New Jersey Supreme Court’s “Aggrieved Consumer” Ruling Will Erode TCCWNA Class Actions

The New Jersey Supreme Court’s April 16, 2018 decision in Spade v. Select Comfort (consolidated with Wenger v. Bob’s Discount Furniture, LLC), entirely destroys the viability of “no injury” class actions under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) and will also surely erode the viability of TCCWNA class certification more broadly. Via referred questions from the Third Circuit Court of Appeals, the N.J. Supreme Court held that in order to be an “aggrieved consumer” under the TCCWNA, a plaintiff must demonstrate an adverse consequence caused by an unlawful provision in a consumer contract or other writing.

The TCCWNA essentially prohibits businesses from including in any written consumer contract, warranty, or sign any provision that “violates any clearly established legal right of a consumer or responsibility of a seller” or other business. N.J.S.A. § 56:12-15. Although the TCCWNA on its face appears to only allow an “aggrieved consumer” to sue to recover a “civil penalty” of not less than $100 or actual damages, this Statute has been used—some might say abused—with increasing frequency by the plaintiff class action bar to bring “no injury” class actions premised solely upon the existence of a contract containing some unenforceable or illegal provision. Naturally, tens or hundreds of thousands of uniform consumer contracts with allegedly offending provisions could lead to devastating potential exposure, even where consumers admittedly suffered no harm. Although TCCWNA was enacted back in 1981, the Supreme Court had never before addressed the question of whether the mere receipt of an offending consumer contract rendered that consumer an “aggrieved consumer” entitled to the statutory penalty remedies of the Act—until now.

In Spade/Wenger, the defendants moved to dismiss, asserting that the plaintiffs had failed to state a claim under the TCCWNA. The plaintiffs alleged that they had entered into furniture sales contracts, which included provisions that violate certain New Jersey regulations. But the defendants argued (1) that these regulations did not constitute “clearly established legal rights” as required by the statute and (2) that, either way, the plaintiffs failed to allege that the provisions had caused them any actual harm.

After the U.S. District Court consolidated Spade and Wenger, the Court granted motions to dismiss, and the plaintiffs appealed. The Third Circuit determined that the appeals “raised important and unresolved questions of New Jersey law” and thus certified two questions of law to the Supreme Court pursuant to Rule 2:12A-3:

  1. Does a violation of the Furniture Delivery Regulations alone constitute a violation of a clearly established right or responsibility of the seller under the TCCWNA and thus provides a basis for relief under the TCCWNA?
  2. Is a consumer who receives a contract that does not comply with the Furniture Delivery Regulations, but has not suffered any adverse consequences from the noncompliance, an “aggrieved consumer” under the TCCWNA?

With respect to the first question, the defendants asserted that “administrative regulations cannot give rise to a ‘clearly established’ legal right or responsibility for purposes of the TCCWNA.” And various amici supported the defendants arguments by adding, for example, that provisions that violate regulations by omission should not count as violating the TCCWNA and/or that “clearly established” must mean “well-recognized,” whether regulation or not. The Court, however, held that “[n]othing in either the TCCWNA’s plain language or its legislative history suggests that the inclusion of language in a contract or other writing that violates a regulation cannot be the basis for a claim under [the statute].”

However, the Court’s answer to the second question will likely result in the most far-reaching and significant consequences for New Jersey retailers and other businesses.

Applying “familiar principles of statutory construction”—including the rejection of surplusage, the appreciation of context, and the impact of legislative history—the Court ultimately ruled that “[a] plaintiff pursing a TCCWNA cause of action must prove four elements” including “that the plaintiff is an ‘aggrieved consumer.’” Further, “the term ‘aggrieved consumer’ denotes a consumer who has suffered some form of harm as a result of the defendant’s conduct” and “[i]n 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.”

The Court additionally explained that “[i]f ‘aggrieved consumer’ were construed to mean nothing more than a ‘consumer’ to whom a contract or other writing is offered, given or displayed, the term ‘aggrieved’ would indeed be superfluous.” In that sense, the Court’s conclusion is the obvious one. But, in the years leading up to Spade/Wenger, some courts had predicted this “injury” requirement, while others had not.

This landmark opinion from the New Jersey Supreme Court no doubt comes as a sigh of relief from companies targeted by plaintiffs alleging “no injury” TCCWNA class actions and brings New Jersey consumer protection law in greater alignment with that of other states. In recent years, there has been a rising tide of “no injury” TCCWNA litigation—especially in the e-commerce space—which has now essentially been foreclosed by this decision.

We will continue to monitor TCCWNA jurisprudence going forward and report on whatever trends rise in the wake of Spade/Wenger.

Michael R. McDonald, a Director in the Gibbons Commercial & Criminal Litigation Department, and Joshua S. Levy, an Associate in the Gibbons Commercial & Criminal Litigation Department, authored this post.
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