No Harm, No Foul: NJ Supreme Court Rejects No-Injury “Gotcha” Suits Under TCCWNA

The past few years witnessed an outbreak of no-injury class actions seeking statutory penalties under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). Most of the plaintiffs in these cases challenged the wording of terms of use and other customer-facing documents, and did not even bother to allege that they had ever read those documents, let alone that they had ever been harmed or affected by them in any meaningful way. That resulted in a series of appeals—in both state and federal courts—regarding who qualifies as an “aggrieved consumer” with standing to seek penalties under the statute.

Yesterday the New Jersey Supreme Court resolved that issue once and for all, confirming that a consumer is not “aggrieved” if they have not “suffered some form of harm as a result of the defendant’s conduct.” See David Spade v. Select Comfort Corp., No. 078611 (Apr. 16, 2018). The court’s decision to give teeth to the “aggrieved consumer” requirement should result in the immediate dismissal of many “gotcha” class actions. Although it may also result in new test cases that are designed to push the envelope of what qualifies as a “harm,” it should make it difficult to obtain class certification in such cases, as they will be premised on alleged injuries that are not only intangible but also idiosyncratic.

The Statute

Until recently, TCCWNA was a little-known statute that applies to consumer contracts, notices, warranties and signs. It has three primary provisions.

First, Section 15 states that a “seller” (among others) may not “offer” (among other things) a “consumer or prospective consumer” a contract, warranty, notice, or sign that “includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller. . . .” The plaintiffs’ bar has been creative in conjuring “rights” or “responsibilities” that they claim have been “violated,” and, in particular, have challenged the wording of limitations of liability in form contracts.

Second, Section 16 states that consumer contracts, warranties, notices, and signs may not “contain any provision by which the consumer waives his rights under this act,” and (with the exception of warranties) may not “state that any of [their] 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.” The plaintiffs’ bar has cited Section 16 when challenging the wording of severability provisions and savings clauses, arguing that such provisions “state” that a provision “may be void . . . in some jurisdictions,” which would then trigger a duty to “specify[] which provisions are or are not void” in New Jersey.

Third, Section 17 creates a private right of action for civil penalties of “not less than $100.00 or for actual damages, or both”—but only for a plaintiff who is an “aggrieved consumer,” and only against a defendant “who aggrieved him.”

The Cases

The Plaintiffs in these consolidated cases brought suit—even though their furniture had been delivered without damage or delay—because their sales contracts allegedly omitted language that was required by New Jersey’s Delivery of Household Furniture and Furnishing Regulations. This, the Plaintiffs claimed, was actionable under Section 15 of TCCWNA because it violated a “clearly established legal right of a consumer or responsibility of a seller.”

The District of New Jersey dismissed the Plaintiffs’ claims, finding that they were not “aggrieved” consumers who had statutory standing under Section 17 of TCCWNA. The Plaintiffs then took an appeal to the Third Circuit, which certified two threshold questions to the New Jersey Supreme Court, including the following: “Is a consumer who receives a contract that does not comply with the Furniture Delivery Regulations, but has not suffered any adverse consequences from the non-compliance, an ‘aggrieved consumer’ under the TCCWNA?”

The Decision

A unanimous New Jersey Supreme answered that question in the negative and explained that a consumer is not “aggrieved” if they have not “suffered some form of harm as a result of the defendant’s conduct.” Opinion at 24.

The court’s analysis begins and ends with the language and structure of the statute, in which the court found “ample evidence” of an intent to limit the scope of the statute’s penalty provision. Of particular importance to the court was the fact that the statute used broad language in prohibiting conduct and narrow language in providing penalties:

In the provision of the TCCWNA that defines a statutory violation, the word “consumer” – unmodified by the term “aggrieved” – broadly denotes “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.” . . . Thus, when it defined the conduct barred by the TCCWNA, the Legislature chose expansive language to describe the consumers and potential consumers whom the statute was enacted to protect.

In the TCCWNA’s remedial provision, however, the Legislature chose a more precise term: “aggrieved consumer.” The Legislature clearly intended to differentiate between “consumers and prospective consumers” – the broad category of people whom the Legislature seeks to shield from offending provisions – and “aggrieved consumers” entitled to a remedy under the TCCWNA.

Opinion at 22–23 (citations omitted). In light of that statutory language, finding that an “aggrieved consumer” means the same thing as “consumer” would render the word “aggrieved” superfluous. Id. at 23.

Also of importance to the court was the fact that the legal and other dictionaries that were available to the Legislature when it was drafting the statute all defined the word “aggrieved” in a way that denoted an actual injury or loss. Id. at 24 (citing 1979 edition of Black’s Law Dictionary and 1981 edition of Webster’s Dictionary). Notably, this central part of the court’s decision adopts an argument that—as Chief Justice Rabner noted at oral argument—our team developed in an amicus brief filed on behalf of the Retail Litigation Center, which represents the interests of the retail industry in important judicial and regulatory proceedings.

The court concludes by noting—as the Defendants and amici had generally conceded—that a plaintiff could in certain cases qualify as “aggrieved” even if they have no monetary harm. It offers the following hypothetical as an example:

If, for example, a furniture seller fails to timely deliver a consumer’s furniture, and the consumer would have sought a refund had he or she not been deterred by the “no refunds” language prohibited by N.J.A.C. 13:45A-5.3, that consumer may be an “aggrieved consumer” entitled to a civil penalty under N.J.S.A. 56:12-17. If an untimely delivery and misleading “no refunds” language leave a consumer without furniture needed for a family gathering, the consumer may be an “aggrieved consumer” for purposes of N.J.S.A. 56:12-17. Proof of harm resulting from contract language prohibited by N.J.S.A. 56:12-15 may warrant a civil penalty under N.J.S.A. 56:12-17, even if the harm is not compensable by damages.

Id. at 26. But the court reiterates that, in the absence of “evidence that the consumer suffered adverse consequences as a result of the defendant’s regulatory violations, a consumer is not an ‘aggrieved consumer’ for purposes of the TCCWNA.” Id.

The Takeaway

The court’s decision is a significant victory for any business with customers in New Jersey. In rejecting the Plaintiffs’ aggrieved-means-nothing argument, the court gave meaning to the plain language of the statute and gave businesses much-needed relief from the lawyer-driven litigation that had threatened annihilating aggregate penalties despite the absence of any harm to anyone. Although some plaintiffs may file new cases that test what kinds of “harms” will confer standing, the decision should make it very difficult to obtain class certification in such cases, as they will involve intangible injuries like those in the hypothetical above—injuries so idiosyncratic that proving them on a class-wide basis seems exceedingly unlikely.