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Old Law Spawns New Class Action Headaches

7 Jun, 2016 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Ari N. Rothman, Shahin O. Rothermel

An obscure, decades-old New Jersey law has found new life in the hands of plaintiffs’ attorneys, who hope to extract large settlements from marketers by alleging their website terms and conditions do not comply with the law. Although the first wave of these lawsuits is still working its way through the courts, now is the time for marketers to review and revise their website terms and conditions to mitigate exposure to this class action onslaught.

The New Jersey Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) prohibits sellers, lenders, and others from presenting any contract, written notice, or sign to any consumer that eliminates any legal right a consumer would otherwise have, or that relieves any legal obligation imposed on a seller by law. The statute provides that a consumer’s rights are non-waivable, and any provision that purports to waive the consumer’s protection under the TCCWNA is invalid. TCCWNA also requires websites to expressly identify any of the website’s terms that are invalid in New Jersey. An aggrieved consumer is entitled to recover a minimum civil penalty of $100, actual damages, or both, as well as attorney’s fees and costs.

The law has been on the books for years, but arguments that it applies to website terms of use and website visitors, or “potential consumers,” are new. Plaintiffs’ lawyers have challenged indemnification clauses, limitations of liability, and disclaimers of warranties in websites’ terms of use and terms of sale under the statute.

Marketers have fought back with a variety of arguments, contending that consumers who are mere visitors are not “aggrieved consumers” and thus cannot recover under the statute. A second line of attack has argued that some websites’ terms of use apply only to consumers’ use of the websites, while a separate contract governs the purchase of a product.

Instead of waiting for these attacks and defenses to play out in the courts, marketers should act now to cut off potential class actions. Begin by working with experienced legal counsel to review and revise website terms. In addition to limitations of liability and warranty disclaimers, pay particularly close attention to provisions that largely favor the marketer over the consumer, which could be challenged as contrary to New Jersey law and thus subject to a challenge under the statute. Finally, a marketer’s terms should include a strong arbitration provision and class-action waiver, which could reduce the odds that a website will be targeted in the first place.

Jeffrey D. Knowles and Ari N. Rothman are partners in Venable’s Advertising, Marketing, and New Media practice group. Shahin O. Rothermel is an attorney in the group. They may be reached at (202) 344-4000.

About the Author: Jeffrey D. Knowles

Jeffrey D. Knowles

About the Author: Ari N. Rothman

Ari N. Rothman

About the Author: Shahin O. Rothermel

Shahin O. Rothermel

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