For the past few years, consumer-facing businesses that advertise and sell to New Jersey consumers have been subject to an ever-rising tide of class action lawsuits under New Jersey’s Truth-in-Consumer Contract Warranty and Notice Act (TCCWNA, pronounced “tic-wun-uh”). TCCWNA’s broad language and range of remedies (up to $100 per violation and attorneys’ fees) make it attractive to plaintiffs’ attorneys and a thorn in the side of corporate defendants. With a recent decision by the New Jersey Supreme Court, however, the tide may be turning. In Dugan v. TGI Fridays, Inc., 171 A.3d 620 (N.J. 2017), the state’s Supreme Court denied class action certification in two TCCWNA class actions consolidated for appeal.  

Prior Eversheds Sutherland legal alerts have focused on what constitutes a concrete and particularized injury under TCCWNA, how courts have evaluated standing for TCCWNA plaintiffs under Article III of the Constitution, and strategies to defend TCCWNA actions using the statute’s plain language. (Blood in the Water: Courts Evaluate Standing in Three Recent TCCWNA Class Actions)  But the decision in Dugan provides a means of defending against class certification itself—significantly reducing the incentives for plaintiffs by forcing them to bring their cases individually.  

The Consolidated Appeals

The Supreme Court’s decision in Dugan covers two consolidated appeals, both of which focused on the alleged failure of New Jersey restaurants to disclose the prices of alcoholic and non-alcoholic beverages on their menus. The case garnered significant attention in the community, drawing five amicus briefs focusing on the TCCWNA questions at issue. 

Two TCCWNA provisions are relevant to the Supreme Court’s analysis: Section 15, under which the allegations arise, and Section 17, which imposes a range of penalties against violating defendants. Section 15 provides in part that “[n]o seller” shall “display any written consumer warranty, notice or sign . . . which includes any provision that violates any clearly established right of a consumer.”  N.J.S.A. 56:12-15 (emphasis added). Section 17 provides that any violating defendants “shall be liable to the aggrieved consumer.”  N.J.S.A. 56:12-17.

In the first appeal, Dugan v. TGI Fridays, Inc., 445 N.J. Super. 59 (App. Div. 2016), the plaintiffs asserted, among other claims, that TGI Fridays’ failure to notify consumers of the price of beverages (on their “otherwise comprehensively priced menus”) and the alleged practice of charging different prices for the same drinks depending on whether the drink was ordered at the bar versus at a table, violated consumers’ clearly established rights. 
 
The second appeal, Bozzi v. OSI Restaurant Partners, LLC, No. A-93-15 (077556), involved similar issues at Carrabba’s Italian Grill and other New Jersey restaurants owned or operated by OSI. The putative class representative claimed that Carrabba’s failed to disclose the price of beverages on its menus, and that it increased the price of the same beverages over the course of a customer’s visit without notifying the customer of the change, also in alleged violation of the customer’s clearly established rights. 

The Predominance Requirement: Aggrieved Consumers and Clearly Established Legal Rights

Focusing on what constitutes an “aggrieved consumer” under Section 17 and a “clearly established legal right” under Section 15, the New Jersey Supreme Court ultimately held that plaintiffs in both Dugan and Bozzi failed to meet the predominance requirement under New Jersey’s class action statute, Rule 4:32-1, which mirrors Federal Rule of Civil Procedure 23.

The court appeared to consider the question of whether the customer was an “aggrieved consumer” under Section 17 to be a threshold question for liability. On that “critical” issue, the court explained that in TCCWNA cases the requirement that a plaintiff be an “aggrieved consumer” raises “a range of individual questions” about the customer’s interactions with the server and the customer’s experience at the restaurant. For example, plaintiffs would have to establish that they had been given a menu. That question could not be answered, according to the court, by merely looking at customer receipts or restaurant training manuals. Rather, the answer would require significant individual analysis for each class member. 

Second, the court found that the question of whether the defendants violated “clearly established legal rights” similarly “raises the specter of disparate results for different members of the class.” The question of whether something is a “clearly established legal right” under TCCWNA requires a case-by-case assessment on whether the practice violated a legal right or responsibility—state or federal—at the time the warranty, notice or sign was displayed. Looking to prior legal precedent, the custom and practice of New Jersey restaurants, and guidance from the Attorney General, the court concluded that there was no evidence that failing to disclose prices on menus violated an existing legal right.  

On a more practical note, and one which seems to demonstrate the court’s discomfort with the broad application of TCCWNA in class actions, the court questioned whether TCCWNA was truly intended to apply to cases such as Dugan and Bozzi. Specifically, the court noted that the Dugan class action could give rise to more than $1 billion in penalties and that nothing in the statute’s legislative history suggests that it should be used to impose such sweeping penalties.

Takeaways

Dugan aids defendants in both state and federal TCCWNA class action claims, since New Jersey’s class action rule mirrors FRCP 23, and is not limited to complaints against restaurants that allegedly fail to disclose beverage prices. Given the frequency with which state and federal TCCWNA class action claims have been filed over the past several years, the New Jersey Supreme Court’s decision in Dugan is unlikely to stem the flow of complaints entirely. As discussed in prior legal alerts, the best way to avoid TCCWNA liability is to be proactive. Simple compliance steps—changes to contract language and online terms and conditions, for example—will often allow companies to avoid the risk and cost of litigation.

[View source.]