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Gamble On Misinterpretation and You Might Just WinSusana Cruz  Hodge

This month, the Appellate Division effectively rewrote the Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A. 56:12-14 et seq. In Smerling v. Harrah’s Entm’t, Inc., No. A-4937-13T3, 2016 WL 4717997 (N.J. Super. Ct. App. Div. Sept. 9, 2016), Harrah’s mailed a promotional offer to plaintiff that stated:

$15 BIRTHDAY CASH! Offer valid August 1 or August 10, 2003 only. Must present coupon at Total Rewards Center. Hours of operation for Total Rewards Center:
Sun--Fri: 8am--12 Midnight
Sat: 8am--2am
Valid at Harrah’s Atlantic City only.
Debra Smerling Valid 08/01/03 or 08/10/03

Now, for most people, a day lasts 24 hours and begins at 12 a.m. and ends at 11:59 p.m. But Harrah’s is not most people. Harrah’s has an undisclosed “Casino Hours” policy under which promotional offers cannot be redeemed between midnight and closing on the promotion’s redemption date. As a result, when plaintiff went to redeem the promotional offer between midnight and 12:30 a.m. on August 10, Harrah’s would not honor it and asked that she return after 6 a.m. Since plaintiff did not have plans to spend the night, she was unable to redeem the promotional offer. 

Plaintiff brought a class action and won in the Law Division. Harrah’s appealed, and the Appellate Division focused on the singular issue with respect to plaintiff’s TCCWNA claim: was plaintiff a consumer? Despite the plain language of the TCCWNA and our Supreme Court’s interpretation of that plain language, the Appellate Division answered the question in Harrah’s favor, disposing of the TCCWNA claim altogether. The Court repeatedly cited Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013) as well as the plain language of the TCCWNA, yet both overwhelmingly support a finding in plaintiff’s favor.

The Appellate Division focused on Section 15 of the TCCWNA, which states what conduct is prohibited and defines “consumer”:

No seller, lessor, creditor, lender or bailee shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign after the effective date of this act which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed. Consumer means any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.

N.J.S.A.
56:12-15 (emphasis added). The court correctly noted that the plain language of the statute requires that “[t]he party to be protected must be a ‘consumer or prospective consumer.’” The Court also correctly noted that the targeted conduct has two elements. First, the seller must “offer” or “enter into any written consumer contract” or “give or display any written consumer warranty, notice or sign.” Second, the writing must “include [a] provision that violates any clearly established legal right of a consumer or responsibility of a seller.”

Unfortunately for plaintiff, the court ignored the words “offer” and “prospective” in the rest of its analysis. Relying on the definition of “consumer” as stated in Section 15, and a misapplication of Shelton, the Appellate Division ultimately found that since plaintiff did not purchase, lease, borrow or bail any money, property or service, she was not a consumer for the purposes of bringing a TCCWNA claim.

Given the court’s acknowledgement that the plain language of a statute is its best indicator of legislative intent, and its reliance on Shelton, this result is nothing short of puzzling. An in-depth summary of Shelton may be found here, but suffice it to say that the Supreme Court found in plaintiffs’ favor. For several reasons, the Court’s reasoning in Shelton should have produced a different result in Smerling.

The Appellate Division should have heeded the Supreme Court’s guidance with respect to the weight of the plain language of a statute:

N.J.S.A. 1:1-1 provides that words and phrases shall be given their generally accepted meaning, unless that meaning is inconsistent with the clear intent of the Legislature or unless the statute provides a different meaning. Words in a statute should not be read in isolation. Rather, a court must consider the context because “‘[t]he meaning of words [used in a statute] may be indicated and controlled by those [words] with which they are associated.’” We must also avoid an interpretation that renders words in a statute surplusage. In short, words make a difference. We must assume that the Legislature purposely included every word, and we must strive to give every word its logical effect.
 
The best way to see the error in the Smerling decision is by analyzing this paragraph.

First, the Supreme Court instructs courts to give the language of the statute its plain meaning unless the meaning is inconsistent with the Legislature’s intent or the statute provides a different meaning. The plain language of the TCCWNA clearly states that it applies to a litany conduct, including to an “offer” made to any “prospective consumer.”

Per the Supreme Court’s instruction, the Smerling court should not have focused at all on “consumer,” and instead should have accepted the generally accepted definitions of “offer” or “prospective consumer" since the statute does not provide a different meaning of these terms and accepting their generally accepted definitions would not violate the legislative intent. The Supreme Court also “conclude[d] the Legislature enacted the TCCWNA to permit 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” (emphasis added). Thus, to apply the generally accepted meanings of “offer” and “prospective” would support the Legislature’s intent.

Second, the Supreme Court instructs that words should be read in context, not in isolation. The TCCWNA expressly includes both consumers and prospective consumers and both offers and executed contracts. Shelton recognized that in the quotation contained in the preceding paragraph. The inclusion of prospective buyers is not a mistake and is placed into context by the fact that the Legislature included offers in the statute. If the Legislature meant the TCCWNA to apply only to offers that are accepted through an exchange of consideration, then it would not have included “offers” and “prospective consumers” in the statute as well as contracts and “consumers.”

Third, the Supreme Court instructs courts to avoid interpretations that would render words surplusage.  That is because words matter. Yet, the Smerling court read the words “offer” and “prospective” out of the statute and ignored the Legislature’s clear intent that the TCCWNA apply to offers and to prospective consumers. In this regard, Smerling squarely conflicts with a prior decision by the Appellate Division. See United Consumer Financial Services Co. v. Carbo, 410 N.J. Super. 280, 305-307 (App. Div. 2009) (“This court has held that the act of offering a consumer contract that violates a legal right of a consumer under the law is sufficient to establish a violation of this statute.”).

The Smerling court buoyed its finding with the definition of “consumer contract” as defined in the Plain Language Act, N.J.S.A. 56:12-1 to -13. The Supreme Court in Shelton found it appropriate to transport that definition into the TCCWNA. However, the Appellate Division failed to consider that the definition is applicable to the terms “consumer contract” in the TCCWNA, but not to the term “offer.” After all, at issue in Smerling was a promotional offer, so it makes little sense to turn to the Plain Language Act’s definition of “consumer contract” when the TCCWNA expressly covers more than just consumer contracts.

The Appellate Division should have recognized that offers to prospective customers are within the scope of the TCCWNA. Such a finding is in line with the TCCWNA’s Sponsor Statement as well as the Third Circuit’s interpretation of the statute. See Statement to Assembly Bill No. 1660 (May 1, 1980) (“This bill prohibits businesses from offering or using provisions in consumer contracts, warranties, notices and signs that violate any clearly established right of a consumer.”) (emphasis added); Johnson v. Wynn’s Extended Care, Inc., No. 15-1343, 2015 U.S. App. LEXIS 21682, *3 (3d Cir. 2015) (stating that “[t]o find a violation of the TCCWNA, [plaintiff] had to allege that the service contract presented” to her violated a clearly established right) (emphasis added).

Finally, while the Smerling court heavily relied on Shelton, it failed to note an important aspect of the TCCWNA that Shelton relied upon:

Other than the exclusion of transactions involving the lease or sale of residential real estate, see N.J.S.A. 56:12-15, the TCCWNA does not expressly exclude personal property. The TCCWNA does not, then, exclude intangible property.
 
Shelton, 214 N.J. at 431. Likewise, since the TCCWNA expressly enumerates certain exemptions, but does not exclude promotional offers (and expressly includes offers to prospective consumers), the Smerling court’s interpretation of the TCCWNA is wholly unsupported by its plain language and the guidance provided by the Supreme Court in Shelton.

On a side note, I applaud the Appellate Division’s attempt to bring back “the Truth Act” (first used in 2004 in Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577, 581-582 (App. Div. 2004)), as a shorthand for the statute at issue. That’s certainly less of a mouthful than the TCCWNA and we should all adopt it.