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The TCCWNA - A Straightforward Statute with a Complicated AcronymSusana Cruz  Hodge

The Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A. 56:12-14 et seq., has recently been the subject of several news articles because of the uptick in complaints alleging that the Terms of Use located on websites violate the statute. Since these cases are all in their inception, it remains to be seen whether TCCWNA claims will survive motions to dismiss. Given the clear language of the TCCWNA and the recent wins for the plaintiffs on certain key issues raised in TCCWNA cases, the recent Terms of Use cases present an uphill battle for defendants.

By enacting the TCCWNA, the Legislature clearly sought to protect consumers in New Jersey from illegal contract provisions. The Sponsors’ Statement clearly expresses a concern that “legally invalid or unenforceable, [provisions] in a contract, warranty, notice or sign deceives a consumer into thinking that they are enforceable and for this reason the consumer often fails to enforce his rights.” See Sponsors’ Statement, Statement to Assembly Bill No. 1660 (May 1, 1980). Section 15 addresses this concern by providing that:

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.
 
N.J.S.A. 56:12-15-15. Section 16, which does not apply to warranties, restricts sellers from simply including a catch-all provision in a contract, notice or sign stating “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; provided, however, that this shall not apply to warranties.” N.J.S.A. 6:12-16. By enacting Section 16, the Legislature made clear that if a seller wants to do business in New Jersey, then it must tailor its contracts, notices, and signs to reflect New Jersey law.

The recently filed Terms of Use cases raise several avenues for defense, but few are likely to gain any leverage with the courts. For example, the argument that the terms and conditions are not “notices” or “contracts” pursuant to the statute is likely to fail. The seminal case on what constitutes a notice under the TCCWNA is Shelton v. Restaurant.com, 214 N.J. 419 (2013). There, the notices at issue were gift certificates stating they expired “one year from date of issue, except ‘where otherwise provided by law,’” and were “void ‘to the extent prohibited by law.’” Id. at 423. The Supreme Court of New Jersey found the gift certificates were “printed announcement[s]” and thus fell squarely under the ordinary meaning of the term notice. Id. at 441 (citing Black’s Law Dictionary 1164 (9th ed. 2009)). Therefore, there is no question that the Terms of Use on websites are (at minimum) notices. Additionally, the Terms of Use are also contracts because several contain preambles binding the user to the terms whether or not the user reads the terms. Further, these types of boilerplate terms are precisely those defendants invoke to strong-arm plaintiffs into class action waivers and arbitration agreements. Accordingly, it is highly likely that courts will find that the Terms of Use are notices or contracts.

The argument that the consumer is not an “aggrieved consumer” under the statute, N.J.S.A. 56:12-17, unless she purchased a product on the website or has actual damages, is also likely to fail. The statute expressly applies to contracts, warranties, notices, and signs that are offered to a consumer. Not only does the statutory language expressly state this, but so does the Sponsors’ Statement. (“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.”). Sponsors’ Statement, Statement to Assembly Bill No. 1660 (May 1, 1980) (emphasis added). Further, the legislative history indicates that the words “whom he aggrieved or injured” were omitted from Section 17. Thus, the TCCWNA does not require that a consumer actually enter into a contract with a seller or that the consumer suffer actual damages or an injury in order to be considered an “aggrieved consumer.” Cf. Barrows v. Chase Manhattan Mortg. Corp., 465 F. Supp. 2d 347, 362 (D.N.J. 2006) (the TCCWNA “can be violated if a contract or notice simply contains a provision prohibited by state or federal law, and it provides a remedy even if a plaintiff has not suffered any actual damages.”); Feder v. Williams-Sonoma Stores, Inc., No. 11-3070, 2011 U.S. Dist. LEXIS 109739, at *6 (D.N.J. Sept. 26, 2011) (“The TCCWNA ‘provides a remedy even if a plaintiff has not suffered any actual damages.’”) (quoting Barrows, 465 F. Supp. 2d at 362)).

The Third Circuit recently iterated that a “[t]o find a violation of the TCCWNA, [plaintiff] had to allege that the service contract presented” to her violated a clearly established right. Johnson v. Wynn’s Extended Care, Inc., No. 15-1343, 2015 U.S. App. LEXIS 21682, *3 (3d Cir. 2015) (emphasis added) (finding that a service contract’s provision waiving attorney’s fees and splitting costs violated the TCCWNA because “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.”).

Defendants are likely to invoke the United States Supreme Court’s recent ruling in Spokeo, Inc. v. Robins, where the Supreme Court found that plaintiffs cannot “allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.” 194 L. Ed. 2d 635, 645 (2016). However, the Supreme Court acknowledged that the “risk of real harm,” id., is sufficient to confer standing. The Sponsors’ Statement about the TCCWNA has identified the harm sought to be addressed by the statute (the “very inclusion [of the illegal provision] deceives a consumer . . .”). By the time a consumer is presented with a contract, warranty, notice or sign, or has entered into a contract, containing illegal provisions, the risk of harm has materialized. The TCCWNA does not require that the consumer is actually confused by an illegal provision or that the provision actually deters a consumer from enforcing her rights. It would be nonsensical that the Legislature enacted the TCCWNA to eliminate illegal provisions that deter consumers from enforcing their rights, but intended to confer standing only to consumers who are not confused and do enforce their rights (by, for example, seeking to invalidate an illegal indemnification provision that was invoked by a seller).

Accordingly, it is likely that so long as plaintiffs are able to establish that the provisions at issue violate a clearly established right, these Terms of Use cases will survive the upcoming motions to dismiss.