An unusually strong New Jersey law, the Truth-in-Consumer Contract, Notice and Warranty Act (“TCCWNA”), “prohibits consumer documents from containing provisions that violate clearly established rights or responsibilities,” whether or not the business that distributed the document then acts on the provision. Businesses that imprudently employ standard-form contracts available from office-supply stores, for example, may violate the law if the language deviates (as it often will) from more pro-consumer New Jersey doctrines. The law carries a $100 per-infraction fee that can be multiplied to large numbers applied across a range of transactions. A cottage industry of entrepreneurial suit-filing has grown up under the statute but now, in the case of Spade v. Select Comfort, a unanimous New Jersey Supreme Court has ruled that only consumers who have suffered actual damage can sue under the law, though damages can be non-monetary. The decision is likely to cut back on entrepreneurial uses of the law and in particular class actions where no evidence can be shown that a document’s improper wording harmed many members of a putative class. [Ryan P. Phair and Emily K. Bolles (Hunton & Williams), Lexology; earlier here, here, and related]
Two kids accidentally got served sangria at a suburban Boston restaurant. Despite lack of any report of ill effects from the mix-up, the mom is still suing, just because [NBC Boston]
According to attorney Jeffrey Newman in the Times of Trenton, New Jersey law allows class actions and consumer fraud suits to be based on paperwork infractions with no showing of actual harm, creating openings for opportunistic litigation:
As an attorney, I have defended numerous business owners against frivolous claims in which the plaintiff could prove absolutely no injury and he or she had received whatever service or product that was promised. Yet there was language in the purchase agreement that was found to be considered “non-compliant” with the Contractors Registration Act and the Consumer Fraud Act’s Home Improvement Contract regulations.
…Contractors who choose to use boilerplate contracts often sold in office supply stores are playing with fire, as such agreements would never withstand the scrutiny of the state’s consumer protection laws. When contractors use these forms and are sued, the courts can rule that they have to hand back to the consumer every penny — even the money they laid out for materials to do the job. … In another case, we represented a contractor whose advertisements were not in compliance. Even though the plaintiff never bought anything, our client was still sued!
I’m quoted in Sandra Pedicini’s report on the settlement (with $9 appetizer vouchers) of a lawsuit charging the Olive Garden restaurant chain with “printing the last six digits of customers’ credit-card numbers on receipts. The limit under the Fair and Accurate Credit Transactions Act is five.” Under FACTA, lawyers need not show that class members suffered actual damages from the violation; instead, they can claim statutorily prescribed damages, multiplied by the (usually large) number of customers involved. In most such cases, there are no reports of any identity theft because of the breaches: “It’s like reckless driving in which no one had an accident and except for the lawyers, no one even noticed the car speeding,” I’m quoted as saying. [“Olive Garden diners may be eligible for $9 voucher”, May 19]
Overlawyered readers may remember the problem of FACTA lawsuits when a poorly drafted federal law led to attorneys seeking $1000 for every occasion when a credit-card slip showed an expiration date.
Stroock & Stroock’s Daniel A. Rozansky and Scott M. Pearson have an op-ed in today’s San Francisco Chronicle discussing problems with a similar California law. California prohibits businesses from requesting or requiring “personal identification information” while accepting a credit-card payment; this includes address and phone number, but doesn’t specify what else. Entrepreneurial trial lawyers are asking courts to hold that it includes harmless information like ZIP codes: since the statute provides for $1000/violation damages in the absence of a showing of harm without a cap, extortionate lawsuits are easy to create–and a further drag on the already-suffering California economy.
- Don’t miss Roger Parloff’s tour de force coverage in Fortune blowing whistle on that dodgy suit in Moscow against Bank of New York Mellon, adorned by participation of lawprofs Dershowitz and Blakey [PoL overview, main article]
- Digital remixes and copyright law [Lessig, WSJ]
- Surgeon at Connecticut’s Greenwich Hospital revealed as drug abuser, Koskoff, Koskoff & Bieder now pressing suit on behalf of general class of patients, which sounds like it means “whether harmed or not” [Greenwich Time, Newsday via TortsProf weekly roundup]
- Chicago sheriff halting foreclosures, or maybe not, reportage is confused [Reuters, big discussion at Steve Chapman blog] And is Obama taking the idea national with bid for 90-day moratorium on foreclosures? [AP]
- Foie gras-style financial gavage? “None of banks getting government money was given a choice about it, said one of the people familiar with the plans.” [Bloomberg, Bernstein @ Volokh] More: Ann Althouse, Kuznicki/Cato at Liberty.
- Trey Allen law firm in Dallas agrees to pay $840,000 restitution after profiting from staged car crash scheme, but Allen’s lawyer says client wasn’t aware of any fraud [ABA Journal]
- Smoking bans, alcohol taxes contributing to steep decline of English village pubs [Newsweek]
- Bias-law panel rules Wal-Mart within its rights not to hire a female applicant for Santa Claus position [eight years ago on Overlawyered]
As good an argument for the Class Action Fairness Act as any: Trial lawyers sued Compaq in Texas over an allegedly defective disk controller, though none of the plaintiffs had ever suffered a malfunction or a loss of data, alleging a violation of Texas consumer fraud law on behalf of a nationwide class. No dice: the Texas Supreme Court threw out the case, noting that Texas law did not permit the sort of nationwide class action contemplated by the plaintiffs. End of story? Nope: the same trial lawyers filed the same complaint again, this time in Oklahoma state court, and asked the Oklahoma state court to apply Texas law to a nationwide class. “Sure thing!” the court rubber-stamped–applying an ersatz version of Texas law rejected by Texas courts. The forum-shopping was able to extract $40 million in attorneys’ fees from a questionable coupon settlement, as an Overlawyered post noted August 6. The Summer 2008 issue of State Court Docket Watch includes my essay discussing why this is a constitutionally problematic set of decisions by Oklahoma courts–written before, though published after, the Anthony Caso analysis for WLF.
Two readers have written to alert us to this settlement (PDF), including frequent commenter Todd Rogers:
I received notice in the mail [this month] that I’m party to a class action suit against VW USA. I drive a Passat with a “Smart Key.” According to the suit, VW has been naughty because they did not make the key duplication apparatus available enough to locksmiths, third party key duplicators, and the like, in the event that I (we) want to make another key. What would my settlement be? I’m the benefactor of “greater communication” from VW USA.
What do you know…owners of Mercedes Benz suffered the same injury and it was the same firm, Lurie & Weiss, who helped make them whole, as well. Who’s next?
Objections and requests for exclusion must by filed by the end of August, and a fairness hearing is scheduled for Sept. 22 in the courtroom of the Hon. Audrey B. Collins in federal court in Los Angeles.
- Beck and Herrmann fisk a NEJM anti-preemption editorial. [Beck/Herrmann; NEJM]
- Lessons of the Grasso case. [Hodak]
- You think BigLaw has it bad? Plaintiffs’ attorney who invented the benefit-of-the-bargain theory for pharmaceutical class actions where no one has suffered any cognizable injury, has made his firm tens of millions, but still hasn’t made partner. “Zigler said he never meets most of the people he represents in these high-profile cases.” [St.L. Post-Dispatch; related analysis from Beck/Herrmann]
- Speaking of harmless lawsuits, “an atrocity in Arkansas,” as Arkansas Supreme Court ignores basic principles of due process and civil procedure to certify an extortionate pre-CAFA class action from MIller County. [Hmm, that’s Beck/Herrmann again; General Motors v. Bryant; related from Greve]
- Speedo competitor: unfair competition to say your innovative swimsuit has an advantage just because 38 out of the last 42 world records (as of June 30) were broken in the suit. [Am Law Daily]
- Background on bogus shower curtain scare story (earlier). [NYT; related AEI event]
- EMTALA-orama: don’t discuss payment in the emergency room if you don’t want to get sued. [ER Stories]