The Surge of “TCCWNA” Class Actions in New Jersey

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Until recently, the New Jersey Truth-In-Consumer Contract Warranty and Notice Act (TCCWNA or the Act) was a relatively obscure consumer protection statute that sat dormant on New Jersey’s books for almost three decades. That all changed when a series of cases opened the floodgates to consumer class action litigation. In April, the New Jersey Civil Justice Institute issued a staggering prediction that the wave of TCCWNA lawsuits against retailers and other defendants could double in size over the next two years.

Building Up TCCWNA

The purpose of TCCWNA is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. Kent Motor Cars, Inc. v. Reynolds & Reynolds Co., 207 N.J. 428, 457 (2011). The essence of TCCWNA is a vague provision prohibiting the use of contract language “that violates any clearly established legal right of a consumer or responsibility of a seller …”

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.

TCCWNA creates no new rights, but provides generous statutory remedies for violations of another statute. The Act provides for a statutory penalty of $100 per violation, without any need to establish actual injury. TCCWNA packs an extra punch by allowing plaintiffs’ counsel recovery of their fees, costs, and for actual damages. In sum, the Act imposes hefty penalties for mere technical violations of some other state or federal law or regulation affecting consumer rights, whether or not the underlying law or regulation provides for any sort of remedy or penalty.

The Rise of TCCWNA Consumer Class Actions

The use of the Act began to rise in 2009, after the New Jersey Appellate Division ruled that a TCCWNA claim could be brought as a class action even if a plaintiff had not suffered an ascertainable loss. In United Consumer Financial Services Co. v. Carbo, 410 N.J. Super. 291 (App. Div. 2009), the plaintiff, United Consumer, sued Carbo for defaulting on a retail installment contract from the purchase of a vacuum, sold to him by a door-to-door salesman. Carbo lodged a cross claim against United Consumer under TCCWNA, stating that the terms of the retail contract violated another New Jersey statute, the Retail Installment Sales Act. The trial court ruled that the TCCWNA claims were valid, even if members of the class suffered no ascertainable loss. The Appellate Division affirmed.

TCCWNA went digital in 2013 with the New Jersey Supreme Court’s decision in Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013), and then last year, in Johnson v. Wynn’s Extended Care, Inc., 635 Fed. Appx. 59 (3rd Cir. 2015), the Third Circuit reversed a dismissal of a TCCWNA claim concerning an online term in a vehicle warranty agreement that purportedly waived a consumer’s right to seek attorneys’ fees. These decisions show the potential breadth of the Act.

Sheltan was submitted to the New Jersey Supreme Court by the Third Circuit Court of Appeals to resolve issues of first impression: whether TCCWNA applies to tangible and intangible property, and whether a gift certificate purchased from an online retailer is within the scope of the Act. The plaintiffs had purchased $25 certificates to various restaurants from Restaurant.com. The certificates displayed certain standard conditions and restaurant-specific terms, such as an expiration date and the often-used “[v]oid to the extent prohibited by law.” The plaintiffs claimed that the expiration date and “void where prohibited” language violated the New Jersey Consumer Fraud Act, the New Jersey Gift Certificate Statute, and TCCWNA. The Supreme Court of New Jersey agreed. It held that the certificates were “consumer contracts,” and that their specified conditions and terms constituted “notices” to bring “the transaction” within the scope of TCCWNA. “In the end, we conclude that the TCCWNA is a remedial statute, entitled to a broad interpretation to facilitate its stated purpose … [and the] Legislature remains free to change the law should it so choose.” Id. at 442-43.

In Johnson, the Third Circuit revived a class action in which the putative class purchased an extended auto service contract from Wynn. Wynn had actually serviced the plaintiff’s car, so the only question before the court was whether a term in the contract waiving attorneys’ fees violated TCCWNA. The Third Circuit found that the recovery of attorneys’ fees and costs constitutes a clearly established legal right such that any provision preventing such recovery qualifies as a violation under the Act.

These cases have created a very low threshold for plaintiffs to survive at the motion to dismiss stage, which should raise concerns for any company doing business in the Garden State. As a result, dozens of major retailers have been sued in New Jersey this year and the numbers will continue to grow. Given the breadth of TCCWNA and the civil penalties involved, many plaintiffs’ lawyers view the Act as low-hanging fruit that can reap tremendously large verdicts. Companies should take efforts to minimize their risk and exposure.

What Can Companies Do?

While the trend is certainly troubling, there are ways to prepare a defense against these types of lawsuits:

  • The bottom line is that as a result of a slate of consumer-friendly decisions, companies doing business in New Jersey must pay particular attention to their online terms, conditions, and disclaimers. Businesses should examine whether any clause should specifically exclude State residents, or provide a mandatory mediation/ arbitration provision.
  • Companies should also review their insurance policies to determine whether these types of claims may be covered, and if not consult with their carrier about obtaining additional coverage.
  • Finally, businesses should engage experienced counsel to review their consumer-facing notices, whether web-based or written, to ensure compliance with the Act.

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