A formerly obscure, 35-year-old New Jersey statute is increasingly taking its place as the claim of choice for class action lawyers suing consumer-facing companies. Most recently, plaintiffs' lawyers are using the ambiguous statute to sue companies whose website terms and conditions, like most, include broad disclaimers and limitations of liability, claiming that the provisions are unenforceable in New Jersey, and that including them on the website violates New Jersey law. More than a dozen such class actions have been filed just this year.

The statute—the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA)—precludes a seller from "offering" or "displaying" to a consumer nearly any writing with a provision that violates the "clearly established legal right" of that consumer. Unlike the more familiar Consumer Fraud Act (CFA), plaintiffs argue that TCCWNA does not require an unconscionable commercial practice by the defendant, or any actual harm to the plaintiff. Instead, according to plaintiffs, the mere presentation of an offending writing violates the statute, and imposes statutory damages of $100 per offense, plus attorneys' fees.

Given this low bar, class action lawyers are filing an increasing number of cases based on form documents provided to most or all of a company's customers, including sales and service contracts, legal disclosures, and, most recently, website terms and conditions. Plaintiffs allege that one or more provisions in the form document or website are unenforceable, or otherwise misstate New Jersey law, and that the defendant therefore owes at least $100 to every one of its customers in the prior six years. For even modest-sized companies, the damages quickly can surpass $1 million, before counsel fees.

Although TCCWNA was enacted nearly 35 years ago, it lay dormant for most of that time, as plaintiffs remained focused on the CFA. But recently, plaintiffs have realized not only TCCWNA's enormous financial potential and greater ease of proving liability, but also its perceived easier path to class certification. Plaintiffs now include TCCWNA claims as a matter of course, or even as the only claim in a case. TCCWNA is a broadly written and, in some cases, broadly construed consumer protection statute, with a high potential for abuse, and penalties that quickly become punitive.

Ballard Spahr's Litigation Department has been at the forefront of defending TCCWNA actions, having obtained significant victories in two consumer class actions based on the statute. TCCWNA cases are dangerous, and courts struggle with the statute's ambiguity, and the lack of guidance on how to apply it. But there is a clear strategy for defending TCCWNA cases, and it is important to deploy that strategy from the outset of a case.

Copyright © 2016 by Ballard Spahr LLP.
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