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Online Shoppers Using 35-year-old NJ Consumer Law Against Websites

Lawyer says big retailers are being hit with ‘literal blizzard’ of claims from across the United States

ecommerce

More than three decades after its passage, a modest New Jersey consumer-protection law has become an Internet scourge, at least in the eyes of some companies.

Passed in 1981 to ensure businesses did not mislead customers about their rights, the Truth in Consumer Contract, Warranty, and Notice Act helped eliminate confusing language in sales offers, store notices, and product liability statements. And then it sat quietly, a seldom-noticed piece of the state's legal furniture.

But when the New Jersey Civil Justice Institute and the Morris County Chamber of Commerce held a forum with prominent lawyers Tuesday on the "unintended consequences" of legislation, TCCWNA trumped other topics.

New Jersey civil courts are being hit with suits from around the country using TCCWNA to challenge the terms and conditions listed on some commercial websites. Big corporations, including Wal-Mart, Hertz, and Bed Bath & Beyond, have been hit with class-action suits charging they violated the little-known New Jersey statute.

"There has been a literal blizzard of demand letters that have gone out to businesses across the country," said Edward Fanning, chair of the product liability group at McCarter & English.

The letters are warnings from plaintiffs' attorneys, contending the terms and conditions of sales, discounts, memberships, and other offers made via websites could violate TCCWNA.

Although the law's penalties are slight — $100, actual damages, or both — they apply to each infraction, Fanning noted. That makes it a potentially devastating tool against the owners of heavily trafficked websites, he said.

The demand letters warn "hundreds of thousands or even millions of people may have been exposed" to multiple confusing terms, even if they were just casually browsing a website rather than shopping, Fanning said.

Another key provision of the New Jersey statute is that it applies not just to customers who bought a lamp or joined a club but to any "prospective consumer." The penalties must be paid to any "aggrieved consumer," not only those who completed transactions.

"What's amazing about the statute is that so much of it is undefined," said Zane Riester, another McCarter & English lawyer. "An 'aggrieved consumer,' there's very little case law on what that means … and you really can't have an aggrieved prospective consumer," he said. "I do think there has to be some level of harm."

But some lawyers say that while the Legislature may not have anticipated the rise of e-commerce, it spelled out its intentions when approving the law.

"The act is very clear that the (misleading) writing can be contained in a mere offer," said Joseph DePalma, co-founder and managing member of Lite DePalma Greenberg. "So you don't have to enter into a contract."

With major decisions pending in both state and federal courts, where the big class-action suits were filed, defense attorneys and their business clients should not be overly confident about the outcomes, said Jeff Jacobson, a former legal director for the state attorney general's office now in private practice.

"The legislative history is clear as a bell," he said.

One of the last laws signed by Gov. Brendan Byrne before he left office, TCCWNA had a prime target, "Void where prohibited." Advertisements, store notices, warranty forms, and even contracts contained this and similarly nebulous disclaimers. They seldom specified what was prohibited or where.

The problem is, "those provisions aren't legal in New Jersey," Jacobson said.

The act tackled that directly, saying, "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."

When passing the short bill, the state Legislature presented its view of the problem. As a complement to protections against fraud, legislators wanted consumers to know their legal rights.

"Far too many consumer contracts, warranties, notices, and signs contain provisions which clearly violate the rights of consumers," the legislative statement said, adding, "Their very inclusion in a contract, warranty, notice, or sign deceives a consumer."

The issue also had become one of safety, as some businesses expanded their disclaimers, attempting to evade responsibility for physical conditions on their property.

"Public storage firms had provisions in their contracts that said if you slip and fall on my premises, even if it's my fault, you're liable," Jacobson said. "And if you bring your Uncle Joe to help you and he slips and falls, you have to indemnify me against any claim that he might bring."

Recent cases show how TCCWNA is being cited in e-commerce disputes. In February, Darla Braden of Ocean County filed suit against TTI Floor North America of Solon, OH, the makers of Hoover vacuum cleaners, objecting to a liability disclaimer on the company's website.

In March, David Hecht of Closter sued Hertz in federal court, seeking to establish a class suit challenging the car rental company's terms for a rewards program. His suit contends the company does not say what conditions apply in New Jersey.

Worried companies should remember that "with respect to website terms of use, less is more," Riester said. Some courts have allowed fuzzy updates of "void where prohibited," such as "to the fullest extent allowed under applicable law."

"If you've only received a letter, do nothing, and by that I don't mean nothing, do your due diligence," and tweak the language of any disclaimers, Riester said.

"I always advise people to fix the problem," without going to court when possible, Jacobson said. If a website has attracted one challenge that might mean paying $1,000, "well, we (attorneys) will charge $1,000 to open the envelope," he said.

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