New Jersey is widely considered to be among the most consumer-protective states in the country. One of New Jersey's broader consumer protection laws is the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). While this statute is not new, of late it has become a favorite tool of plaintiffs' counsel in fashioning class action complaints seeking potentially staggering damages awards.
Recent cases under the TCCWNA have targeted various terms and conditions that retailers seek to impose for transacting business on their websites, such as contractual limitations of liability and waivers of consumers' rights to recover attorneys' fees. In light of the liberal construction courts and commentators alike have given the TCCWNA, retailers doing business over the Internet need to be particularly mindful of their online terms and conditions, which, if not carefully constructed, could expose those companies to expensive litigation.
The TCCWNA: The Belt-and-Suspenders of Consumer Protection
Under New Jersey's TCCWNA, no seller may offer to a consumer or prospective consumer any contract, warranty or notice that includes any provision that violates a clearly established legal right of the consumer or responsibility of the seller. While the act does not establish any new substantive rights or responsibilities on its own, in the words of one federal judge, it "bolsters rights and responsibilities established by other laws." The act provides New Jersey consumers with an additional method of enforcing rights afforded to them through other legislation, such as the New Jersey Consumer Fraud Act.
For example, many nationwide companies attempt to deal with variations in state law by including blanket provisions such as "void where prohibited" in their contracts, terms and conditions. The TCCWNA impacts this approach, as it states that "[n]o consumer contract, notice or sign shall state that any of its provisions is or may be void, unenforceable or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey." Based on New Jersey's strong interest in protecting its consumers, New Jersey courts have held that the TCCWNA must be interpreted broadly.
The Rise of TCCWNA Class Action Litigation
New Jersey enacted the TCCWNA in 1982. The statute was mostly overlooked, however, until recent years. Beginning in 2009, judicial decisions affirming the certification of TCCWNA class actions led to a significant uptick in TCCWNA class action claims. Recent lawsuits have targeted numerous types of retailers and businesses, attacking various forms of allegedly improper contracts and notices, such as mortgage loan agreements, rental and leasing contracts, product packaging, and even restaurant menus. Increasingly, class action plaintiffs have been targeting online retailers and e-commerce businesses, focusing on those retailers' website terms and conditions.
Plaintiffs' class action counsel find the TCCWNA appealing in part because, in addition to a civil penalty of no less than $100 per violation and/or the consumer's actual damages, the act provides for the consumer's recovery of reasonable attorneys' fees and court costs. Perhaps more importantly, the statute allows a consumer to bring a claim even if he or she has not suffered any actual harm as a result of the offending provision of the offer or contract, and regardless of the good faith intent of the company offering the offending term or provision. While recent federal case law has called into question plaintiffs' ability to bring claims in the U.S. District Courts absent any concrete injury, New Jersey's state courts may take a more liberal approach to plaintiffs' standing to sue.
The TCCWNA allows recovery for even seemingly trivial technical violations, and many commentators have argued for a construction of the act so broad that it would allow for claims by consumers who have not even entered into any transaction with the defendant company, but have instead merely seen the offending contract, notice or term. While no court has yet addressed this question directly, the potential for a significant award to a class consisting of Internet users who have come across an offending term or condition on a company website, for example, is evident. Compounding this concern, courts have held that non-New Jersey residents may also invoke the protections of the Act – and receive the $100 civil penalty award – allowing for nationwide classes of consumers in litigation brought pursuant to the act.
Courts have recognized certain defenses and limits to the scope of the act. For example, one federal court in New Jersey recently dismissed an individual TCCWNA claim, upholding a contractual provision that imposed a reasonable limitations period, after which consumers could no longer bring any claim – including a TCCWNA claim – against a company. Another federal court in New Jersey confirmed that an omission from a contract does not give rise to a TCCWNA claim. Nonetheless, the broad construction other courts have given the TCCWNA certainly warrants diligence and care in all consumer-facing communications and terms presented by companies doing business or offering products in New Jersey.
Bottom Line
New Jersey's TCCWNA allows consumers to recover damages or civil penalties from retailers who use terms and conditions that violate the consumers' clearly established legal rights. With the New Jersey courts' generally broad, consumer-friendly construction of this act, and a statutory penalty of $100 per violation regardless of whether the consumer has suffered any actual harm, the act increasingly has become a favorite among plaintiffs' class action counsel. Online retailers should actively review their terms and conditions, both to ensure compliance with New Jersey law and to be certain that those terms are constructed so as to afford the maximum protection available against these class action claims.
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