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Plaintiffs filed a putative class action in the District of NJ alleging Sony Entertainment’s Playstation websites’ terms and conditions (TOCs) bind customers to an unfair and illegal contract that requires them to waive consumer protection and warranty rights, specifically violating the NJ Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). Plaintiffs seek statutory penalties ($100) for each violation of the TCCWNA, interest, costs, attorneys’ fees and injunctive relief.

Section 15 of the TCCWNA generally prohibits retailers from offering or displaying any provision that violates a “clearly established right” to any actual or prospective consumer in a consumer contract, warranty, notice or sign. Section 16 generally prohibits retailers from stating that any provision is, or may be, void, unenforceable or inapplicable in “some jurisdictions” without specifically stating whether it applicable in New Jersey or not.

Although the law is more than 30 years old, a number of TCCWNA cases have been filed in NJ in the past six months and have targeted a number of TOCs commonly found on many retailers’ websites, including exculpatory, indemnification, choice of law, severability, savings, privacy, and limitation of liability provisions. Many retailers have been targeted with such lawsuits and/or received pre-lawsuit demand letters, which has caused different reactions, from settling early on an individual basis; to moving to compel arbitration or to strike class allegations; to filing motions to dismiss that raise a number of arguments, including the applicability of the U.S. Supreme Court’s Spokeo v. Robins decision and TCCWNA’s non-applicability to commercial websites. In Spokeo, the Supreme Court explained that an asserted injury, even to a statutorily conferred right, “must actually exist,” and must have “affect[ed] the plaintiff in a personal and individual way”; and also that some statutory violations result in no harm.

Key Takeaway. Until retailers obtain clarity from the NJ courts or legislature regarding the breadth and scope of the TCCWNA, retailers should review their website TOCs, as well as any other terms contained in written materials displayed to consumers. There are a number of proactive steps that retailers can take to reduce risk.

Two things to note. Arbitration clauses and class action waivers that are embedded in TOCs have come under scrutiny by the courts and regulators. For example, in May 2016, the Consumer Financial Protection Board (CFPB) proposed a rule that would prohibit mandatory arbitration clauses in consumer financial services contracts that prevent class actions, but would allow companies to require consumers to pursue individual claims in arbitration. This proposed arbitration rule prompted nearly 11,000 comments both strongly in support and in opposition. Note also that the applicability of any rights restrictions with respect to employees, e.g., class waivers, is not the same as consumers and may invoke a different body of law. See, e.g., Morris v. Ernst & Young, No. 13-16599 (9th Cir. Aug. 22, 2016)).)

Please contact Khizar A. Sheikh, Esq. (ksheikh@lawfirm.ms or 973-243-7980) for more information.