TCCWNA Back Before the New Jersey Supreme Court

This year the federal courts in New Jersey have seen a dramatic uptick in the filing of class action lawsuits seeking statutory damages under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”), particularly cases targeting merchants selling or promoting goods or services via the internet. These cases are premised on the notion that the “terms and conditions” or “terms of use” on a company’s website constitute a contract and thus subject companies to potentially massive class-wide penalty damages should the terms of use contain language which violates the TCCWNA. As motions to dismiss are pending in many of these cases, the federal courts in New Jersey may soon provide further clarity on a number of important questions, including: (1) whether online website users are “aggrieved consumers” as required under the statute; (2) whether plaintiffs bringing bare TCCWNA claims have Article III standing given the U.S. Supreme Court’s recent Spokeo decision; and (3) whether the statute reaches contractual provisions wholly unrelated to a consumer’s transaction.

While the federal courts grapple with a variety of questions about whether complaints in the “terms of use” context adequately plead viable claims for relief, the New Jersey Supreme Court is poised to consider questions of statutory interpretation of the TCCWNA within the context of class certification in state court. Specifically, on July 26, 2016, the New Jersey Supreme Court agreed to hear two separate, but related, appeals – Dugan v. TGI Friday’s, Inc. and Bozzi v. OSI Restaurant Partners, LLC.

In Dugan, the Appellate Division reversed a trial court’s Order, which certified a class of TCCWNA plaintiffs alleging unlawful practices relating to the omission of prices from TGI Friday’s menus. While the court found it plausible that the defendant had committed TCCWNA violations via its menus, the court agreed with the defendant that class certification was inappropriate, because “each individual class member [would] be required to demonstrate that he or she was provided with a menu that violates the law.” Implicitly, then, the Court recognized a causal nexus requirement. According to the Appellate Division, when the trial court granted class certification, it erred by including in the class “all persons who purchased an unpriced soda, beer or mixed drink regardless of whether they reviewed the menu before purchasing the beverages.” Reminding the parties that “[t]he purpose of the TCCWNA is to prevent deceptive practices in consumer contracts,” the Appellate Division explained as follows:

Plaintiffs allege that TGIF instructs its servers to hand opened menus to all patrons. However, if TGIF gave its servers such instructions, they may not have always been followed. For example, a server may have forgotten to provide the menu to a customer, or a patron may have told the server a menu was not required. Individualized inquiries would be required to determine whether each class member was handed a menu that lacked beverage pricing.

The court also held that certification under the New Jersey Consumer Fraud Act was similarly inappropriate, given the putative class members’ inability to demonstrate “ascertainable loss” on a class-wide basis. Overall, this ruling is a stark contrast to the Dugan plaintiffs’ view, set forth in their appellate brief, that certification of their class required only proof of the defendant’s general “practices.”

In any event, the same trial court that originally granted certification in Dugan also granted certification in Bozzi on the same grounds. But, in Bozzi, according to the defendant, OSI Restaurant, “the Appellate Division inexplicably denied OSI’s motion for leave to file an interlocutory appeal to the similar class certification order,” even though the Appellate Division had reversed the similar class certification order in Dugan. Thus, the defendant in Bozzi requested the Supreme Court’s intervention claiming that the Appellate Division’s decision in Dugan “mandates the reversal of the class certification order.”

“Different courts are reaching wildly different answers to the same fundamental questions of New Jersey law,” the Dugan plaintiffs wrote to the Supreme Court, referencing these issues of class certification. The New Jersey Supreme Court is therefore now set to answer the same question presented for both cases: “Is class certification appropriate in this action where plaintiffs allege that defendant violated the Consumer Fraud Act and the Truth-in-Consumer Contract, Warranty, and Notice Act by failing to include drink prices on its menu?” (There is a second question presented at issue in Dugan as well, specifically relating to the lawfulness of charging varying drink prices depending on the in-restaurant location of service.) Importantly, the ramifications of the Supreme Court’s answer is likely to reverberate far beyond the realm of menus and drink prices, as the certifiability of TCCWNA classes is crucial to the viability of present and future litigations. (And this is to say nothing of the reality that recent federal decisions appear to directly contradict the notion that omissions are actionable under the TCCWNA.)

Whatever the outcome in Dugan and Bozzi, all eyes will be on this Supreme Court term, as the Court wades into TCCWNA jurisprudence just when the use of that statute to target retailers and other merchants has never been greater. For better or for worse, the Court has only waded into the TCCWNA a small handful of times, including in Kent v. Motor Cars, Inc. v. Reynolds & Reynolds, Co., 207 N.J. 428 (2011), Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013), and Manahawkin Convalescent v. O’Neill, 217 N.J. 99 (2014).

Restaurant.com. is a client of Gibbons P.C. The firm and specifically, Michael R. McDonald, were actively involved in the litigation mentioned. Prior results do not guarantee a similar outcome.
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