NJ Supreme Court Narrowly Defines “Aggrieved Consumer.” End Of The Road For One Type Of “No Injury” Class Action?

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I have written a number of times about New Jersey's Truth in Consumer Contract, Warranty and Notice Act (TCCWNA). (Here, here, and here for example.) This statute, which was largely ignored after it was enacted in 1981, became increasingly popular in recent years as part of so-called no injury class actions. (So-called mostly by defense counsel, not plaintiff's counsel.) Its popularity may now have come to an end, however, because the New Jersey Supreme Court recently issued its opinion in the highly-anticipated case, Spade v. Select Comfort Corp., which answered two questions certified to it by the U.S. Circuit Court of Appeals for the Third Circuit, one of which appears to hamper, at the very least, the ability of plaintiffs to sue for alleged violations of the act.

By way of brief background, the TCCWNA was enacted to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. It provides:

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.

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 containing a provision that violated a legal right of the consumer or a responsibility of the seller; and (4) that it was an "aggrieved consumer." Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, and reasonable attorneys' fees and court costs.

The questions certified to the Supreme Court in Spade arose out of two cases that had been consolidated by the district court. Each involved plaintiffs who ordered furniture pursuant to contracts that violated certain regulations promulgated by New Jersey's Division of Consumer Affairs. The regulations require, among other things, that furniture sellers deliver furniture to customers by or before the promised delivery date or provide written notice that they will not be able to do so. Sellers must also provide notice to the purchaser that if the delivery is late, the consumer has the option of canceling the order and receiving a full refund, or agreeing to accept delivery at a specified later date. The regulations also prohibit sellers from including certain language in their contracts, such as "all sales final," "no cancellations," and "no refunds." In Spade, plaintiffs alleged that the contracts they entered into with defendants did not contain language required by these regulations, contained language prohibited by these regulations, or both. Notably, however, plaintiffs received their furniture deliveries on time.

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Size Matters: Seventh Circuit Rejects Subway Footlong Settlement Because It Provided No Meaningful Benefit To Class Members

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

I am a regular Subway customer, so I read the Seventh Circuit's opinion, In re. Subway Footlong Sandwich Marketing and Sales Practices Litigation, with great interest. You probably remember the events that spawned this litigation. As the Seventh Circuit described it: "In January 2013 Matt Corby, an Australian teenager, purchased a Subway Footlong sandwich and, for reasons unknown, decided to measure it. The sandwich was only 11 inches long. He took a photo of the sandwich next to a tape measure and posted the photo on his Facebook page. Thus a minor social-media sensation was born." And, "[w]ithin days of Corby's post, the American class-action bar rushed to court," therefore, a class action lawsuit was also born. It ended a few years later with a settlement, which the Seventh Circuit just overturned.

To say that the Seventh Circuit was critical of the settlement would be an understatement. Its opinion is filled with subtle, and not so subtle, criticisms of the settlement and plaintiffs' counsel. For example, early in its opinion, the court observed: "In their haste to file suit [ ] the lawyers neglected to consider whether the claims had any merit. They did not." It did not get much better for plaintiffs from that point on.

The court noted that the parties engaged in limited, informal discovery early on in the case, with the intent of going to mediation. This discovery revealed that plaintiffs' claims were deficient. It showed that "the length of the [baked] bread has no effect on the quantity of food each customer receives." First, all of Subway's raw dough is exactly the same size. So, even the few rolls that bake to approximately a quarter-inch less than 12 inches because of natural, and unpreventable, "vagaries in the baking process" provide the same bread as those that bake to the full 12 inches. Second, Subway standardizes the amount of meat and cheese that its "sandwich artists" put on each sandwich, so whether the bread is 12 inches long or a quarter-inch short, the customer still gets the same amount of food. (In the interest of full disclosure, because I am a regular, I do occasionally get an extra slice of ham, salami, and pepperoni on my six-inch BMT at my local Subway.) "This early discovery, limited though it was, extinguished any hope of certifying a damages class."

"Rather than drop the suits as meritless," however, plaintiffs shifted the focus of the lawsuit from one seeking damages to one seeking injunctive relief. THey filed an amendec complaint and, after mediation, reached a settlement with Subway, under which Subway would, for four years, implement practices designed to ensure, the the extent possible, that its sandwich rolls measured at least 12 inches long. But, the settlement noted that "because of the inherent variability in food production and the bread baking process, Subway could not guarantee that each sandwich roll [would] always be exactly 12 inches or greater in length after baking." In other words, Subway would try to fix, but could not guarantee that it would fix, the problem that spawned the lawsuit.

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Havanese Day! Statements on duped dog buyer’s blog not defamatory

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

In Roberts v. Mintz, defendant bought what he believed was a "healthy, nine-month old, purebred Havanese," but what he got was a two-year old dog that was not a purebred Havanese, and was suffering from various health problems. Defendant complained and plaintiffs offered to refund his money in exchange for the dog. Defendant refused. He wanted the refund, but he wanted to keep the dog because he had already incurred $800 in veterinary fees and because he had become fond of the dog, which he named Moose.

One month after buying Moose, defendant began posting about his experience with plaintiffs on his blog. As you probably guessed, the posts were not positive. Eventually, plaintiffs sued in connection with six specific statements defendant made on his blog, which, among other things, accused plaintiffs of being members of a "notorious ring of South Jersey dog grifters," alleged that plaintiffs had been convicted of animal cruelty, claimed that plaintiffs' lived in a "run down farmhouse with 6 children," and described plaintiffs as "despicable human beings" who ran a "fraudulent puppy mill." Defendants also posted that they had heard from others who were "unwittingly scammed" by plaintiffs. Individuals who claimed to be plaintiffs responded to some of the posts in the comments sections of the blog, calling defendant a "liar" and a "jerk," and claiming that he "suffered from 'rage syndrome,' a behavioral condition that afflicts canines."

In lieu of answering plaintiffs' complaint, defendant moved for summary judgment, seeking to have the complaint dismissed. He also served plaintiffs with a frivolous litigation letter. Plaintiffs cross moved for summary judgment and also sought an injunction preventing defendant from defaming them. The trial court granted defendant's motion. It held that plaintiffs were barred from suing in connection with several of the statements because the one-year statute of limitations had expired. In doing so, it rejected plaintiff's claim that the statute of limitations should have been tolled because defendant had committed a continuous tort. The trial court found that the remaining statements were "opinions, epithets, and hyperbole," and were therefore "not sufficiently factual to be actionable."

Defendant then moved for sanctions, and the trial court granted the motion. Although it did no award defendant all of the sanctions he sought, it did award him $25,000 — assessed against both plaintiffs and their counsel — because plaintiffs filed their complaint without sufficient evidentiary support and because several claims were barred by the statute of limitations.

Both sides then appealed — plaintiffs seeking to reverse the trial court's decision dismissing their complaint, and defendant seeking to reverse the trial court's decision to award him less in sanctions than what he requested

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Refer(ral) Madness: Court Nixes Fee Sharing For Lawyer Who Referred Case To Lawyer Who Referred Case To Lawyer Who Handled Case

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Under New Jersey law, lawyers can, in some instances, share fees with lawyers at a different firm to whom they refer a case. But what happens when Lawyer A refers a case to Lawyer B who then refers the case to Lawyer C? Can Lawyers A and B share in the recovery that Lawyer C achieves for the client? This was the question the Appellate Division faced in Weiner & Mazzei, P.C. v. The Sattiraju Law Firm, PC. The answer, in that case, was "no," but there are instances where this type of three-way sharing would be appropriate.

In Weiner & Mazzei, a lawyer was contacted by a family friend in need of advice on a possible workplace injury/change of employment case. The lawyer advised the family friend that he appeared to have a valid claim and referred the family friend to an attorney who specialized in that area of law. The first lawyer claimed that he told the family friend that the second lawyer would take the case on contingency and that the first lawyer would be paid a referral fee. The family friend denied ever being told about the referral fee.

After speaking with the first lawyer, however, the second lawyer also refused the case but agreed to refer it to defendant, a law firm with at least one certified civil trial attorney. The second lawyer had a standing referral agreement with defendant and defendant agreed to abide by the usual one-third referral fee contained in that agreement.

Defendant prosecuted the client's employment case and eventually reached a confidential settlement with the client's former employer. Plaintiffs — the first and second lawyers — sued, claiming they were jointly entitled to one-third of defendant's fee. Defendant moved for summary judgment, which was originally denied, but was later granted upon reconsideration. Plaintiffs appealed.

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Are Exceptions Starting To Swallow The “American Rule” In New Jersey?

The answer to that question would appear to be: it depends who you ask. In a pair of decisions released on April 26, 2016, Innes v. Marzano-Lesnevich and In Re Estate of Folcher, the New Jersey Supreme Court addressed the “American Rule” — the idea that each party to a lawsuit is responsible for its own attorney’s fees — and specifically whether to narrow or expand certain common-law exceptions to that rule. At the center of the two decisions was Justice LaVecchia, who authored the majority opinion in Folcher and the dissent in Innes. These decisions leave little doubt that this is not the last we have heard from the Supreme Court on the parameters of the American Rule.

First, a brief history of the American Rule in New Jersey. In 1948, New Jersey adopted a new Constitution and re-organized its court system. As part of this re-organization, and as it relates to the awarding of prevailing party attorney’s fees, New Jersey could have adopted either the English Rule, which allows for the liberal awarding of such fees, or the American Rule, which does not. New Jersey chose the latter. This decision is currently embodied in Rule 4:42-9, which only allows for eight exceptions to the general rule.

Over the years, however, New Jersey courts have created common law exceptions to the American Rule. These cases have followed two, independent tracks, one arising in the context of the attorney-client relationship and one arising in the context of estate administration.

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