The New Jersey Supreme Court, by its decision in Dugan v. TGI Fridays, Inc.
, No. A-92-15, 2017 WL 4399352 (N.J. 2017),1 has provided businesses the latest tool in defending putative class actions under New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA), N.J.S.A. 56:12-14, et seq. By way of a reminder, 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. The TCCWNA’s damages provision also provides that “any person who violates the provisions of this Act shall be liable to the aggrieved consumer for a civil penalty of not less than $100, or actual damages or both, at the election of the consumer, together with reasonable attorney fees and costs.” N.J.S.A § 56:12-17 (emphasis added). In Dugan— which we first reported on concerning an intermediate appellate opinion in our March 28, 2016 update
—the Supreme Court determined that the “predominance” required for class certification under N.J. Court Rule 4:32-1 was lacking because common questions would not predominate in determining whether a customer was “aggrieved” and whether a “clearly established” legal right had been violated. Rule 4:32-1(b)(3) allows class actions to be maintained if questions of law or fact common to the class members “predominate over any questions affecting only individual members,” and if a class action is superior to other methods of adjudication.
decision comes at a time when lower courts, practitioners, and companies doing business in New Jersey alike have been eagerly anticipating guidance from the New Jersey Supreme Court on certified questions to the high court from the U.S. Court of Appeals for the Third Circuit. In November 2016, the Third Circuit certified two questions to the New Jersey Supreme Court as to: (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). It remains to be seen whether the New Jersey Supreme Court views the Dugan opinion as adequately answering those questions or whether a companion opinion squarely responding to the Third Circuit’s inquiries is forthcoming.
In Dugan, the plaintiffs’ TCCWNA claim alleged that TGI Friday’s restaurant (“TGIF”) violated a “clearly established legal right of a consumer or responsibility of a seller” by offering beverages for sale “without notifying the consumer of the total selling price at the point of purchase” by failing to provide a menu with prices prior to ordering and only later disclosing the price printed on the bill (citing N.J.S.A. 56:12–15; N.J.S.A. 56:8–2.5). Dugan v. TGI Fridays, Inc., No. 077556, 2017 WL 4399352, at *5 (N.J. Oct. 4, 2017). Plaintiffs demanded damages and civil penalties, among other relief under the TCCWNA. Id.
The Court noted that Dugan plaintiffs contended that common questions of law and fact predominated over individualized facts, and that their CFA and TCCWNA claims for the class can be proven “as a whole because TGIF subjected all customers to a price-gouging strategy, and they need not present proofs of each customer’s interaction with the server or motivation in purchasing a beverage.” Id. at *8. TGIF, on the other hand, argued “that to establish a claim under the TCCWNA, each class member would be required to prove that he or she was given a menu.” Id.
The Court noted four case examples where “courts ha[d] examined the interaction between the parties and the nature of the contract or other writing” to determine if the TCCWNA had been violated, id. at *23, and said that the “critical inquiry” of whether plaintiff was presented with a menu “cannot be resolved by customer receipts or other documents” but that “the testimony of the individual claimant or another witness would be necessary to prove that the plaintiff satisfies the statute’s requirements and is thus an ‘aggrieved consumer.’” Id. at *25. Highlighting the need for individual inquiry, the Court said that introducing TGIF training documents concerning distribution of menus would “not prove that any individual consumer received a menu, much less demonstrate the critical interaction between any single member of the putative class and the allegedly offending menu.” Dugan, 2017 WL 4399352, at *25. Thus, because each TCCWNA plaintiff must individually show that he or she received a menu to qualify as an “aggrieved consumer,” the Court found individual questions predominated on this issue, making class certification inappropriate. Id.
On the separate TCCWNA requirement calling for a violation of a “clearly established legal” right or responsibility, the Court believed class treatment would risk “disparate results” for members of a would-be class. Id. at *25. Tellingly, the Court noted that the “clearly established standard accordingly requires a case-specific evaluation whether a ‘written consumer contract[,] . . . warranty, notice or sign’ violates a legal right or responsibility that was ‘clearly 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.” Id. at *23. Also, the Court noted, no published opinion required a restaurant to list prices on a menu, and this practice of selling food items without a posted schedule of prices is common. Id. at *23. As to plaintiff Dugan’s assertion that the Appellate Division’s 2011 opinion created a “clearly established legal right,” the high court disagreed, but concluded that even if Dugan was right, it would only prove the right was established as to him. Id. Accordingly, the Court found that common issues would also not predominate on this second TCCWNA element in question.
Layering on legislative intent, which may provide insight into its designs to curtail TCCWNA, the Court examined historical materials and found nothing to indicate that the Legislature meant to impose “billion-dollar penalties on restaurants that serve unpriced food and beverages to customers.” Id. at *25. Such concerns have been raised repeatedly by nearly every company subject to TCCWNA class action litigation. In contrast, the Dugan Court also observed that substantively, the TCCWNA was enacted to prevent unlawful provisions in “contracts, warranties, notices and signs.” Id. (citing legislative history materials). Unmistakably, these points discourage an approach that would multiply the statutory damages in large class actions to impose crushing liability on a corporation.
The effects of Dugan could be far-reaching. If courts must examine the grievances of a consumer on an individualized basis under Dugan’s circumstances in which training materials may have been probative of a habit or practice, the possibility of finding cases in which common questions would predominate as to an “aggrieved customer” or a “clearly-established legal right” is narrowed significantly. This comes as welcome news for companies serving the public in New Jersey, as it should have the effect of calming the recently rising tide of TCCWNA litigation.
For more information on the matters discussed in this Locke Lord QuickStudy, please contact the authors.
1 This opinion decided a consolidated appeal of Debra Dugan v. TGI Fridays, Inc. (A-92-15) (077567) and Ernest Bozzi v. OSI Restaurant Partners, LLC (A-93-15) (077556). Both cases involved plaintiffs alleging that respective defendant operators of New Jersey restaurants engaged in unlawful prac¬tices with respect to the disclosure of prices and seeking relief under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -206, and the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18.