In recent years, creative plaintiff-side class action attorneys in New Jersey have attempted to seek relief under the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), which allows for $100 in statutory damages per violation to “aggrieved consumers” when terms in certain contracts or other writings violate a “clearly established legal right of a consumer or responsibility of a seller.” N.J. Stat. Ann. § 56:12-14 et seq.  Although the TCCWNA has been around since the 1980s, it has only recently been employed by named plaintiffs in putative class actions, most likely in an attempt to circumvent the ascertainable loss and causation requirements of New Jersey’s Consumer Fraud Act (“CFA”) and because the prospect of $100 per violation greatly exceeds actual damages in many cases.  Thankfully for defendants, a recent New Jersey Supreme Court decision, Dugan v. TGI Fridays, Inc., makes it more difficult to certify class actions brought under the TCCWNA and circumscribes the type of “clearly established legal right[s]” that may form the basis of a TCCWNA claim.

Dugan is a consolidated appeal of two actions in which plaintiffs alleged that the defendant operators of New Jersey restaurants engaged in unlawful practices with respect to the disclosure of prices charged to customers for alcoholic and non-alcoholic beverages. In the first action, plaintiffs alleged that TGI Fridays and Carlson Restaurants (collectively, “TGIF”) offered beverages in menus without listing their prices. Plaintiffs claimed this was a violation of the CFA and a related regulation, § 56:8-2.5, which provides that it is unlawful to sell merchandise at retail unless the “total selling price” is plainly marked at the point where the merchandise is offered for sale. The named plaintiff in the second action similarly claimed that Carrabba’s Italian Grill (and other restaurants) violated the CFA and the same regulation based on allegations that menus and other displays failed to disclose drink prices and discounts in effect at different times the restaurant was open. Plaintiffs in both actions also sought relief under the TCCWNA.

At the class certification stage, the lower courts in the two cases were split on whether common questions predominate over individual issues with respect to ascertainable loss.  On appeal, the Supreme Court of New Jersey held that class certification was improper for the TCCWNA claims because, among other things, plaintiffs failed to show that “questions of law or fact common to the members of the class predominate over any questions affecting only individual members.” Specifically, the Supreme Court noted that the TCCWNA, by its terms, does not apply when a defendant fails to provide the consumer with a required writing, be it a “contract,” “warranty,” “notice” or “sign.” Thus, each member of the class would have to prove he or she was presented with a menu during his or her visit to the defendants’ restaurants. This individual question would require testimony by each class member or another witness to prove that the member is an aggrieved consumer.

The Supreme Court also held that the failure to provide prices on a menu is not a violation of a “clearly established legal right of a consumer or responsibility of a seller” as required under the TCCWNA because such cases have never arisen in the history of prosecutions under § 56:8-2.5. Moreover, the Supreme Court noted that “if plaintiffs were to prove that each of the thirteen to fourteen million restaurant visits by a member of the plaintiff class gave rise to a TCCWNA violation warranting a civil penalty of $100, [then] TGIF would be liable for penalties amounting to more than a billion dollars.”  The Supreme Court found there is nothing in the legislative history of the TCCWNA suggesting the legislature intended to impose billion-dollar penalties on restaurants that serve unpriced food and beverages to customers.

Watch this space for further developments.


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