Today, the New Jersey Supreme Court issued a much-anticipated decision construing New Jersey’s Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”). The decision affirmed that one who has not suffered actual harm from an allegedly unlawful provision in a contract or notice is not “aggrieved” and therefore cannot sue under the TCCWNA.  Importantly, the Court held that the harm need not necessarily be monetary, but it does have to exist.  This unanimous decision should bring an end to the recent wave of speculative class action lawsuits asserting TCCWNA claims based, for example, on standard provisions in online Terms of Service.

The TCCWNA, as discussed in prior posts here and here, imposes a steep $100-per-violation penalty whenever a “contract” or “notice” contains a term that violates “clearly established” New Jersey or federal law.  If a contract or notice says that some of its terms may not apply in “some states,” without specifically identifying provisions that are unlawful and thus inapplicable in New Jersey, the same $100 penalty attaches.  In a landmark decision last October, the New Jersey Supreme Court curtailed the circumstances in which TCCWNA claims can be pursued on behalf of a class by holding that the statute’s requirement that a consumer must be “aggrieved” requires proof that every putative class member at least was “presented with” the offending notice (in that case a restaurant menu).  The court also put real teeth in the requirement that the “right” a notice supposedly violates must be “clearly established.”

The October decision did not address other important TCCWNA issues, including whether one can be an “aggrieved consumer” without having suffered any actual harm. Just after oral argument in the October-decided case, however the Supreme Court accepted a certified question from the Third Circuit Court of Appeals as to whether one without damages can sue under the TCCWNA.

In Spade v. Select Comfort Corp., the plaintiffs purchased an allegedly faulty adjustable bed and received a refund after the defendant could not fix it.  The plaintiffs nevertheless sued the seller under the TCCWNA, contending that its contract failed to conform to New Jersey regulations for selling household furniture regarding delivery timing.  A district judge dismissed those claims, finding the consumers were not “aggrieved” because they received their refund and because their claim against the seller had nothing to do with delivery timing.

In Wenger v. Bob’s Discount Furniture LLC, the plaintiffs ordered goods from the defendant and received them without complaint, but still sued under the TCCWNA based on allegedly unlawful aspects of the customer agreement, including font size, the company’s refund policy, and several of the contract’s other provisions.  The same district judge dismissed those claims, too, on essentially the same basis, and both cases found their way to the Third Circuit.

On November 23, 2016, the Third Circuit asked the New Jersey Supreme Court to decide whether (1) a consumer who receives a non-conforming contract, but who has not suffered any adverse consequences, is “aggrieved” and therefore can sue under the TCCWNA; and (2) a contract provision that violates the state’s Furniture Delivery Regulations satisfies the “clearly established right” provision of the TCCWNA. That is what led to today’s decision.

The Supreme Court answered the first question by holding that contracts containing provisions at odds with regulations do violate the TCCWNA.  That aspect of today’s ruling cannot be ignored.  Among other things, it means that the New Jersey Attorney General’s Office absolutely can pursue businesses for TCCWNA violations if they include such unlawful provisions.

The Court very clearly and strongly held, however, that consumers cannot sue unless they are “aggrieved.” The plaintiffs tried to define “aggrieved” to mean anyone who is offered or enters into a contract containing an offending term, but the Court held that such an expansive interpretation would effectively write the word “aggrieved” out of the statute.  The term “aggrieved consumer,” the Court held, must “denote[] a consumer who has suffered some form of harm as a result of the defendant’s conduct.”

Although there is much for the business community to celebrate in today’s decision, attention must be paid to the last section of the Court’s opinion, beginning with “[w]e do not, however, view [cognizable] harm to be limited to injury compensable by monetary damages.” TCCWNA, the Court held, “contemplates that a consumer may be entitled to a remedy notwithstanding the absence of proof of monetary damages.”  This might include, for example, someone who received a late delivery and was dissuaded from seeking a refund because an unlawful provision told her she could not do so.  Allegations like this would seem to be highly individualized, however, and therefore not proper subjects for class actions.

Wenger and Spade now return to the Third Circuit, which presumably will uphold the district court’s dismissals.  A cascade of dismissals of other suits then should follow.

On Monday, a California federal judge enforced the California choice-of-law clause in Facebook’s online terms of use, and on that basis refused to consider the claims of a New Jersey resident that aspects of those terms of use violated New Jersey’s consumer contract disclosure law, the Truth-in-Consumer Contract, Warranty, and Notice Act (“TCCWNA”).  The decision should provide some peace-of-mind to online retailers based outside New Jersey who have choice-of-law clauses in their terms of use.  A note of caution is warranted, however, because the judge found it important that Facebook’s contract chose California law, and “California’s consumer protection laws have been recognized as among the strongest in the country.”  

The case is Palomino v. Facebook, Inc., No. 16-cv-4230-HSG (N.D. Cal.).  The plaintiffs claimed that Facebook’s terms of use contained provisions purporting to “disclaim liability” for willful misconduct, and to “bar claims for personal and economic injury and punitive damages” and “for deceptive and fraudulent conduct.”  Whether provisions like this actually violate the TCCWNA is a matter of dispute in other cases pending in state and federal courts in New Jersey and elsewhere.  Judge Haywood S. Gilliam held that he did not have to reach that question, however, because Facebook’s enforceable choice-of-law clause favoring California law precluded the plaintiff, a New Jersey resident, from suing under his home state’s consumer protection laws.

California’s test for enforcing a choice-of-law clause, set forth by the California Supreme Court in Washington Mut. Bank, F.A. v. Superior Court, 24 Cal. 4th 906, 916 (2001), begins by asking whether the chosen state has a substantial relationship to the parties or their transaction or, if not, whether there is any other reasonable basis for the choice.  If the answer to either question is yes, a plaintiff seeking to avoid application of the contractual choice must establish both “that the chosen law is contrary to a fundamental policy” of the alternative state and that the alternative state “has a materially greater interest in the determination of the particular issue.”  Facebook easily cleared the burden-shifting hurdle because it is headquartered in California.  Plaintiffs then failed to meet their burden because they “failed to show that California’s consumer protection law,” which itself precludes a wide array of false and deceptive practices and “aim[s] to accomplish the same end,” is “contrary to New Jersey policy.”  That California’s law “affords different rights and remedies” is immaterial because “[c]ourts should not refrain from applying the chosen law merely because this would lead to a different result.”     

The decision’s caveats are important, but the bottom line is that non-New Jersey choice-of-law clauses, applied by online retailers outside New Jersey, may preclude TCCWNA claims.  


In 2016, many retailers found themselves on the wrong end of class actions brought under New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”). The suits allege that these retailers’ website terms of service either contained provisions that violated some “clearly established” New Jersey or federal law, or else stated that violative terms might not apply in “some states” without saying which specific terms are ineffective in New Jersey.  The TCCWNA statute has major teeth, especially in class actions, with statutory penalties of $100 per “violation.”  Plaintiffs, however, must clear some equally major hurdles, including demonstrating that they were “aggrieved” by a violative contract and that the contractual terms they are attacking truly run afoul of a New Jersey or federal right that is “clearly established.”

Many retailers recently have scrutinized their website terms with the TCCWNA in mind, and the pace of new TCCWNA lawsuits has significantly slowed. As for past liability, major national retailers have had motions to dismiss TCCWNA cases fully briefed for several months now.  Both the plaintiffs’ and defense bar in New Jersey had hoped to end 2016 with some clarity about the TCCWNA’s contours.  Unfortunately, that clarity has not yet come.

Two judges have dismissed TCCWNA claims for lack of Article III standing, citing the Supreme Court’s recent decision in Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016), that a plaintiff cannot sue in federal court without having suffered “concrete and particularized” harm.  Neither court reached the merits of the plaintiffs’ TCCWNA claims.  The more recent of the two Spokeo dismissals came in October, and the plaintiff immediately appealed to the Third Circuit.

The Third Circuit already has another TCCWNA case before it, fully briefed. In November, the Third Circuit certified two questions arising from that appeal to the New Jersey Supreme Court that are relevant to several pending motions to dismiss:  (1) Is a consumer who received a contract that does not comply with a particular state regulation, but who has not suffered any adverse consequences from that noncompliance, an “aggrieved consumer” able to sue under the TCCWNA?  (2) Does a violation of that regulation alone constitute violation of a “clearly established legal right” and thus provide a basis for relief under the TCCWNA?

The New Jersey Supreme Court has not yet said whether it will rule on those questions, but that Court definitely will rule later this year on two other TCCWNA cases alleging that restaurants violated the law by not clearly posting prices on drink menus and, in one case, charging different prices for the same drink, depending upon whether the drink was served at a table or at the bar.

Those appellate goings-on may be impacting the District Court’s consideration of the other pending motions to dismiss. In early December, the judge presiding over a TCCWNA terms-of-use case against a major retailer “administratively terminated” that company’s motion to dismiss and effectively stayed the case pending the outcome of the two Third Circuit appeals.  No other district judges have taken that step, but motions to dismiss several other significant TCCWNA cases remain sub judice before them.

Decisions in those cases still could come at any time, but it also is possible that retailers must wait until the New Jersey Supreme Court and/or Third Circuit decides the TCCWNA cases before them — possibly not until late 2017 — before we learn how easy, or difficult, it is for plaintiffs to sue under this problematic law.

Do your Terms of Service preclude litigants from claiming consequential damages or attorneys’ fees? If new class action lawsuits in New Jersey are right, merely including these terms, and potentially many other disclaimers, violates New Jersey state law, and subjects you to a penalty of $100 per sale.

This interpretation of New Jersey’s 36 year-old Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A. 56:12-14, et seq., is certainly aggressive, and quite possibly wrong. But because the theoretical damages in these cases is so high, proving the theory wrong in court would entail significant risks.  The plaintiffs’ bar is counting on lawsuit targets preferring to settle.

TCCWNA precludes any “seller” from “offer[ing] to any consumer . . . or enter[ing] into any written consumer contract . . . or display[ing] any written consumer warranty, notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time. . . .” A warranty may state generally under TCCWNA that certain of its exclusions may not apply in some jurisdictions, without specifying which provisions or which states those may be, but “[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.”

“Any person who violates [TCCWNA] shall be liable to the aggrieved consumer for 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.” Because the statute makes it unlawful merely to “display” a “notice or sign” that purports to disclaim a “clearly established legal right,” the argument is that a consumer is “aggrieved” under the statute merely by virtue of having seen the “notice or sign” before making a purchase, whether or not the consumer had any problems with the purchase.

In December 2015, the Third Circuit Court of Appeals issued an unpublished, non-precedential decision reversing dismissal of a TCCWNA class action where an extended-service warranty firm’s contract purported to preclude consumers from seeking attorney’s in lawsuits, because New Jersey law precludes waivers of statutory rights to fee awards. That decision has added new fuel to the TCCWNA fire.  New Jersey businesses are not happy, but no legislative fix has yet found any traction.

What can online retailers, and those with brick-and-mortar presence in New Jersey, do to avoid becoming the next TCCWNA defendant?

One necessary step is to examine your terms and conditions carefully and consult counsel familiar with New Jersey consumer protection law. If a particular disclaimer of liability, though unenforceable in New Jersey, is otherwise important to you, TCCWNA allows you to keep it, but only if you expressly state that the disclaimer does not apply in New Jersey.  Most online retailers’ terms of service already contain special notifications about consumers’ rights under California’s “Shine the Light” marketing law; the bite of these recent TCCWNA suits may mean it is time to include special notifications to New Jersey consumers, too.

New Jersey’s TCCWNA wave also highlights the value of a well-drafted arbitration clause and inclusion of a provision requiring claims to be arbitrated individually, rather than on behalf of a class. New Jersey state courts are relatively unfriendly toward arbitration clauses, and will enforce them only if consumers received clear notice a contract contained an arbitration clause and class waiver.  We have a model arbitration provision that takes account of recent court decisions, and we can help you implement the provision in ways that maximize its potential for enforceability.

Jeffrey S. Jacobson is a partner in our New York and New Jersey offices and a former Chief Counsel to the New Jersey Attorney General.