Supreme Court Says TCCWNA Gives Broad Protections to Consumers

Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013).  [Disclosure:  I argued this case in the Supreme Court for the successful plaintiffs].  This consumer protection case has had a long odyssey.  Originally filed in the Law Division, Middlesex County, the case was then removed to federal court.  The district court dismissed the case for failure to state a claim.  Plaintiffs appealed to the Third Circuit Court of Appeals.  At oral argument, that court suggested that it would ask the Supreme Court of New Jersey to answer some certified questions about the Truth in Consumer Contract, Warranty, and Notice Act (“TCCWNA”), N.J.S.A. 56:12-14 to -18, since the Third Circuit felt that it had little TCCWNA law to go on.  The Court of Appeals posed two questions, which the Supreme Court agreed to answer.  The case was argued twice in the Supreme Court, in March and October 2012.  In between those arguments, the Court added a new question.  Today, in a unanimous opinion by Judge Cuff, the Court answered all three questions in favor of plaintiffs, and in favor of a broad construction of the TCCWNA, in accordance with legislative intent.

The case was about Restaurant.com gift certificates.  Those certificates, sold by Restaurant.com to consumers on a website, offer consumers the ability to dine at participating restaurants, subject to certain terms set by those restaurants (e.g., not valid on Saturday night; must spend at least $35, etc.), and terms imposed by Restaurant.com.  Two of the latter terms were that the gift certificates (1) expired one year from the date of issue, “except where otherwise provided by law,” without specifying whether that term applied in New Jersey, and (2) were void “to the extent prohibited by law,” again without stating whether or to what extent the gift certificates are void or valid in New Jersey. 

Plaintiffs filed a putative class action, asserting that the gift certificates violated the Gift Card Act, N.J.S.A. 56:8-110 to -112, the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq. (“CFA”), and the TCCWNA.  The Gift Card Act requires gift certificates to be valid for at least two years, and the TCCWNA expressly forbids sellers from statements such as “void where prohibited by law,” instead requiring that sellers state what New Jersey law says.

Defendant obtained dismissal in federal court by arguing that its gift certificates were not “property” covered by the TCCWNA, that plaintiffs were not “consumers” as the TCCWNA defines that term, and that, as to the CFA, plaintiffs had no ascertainable loss since they had not shown that they had tried to use the certificates but were rebuffed due to the expiration date.  The certified questions that the Supreme Court answered went only to the TCCWNA issues.  Those questions were: (1) whether the gift certificates constituted “property” under the TCCWNA; (2) if the gift certifcates are property, whether they are “primarily for personal, family or household purposes,” as the TCCWNA requires; and (3) whether the sale of the certificates constituted a “written consumer contract” under the TCCWNA, or whether the gift certificates “gave or displayed any written consumer warranty, notice or sign,” again as the TCCWNA would require for there to be liability. 

Judge Cuff answered each question in the affirmative.  After summarizing some essential principles of statutory construction, Judge Cuff turned to the questions.  Under N.J.S.A. 56:12-15, a “consumer” is “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.”  Though the TCCWNA does not define “property,” it does expressly exclude the lease or sale of real property.  Viewing the legislative history of the TCCWNA, employing the “default” definition of “property” contained in N.J.S.A. 1:1-2, and taking into account the Legislature’s decision to exclude real property from the TCCWNA (but not intangible property), the Court determined that intangible property such as gift certificates are covered “property.”

Judge Cuff also rejected defendant’s argument that “primarily for personal, family or household use” meant that intangible property was excluded from the TCCWNA.  She canvassed extensively other statutes that used that phrase, and concluded that “the classification is by use and not the nature of the goods.”  Thus, rather than excluding intangibles, “the phrase simply describes the use to which the property is put.” 

The Court then ruled that the gift certificates are “primarily for personal, family or household use.”  Defendant had contended that the certificates were nothing more than “an intangible, inchoate, and contingent right to a discount from another, which does not fall within the scope of the TCCWNA.”  Judge Cuff disagreed.  After carefully analyzing the gift certificates, she held that “the very nature of the certificates underscores that those items of intangible property are acquired for personal, family, or household use….  Dining out and pursuing entertainment may not be essential to daily living, but they are quintessential personal, family, or household pursuits.” 

Finally, the Court determined that the gift certificates both constituted a “consumer contract” and gave or displayed a “written warranty, notice or sign” as defined by the TCCWNA.  As to the former, Judge Cuff read the TCCWNA together with the Plain Language Act, N.J.S.A. 56:12-1 to -13, which (unlike the TCCWNA) contains a definition of “consumer contract.”  “The transaction has all the basic features of a contract: offer, acceptance, consideration, and performance by both parties.”  The Court found that the gift certificates gave a “notice,” using the common definition of that term– “a written or printed announcement.”  Since the certificates “contain a printed announcement, which conditions the use of the certificates,” they gave a “notice.” 

This opinion is a ringing reaffirmation of the Legislature’s intent, through the TCCWNA as part of a larger body of legislation, to give broad protections to consumers.  Defendant’s often unrealistic arguments (such as that there was no “written consumer contract” because the gift certificates were purchased electronically, a contention that Judge Cuff debunked by reference to the Uniform Electronic Transactions Act, N.J.S.A. 12A:12-1 to -26) were correctly rejected.  The matter now returns to the Third Circuit.  In light of today’s opinion, that court should, at a minimum, reinstate plaintiffs’ TCCWNA claim.

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  1. […] that earlier this week in Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013), discussed here, which involved another consumer protection statute, the Truth in Consumer Contract, Warranty, and […]

  2. […] were In re Princeton Office Park L.P. v. Plymouth Park Tax Servs., LLC, 218 N.J. 52 (2014), and Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013).  [Disclosure:  I argued for the successful plaintiffs before the Supreme […]

  3. […] appeal related to the Supreme Court of New Jersey’s decision in Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013), on questions certified to the Court by the Third Circuit, which the Supreme […]

  4. […] restaurant gift certificates generated electronically only).  Shelton is discussed here.  The Supreme Court might be persuaded to answer the plea of Judge Fuentes, take this case up, and […]

  5. […] meaning of the TCCWNA was in Shelton v. Restaurant.com, Inc., 214 N.J. 419 (2013).  As discussed here, that decision resulted in a resounding victory for the plaintiffs there.  [Disclosure: I argued […]

  6. […] statutes.  Two prior examples are Shelton v. Restaurant.com, 214 N.J. 419 (2013), discussed here [Disclosure:  I argued, and re-argued at the Court’s request, that appeal for the successful […]

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