Why the TCCWNA Matters to Retailers in New Jersey
New Wave of Consumer Class Actions Likely to Continue Despite Recent Progress in State, Federal Courts
- In the past few years, an unprecedented number of consumer class action claims have been filed under the New Jersey Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA).
- These claims have resulted in retailers spending hundreds of thousands, if not millions, of dollars defending questionable class claims that have little to do with protecting consumers' rights.
- The increase in TCCWNA claims is likely to continue in the foreseeable future. Retailers need to understand the issues involved and take proactive steps to minimize their risk and exposure.
The New Jersey Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 et seq., was enacted in 1981 by the New Jersey Legislature to address a growing trend of calculated deception in the consumer context. In concept, the TCCWNA had laudable goals to protect New Jersey residents from unscrupulous, fly-by-night businesses that were taking advantage of consumer rights. However, the recent wave of purported consumer class actions brought under the TCCWNA do not just target "bad actors" in order to protect the rights of New Jersey consumers. Rather, the vast majority of these claims target legitimate companies that contribute lawfully to commerce across the country, including in New Jersey, seemingly in order to line the pockets of class counsel without regard to whether there are actually legitimate consumer issues at stake.
For 30 years, the TCCWNA had a low profile. However, in the past few years, an unprecedented number of TCCWNA claims have been filed throughout New Jersey courts. These claims have resulted in retailers spending hundreds of thousands, if not millions, of dollars defending questionable class claims that have little to do with protecting consumers' rights. Despite recent favorable decisions for retailers, TCCWNA claims will likely increase in the foreseeable future. Retailers need to understand the issues involved and take proactive steps to minimize their risk and exposure.
What the TCCWNA Was Designed to Address – and How It Is Now Used Against Retailers
The legislature history of the TCCWNA confirms that it was designed to protect consumers from contract provisions that are illegal and unenforceable. Critically, "the provisions must deceive a consumer into thinking that they are enforceable and for this reason the consumer ... fails to enforce his rights."1 Generally, Section 15 of the TCCWNA prohibits retailers from offering or displaying any written warranty, notice or sign to a consumer "that violates any clearly established legal right of a consumer" under state or federal law. Section 16 prevents retailers from including any language in a consumer contract, warranty, notice or sign whereby: (a) the consumer "waives his rights under the act," and/or (b) the provisions may be void, unenforceable, or inapplicable in "some jurisdictions" without specifically stating whether they are void, unenforceable, or inapplicable in New Jersey or not.
The TCCWNA does not create new rights or responsibilities, but it provides consumers with an additional remedy to enforce existing rights and responsibilities established by other laws. A violation of the TCCWNA results in either actual damages or a $100 penalty per violation, plus attorneys' fees and costs.
The TCCWNA's popularity increased significantly in 2009 as a result of a decision issued by a New Jersey Appellate Court, which held that TCCWNA claims could be brought as a class action even if the plaintiff has not suffered an ascertainable loss.2 This case was followed by a series of state court decisions that suggested to plaintiffs' counsel that TCCWNA claims were viewed as "plaintiff-friendly" and, perhaps, less difficult to sustain than actions filed under the New Jersey Consumer Fraud Act.
Because class counsel is emboldened by the purported concept that a mere technical violation of the TCCWNA, even without any resulting impact, harm, loss or deception felt by the consumer, can result in a violation, companies are faced with defending class claims with unrealistic expectations of expected damages in the tens of millions of dollars.
Class Counsel Targets in New Jersey
Because enforcement of the TCCWNA has been effectively left to private attorneys, the increase in TCCWNA claims is expected to continue for the foreseeable future. To this end, on April 22, 2016, the New Jersey Civil Justice Institute issued troubling statistics confirming the dramatic increase in TCCWNA claims filed over the past six years. Although the first 25 years of the statute saw little – if any – use, the past six years has confirmed, on average, 20 class actions being filed each year, with 2015 reaching more than 25. If the first few months of 2016 are any indication, the total number of new actions in 2016 will likely exceed 30.
Originally, claims focused on terms and conditions contained in retailers' written consumer contracts, warranties, notices and/or signs. Cases involved automobile sales contracts, restaurant menus, gift cards, advertising materials, telephone pitches and storage rental agreements, among other matters.
While the "written consumer-facing claims" continue, class counsel have shifted their focus toward "web-based consumer communications." Specifically, class claims have increased significantly against online retailers, with a focus on the retailers' website terms and conditions. The retailers targeted are wide ranging, including auto parts manufacturers and distributors, home goods retailers, cosmetic companies, toy stores, car rental companies, clothing retailers, electronic retailers, appliance retailers, storage facilities and restaurant groups, among many others. The new wave of complaints addresses terms and conditions that purport to disclaim or limit liability, limit or disclaim damages, shorten statutes of limitations and limit indemnification obligations, as well as items such as choice of law, severability and savings clauses.
Recent Trends Provide Defenses for Retailers
For some time, TCCWNA case law did not appear favorable to retailers, especially given the state court's significant reliance on New Jersey's reputation for being strict with respect to consumer fraud. These decisions often pushed the boundaries of the TCCWNA, leaving retailers with no choice but to attempt to settle claims on somewhat favorable terms. However, numerous favorable federal court decisions have been issued in the past few years, providing retailers with increased hope and precedents to limit the unanticipated and unlawful scope and breadth of TCCWNA enforcement.3
In addition, an increasing number of state courts in New Jersey are more carefully scrutinizing TCCWNA claims, indicating that TCCWNA claims must be premised on affirmative, deceptive conduct.4
Holland & Knight has specific and recent experience with the TCCWNA. This year, on behalf of a national furniture retailer, Holland & Knight successfully defeated a purported TCCWNA class action arising out of alleged violations of the New Jersey Delivery of Household Furniture and Furnishings regulations. After removing the action to federal court under the Class Action Fairness Act and successfully confirming the U.S. District Court for the District of New Jersey's jurisdiction in a challenge before the U.S. Court of Appeals for the Third Circuit, the District Court dismissed all claims against the retailer. The District Court confirmed that, in order to sustain a TCCWNA claim, the prospective plaintiff must be "aggrieved" such that he or she has suffered the "effects of a violation" of the TCCWNA or that the plaintiff's "personal, pecuniary, or property rights have been adversely affected by another person's actions."5 The District Court flatly rejected the plaintiff's argument that even technical violations of the TCCWNA will result automatically in liability. The matter is now before the Third Circuit Court of Appeals along with another case against a second furniture retailer.
Considerations for Retailers
There is considerable uncertainty given the expected increase in actions and lack of clear, definitive guidance from the courts concerning the types of TCCWNA claims that can be sustained. Regardless of size and type, every retailer must take the threat of TCCWNA claims seriously.
The increased trend in purported class action filings claiming TCCWNA violations undoubtedly will continue for the foreseeable future. The statute provides a quick avenue for plaintiffs to evade the more cumbersome requirements of a Consumer Fraud Act claim, while still enjoying the benefits of prospective class status. In that respect, the prospect that minor, technical violations can result in multimillion-dollar class awards is especially appealing to plaintiffs' counsel.
To minimize their risk and exposure, retailers should:
- Engage in active (and immediate) compliance review of consumer-facing communications: Undertake an immediate comprehensive analysis of consumer communications, whether web-based, social media, form contracts, terms and conditions, and/or any other written communication provided to consumers; take active steps to refine and/or revise terms to ensure more strict compliance with the "letter of the law" in an attempt to avoid being targeted by class counsel, with a particular focus on website terms and conditions, including provisions that limit liability or disclaim warranties.
- Confirm internal policies concerning modifications to consumer-facing communication: Establish internal policies such that changes to consumer communications (whether web-based, social media, or hard copy) are actively evaluated for continued compliance with the law to minimize potential suits.
- Consider targeted training where appropriate: Identify specific New Jersey regulations that impact your particular industry and provide training, as appropriate, to managers and/or employees who may be responsible for providing company communications to consumers.
- Evaluate the benefits of mandatory mediation/arbitration provisions: Consider whether such provisions could have a positive impact on any TCCWNA claims brought.
- Proactively evaluate insurance coverage: Evaluate your insurance policies to determine whether these types of claims are covered – at least in terms of providing a defense based upon the standard allegations in these types of actions – and speak to your broker or insurer to determine what types of additional coverage may be available to protect you in the event a claim is filed.
- If sued, consult with experienced counsel immediately: While a number of defenses exist to these claims, depending upon the particular facts at issue and numbers of consumers involved, exposure could easily reach tens if not hundreds of millions of dollars, especially when considering the terms and conditions contained in a commercial website. Further, early consideration must be given to the best venue for a case (i.e., state or federal court, assuming federal court is an option), proof to support removal to federal court when possible, early dispositive motions to dismiss and potential discovery issues, including class-related discovery.
Holland & Knight attorneys Brett D. Carroll, Brian G. Leary and Nathaniel F. Hulme have significant experience with TCCWNA claims and can answer any questions regarding TCCWNA trends and specific strategies for defending your company.
1Statement to Assembly, No. 1660 (May 1, 1980) (emphasis supplied).
2See United Cons. Fin. Ser. v. Carbo, 410 N.J. Super. 280 (App. Div. 2009).
3See Watkins v. DineEquity, Inc., 591 Fed Appx. 132 (3d Cir. 2014) (refusing to find TCCNWA claims in the absence of affirmative, deceptive conduct); see also Wilson v. Kia Motors Am, Inc., 2015 WL 3902540 (D.N.J. June 25, 2015) (requiring consumer to prove each element of his underlying Consumer Fraud Act claim to support a TCCWNA claim); Matijakovich v. P.C. Richard & Son, No 2:16–cv–01506–WHW–CLW (D.N.J. June 21, 2016) (concluding that omission of regulatory notices not actionable under the TCCWNA); Mladenov v. Wegmans Food Markets, Inc., 124 F. Supp. 3d 360 (D.N.J. 2015) (dismissing TCCWNA claim in which consumer could not prove each element of his underlying claim).
4See, e.g., Wright v. Bank of Am., Inc., No. L–433–15, 2016 WL 631910 (N.J. Super. Ct. Jan. 28, 2016) (holding that "'deception' . . . is integral to the TCCWNA claim" and dismissing TCCWNA claim where consumer not deceived by omission of information required by statute); see also Walters v. Dream Cars Nat'l, LLC, No. BER–L–9571–14, 2016 N.J. Super. Unpub. LEXIS 498 (N.J. Super. Ct. Mar. 7, 2016) (recognizing that the TCCWNA is designed to "target those vendors that engage in deceptive practice and [seeks] to only punish those vendors that in fact deceive the consumer, causing harm to the consumer"); Greenberg v. Mahwah Sales & Serv., Inc., No. BER–L–6105–15, 2016 WL 193485 (N.J. Super. Ct. Jan. 8, 2016) ("TCCWNA's primary goal is to prevent confusion among consumers as to their legal rights."); Cameron v. Monkey Joe's Big Nut Co., No. BUR–L–2201–07, 2008 WL 6084192 (N.J. Super. Ct. Aug. 4, 2008) (holding that consumer had no viable TCCWNA claim because he was not aggrieved when he had not suffered the effects of the alleged violation); Walker v. Giuffre, No. MID–L–3187–03 (N.J. Super. Ct. May 17, 2007) (dismissing TCCWNA claim because there is "nothing in the statute to suggest that the Legislature intended to authorize a consumer, who is not actually harmed, to bring a TCCWNA claim based on purely CFA violations as to which she would have no standing to bring suit under the CFA itself").
5Wenger v. Bob's Discount Furniture, LLC, No. 3:14–cv–07707–FLW–LHG (D.N.J. Feb. 29, 2016).
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.