A new wave of potential class action lawsuits has struck unsuspecting retailers doing business in New Jersey. Companies like Apple, Toys R’ Us, Facebook, Staples and more are defending themselves against class action suits brought under one of New Jersey’s consumer protection laws, not because the retailers are harming consumers in any financial or physical way, but because they violate technical requirements under the Truth In Consumer Contract Warranty and Notice Act (TCCWNA, or the “Truth In Consumer Act”), a statute enacted in the 1980s that doesn’t even require actual damages to occur.
Now, given the implications with online retail businesses and the potentially crippling scope of damages that can be sought under the Truth In Consumer Act, the New Jersey Supreme Court is getting involved to reconcile opposing lower court opinions and legislators are working to prevent an onslaught of these types of lawsuits that are seen by skeptics as contrary to the lawmakers’ original intent.
What is the TCCWNA?
The Truth In Consumer Act was passed in 1981 by the New Jersey legislature to prevent companies from including clauses in their consumer agreements that violated clearly established consumer legal rights. The spirit of the law is to prevent companies from using language that would prevent unknowing consumers from exercising their rights to sue the company, especially in cases where the preventative clauses being used are not actually enforceable. Examples include clauses that waive consumers’ rights to attorney’s fees or overreaching indemnification clauses. The cause of action is the presence of the clause itself, not any actual damage or harm incurred.
The law permits statutory penalties of $100 per person for consumers and includes potential customers as well. In the world of online retail, the implications for businesses located inside as well as outside of New Jersey are alarming. Plaintiffs’ lawyers claim that the law is a common sense approach toward ensuring that companies don’t act recklessly in the market, but defense attorneys are crying foul. They claim that these cases are driven by profit motive, and the statute is being exploited in a way that only benefits the lawyers.
What to Watch For
Lower courts are coming out divided as to when a class can be certified when no actual damages have been suffered. The New Jersey Supreme Court is reviewing those lower court decisions in an attempt to reconcile, and legislators are exploring options to prevent awarding of attorney's fees and other costs for technical violations of the Truth-in-Consumer Act.
In the meantime, retailers with customers in New Jersey need to do a careful legal review of their consumer agreements. This includes website disclaimers, terms of use, written notices with limitations of liability and really any other consumer-facing agreement. Companies should also review their insurance coverage to see if they're covered for settlements in such cases.
