Locke Lord Article: Doing Business in New Jersey? Your Website Terms & Conditions May be Plaintiffs’ Next Target

by Locke Lord LLP
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Doing business in New Jersey just got thornier. Recent decisions broadly interpreting the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14, et seq., have spawned a flurry of pre-suit notification letters and class action complaints claiming that companies’ website terms and conditions, advertisements, consumer contracts, and other written communications run afoul of the statute. The TCCWNA prohibits sellers from “offer[ing] to any consumer or prospective consumer or enter[ing] into any written consumer contract or giv[ing] or display[ing] any written consumer warranty, notice or sign” that “violates any clearly established legal right of a consumer.” TCCWNA violations entitle plaintiffs to statutory and actual damages, injunctive relief, and attorney’s fees.   

Why Should the TCCWNA Matter to Me Now?
Plaintiffs are seizing on the developing body of TCCWNA case law to attack defendants’ website terms and conditions. See e.g., Russell v. Croscill Home LLC, No. 16-cv-01190 (D.N.J. Mar. 2, 2016) (putative class action alleging defendant’s website terms and conditions violate TCCWNA); Darla Braden v. TTI Floor North Am. Inc. d/b/a Hoover, No. 3:16-cv-00743 (D.N.J. Feb. 10, 2016) (same). In Hoover, for example, plaintiff filed a TCCWNA class action complaint on behalf of herself and “all persons in the State of New Jersey who purchased products from …hoover.com, for personal use”. Hoover Compl. ¶ 44. The complaint alleges that Hoover’s “website contains a consumer contract (entitled ‘Terms & Conditions’) that purports to impose illegal exculpatory and other such provisions upon all purchasers of goods or services from that website and purports to nullify certain legal duties and responsibilities Hoover owes its consumers.” Id. ¶ 1. Plaintiff argues that the website’s Terms & Conditions purport to: (1) protect Hoover from liability for tortious acts and for manufacturing or selling dangerous products; (2) prohibit customers from seeking redress for injuries that were caused by unsafe products; and (3) absolve Hoover of any liability arising from third-party criminal acts. Id. ¶¶ 14-17.   

The Hoover and Croscill cases are emblematic of plaintiffs’ attempts to stretch TCCWNA liability and apply it in the digital age, particularly where the sheer volume of internet activity and website analytics make “numerosity” an easy prong to satisfy in the class certification analysis. Any entity doing business in New Jersey, even if only through its website, must be mindful of the TCCWNA and recent case law interpreting it when drafting and modifying its consumer-facing communications.

What Constitutes a Violation of the TCCWNA?
The TCCWNA “prohibits a seller from entering into a contract with a consumer that includes any provision that violates a federal or state law.” Manahawkin Convalescent v. O’Neill, 85 A.3d 947, 962-63 (N.J. 2014) (emphasis added). The statute defines “consumer” as “any individual who buys . . . any . . . property . . . which is primarily for personal, family or household purposes.” N.J.S.A. § 56:12-15. Any entity that is involved in the production of a consumer good, or is part of the chain of distribution, advertising, or sale of the consumer good may constitute a “seller” under the TCCWNA if it can be said that the business “was not a stranger” to the transaction, “lent its assistance to the transaction,” or “obtained a benefit from the transaction.” Smith v. Vanguard Dealer Servs., L.L.C., No. A-3875-09T2, 2010 WL 5376316, at *3 (N.J. Super. Ct. App. Div. Dec. 21, 2010).   

The New Jersey Supreme Court and federal courts applying New Jersey law have made clear that the TCCWNA’s applications are far reaching—from traditional consumer contracts, to terms and conditions on gift certificates, and even to representations made on restaurant menus. See e.g., Shelton v. Restaurant.com, Inc., 214 N.J. 419, 442-443 (N.J. 2013) (concluding that the “TCCWNA is a remedial statute, entitled to a broad interpretation” for the purpose of permitting “consumers to know the full terms and conditions of the offer made to them by a seller or of the consumer contract into which they decide to enter”). Importantly, under the TCCWNA, courts have found that a seller can be liable to a customer, or even a prospective customer, who has no actual damages. See e.g., Johnson v. Wynn’s Extended Care, Inc., No. 12-cv-0079, 2012 WL 5880310, at *4 (D.N.J. Nov. 20, 2012). A seller who violates the TCCWNA is liable for statutory damages of not less than $100.00 for each separate violation of the statute or for actual damages, or both at the election of the consumer, together with reasonable attorney’s fees and court costs. See N.J.S.A. § 56:12-17. A consumer “also shall have the right to petition the court to terminate a contract which violates the provisions of…this act and the court in its discretion may void the contract.” Id.

In recent years, plaintiffs have alleged violations of the TCCWNA based on exculpatory provisions seeking to limit sellers’ liability, provisions purporting to waive attorney’s fees and shift costs, and provisions mandating that consumers waive the right to sue and submit to arbitration. By way of example, in Martinez-Santiago v. Pub. Storage, 38 F. Supp. 3d 500, 514 (D.N.J. 2014), the class representative plaintiff alleged that the exculpatory and indemnification provisions in the defendant’s standard form contract for the lease of personal storage space violated the TCCWNA because they purported to disclaim liability for personal injuries occurring on the defendant’s property. In denying defendant’s motion to dismiss and subsequently certifying the class, the court found that the class representative adequately stated a violation of a clearly established right—at the time plaintiff signed her agreement with defendant, it was clearly established “under the common law,” that defendant “has a duty to guard against any known dangerous conditions on its property or conditions that should have been discovered” and that “enforcing the exculpatory provision would give [defendant] permission to be careless—negligent, reckless—in the maintenance of its property.” Martinez-Santiago, 38 F. Supp. 3d at 514.

Similarly, the Third Circuit has held that a class representative plaintiff’s TCCWNA claim was sufficient to survive a motion to dismiss where the plaintiff alleged that a provision of defendant’s service contract required that consumers waive attorney’s fees and split costs. See Johnson v. Wynn’s Extended Care, Inc., No. 15-cv-1343, 2015 WL 8781374, at *1 (3d Cir. Dec. 15, 2015). In Johnson, the court explained that the district court’s dismissal of the claim was improper since “the New Jersey Supreme Court has clearly held that clauses preventing the recovery of attorney’s fees and costs, when mandated by statute, are unconscionable.” Id. at *2.   

New Jersey courts also have addressed the intersection of arbitration provisions and the TCCWNA. In Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306, 311 (N.J. 2014), cert. denied, 135 S. Ct. 2804 (2015), plaintiffs alleged that defendant’s arbitration provision in its debt-adjustment service contract violated the TCCWNA because it did “not clearly and unequivocally state its purpose in depriving [plaintiff] of her time-honored right to sue”. The trial court dismissed the complaint and enforced the arbitration provision and the Appellate Division affirmed. On appeal, the New Jersey Supreme Court reversed. Although the court recognized the deep body of law and policies favoring arbitration pursuant to the Federal Arbitration Act and identical New Jersey Arbitration Act, the court reasoned that “arbitration’s favored status does not mean that every arbitration clause, however phrased, will be enforceable.” Atalese, 99 A.3d at 312. In examining the language of the particular arbitration clause at issue in Atalese, the court explained that the absence of “clear and unambiguous language that the plaintiff is waiving her right to sue or go to court to secure relief” rendered the arbitration agreement unenforceable, potentially giving rise to a TCCWNA claim. Id. at 315-316.   

What Can You Do to Shield Your Business from Liability under the TCCWNA?
Companies doing business in New Jersey must draft and review their terms and conditions, social media presence, form contracts, and other consumer-facing communications with New Jersey law in mind. In particular, exculpatory provisions seeking to limit sellers’ liability, provisions purporting to waive attorney’s fees and shift costs, and provisions mandating that consumers submit to arbitration should be carefully reviewed and modified to the extent they compel consumers to waive or limit certain rights in violation of New Jersey law. The best defense to TCCWNA claims is to ensure that your company’s terms and conditions and other consumer-facing communications are up-to-date and consistent with recent case law.

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