We saw an explosion of lawsuits in 2016 alleging that retailers and other businesses were violating the New Jersey Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA) with the terms of use and other consumer-facing agreements on their websites. While the consumer protection statute has been around for more than 30 years, it has recently gained increased traction with class action plaintiffs who are asserting a broad interpretation of the law. Many plaintiffs have not alleged that they suffered an actual loss or injury, or even read the documents at issue.
There is some uncertainty as to how courts will treat TCCWNA claims against online retailers and companies engaged in e-commerce, but some early decisions have signaled a willingness from the courts to push back against this rising trend.
TCCWNA
Enacted in 1981, the TCCWNA prohibits sellers of products and services from including terms in consumer contracts that violate “any clearly established legal right of a consumer” under New Jersey or federal law. The law also prohibits contracts or notices from including language 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” in New Jersey.
The statute provides minimum damages of $100 per customer, actual damages, or both, as well as attorney’s fees and costs.
Recent Court Decisions
Companies defending against TCCWNA claims in federal court have had some success using a standing defense under the Supreme Court’s Spokeo Inc. v. Robins ruling, which held that plaintiffs must to suffer a “concrete and particularized injury” in order to have standing to sue. Others have successfully argued that plaintiffs are not “aggrieved customers,” as required by the statute.
In Russell v. Croscill Home, for instance, a consumer brought a putative class action in the District of New Jersey alleging that Croscill Home had violated the TCCWNA by imposing unfair provisions in the terms and conditions on its website. Croscill successfully moved to dismiss the lawsuit, in part because the plaintiff hadn’t shown it was an “aggrieved customer.” Aggrieved customer, as defined by Black’s Law Dictionary, means “one entitled to a remedy, especially a party who’s personal, pecuniary or property rights have been adversely affected by another person’s action.” The court said the plaintiff had not established any losses stemming from the terms and conditions on Croscill’s website. “[T]herefore, he is not an aggrieved customer that is required to bring the statutory action.”
Days later, in Hecht v. Hertz Corp., the District of New Jersey rejected similar claims that the terms and conditions on Hertz’s website violated the TCCWNA because they failed to specify whether certain terms applied in New Jersey and whether certain terms were unenforceable under New Jersey law. Using the Supreme Court’s Spokeo analysis, the court said the plaintiff lacked standing to sue. “At bottom, plaintiff’s [complaint] presents the quintessential ‘bare procedural harm, divorced from any concrete harm,’ which cannot ‘satisfy the injury-in-fact requirement of Article III.’”
More recently, Facebook was able to convince a judge to dismiss TCCWNA claims against it based on a choice-of-law provision. In that case, Palomino v. Facebook, a judge in the Northern District of California ruled that a California choice-of-law provision included in the social media website’s Terms of Service precluded two New Jersey residents from suing Facebook under the statute. Under California’s test for enforcing a choice-of-law clause, the plaintiffs were required to show that applying California law would violate “fundamental New Jersey policy.” The judge said the plaintiffs failed to meet this burden, noting that California’s consumer protection laws have been recognized as among the strongest in the country and arguably go even further than the TCCWNA.
Facebook had also argued that it was not a “seller” and plaintiffs were not “consumers.” It has been an outstanding question whether the law applies to companies, like social media websites, who do not have a direct sales relationship with the plaintiffs. The court did not address this issue, limiting its decision to the choice-of-law provision.
Conclusion
From a business’s perspective, these decisions are an encouraging signal from the courts. However, there still remains a good deal of uncertainty about the viability of TCCWNA claims. For companies engaged in e-commerce or doing business in New Jersey, it would be prudent to review online terms of use and other notices and agreements, keeping the TCCWNA in mind.
