Phone 208.344.6000 Email info@hawleytroxell.com
     

Deluge Of New Claims Challenging Website Terms Of Use Under NJ Statute

Added by Bradlee Frazer in News on August 25, 2016

A decades-old New Jersey consumer protection statute, the Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) is being used to threaten operators of websites around the country. A number of class action lawsuits have been filed in New Jersey and elsewhere claiming that the defendant’s website Terms of Use (“TOU”) violate the TCCWNA, thus giving rise to claims for statutory damages, even in the absence of actual damages. We are encouraging clients to engage in proactive review and modification to their website TOU and other consumer contracts now to reduce exposure to claims and demands for pre-suit settlements even if they do not have substantial contacts with New Jersey.

The TCCWNA was enacted in 1982 to prohibit the inclusion of terms in consumer contracts, warranties or notices that violate any clearly established rights of consumers or that purport to abrogate the responsibilities of sellers. Although such provisions are unenforceable, the legislature reasoned that their very inclusion in consumer contracts or disclosures misled consumers into believing those provisions were valid, thus preventing consumers from asserting their rights. Claimants and their counsel are now targeting online retailers and other website operators whose TOU contain disclaimers, limitations of liability and indemnification provisions that may, arguably, violate clearly established consumer rights or obligations of sellers under the TCCWNA. For example, a provision that seeks to disclaim a seller’s liability for its own negligence has been held to violate New Jersey public policy under certain circumstances. While a number of defendants have sought to dismiss such claims in the context of website TOU, there has not yet been definitive authority clarifying the issue. Another reason why website operators are so appealing to class counsel is the sheer number of potential claimants that can be aggregated. If a seller violates the act, an “aggrieved” consumer may seek a civil penalty of not less than $100 per consumer or actual damages. Such damages can escalate quickly for website operators with potentially tens or hundreds of thousands of New Jersey visitors.

The legal risk to website operators or consumer product distributors is significant. To date, choice of law provisions calling for the application of another jurisdiction’s law have not afforded a ready defense. For those already facing lawsuits or demands, a number of strategies may be employed to resist or resolve disputes, including early motion practice on the questions of whether the TOU actually violate a clearly established legal right or whether the TOU are directed solely to the informational aspects of using the website and not to any consumer transaction. However, any businesses with a consumer-facing website, whether or not they have been served with a claim or demand, should review their website TOU to identify any provisions which may arguably infringe upon consumer rights or which seek to impermissibly relieve sellers from their legal responsibilities under the TCCWNA.