Vedder Thinking | Articles New Jersey Consumer Statute Presents Trap for Unwary Retailers Engaged in E-Commerce
December 5, 2016
While the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (the TCCWNA) has been around for over 30 years, there has been a recent surge in the filing of class action lawsuits under the statute against businesses engaged in e-commerce. The statute was enacted in 1981 to regulate "consumer contracts, warranties, notices and signs contain[ing] provisions which clearly violate the rights of consumers." Although such provisions are legally unenforceable, the legislature reasoned that "their very inclusion in a contract, warranty, notice or sign deceives a consumer into thinking that they are enforceable and for this reason the consumer often fails to enforce his rights."
Initially, the statute was not used very much and remained dormant during the first 30 years following its enactment. Recently, however, the plaintiffs' bar has resurrected the statute, targeting the website terms and conditions of businesses engaged in e-commerce. This resurrection began in 2013 as a result of the New Jersey Supreme Court holding that certificates issued by restaurants and offered for purchase by an Internet marketer are subject to TCCWNA rules1, and it has continued for a few reasons. First, plaintiffs are asserting that the TCCWNA is very broad in scope. Indeed, plaintiffs' lawyers contend that it applies to consumers who suffered no actual injury. Additionally, the statute provides for statutory damages of $100 per customer as well as attorney's fees and costs, which creates the potential for very large monetary awards. Finally, while more guidance is necessary to determine how courts will treat e-commerce TCCWNA claims, there have been several plaintiff-friendly TCCWNA decisions in New Jersey.
II. Key Provisions
Plaintiffs' lawyers focus on two provisions of the TCCWNA. The first prohibits business from offering contracts or displaying any warranty, notice or sign "which includes any provision that violates any clearly established right of a consumer . . ."2 Claims asserting violations of this provision could be based on any number of things. For instance, courts have found that the following provisions violate a clearly established right:
- Storage unit rental contract provision releasing defendant from liability "for any personal injuries or property damage sustained by customer and/or customer's guests" while on defendant's property3
- Lien sale preparation fee provision imposing an improper fee to cover the costs selling a customer's stored property to recover unpaid rent4
- Exculpatory provision in storage unit rental contract purporting to hold defendant harmless for most losses incurred by customers, except those that were the direct result of defendant's fraud or willful conduct5
- Service contract provision waiving attorneys' fees and splitting costs6
The second provision prohibits the use of catch-all invalidity provisions—that is, provisions in a contract or warranty notice stating "that any of its provisions is or may be void, unenforceable or inapplicable in some jurisdictions without specifying which provisions are not void, unenforceable or inapplicable within the State of New Jersey . . ."7 This provision only applies to contracts or warranty notices that are used in multiple jurisdictions. Where applicable, however, courts have allowed plaintiffs asserting violation of this provision to survive a motion to dismiss.8
III. Recent Cases
Courts have recently begun to weigh in on TCCWNA cases in the e-commerce context, and the decisions thus far bode well for businesses. For instance, in Russell v. Croscill Home, LLC, the plaintiff filed a class action complaint alleging that certain terms and conditions on Croscill's website violated the TCCWNA.9 Specifically, the plaintiff alleged that the terms violated clearly established consumer rights by, for instance, purporting to deprive consumers of the right to pursue a remedy for harms resulting from Croscill's tortious acts.10 Croscill filed a motion to dismiss, which the court granted for two reasons. First, using the Supreme Court’s analysis in Spokeo, Inc. v. Robins,11 the court held that the plaintiff lacked standing to sue because the plaintiff failed to sufficiently allege concrete injury.12 The court noted that "the complaint lacks any allegation that the plaintiff read the terms and conditions or that the plaintiff was in any way injured."13 Second, the court held that the plaintiff failed to demonstrate that he was an "aggrieved" consumer.14 The court looked to Black's Law Dictionary to define the term "aggrieved," and used the following definition: "one entitled to a remedy, especially a party who's [sic] personal, pecuniary or property rights have been adversely affected by another person's action."15 The court reasoned that because the plaintiff failed to allege any losses resulting from Croscill's terms and conditions, he was not an "aggrieved" consumer and therefore could not maintain an action under the TCCWNA.16 The plaintiff filed an appeal shortly after the court rendered its decision.
Similarly, in Hecht v. Hertz Corp., the plaintiff filed a class action complaint, alleging that the terms and conditions on Hertz's website violated the catch-all invalidity provision of the TCCWNA because they failed to specify whether certain terms applied in New Jersey and whether certain terms were unenforceable under New Jersey law.17 Hertz moved to dismiss the complaint, arguing that the plaintiff lacked standing.18 Again, using the Supreme Court's analysis in Spokeo, the court held that plaintiff failed to sufficiently allege that he suffered "concrete harm" and therefore did not satisfy the injury-in-fact requirement of Article III standing.19 The court explained that the plaintiff "set forth bare statutory violations but [did] not describe a single concrete harm resulting from these violations."20 Accordingly, the court dismissed the complaint.21
IV. Going Forward
Despite the recent wave of litigation, there is still a lot of uncertainty regarding the viability of TCCWNA e-commerce claims, as the courts have not had sufficient occasion to provide clear direction. Fortunately, the few decisions that do exist are reassuring. In any event, businesses engaged in e-commerce should be proactive. To limit potential liability and avoid being the subject of class action litigation, businesses which engage in e-commerce in New Jersey should have experienced counsel review website terms and conditions and revise as necessary to ensure they are compliant with applicable law.
1 Shelton v. Restaurant.com, Inc., 214 N.J. 419, 424 (2013).
2 N.J. STAT. ANN § 56:12-15.
3 Castro v. Sovran Self Storage, Inc., 114 F. Supp. 3d 204, 216 (D.N.J. 2015).
4 Id. at 214.
5 Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500, 515 (D.N.J. 2014).
6 Johnson v. Wynn's Extended Care, Inc., 635 Fed. Appx. 59, 60 (3d Cir. 2015).
7 N.J. STAT. ANN. § 56:12-16.
8 Martinez, 38 F. Supp. 3d at 511–12.
9 3:16-cv-1190 (PGS) (D.N.J. Oct. 11, 2016) (Complaint).
11 136 S. Ct. 1540 (2016).
12 3:16-cv-1190(PGS), at 7–8 (D.N.J. Oct. 11, 2016) (Decision Transcript).
13 Id. at 4.
14 Id. at 8–9.
15 Id. at 9.
17 No. 2:16-cv-01485 (WJM), 2016 U.S. Dist. LEXIS 145589, at *3–4 (D.N.J. Oct. 20, 2016).
18 Id. at *1.
19 Id. at *6.
20 Id. at *6–7.
21 Id. at *10.