Since around 2011, New Jersey businesses such as self-storage facilities, fitness centers and furniture stores have faced an ever-growing number of class-action complaints under the Truth in Consumer Contract, Warranty and Notice Act (TCCWNA) seeking statutory penalties of $100 per customer and attorneys’ fees. The typical case demanded that every customer that entered into a form contract should be entitled to a statutory award of $100 with the usual allowance for an enhanced award for the class representative and fees for the class attorneys- usually in amount approaching or exceeding seven figures. The consumer, who suffered no harm, would walk away with a coupon and a few dollars, the class representatives with a little more, and the class attorneys with their pockets fully lined.

For these kinds of businesses, which largely use form contracts and often deal with upward of 100,000 customers during class periods, the potential exposure was often in the realm where the continued viability of the business was at stake. Today, the New Jersey Supreme Court has allowed those business owners to breathe a sigh of relief.

In a landmark ruling, the New Jersey Supreme Court ruled today that for a consumer to be “aggrieved” under the TCCWNA, that consumer has to show actual harm. Prior to today’s ruling, courts granted consumers millions of dollars of relief upon as little a showing as the class members having been presented a contract containing an objectionable provision – even if they didn’t enter into the contract, and even if they suffered no harm. Businesses were left with no real guidance on how to structure their form contracts and were in constant fear that some court would determine that some obscure contractual provision violates a consumer’s “clearly established legal rights”- a phrase undefined by the TCCWNA which can trigger millions of dollars of exposure.

Now, the customer will have to show not only that some language prohibited by the TCCWNA was included, but also that he suffered some type of harm, such as failing to bring a meritorious personal injury lawsuit that the contract misleadingly informed him couldn’t be brought.

The ruling isn’t all roses for business owners– the other question the court was asked by the Third Circuit to address involved whether violation of a regulation could be a violation of a “clearly established legal right” for TCCWNA purposes. The court ruled that it did. So, while the consumer must now demonstrate actual harm – which should greatly limit these kinds of cases being brought on a class-wide basis- inclusion of offending language is still actionable and can result in considerable exposure.

If you run the type of business that deals with large numbers of consumers or uses form contracts, now is the time to review your promotional materials and form contracts to make sure they don’t expose you to liability under TCCWNA.