by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
New Jersey's Consumer Fraud Act (CFA) has long been a favorite of plaintiff's attorneys, but there is another consumer protection statute that is rapidly gaining on the CFA in popularity — the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) (or, as it is sometimes awkwardly pronounced, "ta-KWA-na"). Although it has been around for thirty years, case law interpreting the TCCWNA is still in its infancy because the act has only recently become a common claim in putative consumer class actions. In a new, unpublished decision, Matijakovich v. P.C. Richard & Son, the U.S. District Court for the District of New Jersey, addressed one unsettled aspect of the still developing body of case law surrounding the TCCWNA.
First, a brief primer on the TCCWNA, which provides, in part:
No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract . . . or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.
Its purpose is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract; and (4) that the consumer contract contained a provision that violated a legal right of the consumer or a responsibility of the seller. Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, in addition to reasonable attorneys' fees and court costs.
In Matijakovich, plaintiff purchased a washing machine from defendant. He entered into a contract with defendant and defendant delivered and installed the washing machine. Although the delivery was not delayed, plaintiff alleged that the contract with defendant violated New Jersey Household Furniture and Furnishing Regulations because it did not contain language disclosing defendant's obligation in case of delay. (You can see from this allegation why plaintiff's counsel love the TCCWNA — even though delivery was not delayed, plaintiff attempted to sue for the seller's failure to include contract language related to delay.) Plaintiff purported to sue on behalf of a class of individuals, estimated to be as many as 50,000, who purchased appliances from defendant pursuant to contracts like the one plaintiff signed.
Defendant moved to dismiss the complaint, arguing that a TCCWNA claim cannot be based on an omission. It argued that the TCCWNA prohibits a seller from entering into a consumer contract that includes an illegal term, therefore it applies only to affirmative statements, not omissions of allegedly required language.
The district court agreed with plaintiff. In its decision, the district court noted that the New Jersey Supreme Court had "not ruled on whether a TCCWNA claim may be based on an omission," but that this was not a new issue in the U.S. District Court for the District of New Jersey. In fact, according to the Matijakovich court, a sister court had dealt with an analogous issue in an earlier case, Watkins v. DineEquity, Inc. In that case, the district court held that the omission of beverage prices from a restaurant menu was not actionable under the TCCWNA. In describing this prior holding, the Matijakovich court held:
The court based its decision in part on a plain reading of the statute's phrase, "includes any provision," reasoning that a "reading of 'includes' [that] also covers its inverse, 'omits,' impermissibly reads in more prohibited conduct than is provided by the statute, even under a liberal construction approach." The court also looked to the legislative history of the TCCWNA and noted that the bill's "Sponsor's Statements included no examples of deceptive omissions that were envisioned as falling within the scope of the statute."
The district court noted that the Third Circuit affirmed this decision, holding that the "TCCWNA encompasses only illegal provision in writings covered by the statute, and does not make actionable omissions." Based on this precedent, and because plaintiff's claims in Matijakovich were "entirely based on an alleged omission," the district court held that plaintiff failed to state a plausible claim under the TCCWNA. For this reason, it granted defendant's motion to dismiss.
It is important to note, however, that the New Jersey Supreme Court is the final arbiter of New Jersey law and, as the Matijakovich court observed, it has yet to decide whether a claim under the TCCWNA can be based on an alleged omission. Given the sheer number of lawsuits being filed under the TCCWNA, this issue may eventually make it up to the Supreme Court, and may be decided differently if or when it does. For now, however, this is a positive decision for those entities facing a putative class action under the TCCWNA.