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N.J. attorneys lead discussion on increase in truth-in-consumer contract lawsuits

By Kyla Asbury | Dec 15, 2014

TRENTON, N.J. (Legal Newsline) - Two New Jersey recently attorneys led a discussion on the uptick in Truth-in-Consumer Contract, Warranty and Notice Act lawsuits filed in New Jersey in the last year.

Mike McDonald, an attorney for Gibbons PC, and Gavin Rooney, an attorney with Lowenstein Sandler, discussed TCCWNA and its sudden growth after being a consumer protection law for more than 30 years. They cited the plaintiffs' ability to circumvent requirements under the state Retail Installment Sales Act and the Consumer Fraud Act to obtain the same result as a class action lawsuit.

"I can summarize what I think is driving the TCCWNA uptick in two words: penalty damages," McDonald said in a teleforum broadcast by the New Jersey Civil Justice Institute. "I think the TCCWNA gives plaintiffs the ability to circumvent the requirements of the Consumer Fraud statute and the requirement in showing any unconscionable or fraudulent conduct."

McDonald said this makes the statute easier to prevail upon, while still providing a substantial benefit monetarily.

"In class action litigation, penalty damages can be easily assessed, particularly with businesses that work with form agreements, if there is a violation of the statute, penalty damages can be assessed against the defendants for the entire class," McDonald said. "This is a very attractive option for the plaintiff's bar."

McDonald said this removes some of the substantial hurdles to establishing the predominance requirement under Rule 23(b)(3).

In terms of who is benefitting, McDonald said it is definitely not the businesses being sued.

"I also doubt there are many consumers that will claim that they've benefited from the statute," McDonald said.

Rooney said there are three principal policy issues that flow out of the TCCWNA statute that work synergistically to create a potentially large problem for defendants who enter into form contracts with their customer base in New Jersey.

"There is no injury requirement--you're not required to be injured to bring a lawsuit under TCCWNA, the only thing you need to be able to show is that a contract violated what is deemed to be a clearly established legal right of the consumer," Rooney said. "It doesn't matter if the offending provision in the contract was read by the consumer, whether it was ever invoked by the defendant or whether it mattered to anyone. That is enough to bring a TCCWNA statute and seek damages."

Rooney said this distinguishes TCCWNA in a very substantial way from the CFA.

"Injury is ordinarily a core requirement, that is what sets TCCWNA apart," Rooney said. "TCCWNA does not require that the defendant intended to harm anyone."

Rooney says the marriage of TCCWNA and the class action is another principal policy.

"This is what really creates a potentially enormous liability here for companies who market their products to large numbers of consumers in New Jersey," Rooney said.

By allowing penalty damages to be asserted without injury and to be litigated as a class action, courts are allowing plaintiffs' lawyers to bring class actions as "private attorneys general," supposedly in the public interest, Rooney said.

Rooney said this kind of scenario is most likely with companies with financial instruments, such as rent-to-own businesses.

"The furniture is sold on an installment basis, so the customer walks out with the furniture, puts down a down-payment and enters into an agreement to finance the purchase price of the furniture," Rooney said. "In that sort of situation, where the consumer has not paid at the outset all of the money owed on the item, I suspect you'll end up in situations commonly for past-due debts owed by substantial amount of the class."

TCCWNA provides that no seller may offer to any consumer, or enter into any written consumer contract, or give or display any written consumer warranty, 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 law. It was first passed in 1980.

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