Updated: The Rise in Class Actions Under NJ Consumer Protection Law | Practical Law

Updated: The Rise in Class Actions Under NJ Consumer Protection Law | Practical Law

New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) has inspired a rise in new class action lawsuits against companies that sell products or services to consumers in New Jersey. The TCCWNA places multiple restrictions on the types of written contractual terms that a company can include when dealing with consumers who live in New Jersey.

Updated: The Rise in Class Actions Under NJ Consumer Protection Law

Practical Law Legal Update w-002-9115 (Approx. 6 pages)

Updated: The Rise in Class Actions Under NJ Consumer Protection Law

by Practical Law Commercial Transactions
Published on 11 May 2017 • New Jersey, USA (National/Federal)
New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) has inspired a rise in new class action lawsuits against companies that sell products or services to consumers in New Jersey. The TCCWNA places multiple restrictions on the types of written contractual terms that a company can include when dealing with consumers who live in New Jersey.
This resource was updated on May 11, 2017 to address how some federal courts have shifted their views in light of Spokeo, Inc. v. Robins, on a plaintiff's standing to file suit in federal court as an aggrieved consumer under the TCCWNA.
Companies that sell products or services to consumers in New Jersey should take note of the recent increase in class action lawsuits filed under New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) (N.J. Stat. Ann. §§ 56:12-14 - 56:12-18). This law affects both businesses that have physical operations in New Jersey and those that engage in e-commerce with New Jersey consumers.

Truth-in-Consumer Contract, Warranty and Notice Act

The TCCWNA was enacted in 1981 and applies to any seller, lessor, creditor, lender, or bailee that offers products or services to a consumer or prospective consumer in New Jersey. The TCCWNA prohibits parties from including in a written consumer warranty, notice, or sign any term that:
  • Violates any clearly established state or federal legal:
    • right of a consumer; or
    • responsibility of a seller, lessor, creditor, lender, or bailee.
  • Waives the consumer's rights under the TCCWNA.
  • Broadly states that any of the contract's provisions is or may be void, unenforceable, or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable, or inapplicable in New Jersey (that is, blanket savings clauses). This prohibition against blanket savings clauses does not apply to written warranties.
The purpose of this law is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms and warranties. The TCCWNA does not establish new consumer rights or seller responsibilities; it simply bolsters the rights and responsibilities already established by other laws (Kendall v. Cubesmart L.P., , at *3 (D.N.J. Apr. 21, 2016)).
Some courts have held that an agreement may violate the TCCWNA even if the plaintiff has not suffered any actual damages because a TCCWNA violation arises simply from the language in the contract (Martinez-Santiago v. Pub. Storage, 312 F.R.D. 380, 392 (D.N.J. 2015)). However, relying on Article III standing rules outlined in a recent US Supreme court decision (Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016)), some federal courts have recently found that without an underlying concrete harm, a plaintiff in federal court may not base her complaint solely on allegations of wrongdoing predicated on TCCWNA violations (Rubin v. J. Crew Group, Inc., , at *5 (D.N.J. Mar. 29, 2017)).
For example, a contract could violate the TCCWNA if it has provisions that:
  • Waive a consumer's rights to attorneys' fees or require the consumer to split litigation costs.
  • Limit a business' liability for personal injury or property damage that occurs on its premises.
  • Indemnify a business against losses that occur due to its own negligence or recklessness.
(Johnson v. Wynn's Extended Care, Inc., 635 F. App'x 59 (3d Cir. 2015) and Kendall, ).
If a party violates the TCCWNA, the party is liable to the aggrieved consumer for a civil penalty of at least $100.

Rise in Civil Actions

Although the TCCWNA has been on the books in New Jersey for over 30 years, plaintiffs' lawyers have increasingly begun using it as a basis for suing companies and challenging their online terms and conditions. For example, in only the past few months plaintiffs have brought class actions challenging online terms and conditions from major companies like:
This increase in TCCWNA litigation is likely due in part to the law's broad scope and penalty of at least $100 per violation without the requirement to prove actual harm.

Practical Implications

These class action lawsuits push for an extremely broad application of the TCCWNA and could potentially apply to almost every company that sells consumer products or services online, with written terms and conditions, to customers in New Jersey.
Given the rise in litigation around this law, businesses that offer written contractual terms to consumers in New Jersey (either in person, online, or through a mobile platform) should carefully review those terms to ensure that they do not violate the TCCWNA. It is important to remember that a contract could violate the TCCWNA and expose a business to liability even if the consumer has not suffered any actual damages. In a class action, this liability of at least $100 per violation can add up to extensive damages.
For sample online consumer terms and conditions, see Standard Documents:
For more information on operating an e-commerce website, see Launching a Retail E-Commerce Website for the Sale of Goods Checklist.

The TCCWNA and Choice of Law Provisions

Companies should consider how their choice of law provisions might affect or mitigate their liability under the TCCWNA. The TCCWNA regulates New Jersey facing contracts even if the agreement itself is governed by another state's laws. However, a court might be reluctant to apply the TCCWNA to such contracts if the other state's laws contain robust consumer protection provisions.
For example, a federal court in California recently held in Palomino v. Facebook, Inc. that the TCCWNA did not govern Facebook's online Terms of Service with New Jersey consumers because the contract contained a California choice of law provision ( (N.D. Cal. Jan. 9, 2017)).
Specifically, the district court found that the choice of law provision was enforceable in this contract because California has:
  • A substantial relationship to the parties based on Facebook's being headquartered and maintaining its principal place of business in California.
  • Consumer protection laws that are not contrary to fundamental New Jersey policy.
In determining that California's consumer protection laws are not contrary to the TCCWNA, the district court noted that:
  • California's consumer protection laws have been recognized as among the strongest in the country.
  • California has a robust and extensive body of consumer protection laws that, like the TCCWNA, seek to prevent confusion and deception among consumers and to incentivize businesses to draft clear and understandable business documents.
For more information on drafting and using choice of law provisions, see Practice Note, Choice of Law and Choice of Forum: Key Issues and General Contract Clauses: Choice of Law.