• Seller Beware? Rise of Consumer Class Actions Under New Jersey’s TCCWNA Statute
  • December 16, 2016 | Authors: Kymberly Kochis; Francis X. Nolan; Lewis S. Wiener
  • Law Firms: Sutherland Asbill & Brennan LLP - New York Office; Sutherland Asbill & Brennan LLP - Washington Office
  • Nearly 35 years ago, New Jersey enacted the Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA, pronounced “tic-wun-uh”), which provides additional protection for individual consumers who suffer harm as a result of unfair sales and advertising practices. A consumer can bring a TCCWNA claim for a violation of a consumer’s legal right. For example, when a consumer has a common law claim regarding a sale or a retailer has violated a state regulation relating to advertising, TCCWNA provides an additional legal remedy.

    Over the past several years, plaintiffs’ attorneys have begun asserting TCCWNA claims in high-dollar class action lawsuits untethered to any allegation of a violation of a separate legal consumer right or actual injury, and often in situations where the “consumers” never actually purchased a product or service from the defendant company. TCCWNA has been directed specifically against companies that advertise and sell online to New Jersey residents. Courts have begun to push back against “no injury” suits, however, and, as with other consumer protection statutes, high-value judgments, and liability under TCCWNA can often be avoided if companies work proactively to head off these claims.

    TCCWNA’s Reach

    Section 15 of TCCWNA prohibits any “seller, lessor, creditor, lender or bailee” from violating “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” when offering, advertising or entering into a written contract with a consumer. By prohibiting violation of “any clearly established legal right,” TCCWNA allows recovery of damages and attorneys’ fees for claims based on a separate legal right that, standing alone, may not have otherwise incentivized a plaintiffs’ attorney to bring a class action.

    Section 16 of TCCWNA forbids any contract, warranty, notice or sign (including online pop-up “terms and conditions” statements and privacy notices) that contains language waiving a consumer’s rights under the statute. Furthermore, pursuant to Section 16, contracts, notices and signs cannot include a general statement, such as “certain terms may be void or unenforceable in some states,” unless the statement specifically explains whether those terms are legal under New Jersey law. This section has been used to target all kinds of boilerplate terminology often used in online forms. For example, when a consumer simply sees the language “void where prohibited” as part of terms and conditions or privacy pop-up on a website, TCCWNA may be implicated. This can be true even where a consumer does not make a purchase, although recent case law suggests more courts are dismissing cases where the plaintiff did not make an actual purchase.

    Section 17 of TCCWNA allows consumers to recover “not less than $100” per violation, plus actual damages, plus attorneys’ fees and costs. Importantly, damages are only available to “aggrieved” consumers, and defendants are increasingly attacking so-called “no harm” class actions for failing to put forth a class of “aggrieved” consumers.

    Given the broad terms of the law, the absence of a cap on damages, and the availability of attorneys’ fees under the statute, plaintiffs’ attorneys have filed dozens of TCCWNA class action lawsuits in 2016 alone.

    Recent Dismissals of TCCWNA Class Actions

    Since the U.S. Supreme Court’s May 2016 ruling in Spokeo v. Robins, which requires a plaintiff asserting a claim based on a statutory violation to demonstrate actual, concrete injury to establish Article III standing, several courts have dismissed TCCWNA claims based on the plaintiff’s failure to plead anything more than a naked statutory violation. For example, in Candelario v. Rip Curl, Inc., No. 8:16-cv-00963 (C.D. Cal. Sept. 22, 2016), the Central District of California, relying on Spokeo, concluded that the plaintiff had not adequately pled facts to establish Article III standing; she failed to allege an actual and concrete injury based on an alleged breach of a separate legal right distinct from the alleged naked TCCWNA statutory violation. Specifically, the plaintiff alleged that she was unhappy with the quality of a shirt she purchased online. The terms and conditions the plaintiff agreed to at the time of purchase prohibited her from bringing that claim relating to the purchase.

    The court in Candelario dismissed the complaint, finding that the consumer had not suffered an actual and concrete injury relating to the alleged violation of a legal right separate and apart from the naked violation of TCCWNA. To the extent she wanted to pursue claims relating to the quality of the shirt, there were still certain causes of action available to her that she could have pled that were not prohibited by the company’s terms and conditions. For these reasons, the plaintiff failed to establish that she was “aggrieved” as required under Section 17 of TCCWNA.

    In Russell v. Croscill Home, No. 3:16-cv-01190 (D.N.J. Oct. 12, 2016), the District of New Jersey dismissed a putative class action alleging a violation of TCCWNA for similar reasons. There, the court found that the plaintiff was not “aggrieved” under the terms of the statute because he did not allege a violation of a separate and independent legal harm that caused him an actual and concrete injury independent of the alleged TCCWNA violation. Then, in Hecht v. Hertz Corp., No. 2:16-cv-01485 (D.N.J. Oct. 20, 2016), the District of New Jersey dismissed a putative class action where the plaintiff alleged that Hertz failed to state whether New Jersey law applied to certain parts of its online terms and conditions. The court found that this naked violation of TCCWNA was not enough to confer Article III standing. The U.S. Court of Appeals for the Third Circuit will soon hear appeals of both Russell and Hecht.

    Although Article III standing is not required to pursue class action lawsuits in state court, at least one New Jersey appellate court has rejected a no-harm TCCWNA class action. In Smerling v. Harrah’s Entertainment, Inc., No. A-4937-13T3, (N.J. Super. Ct. App. Div. Sept. 9, 2016), the court overturned a multi-million-dollar judgment, finding that a New Jersey resident who was unable to use a Harrah’s coupon as advertised could not be a “consumer” for purposes of TCCWNA because she had not purchased the coupon.

    These recent dismissals are a promising sign for defendants and potential defendants in TCCWNA lawsuits because they indicate that courts are increasingly unwilling to allow no-harm lawsuits to proceed past the pleading stage. Nevertheless, companies that advertise and sell to New Jersey residents, particularly online, would be well-advised to take steps to avoid being named in TCCWNA lawsuits in the first place. Those steps include revising online advertisements and contract terms to specifically comport with New Jersey law.