Locke Lord QuickStudy: Cautious Optimism for Online Retailers: NJ Federal Court Dismisses another TCCWNA Claim for Lack of Constitutional Standing

Locke Lord LLP
April 3, 2017
A New Jersey federal judge dismissed a proposed class action against online retailer, J. Crew Group, Inc., alleging that the company’s website Terms and Conditions violated New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA) after finding that the Plaintiff lacked an “injury-in-fact” sufficient to confer standing under Article III of the U.S. Constitution. See Rubin, et al., v. J. Crew Group, Inc., No. 16-cv-2167-FLW, Slip Op. at *1 (D.N.J. Mar. 29, 2017).  

In the past twelve months, New Jersey state and federal courts docketed more than 60 class action complaints alleging bare procedural violations of the TCCWNA, a consumer protection statute intended to deter sellers from including in their consumer contracts provisions that violate consumers’ rights.  N.J.S.A. 56:12-15, et seq.  Most of those class action complaints—seeking statutory damages and attorney’s fees—attacked online retailers’ website Terms and Conditions and blindsided companies whose only connection to New Jersey was via internet sales to consumers in the state.  For months, those cases have diverted significant judicial resources as defendants in nearly every pending TCCWNA matter filed motions to dismiss based on plaintiffs’ lack of constitutional and statutory standing to assert such claims.  

Last week, in its Opinion dismissing Plaintiff’s claims against J. Crew, the District of New Jersey sent a seemingly pointed message about the recent wave of TCCWNA class action litigation clogging the Court’s dockets: “[w]hile the intent of the New Jersey legislature in enacting the TCCWNA is to provide additional protections for consumers in this state from unfair business practices, the passage of the Act is not intended . . . for litigation-seeking plaintiffs and/or their counsel to troll the internet to find potential violations under the TCCWNA without any underlying harm.”  Rubin, Slip Op. at *17-18.  

In Rubin, the Court dismissed Plaintiff’s claims for lack of standing where the Plaintiff pled only procedural statutory violations under TCCWNA and did not allege any concrete harm as required by Article III of the Constitution.  Citing the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), the Court rejected Plaintiff’s claim that the “mere presence” of allegedly unlawful Terms and Conditions on J. Crew’s website “causes injury – regardless of whether [Plaintiff] has seen it, read it, or suffered the effects of it.”  Rubin, Slip Op. at *16.  The Court continued, “[t]his is exactly the type of non-particularized and hypothetical injury against which Spokeo cautioned.”  Id.

Echoing other recent decisions that reached a similar result, the District of New Jersey in Rubin recognized that “without an underlying concrete harm, a plaintiff may not base his/her complaint solely on allegations of wrongdoing predicated on TCCWNA violations” because the TCCWNA does not create any new consumer rights “but merely impose[s] an obligation on sellers to acknowledge clearly established consumer rights.”  Rubin, Slip Op. at *12 (citing Shelton v., 214 N.J. 419, 432 (N.J. 2013)).  Central to the Court’s decision in Rubin was that the Plaintiff did not allege any underlying injury that she suffered as a result of purchasing merchandise using the J. Crew website; nor did she aver that she viewed or relied on the Terms and Conditions that were alleged to be violative of the TCCWNA. To illustrate its point, the Court explained, “if a consumer alleges that the terms and conditions of an online retailer’s website violated the TCCWNA by excluding punitive damages in suits, that consumer would not have standing to bring a TCCWNA claim without also asserting an injury inflicted by the retailer that could entitle him/her to punitive damages at the outset.  Absent that underlying harm, under Spokeo, the consumer’s alleged TCCWNA violation is merely procedural.”  Id. at *11.  

Rubin is the latest in a series of defense-friendly decisions dismissing TCCWNA claims premised on website Terms and Conditions, including, for example, Hite v. Lush Internet Inc., No. 16-cv-1533, 2017 U.S. Dist. LEXIS 40949 (D.N.J. Mar. 23, 2017) (dismissing website TCCWNA claim because Plaintiff was not an “aggrieved consumer” sufficient to confer statutory standing); Hecht v. Hertz Corp., No. 16-cv-1485, 2016 U.S. Dist. LEXIS 145589 (D.N.J. Oct. 20, 2016) (dismissing website TCCWNA claim where plaintiff failed to allege any concrete harm sufficient to meet Article III standing requirement); Russell v. Croscill Home LLC, No. 16-cv-1190, 2016 WL 6571278 (D.N.J. Oct. 12, 2016) (dismissing TCCWNA claim where plaintiff failed to allege a “concrete injury . . . as required under Spokeo” and failed to “demonstrate that he [was] ‘aggrieved’ under TCCWNA”); and Candelario v. RIP Curl, Inc., No. 16-cv-963, 2016 U.S. Dist. LEXIS 163019 (C.D. Cal. Sept. 7, 2016) (dismissing claim for lack of Article III standing where plaintiff failed to allege any harm resulting from website’s purported violations of TCCWNA).  

Given defendants’ recent successes in the District of New Jersey, online retailers should be cautiously optimistic about defending against TCCWNA class action complaints brought in federal court by “litigation-seeking plaintiffs and/or their counsel” that are clearly based on “trolling” for potentially violative website Terms and Conditions; however, it likely is too early to sound the death knell for such claims.  Several TCCWNA cases are pending before the Third Circuit and, in November 2016, the Third Circuit certified two questions to the New Jersey Supreme Court that may shed light on: (1) what it means to be an “aggrieved consumer” warranting statutory standing under the TCCWNA; and (2) what constitutes a violation of a “clearly established legal right” providing a basis for relief under the TCCWNA.  See Wenger v. Bob’s Discount Furniture LLC, No. 16-cv-1572 (3d Cir. Order dated Nov. 23, 2016); Spade v. Select Comfort Corp., No. 16-cv-1558 (3d Cir. Order dated Nov. 23, 2016).  Ultimately, New Jersey state courts may prove to be a more hospitable venue for plaintiffs’ TCCWNA claims since those courts are not bound by the Article III injury-in-fact requirement and the defense-oriented decisions applying Spokeo. Indeed, state courts in New Jersey already have seen an uptick in TCCWNA filings.   

As the TCCWNA landscape continues to evolve, companies doing business in New Jersey should remain vigilant and ensure that their website terms and conditions, form contracts, and other consumer-facing communications are up-to-date and consistent with recent case law.  

For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.