Justice Anne Patterson. Photo by Carmen Natale

In response to two questions certified from the United States Court of Appeals for the Third Circuit, on April 16, our Supreme Court, in Spade v. Select Comfort Corp., held that the violation of a regulation, promulgated under the Consumer Fraud Act, constituted a violation of a “clearly established legal right of a consumer or responsibility of a seller” for purposes of the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A. 56:12-14 to -18, but that the consumer who suffered no monetary loss or other “adverse consequences” resulting from the violation was not an “aggrieved consumer” entitled to relief under the act. Specifically, the court held that a violation of a regulation promulgated under the authority of the Consumer Fraud Act which addresses provisions regarding the delivery of household furniture within contracts for sale the delivery of household furniture may, by itself, constitute the violation of a “clearly established legal right of a consumer or responsibility of the seller” for purposes of the act, but further held that “a consumer receives a contract that includes language prohibited by [the regulation] but who suffers no monetary or other harm as a result of that noncompliance, is not an 'aggrieved consumer' entitled to a remedy under the TCCWNA. 56:12-17.”

The regulations in question required, with certain bold face print, that the contract or sales document for household furniture provide the delivery date and a provision that if the merchandise is not delivered by that date and the consumer had the right to cancel the order with a full refund or of accepting the delivery “at a specific later date.” The regulation also prohibited language to the effect that all sales were “final,“ could not be “cancell[ed]” or the like, and that any violation of the provisions were subject to sanctions under the Consumer Fraud Act.

After consolidating two actions, the United States District Court dismissed both complaints, which sought punitive class action certification, on the grounds that the plaintiffs were not “aggrieved” for purposes of the TCCWNA, and the New Jersey Supreme Court accepted the certified questions submitted to it on plaintiffs' appeals.

Writing for our Supreme Court, Justice Patterson pointed out the purpose of the TCCWNA was to require sellers “to acknowledge clearly established consumer rights” and “to provide remedies for posting or inserting provisions contrary to law.” Therefore, the act provides a civil penalty of not less than $100 or actual damages, or both, attorneys' fees and costs to be recoverable for a violation. Under the act, the plaintiff must prove (1) that defendant was “a seller, lessor, creditor, lender or bailee or assignee or assignee of any of the aforesaid;” (2) the defendant offered or entered into “a written consumer contract or [gave] or display[ed] any written consumer warranty, notice or sign;” (3) “that at the time that the written consumer contract is signed or the written consumer warranty, notice or sign is displayed, that writing contains a provision in the 'violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee' under state or federal law, and (4) that the plaintiff is an “aggrieved consumer.”

The court demonstrates that the protections granted to consumers in the Consumer Fraud Act (CFA) and TCCWNA reflect the Legislature's desire to provide that consumer regulations promulgated by the attorney general were designed to have the same force of law as those embodied in a statute. There is “no support in the TCCWNA or in case law for the proposition that regulations cannot serve as the source of a consumer's 'clearly established legal right' or 'responsibility of a seller' under N.J.S.A. 56:12-15” and “carries the force of law.” Therefore, the violation of a regulation promulgated under the CFA is subject to sanction under the TCCWNA, and specifically the violation of N.J.A.C. 13:45A-5.3(c), the furniture contract regulation, “may alone constitute 'a clearly established legal right of a consumer or responsibility of a seller' under the TCCWNA, and thus may provide a basis for relief under the TCCWNA.”

With respect to the second question, Justice Patterson's opinion noted that “when it defined the conduct barred by the TCCWNA, the Legislature chose expansive language to describe the consumers and potential consumers whom the statute was designed to protect,” but that use of the term “aggrieved consumer” in N.J.S.A. 56:12-17 differentiated between “consumers and potential consumers” and the type of consumer entitled to relief under the act. Stated differently, the word “aggrieved” could not be deemed “superfluous” or to have no meaning, and was interpreted to give it “significance“ in distinguishing between “consumers who have suffered harm” “from those who have merely been exposed to unlawful language in a contract or writing, to no effect.“ Significantly, however, according to the court, the harm did not have to be “limited to injury compensable by monetary damages” but also contemplated a consumer could be “aggrieved” and “entitled to a remedy notwithstanding the absence of proof of money damages” if he or she has suffered as a result of a defendant's inclusion of prohibited language in the contract or other writing “even if that harm is not a basis for a damage award.” For example, courts could find that a consumer could be “aggrieved” by an untimely delivery if the furniture was needed for a specific event.

The examples used were limited and certainly not designed to be comprehensive. However, they will open the door for substantial litigation on the subject of harm caused. Thus, while the Spade opinion is a significant loss for the consumer plaintiffs in the case and for consumer advocates, and especially for those who seek class action relief because of the unique and individual circumstances that would constitute harm, the court did hold that the violation of a regulation would constitute a “clearly established legal right of a consumer or responsibility of a seller” and that while the consumer had to demonstrate that he or she sustained actual harm for that consumer to constitute an “aggrieved consumer” for purposes of the TWWCNA, it does leave protection for consumers that are actually hurt as a result of the violation of a regulation, and seems well balanced and persuasive.