United States: Online Terms And Conditions May Spell Trouble For Businesses In New Jersey

Last Updated: May 11 2016
Article by Karen F. Lederer and Patrick M. Ryan

In recent weeks, New Jersey has witnessed the intensification of a trend that has been years in the making, in the form of a succession of consumer class action lawsuits targeting the language of online terms and conditions used by businesses. One of the most recently filed, Martinez v. Burlington Stores Inc., Case No. 1:16-cv-02064, typifies the issue. A class action brought on April 13, 2016 in the U.S. District Court for the District of New Jersey, the prospective class in Martinez claims that online terms and conditions used by Burlington Stores run afoul of New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. § 56:12-14. This statute applies to "consumers," which N.J.S.A. § 56:12-15 defines as "any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes." That section states that "No seller, lessor, creditor, lender or bailee shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign after the effective date of this act which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law..." Further, the statute also prohibits any consumer agreement in which a consumer waives his rights under the TCCWNA, § 56:12-16.

Burlington Stores Inc., commonly known as Burlington Coat Factory, features "Terms of Use" on its website which state that the company is not legally responsible for the sale of dangerous or substandard products through its website. The language also disclaims responsibility for other harms that might be suffered by consumers using the website, such as online fraud or hacking. The plaintiffs in Martinez argue that this disclaimer of responsibility violates the TCCWNA, and seek to certify a class of all consumers who entered into or were displayed the Terms of Use during the applicable statute of limitations – six years under the statute. The complaint requests awards of at least $100 per person for each violation of the statute, and also that the company be ordered to terminate the referenced language.

Burlington Stores is not alone. Two other large companies, Toys R Us and Bed Bath & Beyond, each saw nearly identical class actions filed against them shortly before Martinez. Those cases, Christina Roldan v. Toys R Us Inc., Case No. 2:16-cv-01929, and Edward Sweeney v. Bed Bath & Beyond Inc., Case No. 2:16-cv-01927, were each filed on April 11, 2016, two days before Martinez. All three of those cases claim violations of the TCCWNA arising out of online terms and conditions, and were filed in the same court by the same plaintiffs' counsel.

Similar cases have also been brought against several other companies, including Victoria's Secret, Samsung Electronics, and the New Jersey Symphony Orchestra. The numbers confirm this apparent surge in the number of TCCWNA claims – while 12 decisions involving the statute were issued in 2010, there were 27 issued in 2015. Recent case law over that period has provided support for the uptick in these claims. In Shelton v. Restaurant.com, Inc., 214 N.J. 419, 44142 (N.J. 2013), the New Jersey Supreme Court held that the TCCWNA extends to terms and conditions on commercial websites. Going specifically to the disclaimers of responsibility at issue in the Burlington Stores, Toys R Us, and Bed Bath & Beyond cases, recent decisions such as Martinez-Santiago v. Public Storage, 38 F. Supp. 3d 500, 511 (D.N.J. 2014) and Vaz v. Sweet Ventures, Inc., 2011 N.J. Super. Unpub. LEXIS 3189, *1 (Law Div. July 12, 2011) provide a basis for arguing that these hold-harmless provisions violate the statute.

Given the wide breadth of the statute's application, perhaps this trend should not be particularly surprising. The TCCWNA features no requirement that plaintiffs show actual harm or ascertainable loss in order to recover, unlike claims under the New Jersey Consumer Fraud Act. The TCCWNA also permits an award of $100 in statutory damages for each violation, which the plaintiffs in Martinez and others argue includes each visit to the defendants' websites. Moreover, the Act does not require that there be a contractual relationship between the consumer and the seller – only that the seller "offer" or "display" the notice or sign in question.

The TCCWNA also nullifies one often-used strategy for shielding companies from this kind of liability. It is a typical business practice to state in the terms and conditions that any provision or clause will cease to be effective if it is contrary to applicable state law. However, this option is unavailing under the TCCWNA, because the statute explicitly restricts sellers from using general statements about potentially void provisions. The language reads: "No consumer contract, notice or sign shall 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. § 56:1216. General, boilerplate statements declaring the ineffectiveness of any violative provision are therefore too broad under the TCCWNA.

Subject companies should review their online terms and conditions to check for any provisions that might run afoul of the TCCWNA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Karen F. Lederer
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