United States: New Jersey's Truth In Consumer Contract Law Given Additional Clarity In New Ruling

In rejecting certification of two classes due to lack of predominance, the New Jersey Supreme Court held in Dugan v. TGI Fridays, Inc.[1] that the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) does not apply when a defendant fails to provide a consumer with a required writing, such as a written price disclosure, because the act by its terms addresses the content of consumer contracts, warranties, notices and signs. A claimant who did not receive a purportedly required document therefore is not an "aggrieved consumer." Moreover, failing to include beverage prices in a restaurant menu did not violate a "clearly established legal right" or "responsibility," despite a statute requiring point-of-sale disclosure of the price for retail merchandise, such as through a tag or sign. Taking a practical approach, the court noted that the price disclosure statute has not been held to require such disclosure and in practice many food-service businesses in the state do not list drink prices in menus. In sum, the court found nothing in the legislative history of TCCWNA suggesting an intent to "impose billion-dollar penalties on restaurants that serve unpriced food and beverages to customers."

An explosion of class action litigation in New Jersey targeting standardized consumer contracts has focused attention on a decades-old, consumer protection statute known as the TCCWNA.[2] The law prohibits sellers and others from including any provision that violates "any clearly established legal right of a consumer or responsibility of a seller" in a written consumer contract, warranty, notice or sign. Violators can be liable to an "aggrieved consumer" for a civil penalty of "not less than $100" or actual damages, together with an award of attorneys' fees and costs. In recent actions under the TCCWNA, plaintiffs have challenged provisions in auto leases, website terms of use, car rental agreements, casino promotions, furniture sales contracts, storage unit agreements and even restaurant menus.

Much of the controversy surrounding the TCCWNA has centered on the constitutional standing of individuals or classes to assert claims where a statutory violation is unaccompanied by injury in fact. Relying on the U.S. Supreme Court's decision in Spokeo v. Robins,[3] a number of courts have concluded that such claimants lack standing to pursue claims in federal court under Article III of the U.S. Constitution.[4] Additionally, courts have struggled with the questions of who is an "aggrieved consumer" and what is needed to constitute a "clearly established" legal right or responsibility, because the TCCWNA defines neither phrase. Earlier this year, the U.S. Court of Appeals for the Third Circuit in Spade v. Select Comfort[5] certified these questions directly to the New Jersey Supreme Court in the context of class claims based on the alleged failure of furniture sellers to include in their contracts certain language required by state furniture delivery regulations. Although it has yet to answer the certified questions, the New Jersey Supreme Court provided useful guidance on the meaning of "aggrieved consumer" and how to determine whether an "established legal right or responsibility" is implicated.

The Dugan opinion resolves two cases, consolidated for purposes of appeal. In each case, customers complained that the defendant restaurants they patronized failed to include drink prices in their menus. According to plaintiffs, this omission in a consumer "notice" violated the restaurants' clearly established responsibility to post prices on merchandise as specified in a 1973 law.[6] The absence of disclosed prices, plaintiffs contended, caused class members to pay more for their drinks and deprived them of "their legitimate expectation of an objectively reasonable price."

In both cases, the trial courts certified classes under the New Jersey Consumer Fraud Act (NJCFA) and the TCCWNA.[7] The Supreme Court first addressed the propriety of certification of the NJCFA claims. In the Dugan case, the court found that certification was improper where plaintiff's proffer of common evidence of damages and causation was premised upon a "fraud on the market" theory. The court also reversed certification of the NJCFA claim in the other portion of the consolidated appeal, Bozzi v. OSI Restaurant Partners, LLC, and remanded for certification of a narrowed class composed of customers who were charged different prices for the same drink on the same visit. These rulings, particularly rejection of a fraud on the market approach to damages and causation, are significant in their own right. The court's treatment of the TCCWNA claims, however, will have a more immediate impact given the number of pending cases and the reigning uncertainty in this area of the law as evidenced by the Third Circuit's request for guidance.

In its decision, a 5-1 majority of the New Jersey Supreme Court held that certification of a class of TCCWNA claimants was inappropriate in both appeals because the plaintiffs could not satisfy the predominance factor under Rule 4:32-1(b)(3). That inquiry requires a determination of whether questions of law and fact common to members of the class predominate over any questions affecting only individual members. In resolving this issue, courts employ a rigorous analysis that involves looking beyond the pleadings to examine the substantive legal claims.

Applying that standard to the case before it, the court held that individual questions predominated with respect to the issue of whether the class members were "aggrieved consumers." It first determined that the TCCWNA "does not apply when a defendant fails to provide the consumer with a required writing." In order to succeed on the claim, therefore, plaintiff would have to prove that class members, at a minimum, were actually provided the menu that allegedly violated the act. Plaintiffs' only evidence to support such uniformity were training documents that instructed servers to hand menus to customers. That evidence was simply not enough in the court's view:

Even if we accept plaintiff's theory of liability under the TCCWNA, the testimony of the individual claimant or another witness would be necessary to prove that the plaintiff satisfies the statute's requirements and is thus an "aggrieved customer."


The court went on to reject plaintiff's suggestion that a process could be employed, post-verdict, to determine in each individual's case whether they were provided with the menu. The court reasoned that such a process would be an inappropriate forum to determine an element that is essential to liability under the TCCWNA.

Turning to the "clearly established" legal right or responsibility element, the court similarly recognized the potential for disparate results for different members of the class. In support of their claim, plaintiffs cited to a statute that generally prohibits the sale of merchandise without disclosure of the total selling price on a tag, label or sign. The court rejected the contention that this statute created a "clearly established" right or responsibility, noting that in the several decades of its existence, there has never been any case that held this statute applicable to a restaurant or other food service business. Instead, the court recognized the common practice of many food service businesses in New Jersey of offering food and drinks to customers without designating in writing the prices for the items. The court summed up its commonsense approach to interpreting the TCCWNA with the following observation:

Nothing in the legislative history of the TCCWNA, which focuses on sellers' inclusion of legally invalid or unenforceable provisions in consumer contracts, suggests that when the Legislature enacted the statute, it intended to impose billion-dollar penalties on restaurants that serve unpriced food and beverages to customers.


The import of Dugan will likely be greatest when the court decides the questions that the Third Circuit certified in Spade. The court may, consistent with Dugan, offer a narrow perspective on what it means to be an "aggrieved customer." Clearly, those who did not receive the written contract will be excluded. And, perhaps, the same logic will foreclose the status to a customer in a future case who receives the writing, but who never reads it.[8] Such a holding would create additional hurdles to those seeking class certification since, in many cases, there would likely be inconsistent proofs as to whether class members actually read their agreements, website terms of use or posted signage.

Additionally, the court's embrace of marketplace reality seen in its analysis of the "clearly established" element will guide future courts in how they treat this issue. By eschewing an overly broad application of a somewhat vaguely worded statute in favor of implementing the legislature's true intent to impose an "obligation on sellers to acknowledge clearly established consumer rights," the decision should discourage lower courts from finding "clearly established" legal rights that are not firmly entrenched in the law or consumers' realistic expectations.

Associate Amberly Nicole Beye contributed to this alert.


[1] 2017 N.J. Lexis 975 (October 4, 2017).

[2] N.J.S.A. 56:12-14 to 18.

[3] 578 U.S. ___, 136 S. Ct. 1540 (2016).

[4] See, e.g., Rubin v. J. Crew Grp., Inc., 2017 U.S. Dist. Lexis 46389, at *21-22 (D.N.J. Mar. 29, 2017); Hecht v. Hertz Corp., 2016 U.S. Dist. Lexis 145589 (D.N.J. Oct. 20, 2016); Candelario v. RIP Curl, Inc., 2016 U.S. Dist. Lexis 163019 (C.D. Cal. Sept. 7, 2016).

[5] Spade v. Select Comfort, No. 16-1558, Wenger v. Bob's Discount Furniture, LLC, No. 16-1572 (3d Cir. petition for cert. of question of state law filed Nov. 18, 2016).

[6] N.J.S.A. 56:8-2.5.

[7] The class certification order was subsequently reversed in the Dugan matter by the Appellate Division. The defendant's motion for leave to appeal in the companion matter was denied by the Appellate Division, but granted by the Supreme Court.

[8] One issue the court did not address was the extent to which a TCCWNA claim could ever be based on a mere omission. The Third Circuit, in predicting how the New Jersey Supreme Court would rule, has previously held that the failure to include language in a writing cannot form the basis for a claim. Watkins v. DinEquity, Inc., 591 Fed. Appx. 132 (3d Cir. 2014) (holding that failure to include beverage prices in a menu was not actionable because the TCCWNA only proscribes the inclusion of terms that violate consumers' rights).

Click here to read further Insights from Day Pitney

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

    Disclaimer

    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

    Registration

    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

    Cookies

    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

    Links

    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

    Mail-A-Friend

    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

    Emails

    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

    Security

    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions