What Does TCCWNA Prohibit?
The New Jersey Supreme Court has explained that TCCWNA was meant “to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties in consumer contracts.” Kent Motor Cars, Inc. v. Reynolds & Reynolds Co., 207 N.J. 428, 457 (2011). The statute has three primary provisions:
Section 15: A seller, lessor, creditor, lender or bailee may not “offer,” “give,” “display,” or “enter into” any written consumer contract, warranty, notice, or sign that “includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee….” N.J.S.A. 56:12-15.
Section 16: A consumer contract, warranty, notice, or sign 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 its 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….” N.J.S.A. 56:12-16.
Section 17: If a defendant “violates the provisions of this act,” an “aggrieved consumer” may seek a “civil penalty of not less than $100.00 or for actual damages, or both at the election of the consumer, together with reasonable attorney's fees and court costs.” N.J.S.A. 56:12-17.
What Documents Are Affected?
TCCWNA applies to a “consumer contract, warranty, notice or sign,” and defines “consumer” as “any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes.” N.J.S.A. 56:12-15. That definition has two important limitations. First, it applies only to agreements with or notices to “individuals,” meaning people rather than businesses. See Shelton v. Restaurant.com, Inc., 214 N.J. 419, 429 (2013). Second, it applies only to agreements for or notices regarding “buy[ing], leas[ing], borrow[ing], or bail[ing] any money, property or service which is primarily for personal, family or household purposes,” which further limits the scope of the statute based on the nature and purpose of the transaction. However, this definition has yet to be widely litigated, and it is fair to assume that plaintiffs will try to stretch it well beyond its intended scope.
What Language Is Being Targeted?
Savings Clauses and Severability Provisions
Plaintiffs have challenged common formulations of severability provisions and savings clauses such as “unless prohibited by law,” “to the extent allowed by law,” and “except as required by law,” arguing that they “state” that a provision “may be void, unenforceable or inapplicable in some jurisdictions,” which would then trigger a duty to “specify which provisions are or not void, unenforceable or inapplicable within the State of New Jersey.” The better reading of such clauses is that they do not in and of themselves “state” anything about any “jurisdictions.” Although a number of courts have held just that, the law is not yet settled and complaints continue to be filed every day. To the extent possible, drafters should consider avoiding such language, especially variants that come close to having “jurisdictional” triggers.
Limiting Liabilities or Remedies
Because Section 15 does not explain what it means to be “clearly established,” class action plaintiffs have been creative in conjuring “rights” or “responsibilities” that they claim have been “violated.” Their main target to date has been provisions that limit a defendant’s liability or a plaintiff’s remedies. For example, they have challenged provisions that:
- Prohibit consumers from asserting claims arising from the use of an allegedly dangerous product, which they have alleged violates rights established by the New Jersey Products Liability Act, N.J.S.A. 2A:58C-1 et seq., the New Jersey Uniform Commercial Code, N.J.S.A. 12A:1-101 et seq., and common law duties;
- Require consumers to indemnify businesses for damages caused by the businesses’ own negligence, which they have alleged violates a right established by New Jersey common law;
- Prohibit consumers from recovering punitive damages, which they have alleged violates a right established by the New Jersey Punitive Damages Act, N.J.S.A. 2A:15-5.9 et seq.;
- Prohibit consumers from recovering attorneys’ fees or require consumers to split costs, which they have alleged violates rights established by statutes that permit prevailing plaintiffs to recover fees and costs, see, e.g., New Jersey’s Consumer Fraud Act, N.J.S.A. § 56:8–19; TCCWNA N.J.S.A. § 56:12-17;
- Require consumers to assert claims within a certain period of time, which they have alleged violates rights established by the applicable statute of limitations, see N.J.S.A. 2A:14-1 (six-year limitations period for consumer protection claims); N.J.S.A. 12A:2-725 (four-year limitations period for contract claims);
- Prohibit consumers from asserting claims arising from data breaches by third parties, which they have alleged violates a “responsibility” that they try to cobble together from the New Jersey Identity Theft Prevention Act, N.J.S.A. 56:8-163, and various guidelines and suggestions offered by the FTC and FCC.
What Should Businesses Do?