Some Clarity on the Substantive Provisions of the TCCWNA

Spade v. Select Comfort Corp., ___ N.J. ___ (2018).  [Disclosure:  My partner Susana Cruz Hodge and I submitted an amicus curiae brief in support of the plaintiffs in this case, on behalf of the Consumers League of New Jersey].  This closely-watched case (actually, two consolidated cases) was before the Supreme Court on two certified questions relating to the Truth in Consumer Contract, Warranty, and Notice Act, N.J.S.A. 56:12-14 to -18 (“TCCWNA”) that the Third Circuit Court of Appeals posed.  Those questions were: (1) Does a violation of the Furniture Delivery Regulations alone constitute a violation of a clearly established right or responsibility of the seller under the TCCWNA and thus provide a basis for relief under the TCCWNA? and (2) 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 noncompliance, an “aggrieved consumer” under the TCCWNA?

In a unanimous opinion by Justice Patterson that was issued today, the Court answered the first question in the affirmative and the second question in the negative.  The first ruling was a clear win for plaintiffs, while the second answer, though it was not what plaintiffs sought, leaves them room to vindicate consumer rights under the TCCWNA.  The Court was largely able to answer both questions based on the plain language of the TCCWNA.

Under the TCCWNA, the “clearly established right or responsibility of the seller” must be “established by State or Federal law.”  The key issue regarding the first certified question was thus whether the Furniture Regulations constituted “State or Federal law.”  Justice Patterson had no difficulty in finding that the regulations did represent such law.  “Nothing in either the TCCWNA’s plain language or its legislative history suggests that the inclusion of language in a contract or other writing that violates a regulation cannot be the basis for a claim under N.J.S.A. 56:12-15.  In the TCCWNA, the Legislature did not limit the term “State or Federal law” to statutes, as it could have done with a minor revision of the TCCWNA’s text.”

Moreover, that result furthered “the TCCWNA’s consumer-protection objectives.”  As Justice Patterson explained, the Legislature enacted the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq., to afford strict liability for violations of regulations, and “the content of contracts and other writings used in commercial transactions is typically addressed in regulations, rather than statutes.”  A regulation “carries the force of law” just like a statute, and the Court had previously recognized that a TCCWNA violation could be premised on a violation of a regulation.  Accordingly, plaintiffs prevailed on the first question.

The second question was more of a mixed result.  Plaintiffs sought a ruling that “any consumer who is offered or enters into a contract or other writing that violates [the Furniture Regulations], either by inclusion of an offending provision or omission of a required provision, is an ‘aggrieved consumer’ under N.J.S.A. 56:12-17, whether or not he or she has consequently suffered harm.”  The language of the TCCWNA and its legislative history, including a change in a provision that had provided for “damages” to make it provide for a “penalty” instead, supported plaintiffs’ view.  Nonetheless, the Court adopted a narrower perspective.  The basis for doing so was the Legislature’s use of “consumer,” unmodified by “aggrieved,” to “describe the consumers and potential consumers whom the statute was enacted to protect,” while using “aggrieved consumer” to define those “entitled to a remedy under the TCCWNA.”  Doing otherwise, the Court said, would have rendered “aggrieved” superfluous.

But the Court avoided the worst possible result by defining “aggrieved consumer” in a relatively generous fashion, as indeed was appropriate given the liberal construction in favor of consumers to which the TCCWNA was entitled.  Justice Patterson rejected defense arguments that the “harm” necessary to be an “aggrieved consumer” was “limited to injury compensable by monetary damages.”  She gave two examples: a consumer who “would have sought a refund [for untimely delivery of furniture] had he or she not been deterred by the ‘no refunds’ language” prohibited by the Furniture Regulations, or one whom an untimely delivery and misleading “no refunds” language left a consumer “without furniture needed for a family gathering.”  Both of those consumers would be “aggrieved” because they suffered “adverse consequences.”

Whether today’s ruling on the second certified question will hinder class action cases under the TCCWNA remains to be seen, as there may be arguments available to defendants that not all putative class members sustained the sort of “adverse consequences” that the Court defined in this opinion.  If this decision frustrates class actions, that would be a serious blow to the Legislature’s goal of enhancing protections for consumers by enacting the TCCWNA to strengthen other consumer protection statutes, since individual TCCWNA cases for damages as low as $100 are unlikely to be brought.

The legislative intent of the TCCWNA was to deter sellers from including unlawful provisions in contracts, and to give consumers (even, according to the actual language of the TCCWNA, “prospective consumers”) the right to sue when a contract with such language is offered to them.  But today’s decision declined to do that.  Instead, the Justices evidently felt that they needed to protect defendants against cases where plaintiffs had suffered no “adverse consequences” at all, and at least “adverse consequences” was not defined as narrowly as defendants demanded.

Left unaddressed, however, was the question of how “consumers whom the statute was enacted to protect” would gain any protection if they needed to be “aggrieved” in some fashion in order to win the TCCWNA’s statutory damages/penalty.  Can such consumers seek injunctive or declaratory relief that would prevent enforcement of unlawful contractual provisions against them and/or against a class of other consumers?  Can they get attorneys’ fees in such a case, without which no such case would be brought?  Today’s decision answered the two certified questions, but raises many other questions that will have to be addressed down the road.




One Response to “Some Clarity on the Substantive Provisions of the TCCWNA”

  1. Chuck Riley says:

    Bruce–think you missed the importance of the Goffe/Robinson cases-it was not only rescission but failure to provide a copy of contract(1st impression) and adopting Guidotti Standard from fed ct. on factual disputes over arbitration contracts

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