A New Wave of TCCWNA Claims – Is Your Company Next?January 2017
New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) continues to pose a risk for nearly every company that operates a website offering consumer goods or services. Enacted over three decades ago, TCCWNA was intended to protect consumers from companies using contracts to limit consumers’ already-established rights. After a lengthy period of dormancy, the statute gained new life in New Jersey federal and state courts as plaintiffs’ attorneys filed a series of lawsuits and sent numerous demand letters to companies whose websites receive thousands of visitors per day seeking to recover $100 per alleged violation, plus attorney’s fees and costs. In the class action context, violations of the statute can expose companies to enormous liability. Fortunately, courts are seeing through this ruse, and requiring proof of actual damages, even though the statute does not expressly require it.
As a supplement to our August client alert, we provide the following summary of key TCCWNA cases and general guidance to minimize risk:
TCCWNA Extends to Terms and Conditions on Commercial Websites: In Shelton v. Restaurant.com, Inc., 70 A.3d 544 (N.J. 2013), the court held that restaurant coupons sold by an online retailer for use at a participating restaurant both constituted “written consumer contract[s],” and displayed a “written notice,” for purposes of TCCWNA. In this case, Restaurant.com, an internet business that markets, advertises, and sells certificates redeemable at participating restaurants, was being sued for offering coupons that contained: (1) a provision identifying an expiration date less than twenty-four months from the date of issue; and (2) a provision that the expiration date or any other term in the certificate is applicable except where “prohibited by law” without specifying whether or not that term was applicable in New Jersey.
In Shelton, the court reasoned that because Restaurant.com extended offers to dine through its website, accepted payments and issued printable certificates, the transactions had all the basic features of a contract, and therefore the certificates must be considered written consumer contracts. Id. at 556. Further, the court found that the terms of the certificates must be considered “notice” for purposes of TCCWNA because the ordinary meaning of the term “notice,” along with the legislative intent of the Act, clearly encompass online certificates/coupons. Id. at 558.
Terms and conditions must not violate a consumer’s “clearly-established rights”: Generally, in order to establish a violation under TCCWNA a plaintiff need not prevail on the underlying claim, or even establish every element of the underlying claim; plaintiff need only demonstrate that the violation of a “clearly established legal right…established by State or Federal law” has occurred. N.J.S.A. 56:12-15. However, TCCWNA can only be triggered if the right was “clearly established” by law at the time the challenged contract, notice, or provision was offered to the consumer. Shelton at 549. While there is no exhaustive list of clearly established rights, case law has shed light on certain types of provisions that should be avoided entirely such as:
- provisions that purport to waive the consumer’s right to attorney’s fees and require the consumer to split the cost of litigation. See Johnson v. Wynn’s Extended Care, Inc., 2015 WL 8781374 (D.N.J. Dec. 15, 2015);
- provisions that purport to release the company from liability for personal injuries or property damage. See Castro v. Sovran Self Storage, Inc., 114 F. Supp. 3d 204, 216-17 (D.N.J. Dec. 15, 2015);
- contracts that fail to specify that a service fee is included in a registration fee for a vehicle as required under auto sales regulations. See Bosland v. Warnock Dodge, Inc., 933 A.2d 942 (N.J. Super. App. Div. 2007); and
- provisions allowing the company to charge a fee if a check is returned for any reason (which violates the Retail Installment Sales Act). See United Consumer Fin. Services Co. v. Carbo, 982 A.2d 7 (N.J. Super. App. Div. 2009).
Courts have yet to offer an exhaustive list of “established rights,” as there are several statues and common law principles set in place to protect consumers. Companies should, however, use a common sense approach whenever they attempt to alter or limit a consumer right, and contact an attorney if there are any questions regarding whether a particular provision is legally appropriate.
TCCWNA may extend to non-New Jersey residents: In Miller v. Samsung Elecs. Am., Inc., CIV.A. 14-4076, 2015 WL 3965608, at 11 (D.N.J. June 29, 2015), the court found that plaintiff’s status as a non-resident of New Jersey alone was not enough to dismiss plaintiff’s claim. Miller involved a Florida resident who purchased a laptop computer from a New York corporation, with its principal place of business in New Jersey. Plaintiff alleged to have relied upon false representations made on defendant’s website, and that defendant violated TCCWNA by offering a “written contract” that violated plaintiff’s clearly established legal rights as a consumer.
In this case, the court engaged in a choice of law analysis to determine whether New Jersey law or the law of the plaintiff’s state of residence applied to plaintiff’s TCCWNA claim. The court considered: (1) the place of contracting, (2) the place of negotiation of the contract, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicile, residence, nationality, place of incorporation and place of business of the parties. Here, the court dismissed plaintiff’s claim for lack of standing, finding that Florida had the most significant relationship to the claim based on the particular facts of the case. However, the court left the door open for other non-residents to sue under TCCWNA.
Plaintiff must be an “aggrieved person”: TCCWNA allows only an “aggrieved consumer” to recover a civil penalty and/or actual damages, together with reasonable attorney’s fees and costs. N.J.S.A. 56:12-17. While TCCWNA does not define what it means to be an “aggrieved consumer,” recent case law suggests that at a minimum the plaintiff must be exposed to the alleged terms and conditions. In Russell v. Croscill Home, LLC, No. 3:16-cv-01190 (D.N.J. Oct. 11, 2016), the plaintiff filed a putative class action alleging that the terms and conditions on the defendant’s website violated TCCWNA. The court dismissed the complaint for failure to state a claim under TCCWNA because he did not allege that the product he purchased was defective, that he was injured, or that he had even read the terms and conditions on the website. Id. at 8, 9.
Similarly, in Hecht v.The Hertz, 2016 WL 6139911, at *1 (D.N.J. Oct. 20, 2016), the plaintiff filed a putative class action alleging that the defendant violated TCCWNA because its online terms and conditions did not specify whether New Jersey was one of the jurisdictions where certain exceptions applied. In dismissing the complaint, the court noted that the plaintiff “[did] not allege that he even viewed (let alone relied upon to his detriment) either of these sections of Hertz’s website.” Id. at 4. The court went further to say that the plaintiff’s complaint presented a “bare procedural harm, divorced from any concrete harm,” and suggested that a plaintiff must allege more than mere exposure to the terms and conditions in order to state a claim under TCCWNA. Id.
While TCCWNA does not define what it means to be an “aggrieved person,” it appears that courts are reluctant to allow class actions based solely on mere exposure to online terms and conditions, divorced from any injury-in-fact. With that said, both of the above-mentioned cases are currently on appeal. In the following months, we should get a better understanding from the courts on what it means to be an “aggrieved person” for purposes of TCCWNA.
Avoiding Litigation and Mitigating Risks
TCCWNA is considerably vague and broad in scope. This has allowed plaintiffs’ attorneys to push boundaries in terms of case theory. Under TCCWNA, there are two types of provisions companies should be aware of:
- “Void where prohibited by law” provisions. Many companies engaged in online commerce include blanket savings clauses in their terms and conditions ‒ such as “void where prohibited by law” ‒ in order to convey to the consumer that certain provisions may be inapplicable in some jurisdictions. As mentioned earlier, these types of catch-all provisions are prohibited under TCCWNA. Section 16 requires that terms and conditions clearly identify which provisions are void or unenforceable in New Jersey specifically.
- Provisions that contract away clearly established rights of the consumer or responsibilities of the company. While the courts have not yet provided a fully comprehensive list of prohibited provisions, recent case law cautions against the following:
- limiting the liability of your company for personal injuries or property damage
- requiring consumers to waive their right to recover attorney’s fees
- requiring consumers to split the cost of litigation
- requiring consumers to indemnify the company for claims for damages or lost property or personal injury
- requiring consumers to indemnify the company against losses resulting from the company’s own negligence
- requiring consumers to waive the right to a jury trial
- disclaiming liability for failure to prevent all third-party criminal conduct
Companies can mitigate their exposure to liability by making some simple adjustments to their online terms and conditions. In drafting or revising online terms and conditions, companies should look to do the following:
Avoid overreaching. In general, companies should eliminate provisions that purport to limit the consumer’s ability to seek redress traditionally available to consumer-plaintiffs. For starters, the list of prohibited provisions provided above is a good guideline. Companies should not attempt to shorten statute of limitation periods, require consumers to waive the right to a jury trial, or limit any other well-established right of the consumer.
Avoid blanket-savings clauses. Companies must remember that TCCWNA requires that contracts and notices state clearly which provisions may be void or inapplicable in New Jersey. It is insufficient to simply state “void where prohibited.”
Avoid false statements entirely. While this may be the most obvious thing to avoid, companies should not overlook the importance of making sure that their online terms and conditions do not contain false or misleading information.
In conclusion, case law is still developing as this new wave of litigation works its way through New Jersey courts. Many questions still exist, including those regarding out-of-state plaintiffs, what types of injuries (if any) must be alleged, and which specific rights are covered under TCCWNA. However, companies should be aware that their websites can land them in court for violating TCCWNA. Website terms and conditions should be carefully crafted, and any questions about the legality of certain provisions should be brought to an attorney.
If you need help determining whether your terms and conditions violate TCCWNA or if you have already run afoul of the statute and need counsel, please contact:
Barry Werbin at + 212 592 1418 or [email protected]
© 2017 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.