E-Commerce in New Jersey Threatened by Rise of TCCWNA Class Actions

Owners and operators of e-commerce websites should be aware of an eruption in threatened and filed class actions against online retailers under the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”). The TCCWNA was enacted decades ago, as the New Jersey Supreme Court has explained, to “prohibit[] businesses from offering or using provisions in consumer contracts, warranties, notices and signs that violate any clearly established right of a consumer.” Yet, as laudable as this goal may be, with the potential for class-wide statutory penalty damages, the brevity and breadth of the statute has led to a tidal wave of litigation now targeting terms and conditions within e-commerce websites—an application of the law that could not have even been conceived of when the TCCWNA was passed in 1981.

These lawsuits—brought against dozens of retailers, including Wal-Mart, Toys R Us, Whirlpool, Bed Bath & Beyond, and others—generally take aim at broad indemnification and exculpatory provisions, although the filed complaints find violations of “clearly established legal rights” throughout sets of online terms and conditions. For a thirty-year old statute, there is an unfortunate lack of case law interpreting its provisions—a function of the reality that TCCWNA class actions are less than ten years old.

The legal precedent that does exist is, at times, contradictory, leading to a murky and complex compliance environment. However, a fairly recent spate of decisions permitting TCCWNA class actions against certain types of liability limitations in traditional written contracts has emboldened plaintiffs and engendered much of the present litigation. It remains to be seen whether and to what degree courts will approve of plaintiffs’ efforts to apply the TCCWNA to website terms and conditions. However, given the law’s statutory damages provision—which allows for “a civil penalty of not less than $100.00 or for actual damages, or both at the election of the consumer”—and the national reach of online retail, there is much at stake in the outcome of these litigations, both for parties and the retail industry generally.

Several of the defendants in these lawsuits have moved to dismiss on a number of grounds, including “injury-in-fact” standing requirements under Article III of the constitution, that the plaintiffs are not “aggrieved consumers” as required under the TCCWNA, and—of course—that the allegedly offending provisions do not violate “clearly established legal rights.”

But the fight over the breadth of the TCCWNA and its applicability in the Internet age has only just begun and courts will need some time to sort out many of the outstanding questions. For now, companies (even those without a direct-to-consumer e-commerce presence) should proactively assess their website Terms and Conditions in efforts minimize TCCWNA exposure.