularly in the class action context—can stand.

More than two dozen purported class actions have been filed in New Jersey federal and state courts since the beginning of 2016 claiming that companies violated the TCCWNA by including unlawful provisions in their form contracts, website terms and conditions, and other consumer-facing communications. The TCCWNA has been of particular interest to class action plaintiffs’ counsel because they claim that violations entitle plaintiffs to statutory and actual damages, injunctive relief, and attorney’s fees. To date, plaintiffs’ claims have been fueled by their broad reading of the case law and a dearth of binding precedent applying the statute in the digital age. But defendants are aggressively pushing back with motions to dismiss TCCWNA claims and oppositions to class certification, which are teeing up important questions of law for judicial review. A number of recent and anticipated decisions likely will inform the future of this wave of litigation.

Last week, the District of New Jersey in Truglio v. Planet Fitness, Inc., et al., granted in part and denied in part Planet Fitness’s motion to dismiss the plaintiff’s claims under the TCCWNA and the New Jersey Consumer Fraud Act (“CFA”). No. 15-7959-FLW-LHG, Slip Op. at *20 (D.N.J. July 28, 2016). In particular, the Court dismissed the CFA claim without prejudice because, in part, the plaintiff failed to allege that she suffered the requisite “ascertainable loss” as a result of allegedly unlawful provisions in Planet Fitness’s health club services agreement. The Court also dismissed the plaintiff’s TCCWNA claim to the extent it relied on alleged “omissions” since the TCCWNA prohibits the offering of a consumer contract which “includes any provision that violates any clearly established legal right of a consumer”, not “the ‘mere omission’ of required terms in a consumer contract (or other covered writing)”. Truglio, Slip Op. at *17 (internal citation omitted). The Court left open the question, however, of whether the plaintiff’s TCCWNA claim alleging misleading cancellation provisions in its health club services agreement can stand. Significantly, the Court noted: “Whether Plaintiff can maintain a TCCWNA claim based on the alleged unlawful practice of including misleading cancellation provisions, without being able to allege an ascertainable loss, is less clear.” Id. at *18. Indeed, the Court recognized, “there appears to be a lack of binding precedent as to whether a TCCWNA claim can be based upon an unlawful practice in violation of the CFA, but for which no ascertainable loss occurred; the only analysis of this issue exists in the form of conflicting, non-binding authorities.” Id. at *18 fn. 7 (comparing Watkins v. DineEquity, Inc., 591 F. App’x 132, 141 (3d Cir. 2014) (Greenaway, Jr., J., dissenting) (opining that New Jersey courts would likely permit TCCWNA claim to proceed even where the underlying CFA violation could not support a private cause of action based on a lack of ascertainable loss), with Wilson v. Kia Motors Am., Inc., No. 13-1069, 2015 U.S. Dist. LEXIS 82332, *12 (D.N.J. June 25, 2015) (“Plaintiff here pleads no such [ascertainable] loss and her [CFA] claim fails as a matter of law. As a result, Plaintiff cannot establish a violation of a ‘clearly established legal right’ under the CFA and therefore cannot, by proxy, establish a violation of the TCCWNA.”), appeal dismissed, No. 15-2626 (3rd Cir. Nov. 18, 2015)). The Court in Truglio declined to address the merits of whether a TCCWNA claim can be asserted in the absence of a viable underlying private cause of action under the CFA; instead, the Court questioned whether it maintained subject-matter jurisdiction to hear the single remaining TCCWNA claim since the monetary and class-size thresholds of the Class Action Fairness Act of 2005 (“CAFA”) may no longer be met. Whether Truglio remains in federal court or gets remanded to state court, it is an important case to watch.

Likewise, last week, the New Jersey Supreme Court agreed to consider related appeals regarding whether class certification was appropriate in separate TCCWNA lawsuits alleging that the omission of drink prices on restaurant menus violated state law. In March, the New Jersey Appellate Division held in Dugan v. TGI Fridays, Inc., that plaintiffs failed to meet the “predominance” requirement for maintaining a class action since “individualized inquiries” would be required to determine whether plaintiffs received a TGIF menu that violated the law and whether the omission of prices from the menu caused plaintiffs’ damages. 135 A.3d 1003, 1014 (N.J. Super. Ct. App. Div. 2016), petition for leave to appeal granted, A-92-15, No. 077567 (N.J. July 26, 2016). Implicit in the court’s decision in Dugan was that plaintiffs could not prove the merits of their TCCWNA claims absent evidence that TGIF “provided” or “handed” the allegedly offensive menus to particular consumers. Dugan, 135 A.3d at 1014. In other words, it was not enough for plaintiffs to prove generally that TGIF “offer[ed]” or “display[ed]” menus omitting drink prices to consumers without evidence that those menus were, in fact, delivered to particular members of the class. N.J.S.A. 56:12-15. However, despite apparently similar facts and questions of law, the Superior Court of New Jersey in Bozzi v. OSI Restaurant Partners, LLC., granted class certification on plaintiff’s TCCWNA claims and the Appellate Division declined to consider OSI’s appeal of that decision. No. L-001324-11 (N.J. Super. Ct. Law Div. Dec. 16, 2011), petition for leave to appeal granted, A-92-15, No. 077556 (N.J. July 26, 2016). Confronted with the seemingly different outcomes reached in these similar cases, the New Jersey Supreme Court granted petition for leave to appeal both cases and is poised to address certain relevant TCCWNA issues. Specifically, the New Jersey Supreme Court’s Office of the Clerk has written that the Court will address in both cases the question whether “class certification [is] appropriate . . . where plaintiffs allege that defendant violated the [CFA] and the [TCCWNA] by failing to include drink prices on its menu.”1 In addition, the Court will address in Dugan whether “charging different prices for the same beverage, depending upon where in the restaurant the beverage was served”, violates the CFA and/or TCCWNA. The Court’s decision on these issues may be significant in charting the future course of TCCWNA class action litigation.

Also pending are at least seven motions to dismiss in the District of New Jersey, which will further color the TCCWNA landscape and set parameters for future litigation. Common issues presently before the Courts include, for example: (1) the impact of the U.S. Supreme Court’s recent decision in Spokeo regarding constitutional standing pursuant to Article III’s case or controversy requirement; (2) whether the TCCWNA’s undefined “aggrieved consumer” requirement means a consumer who has suffered an actual injury (i.e., an ascertainable loss); (3) whether the TCCWNA applies to companies’ website terms and conditions that do not relate to the purchase of personal property or services; (4) whether TCCWNA claims are subject to defendants’ arbitration provisions; and (5) whether non-New Jersey residents may sue New Jersey corporations under the Act.

In sum, the TCCWNA landscape is rapidly evolving and companies doing business with New Jersey consumers (particularly through online sales) must keep a watchful eye on this developing case law. In order to avoid potential liability under the TCCWNA, companies should take steps now to implement best practices in their form contracts, website terms and conditions, and other consumer-facing communications to make themselves less attractive to a very aggressive plaintiffs’ bar.

For further information on the TCCWNA, please see our previous client alerts here and here.