Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.J. Sup. Ct.: Certificates issued by Restaurant.com fell under the TCCWNA, (Jul 10, 2013)

By Jody Coultas, J.D.

The New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) applied to restaurant certificates purchased by consumers through a third-party vendor, the New Jersey Supreme Court has held (Shelton v. Restaurant.com, Inc., July 9, 2013, Cuff, C.).

Restaurant.com, Inc. is an internet business that markets, advertises, and sells certificates redeemable at participating restaurants. Consumers search the website for a specific restaurant, select the amount of the certificate, and make an online payment for the certificate, which is typically less than the face value of the certificate. Participating restaurants may impose conditions on the certificate. The purchasers alleged that the certificates violated the New Jersey Gift Certificate Statute (GCS), the New Jersey Consumer Fraud Act (CFA), and the TCCWNA.

The U.S. Court of Appeals in Philadelphia certified questions, which the court reformulated as: (1) whether Restaurant.com’s certificates constituted “property” under the TCCWNA, (2) if the certificates constitute “property,” whether they are “primarily for personal, family or household purposes,” and (3) whether the sale of the certificates constituted a “written consumer contract,” or whether the certificates “gave or displayed any written consumer warranty, notice, or sign.”

The TCCWNA prohibits sellers from offering, giving, or displaying to a consumer or prospective consumer a written consumer contract which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller. The TCCWNA also prohibits any provision in a consumer contract requiring a consumer to waive his or her rights under the Act.

Restaurant.com was unable to show that the certificates were not property under the TCCWNA, according to the court. Restaurant.com argued that the TCCWNA applied only to tangible property, and that the certificates were intangible. As defined generally, property includes personal property, including tangible and intangible property. Other than the exclusion of transactions involving the lease or sale of residential real estate, the TCCWNA does not expressly exclude personal property. The TCCWNA does not, then, exclude intangible property. There was nothing in the plain language or legislative history of the TCCWNA about construing the term “property” to exclude intangible property. Restaurant.com’s argument that the phrase “primarily for personal, family or household purposes” in the TCCWNA should be interpreted to exclude intangible property from the scope of the TCCWNA was dismissed. The phrase describes the use to which the property is put.

The court held that the purchasers were “consumers” within the scope of the TCCWNA because the certificates were property purchased for personal, family, or household use. Consumers are individuals who buy property or service primarily for personal, family, or household purposes. The certificates, also referred to as coupons, closely resembled gift certificates, which are, by their nature, intangible property. The existence of terms and conditions of use did not negate the value of the certificate to the purchaser, and the contingent nature of the certificate did not remove its status as a promise given in exchange for payment to provide food and drink. Dining out and pursuing entertainment are quintessential personal, family, or household pursuits.

The certificates were “consumer contracts” and the standard terms provided on the certificates were “notices” subject to the TCCWNA, according to the court. The court held that “consumer contracts” are written agreements in which an individual purchases real or personal property for cash or on credit for personal, family, or household purposes. The transaction had all the features of a contract, and the fact that the agreement was not in writing was not a factor. Also, the involvement of a third-party restaurant did not negate a consumer contract relationship.

The transactions at issue were within the scope of the TCCWNA, according to the court. The court looked at whether the certificates gave or displayed any written consumer warranty, notice, or sign. The certificates contained a printed announcement, which conditioned the use of the certificates. Those announcements were a notice given by a seller to a consumer in the course of acquisition of property.

The parties disputed whether the TCCWNA is penal or remedial, and thus whether the statute should be interpreted narrowly or broadly. The TCCWN is part of the wide array of consumer protection laws and a constituent part of the entire body of statutory law of New Jersey. The court held that the TCCWNA is a remedial statute, entitled to a broad interpretation to facilitate its stated purpose.

The case is No. A-123.

Attorneys: Bruce D. Greenberg (The Wolf Law Firm) for Larissa Shelton. Michael R. McDonald (Gibbons P.C.) for Restaurant.com, Inc.

Companies: Restaurant.com, Inc.

Cases: StateUnfairTradePractices NewJerseyNews