New Jersey Supreme Court Limits Claims Under the TCCWNA

For about two years, we have been blogging about New Jersey’s TCCWNA, the Truth in Consumer Contract, Warranty and Notice Act. (See our past stories here and here).  This week, New Jersey’s Supreme Court finally got around to issuing a common-sense interpretation to the TCCWNA, a statute which had quickly become a favorite of class-action attorneys seeking the $100 per-violation penalty. Going forward, purely technical violations of the TCCWNA will not be sufficient to maintain a claim.

In Spade v. Select Comfort Corp. (decided by New Jersey’s Supreme Court on April 16, 2018), it was determined that only injured consumers could recover the $100 penalty.  Previously, plaintiffs had argued that anyone could sue a business that offered a contract to a consumer “which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller.”  Lawsuits were often filed by New Jersey residents against online businesses based on provisions of their website terms of use that even arguably violated a “clearly established legal right.”  Faced with these lawsuits, and the uncertainty of which rights were “clearly established,” businesses often chose to settle cases rather than go to the expense of fighting the suit in court.  The chance at a quickie settlement caused many lawsuits of dubious credibility to be filed against legitimate business offerings.

The Spade decision will certainly reduce the amount of TCCWNA litigation because now, a consumer cannot win a lawsuit over an illegal contract provision or term unless the consumer also suffers an injury due to the enforcement of the illegal provision. A look at the facts of two of the plaintiffs in the Spade case will make this concept easier to understand:

The Wenger family ordered furniture from Bob's Discount Furniture.  They received a document from the store saying that if a refund of a special order was requested more than three days after purchase, the store was entitled to deduct a special order fee from the refund.  The Wengers argued this violated New Jersey regulations because: (a) a full refund is required by law if furniture is delivered late; and (b) the fee was disclosed in smaller than ten-point font, when New Jersey requires ten-point font or larger.  However, it was undisputed that the furniture was delivered on time.

The issue of the case then, was whether a consumer who received a contract including provisions which violate New Jersey law, but who (like the Wengers) suffered no adverse consequences as a result of the contract's noncompliance, can recover under the TCCWNA.

Because the wording in the TCCWNA stated that an “aggrieved consumer”--  not any consumer—can recover, the Supreme Court interpreted this phrase as requiring an injury.  “In the absence of evidence that the consumer suffered adverse consequences as a result of the defendant's regulatory violation, a consumer is not an ‘aggrieved consumer’ for purposes of the TCCWNA. In the setting of these appeals, if a consumer has entered into a sales contract containing a provision that violated [New Jersey law], but his or her furniture was delivered conforming and on schedule, and he or she has incurred no monetary damages or adverse consequences, that consumer has suffered no harm. Such a consumer is not an ‘aggrieved consumer.’”  The plaintiffs’ claims in the Spade lawsuit were dismissed due to lack of injury.

One word of caution, however.  A consumer can be “aggrieved” by an injury that has nothing to do with the loss of money.  The Supreme Court’s ruling cited as an example a situation of an untimely furniture delivery and misleading “no refunds” language that leaves a consumer without furniture he or she needed during a family gathering.  In such a case, even though no money was lost, the consumer would be an “aggrieved consumer.”

TAKEAWAY: If a business is sued under New Jersey’s TCCWNA, there is now a clear legal requirement that the consumer must be able to show an actual injury in order to prevail.  Simply showing an illegal contract provision is not enough to win a TCCWNA lawsuit.

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