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Turning the Tide on the TCCWNA?

Supreme Court iStock_000017257808LargeBy Jessica R. Amunson

In recent years, a 35-year-old New Jersey statute known as the Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”) has soared in popularity with plaintiff’s lawyers bringing putative class actions.  These class actions target retailers’ online terms and conditions and often focus on minor technical problems that plaintiffs claim run afoul of the TCCWNA.  With a $100 penalty provided by the statute for each violation, commentators have found that in the TCCWNA, “[c]lass action lawyers … may have struck gold.”  A report from the New Jersey Civil Justice Institute describes the dramatic increase in new cases filed under the TCCWNA.  However, the tide may be turning as several recent decisions from federal district courts question whether plaintiffs have suffered any harm from purported violations of the TCCWNA and whether plaintiffs can therefore meet the Article III standing requirements as recently articulated by the Supreme Court in Spokeo, Inc. v. Robins, 578 U.S. ___ (2016). 

More than 35 years ago, the New Jersey Legislature enacted the TCCWNA as a well-meaning attempt to keep unscrupulous merchants from duping unwitting consumers.  Under the TCCWNA, a “seller, lessor, creditor, lender or bailee” is prohibited from offering any consumer or prospective consumer any written consumer contract or displaying any notice or sign “which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed.”  N.J.S.A. 56:15.  The TCCWNA likewise provides that “[n]o consumer contract, notice or sign shall state 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.” N.J.S.A. 56:16.

However, what was meant to be a measure to protect consumers has instead become the latest tool of the plaintiffs’ bar.  Plaintiffs bringing suit under the TCCWNA typically scour the fine print to find some provision in an online retailer’s website terms and conditions that the plaintiff claims violates some right of the plaintiff or some obligation of the seller.  Some suits do not even allege any violation of a right or obligation—the plaintiff simply finds a provision on a retailer’s website that does not specifically state whether or not it is applicable in New Jersey and claims that this is enough for a violation of the TCCWNA.  The plaintiff then brings suit on behalf of a purported class of everyone who has purchased the defendant’s products from its website in what the New Jersey Civil Justice Institute has described as “little more than a court sanctioned shakedownscheme.” 

Federal district courts, however, have recently issued three decisions rejecting the idea that a plaintiff is harmed by a technical violation of online terms and conditions.  Relying on the Supreme Court’s recent decision in Spokeo, each of these courts has held that a plaintiff does not allege injury-in-fact sufficient to confer Article III standing merely by alleging that a defendant’s online terms and conditions violate the TCCWNA.     In Candelario v. Rip Curl, Inc., No. 8:16-cv-00963 (C.D. Cal. Sept. 22, 2016), the Central District of California dismissed plaintiff’s complaint that Rip Curl’s online terms and conditions contained impermissible limitations on Rip Curl’s liability, finding that although plaintiff had read the terms and conditions after purchasing clothing from Rip Curl and being dissatisfied with her purchase, plaintiff had not plead any concrete and particularized injury.  In Russell v. Croscill Home LLC, No. 3:16-cv-01190 (D.N.J. Oct. 12, 2016), the District of New Jersey similarly dismissed plaintiff’s complaint that he had suffered any injury from defects in online terms and conditions, finding that plaintiff had not alleged that the product he purchased online from defendant was defective in any way.  And in Hecht v. The Hertz Corporation, No. 2:16-cv-01485 (D.N.J. Oct. 20, 2016), the District of New Jersey rejected any claim of standing where all that plaintiff alleged was that defendant failed to specify whether certain terms and conditions on its website were applicable in New Jersey, finding that “Plaintiff sets forth bare statutory violations but does not describe a single concrete harm resulting from these violations.”  (Note:  Jenner & Block represented The Hertz Corporation in this suit.)

These decisions appropriately call into question whether a TCCWNA claim can survive in federal court.  However, Plaintiffs in the Hecht and Russell cases have just filed notices of appeal, so the United States Court of Appeals for the Third Circuit soon will be weighing in on whether plaintiffs can continue to bring class actions in federal court alleging violations of the TCCWNA without demonstrating any injury-in-fact.