Pleading Standards in Putative Class Actions in New Jersey State Courts

Baskin v. P.C. Richard & Son, LLC, ___ N.J. ___ (2021). [Disclosure: I am one of the counsel for the successful plaintiffs in this matter]. In this case, the Appellate Division affirmed the dismissal, for failure to state a claim, of a putative class action under the Fair and Accurate Credit Transactions Act of 2003, 15 U.S.C. 1681 (“FACTA”). That opinion, reported at 462 N.J. Super. 594 (App. Div. 2020), was discussed here.

Plaintiffs’ claim was that defendants had violated FACTA by printing on sales receipts the credit or debit card expiration dates of plaintiffs and class members. Both the Law Division and the Appellate Division ruled that plaintiffs had not sufficiently pled elements necessary to class certification: numerosity, predominance of common questions over individual issues, and the superiority of a class action to other means of adjudication.

Today, in a unanimous opinion by Justice Fernandez-Vina, the Supreme Court reversed that ruling. Applying the de novo standard of review applicable to motions to dismiss at the threshold, which requires that a complaint be the Court held that plaintiffs had sufficiently pled the challenged elements relating to class certification.

As to numerosity, plaintiffs had alleged that “there are, at a minimum, thousands (i.e., two thousand or more) of members that comprise the Class,” and that “[t]he exact size of the Class and identities of individual members thereof are ascertainable through [d]efendants’ records.” As Justice Fernandez-Vina noted, the courts below had “concluded that the numerosity requirement was not satisfied because plaintiffs failed to allege a potential number of class members except to contend that there could be ‘thousands of people whose credit card information was exposed on improper receipts.’”

Justice Fernandez-Vina did not agree. The standard of review required the Court to “accept as true plaintiffs’ allegation that there area minimum of two thousand members of the class. That estimate is also supported by the class period pled, which spanned two years and nine months. In that time period, it is reasonable that the class could contain at minimum two thousand members, given that anyone who received a noncompliant receipt from one of defendants’ stores would be an eligible member. Additionally, absent discovery of defendants’ sales records, plaintiffs have no way to know how many credit and debit card transactions defendants conducted during the relevant period.”

Turning to predominance, the courts below had found plaintiffs’ allegations wanting “because there were too many uncertainties regarding the number of claims and the harm suffered; thus, it was ‘difficult to determine a common nucleus of operative facts.’” Justice Fernandez-Vina reached a contrary conclusion “because the class is seeking statutory damages…. [T]he common nucleus of operative facts is, as plaintiffs pled, whether defendants programmed their equipment to print the expiration dates of customers’ credit/debit cards on receipts;the answer to that question will apply to all class members. Put differently, if plaintiffs are successful in establishing defendants’ willful noncompliance with FACTA, then statutory damages are available to all class members uniformly.”

Defendants had not argued numerosity or predominance in either lower court, and they did not try to defend the rulings below on either of those issues. What they did argue, at all levels, was that a class action was not the superior means of adjudication. They relied on Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., 421 N.J. Super. 268 (App. Div. 2011). That was a case under the Telephone Consumer Protection Act, 47 U.S.C. 227 (“TCPA”), where the Appellate Division had found a class action not superior to individual litigation because the TCPA incentivized individual litigation by offering statutory damages.

Justice Fernandez-Vina found that reliance on Local Baking was “misplaced
because of the differences in establishing a statutory violation under the TCPA and establishing a statutory violation under FACTA.” FACTA has a “willfulness requirement” not present in the TCPA. ” The imposition of the willfulness requirement makes it more difficult for an individual plaintiff to bring a FACTA claim for statutory damages because it is unlikely a plaintiff appearing pro se in small claims court will know how to demonstrate willfulness.”

Moreover, individual damages in a FACTA case are likely too small to give individual victims an incentive to bring their own cases. Finally, Justice Fernandez-Vina said, multiple individual cases carry the risk of “inconsistent results,” which “would not foster judicial efficiency; nor would it be fair to defendants.” Accordingly, the Court reversed the dismissal of the case and remanded it for discovery.

Justice Fernandez-Vina provided a detailed description of the law surrounding numerosity, predominance, and superiority. That analysis will be very useful in class action cases going forward. Today’s unanimous decision was unquestionably correct.