United States: NJ Supreme Court Holds Actual Harm Required To Be An ‘Aggrieved Consumer' Under TCCWNA

Retailers doing physical or online business in New Jersey have been bombarded with "gotcha" class action lawsuits under New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), NJSA 56:12-14, et seq. The TCCWNA has been the plaintiffs' class action bar's consumer protection statute du jour because of its $100-per-person statutory penalty and fee-shifting provision. TCCWNA suits against retailers typically attack standard provisions in retail website terms of use, other consumer contracts, and consumer-facing literature. However, a recent decision by the New Jersey Supreme Court—addressing two certified questions from the US Court of Appeals for the Third Circuit—confirms that there are limits to this statute's reach. This edition of Morgan Lewis Retail Did You Know? examines the New Jersey Supreme Court's recent decision in Spade v. Select Comfort Corp., including the practical implications this decision will have on consumer complaints under the TCCWNA.


The TCCWNA provides a remedy to "aggrieved" consumers in the event that sellers of consumer products and services offer or enter into a written consumer contract, or display or give any written consumer warranty, notice, or sign that includes "any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by a State or Federal law." The TCCWNA confers a private right of action, but only to an "aggrieved consumer."

Following a growing onslaught of consumer cases being brought under the TCCWNA, the Third Circuit certified two questions of law in connection with two companion cases before the court on appeal following the district courts' dismissal of the cases. In these cases, Spade v. Select Comfort Corp. and Wenger v. Bob's Discount Furniture, the named plaintiffs entered into furniture sales contracts that allegedly included certain terms prohibited by the New Jersey Delivery of Household Furniture and Furnishings regulations (Furniture Delivery Regulations), and also failed to include certain language in the required format as dictated by the applicable regulations. Notwithstanding the alleged legal deficiencies with the customer contracts, both plaintiffs received their furniture deliveries in a timely manner and in a conforming condition. Nonetheless, plaintiffs asserted that the technical issues related to the disclosures defendants provided deemed them "aggrieved consumers" with standing to sue under the TCCWNA. The US district courts handling those claims dismissed them for failure to state a cause of action upon which relief can be granted. In particular, the district courts both found that because nothing bad had happened to either of the plaintiffs (i.e., their furniture was timely delivered and in a conforming state), they were not "aggrieved consumers" under the TCCWNA.

Recognizing the importance of the legal questions presented regarding how the undefined term "aggrieved consumer" should be interpreted and what should constitute a "clearly established legal right" under the TCCWNA, the Third Circuit certified the following questions to the Supreme Court of New Jersey:

  1. Does a violation of the Furniture Delivery Regulations alone constitute a violation of a clearly established right or responsibility of the seller under the TCCWNA and thus provide a basis for relief under the TCCWNA?
  2. Is a consumer who receives a contract that does not comply with the Furniture Delivery Regulations, but has not suffered any adverse consequences from the noncompliance, an "aggrieved consumer" under the TCCWNA?

Following extensive briefing by the parties and a number of amici curiae, including a brief submitted by Morgan Lewis on behalf of the New Jersey Retail Merchants Association, and after hearing oral argument, the New Jersey Supreme Court issued its ruling in favor of defendants. Most significantly, the court held that a consumer who was simply exposed to the offending contractual or other terms, but was not injured or harmed as a result, is not an aggrieved consumer and therefore may not collect actual damages or a civil penalty. Rather, to have an actionable claim under the TCCWNA, a plaintiff must suffer some "adverse consequence" in the real world from a defendant's violation of a "clearly established" right of a consumer. As to the first certified question, the court held that in some circumstances, regulations could possibly create a "clearly established right" upon which a truly aggrieved consumer could pursue a remedy under the TCCWNA.

Takeaways from Spade v. Select Comfort Corp.

Administrative regulations may constitute a source of "clearly established" legal rights of a consumer or responsibilities of a seller.

The New Jersey Supreme Court confirmed that a regulation can in some circumstances create a "clearly established legal right," the violation of which could allow an aggrieved consumer to pursue a remedy under TCCWNA. The court reasoned that regulations carry the "force of law," which can effectively void a contract or agreement if violated. Reviewing the plain language of the TCCWNA and its legislative history, the court opined that there is no support for the proposition that regulations cannot serve as the source of a consumer's clearly established legal right or a responsibility of a seller under the TCCWNA.

Importantly, the court stopped short of opining that every regulatory violation will be a violation of a clearly established right. The court also did not reach the question of whether a seller's omission of a provision required under administrative regulations could give rise to a TCCWNA claim (other courts in New Jersey have said that the TCCWNA generally does not extend to omission). Thus, whether a party's allegation of a regulatory violation constitutes a violation of a clearly established legal right or responsibility will still need to be determined on a case-by-case basis.

To be "aggrieved," a consumer must have suffered an actual adverse consequence.

Consistent with arguments asserted by the defendants, including by Morgan Lewis on behalf of the New Jersey Retail Merchants Association, the New Jersey Supreme Court relied on basic statutory construction in determining that, in order to qualify as an "aggrieved consumer" under the TCCWNA, a consumer must suffer some actual harm. In the absence of any adverse consequence resulting from the violation, a party cannot be considered to be "aggrieved." In reaching this conclusion, the court squarely rejected plaintiffs' expansive definition of an "aggrieved consumer" as any consumer to whom an offending contract is merely offered, given, or displayed, regardless of whether or not the consumer consequently suffered any harm. The court noted that, if it were to accept plaintiffs' asserted definition, it would render the term "aggrieved" superfluous. Instead, the court interpreted "aggrieved" "so as to give it significance; it distinguishes consumers who have suffered harm because of a violation of [the TCCWNA] from those who have merely been exposed to unlawful language in a contract or writing, to no effect."

This ruling provides much-needed clarity to alleged claims under the TCCWNA and will undoubtedly help retailers defeat "no harm" or "no injury" claims brought by consumers and the plaintiffs' class action bar. In addition, the decision will make certification of TCCWNA class actions difficult or impossible, as the question of whether a class member is "aggrieved" under the New Jersey Supreme Court's test is highly individualized.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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