NJ Supreme Court Answers Questions, Limits TCCWNA Claim To Require Actual Harm

Author:Mr Paul Halasz and Catherine Dugan O'Connor
Profession:Day Pitney LLP

When faced with a novel issue of New Jersey law, the U.S. Court of Appeals for the Third Circuit has the ability to refer the question to the New Jersey Supreme Court. Last week, the New Jersey Supreme Court answered two certified questions of law from the Third Circuit regarding the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA).1 The TCCWNA prohibits sellers from offering or entering into contracts that include any provision violating a "clearly established legal right" of the consumer. This decades-old consumer protection law has recently spawned a rash of class action litigation. In Spade v. Select Comfort,2 the court held that "clearly established legal rights" can arise from agency regulations, such as rules the Division of Consumer Affairs adopted to regulate the delivery of household furniture. More significantly, however, the court also held that, in order to maintain a claim, an "aggrieved consumer" must have suffered an adverse consequence beyond simply receiving a document that violates the law. The court's pronouncement may well foreclose purported class actions under the TCCWNA where the lead plaintiffs cannot identify concrete damages — monetary or otherwise.

The New Jersey Legislature enacted TCCWNA in 1981 to protect consumers from merchants that include contract terms in customer agreements, posted notices and even restaurant menus that violate a "clearly established legal right of a consumer or responsibility of a seller." The statute also prohibits clauses stating that some provisions may be "void where prohibited" without specifying which provisions are not void, unenforceable or inapplicable within the state of New Jersey. The statute grants a private cause of action to an "aggrieved consumer" to recover "a civil penalty of not less than $100.00 or for actual damages, or both at the election of the consumer, together with reasonable attorney's fees and court costs."

Litigation involving the TCCWNA was sporadic until recent years, when a flood of class actions appeared within New Jersey and in other jurisdictions against New Jersey-based corporate defendants. The relative dearth of older cases corresponded to limited precedents and several uncertainties over the contours of claims under the statute. Defendants challenged the viability of claims in which the class representative could identify no concrete harm other than having received a legally defective contract. Defendants argued, among other things...

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