Category: Class Action Defense

New Jersey Appellate Division Finds Individual Causation Issues Related to Ascertainable Loss Detrimental to Class Certification

New Jersey Appellate Division Finds Individual Causation Issues Related to Ascertainable Loss Detrimental to Class Certification

In Polanco v. Star Career Academy, the New Jersey Appellate Division vacated a $10.7 million final verdict against Star Career Academy (“Star”), a New Jersey for-profit school. At issue in the New Jersey Consumer Fraud Act (“CFA”) class action trial below was whether Star concealed and failed to disclose necessary information to Surgical Technology (“ST”) program applicants and students. Specifically, it was alleged that the school did not have the required accreditation needed for students to gain employment upon graduation. Trial resulted in a verdict against Star in the amount of $9 million, with a $1.7 million fee award. On appeal, the appellate panel first found that students seeking an education from a school like Star have the right to know, before enrollment, whether the school has proper accreditation. This is to afford students the opportunity to attend an accredited institution instead. The panel found that because the record contained evidence that Star had made material misrepresentations to students regarding the lack of proper accreditation, Star’s pre-trial summary judgment motion had properly been denied. However, the appellate panel concluded that the trial court had improperly certified the class because the class-wide claims did not predominate over individual allegations by the...

New Jersey Appellate Division Affirms Dismissal of Four Putative Class Actions Claiming Violations of Section 16 of the TCCWNA

New Jersey Appellate Division Affirms Dismissal of Four Putative Class Actions Claiming Violations of Section 16 of the TCCWNA

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,...

Third Circuit Affirms Remand of Class Action to State Court Under “Local Controversy” Exception

Third Circuit Affirms Remand of Class Action to State Court Under “Local Controversy” Exception

In a decision that may broaden application of the “local controversy” exception to removal under the Class Action Fairness Act (“CAFA”), 28 U.S.C. § 1332(d)(4), the Third Circuit recently affirmed the remand of a putative class action to New Jersey state court holding a corporate defendant with New Jersey citizenship could be considered a “local defendant” because it did not fully divest itself of liability after previously transferring its potential liabilities to a Delaware entity and, thus, remained a real party in interest. In Walsh v. Defenders, Inc., putative class members filed their complaint in New Jersey Superior Court alleging that the contracts they entered into with Defendants related to the class members’ purchase of home security equipment and monitoring services violated New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”) and the New Jersey Consumer Fraud Act (“NJCFA”). Defendants removed the matter to federal court asserting CAFA jurisdiction, and Plaintiff moved to remand under CAFA’s local controversy exception. After initially denying Plaintiff’s motion to remand, the District Court granted Plaintiff’s motion for reconsideration when additional discovery showed that the only defendant with New Jersey citizenship, ADT SSI-Tyco, had contracted with 35.3% of the putative class members. Defendants appealed and...

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

Third Circuit Affirms Narrow Definition of Autodialer Under the TCPA

In a precedential decision, the Third Circuit affirmed a narrow reading of autodialer under the Telephone Consumer Protection Act (“TCPA”), the first such decision within this Circuit following the D.C. Circuit’s rejection of the FCC’s 2015 definition of autodialer in ACA International. In Dominguez v. Yahoo, Inc., plaintiff purchased a cell phone with a reassigned telephone number, the prior owner of which had subscribed to Yahoo’s Email SMS Service. Because the prior owner of the number never cancelled the subscription, plaintiff received a text message from Yahoo every time the prior owner received an email, which amounted to thousands of text messages. Plaintiff filed a putative class action alleging that Yahoo had violated the TCPA, which requires that plaintiff prove that Yahoo’s Email SMS Service was an “automatic telephone dialing system,” i.e., an autodialer. Following the FCC’s 2015 ruling, plaintiff amended his complaint to allege that the Email SMS Service “ha[d] the potential capacity to place autodialed calls.” Yahoo moved for summary judgment, and both parties submitted expert reports addressing the Email SMS Service’s latent or potential capacity. The District Court granted Yahoo’s motion to exclude plaintiff’s expert reports and granted summary judgment in favor of Yahoo. On appeal, the...

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

Supreme Court Limits American Pipe Tolling, Holds Tolling Does Not Apply to Successive Class Actions

The Supreme Court has acted to ensure that the class action device cannot be used to indefinitely extend the statute of limitations, holding in China Agritech, Inc. v. Resh that American Pipe tolling does not apply to successive class actions. American Pipe tolling dates to 1974, when the Supreme Court held that the filing of a class action tolls the statute of limitations for absent class members who seek to intervene after the court has denied class certification. Nine years later, in Crown, Cork & Seal, the Supreme Court extended the rule to toll the statute of limitations for absent class members who choose to file their own individual actions. Resolving a split amongst the Circuits, the Supreme Court held that American Pipe tolling does not apply where class certification is denied and a class member subsequently seeks to bring a new class action after the expiration of the statute of limitations. The Court opined that the “efficiency and economy of litigation” that underpin the American Pipe rule do not support tolling for successive class actions. Rather, the Court determined, barring tolling in such situations will promote efficiency by requiring all litigants who wish to act as class representatives to come...

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Third Circuit Affirms the Dismissal of a Putative Class Action against TD Bank for Failure to Meet Pleading Requirements

Last month, the Third Circuit upheld the dismissal of a putative class action against TD Bank, finding that plaintiffs’ conclusory allegations lacked sufficient evidence and failed to satisfy Rule 9(b)’s heightened pleading standard for claims that sound in fraud. In MZL Capital Holdings, Inc. et al. v. TD Bank, N.A. et al., two account holders with TD Bank filed a proposed class action accusing the Bank of obscuring its exchange rates and improperly charging an embedded fee for converting foreign currency, thereby defrauding its customers in violation of the New Jersey Consumer Fraud Act. Shortly thereafter, plaintiffs amended their complaint to add claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of numerous other state consumer-protection laws. TD Bank moved to dismiss plaintiffs’ claims for failure to state a claim, and the District Court granted TD Bank’s motion, dismissing all of plaintiffs’ claims. On appeal, the Third Circuit affirmed the district court’s decision, concluding that plaintiffs’ claims were inadequately pled. At the outset, the Court re-affirmed the basic principle that claims brought under the Consumer Fraud Act sound in fraud and therefore must comply with Rule 9(b)’s particularity requirement. The Third...

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

New Jersey Appellate Court Upholds Class Waiver & Arbitration Provision

The New Jersey Supreme Court has noted that both “federal and state policies favor[] arbitration.” Nevertheless, the High Court’s Atalese v. Legal Servs. Grp. decision—rejecting the enforceability of an arbitration clause—continues to raise questions about whether New Jersey state courts view such provisions with more skepticism than other jurisdictions. In this regard, the Appellate Division’s recent decision in Signor v. GWC Warranty Corp. provides some welcome guidance. In Signor, the trial court refused to dismiss and compel arbitration of class claims grounded in a particular automobile service contract. The contract contained an arbitration provision with language including: ARBITRATION PROVISION: READ THE FOLLOWING ARBITRATION PROVISION (“Provision”) CAREFULLY, IT LIMITS CERTAIN RIGHTS, INCLUDING YOUR RIGHT TO OBTAIN RELIEF OR DAMAGES THROUGH COURT ACTION. Any and all claims, disputes, or controversies of any nature whatsoever . . . shall be resolved by binding arbitration before a single arbitrator. You agree that any arbitration proceeding will only consider Your Claims. Claims by, or on behalf of, other individuals will not be arbitrated in any proceeding that is considering Your Claims. You and We understand and agree that because of this Provision neither You nor Us will have the right to go to court except as provided...

Third Circuit Holds Agreement to Arbitrate in Illusory Forum Is Unenforceable

Third Circuit Holds Agreement to Arbitrate in Illusory Forum Is Unenforceable

The Third Circuit Court of Appeals recently held, in a precedential decision, that when parties enter an agreement directing them to arbitrate in an illusory forum, the forum selection clause is not severable and the entire agreement to arbitrate is unenforceable. In MacDonald v. CashCall, Inc. et al., a plaintiff brought suit on behalf of himself and a putative class, alleging a loan agreement between the parties was unconscionable and usurious. The agreement at issue included “(1) a provision requiring that all disputes be resolved through arbitration conducted by a representative of the Cheyenne River Sioux Tribe (‘CRST’) and (2) a clause that delegates questions about the arbitration provision’s enforceability to the arbitrator.” The defendants moved to compel arbitration. The district court declined to compel arbitration because the agreement at issue expressly disavowed federal and state law, thus rendering the arbitration provisions invalid as an impermissible prospective waiver of federal and state statutory rights. The district court further held that the arbitration agreement was unenforceable because the forum was illusory, as the selected forum did not conduct arbitrations or have rules for conducting arbitrations. The Third Circuit affirmed the district court’s conclusion that the loan agreement’s arbitration provision cannot direct...

In Defective Shingles Class Action, Third Circuit Rejects Novel “Expected Useful Life” Defect Theory Premised on Warranty Period

In Defective Shingles Class Action, Third Circuit Rejects Novel “Expected Useful Life” Defect Theory Premised on Warranty Period

The Third Circuit recently confirmed that plaintiffs must provide evidence of a specific defect, capable of classwide proof, in order to prevail on proposed class claims, holding that, where defective design is “an essential element of Plaintiffs’ misrepresentation-based claims,” whether proof of the defect “is susceptible to classwide evidence is dispositive of whether Plaintiffs can satisfy predominance” under Rule 23(b)(3). In Gonzalez v. Owens Corning, the plaintiffs sued the manufacturer of Oakridge fiberglass roofing shingles, claiming that their shingles, which were subject to warranties of 25 years or more, were “plagued by design flaws that result in cracking, curling and degranulation” and “will eventually fail.” The plaintiffs argued that the product warranties amounted to representations about the shingles’ expected useful life. Plaintiffs did not dispute that the design specifications for all shingles met the applicable industry design standard (“ASTM”), but claimed that compliance with the ASTM specifications did not consistently yield shingles that would last the stated warranty period. Thus, plaintiffs claimed that the issue of “defectiveness should be judged by the expected useful life of the shingles as represented by the applicable warranty period.” The plaintiffs’ expert, whose testimony was largely stricken as unreliable under Daubert, acknowledged that there...

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

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...