In Duke v. All American Ford, the New Jersey Appellate Division affirmed dismissal of four putative class actions (consolidated for appeal) alleging that agreements to purchase, lease, or rent motor vehicles violated the Truth in Consumer Contracts, Warranty, and Notice Act’s (TCCWNA) Section 16. The trial courts had dismissed all such claims for failure to plead a violation of Section 16. While the appeals in these matters were pending, the Supreme Court issued its decision in Spade v. Select Comfort, holding that “an adverse consequence is a necessary element of the TCCWNA cause of action.” As a result of the Supreme Court’s decision in Spade, the Appellate Division in Duke rejected the appeals and affirmed the orders of dismissal without even considering the various substantive Section 16 arguments.
Each of the putative class action complaints alleged that certain clauses in purchase, lease, or rental documents violated Section 16 of the TCCWNA, which, among other things, prohibits language in a written contract “that any of its provisions is or may be void, unenforceable, or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey.” Three of the cases (Duke, Barbarino, and Greenberg), involved contracts for the lease or purchase of vehicles, which contained a clause related to the payment of sales and use tax stating, in part, that “Consumer assumes and agrees to pay, unless prohibited by law, any such [taxes].” In Walters, the plaintiff took issue with three separate clauses (insurance clause, penalty clause, and release clause). Walters argued that his contract contained qualifying phrases that violated Section 16, including “where state law requires us to,” “the maximum amount allowed by law,” “the maximum amount permitted by law,” and “unless prohibited by law.” However, none of the four complaints had alleged that the plaintiffs or any putative class member suffered any harm or any adverse consequence as a result of the contractual language in question, and, thus, the trial courts granted motions to dismiss for failure to state a claim, and plaintiffs appealed.
The Appellate Division affirmed on the basis of the Supreme Court’s conclusion in Spade that, “[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 held that, just like the Section 15 violation in Spade, Section 16 requires plaintiff to be an “aggrieved consumer.” Thus, the complaints were infirm for failing to “allege that any plaintiff or any member of a putative class has suffered harm or an adverse consequence as the result of a consumer contract, notice, sign, or warranty containing any provision or language prohibited by Section 16.” The court also denied Plaintiffs’ request for remand to the trial courts to amend their complaints, finding that any amendment would be futile, because plaintiff did not explain how putative class members could have suffered an adverse consequence under the contracts.
The Duke decision confirms that the feared TCCWNA no-injury class actions can no longer stand, either under Section 16 or Section 15. As one of the trial courts warned, “if plaintiffs’ interpretation of Section 16 were correct, plaintiffs and the putative class would reap a windfall in the form of civil penalties, despite suffering no harm or deprivation of rights, and thereby subject retailers to potentially endless liability even though they seemingly comply with the language of the TCCWNA as drafted.” This decision should bring an end to most all such no-injury class claims under TCCWNA.