Bohus v. Restaurant.com, Inc.

• Decision Date: 30 April 2015
• Docket Number: No. 14–3316.,14–3316.
• Citation: 784 F.3d 918
• Parties: Gregory BOHUS, on behalf of themselves and others similarly situated ; Larissa Shelton, on behalf of themselves and others similarly situated v. RESTAURANT.COM, INC. Gregory Bohus; Larissa Shelton, Appellants.
• Court: U.S. Court of Appeals — Third Circuit

784 F.3d 918

Gregory BOHUS, on behalf of themselves and others similarly situated ; Larissa Shelton, on behalf of themselves and others similarly situated

v.RESTAURANT.COM, INC.

Gregory Bohus; Larissa Shelton, Appellants.

No. 14–3316.

United States Court of Appeals, Third Circuit.

Argued Feb. 12, 2015.

Filed: April 30, 2015.

Katrina Carroll, Esq., Lite, DePalma, Greenberg, Chicago, IL, Bruce D. Greenberg, Esq. [Argued], Lite, DePalma, Greenberg, Newark, NJ, Christopher J. McGinn, Esq., New Brunswick, NJ, Andrew R. Wolf, Esq., Henry P. Wolfe, Esq., The Wolf Law Firm, North Brunswick, NJ, for Appellants.

Michael R. McDonald, Esq. [Argued], Caroline E. Oks, Esq., Damian V. Santomauro, Esq., Jennifer M. Thibodaux, Esq., Newark, NJ, for Appellee.

Before: CHAGARES, JORDAN, and VANASKIE, Circuit Judges.

OPINION

JORDAN, Circuit Judge.

Larissa Shelton and Gregory Bohus (the “Plaintiffs”) appeal from an order of the United States District Court for the District of New Jersey dismissing their putative class action suit against Restaurant.com. A total of five prior opinions have been issued in this case by, variously, the District Court, the Supreme Court of New Jersey, and our Court. See Shelton v. Restaurant.com (Shelton V ), No. CIV. A. 10–824 JAP, 2014 WL 3396505 (D.N.J. July 10, 2014) ; Shelton v. Restaurant.com, Inc. (Shelton IV ), 543 Fed.Appx. 168 (3d Cir.2013) ; Shelton v. Restaurant.com, Inc. (Shelton III ), 214 N.J. 419, 70 A.3d 544 (2013) ; Shelton v. Restaurant.com, Inc. (Shelton II ), No. 10–2980, 2011 WL 10844972 (3d Cir. May 17, 2011) ; Shelton v. Restaurant.com, Inc. (Shelton I ), No. CIV. A 10–0824(JAP), 2010 WL 2384923 (D.N.J. June 15, 2010). But the end, one may hope, is finally near. We will reverse and remand for entry of judgment solely in favor of the named plaintiffs.

I. Background ¹

The Plaintiffs purchased gift certificates from Restaurant.com that allegedly violated several New Jersey statutes. Restaurant.com sells gift certificates online that “provide a credit for the holder for purchases of food and beverages at the restaurant named on the certificate.” Shelton IV, 543 Fed.Appx. at 169. “[T]he amount paid does not always coincide with the face amount of the certificate.” Id. at 169 n. 2. The gift certificate may contain conditions imposed by the restaurant, “such as prohibiting the use of a certificate on weekends or for the purchase of alcoholic beverages.” Shelton III, 70 A.3d at 547. Substantially all gift certificates issued by Restaurant.com since April 4, 2006—including the gift certificates purchased by the Plaintiffs—share the following characteristics:

Each certificate displayed on its face various restaurant-specific conditions in addition to standard terms and conditions imposed by Restaurant.com. Two standard terms and conditions on the ... certificates were the following: 1) the certificate “[e]xpires one (1) year from date of issue, except in California and where otherwise provided by law[,]” and 2) the certificate is “[v]oid to the extent prohibited by law.”

Id. at 547–48 (alterations in original).

The Plaintiffs filed a purported class action against Restaurant.com in New Jersey state court, and the case was later removed to federal court on the basis of diversity jurisdiction. Id. at 548. The class has not been certified. The Plaintiffs' complaint alleges two claims: in Count I, violations of the New Jersey Gift Certificate Statute, N.J. Stat. Ann. § 56:8–110, and the New Jersey Consumer Fraud Act, N.J. Stat. Ann. §§ 56:8–1 et seq.; and, in Count II, violations of the Truth–in–Consumer Contract, Warranty, and Notice Act (“TCCWNA”), id. §§ 56:12–14 to 12–18. The New Jersey Gift Certificate Statute prohibits gift certificates from expiring within 24 months of the date of sale, id. § 56:8–110(a)(1), and the Consumer Fraud Act provides a cause of action for violations of the Gift Certificate Statute, id. §§ 56:8–11, 8112. The TCCWNA prohibits giving notice to a consumer or offering or entering into any written consumer contract that violates any clearly established consumer right or seller responsibility. Id. § 56:12–15. The TCCWNA also provides that any notice or consumer contract that states that any of its provisions are or may be void, unenforceable, or inapplicable in some jurisdictions must also specify “which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey.” Id. § 56:12–16. The TCCWNA authorizes “the aggrieved consumer” to recover “a civil penalty of not less than $100.00 or ... actual damages, or both at the election of the consumer, together with reasonable attorney's fees and court costs.” Id. § 56:12–17.

The District Court initially granted a motion to dismiss for failure to state a claim. As to the first count, the Court concluded that the Plaintiffs had failed to allege any ascertainable loss, as is required under relevant state law. Shelton I, 2010 WL 2384923, at *4. As to the second count, the Court concluded that the Plaintiffs were not consumers within the meaning of the TCCWNA because the gift certificates they purchased were not “money, property or service[s],” N.J. Stat. Ann. § 56:12–15, but provided only “a contingent right to a discount.” Shelton I, 2010 WL 2384923, at *5. We ultimately affirmed the dismissal of the first count, Shelton IV, 543 Fed.Appx. at 169–70, but before resolving Plaintiffs' challenge to the dismissal of the second count, we certified the following questions to the Supreme Court of New Jersey:

1. Does the TCCWNA apply to both tangible and intangible property, or is its scope limited to only tangible property?

2. Does the purchase of a gift certificate, which is issued by a third-party internet vendor, and is contingent, i.e., subject to particular conditions that must be satisfied in order to obtain its face value, qualify as a transaction for “property ... which is primarily for personal, family or household purposes” so as to come within the definition of a “consumer contract” under section 15 of the TCCWNA?

Shelton II, 2011 WL 10844972, at *4. The Supreme Court of New Jersey accepted the certification but reformulated the questions as follows:

1. Whether Restaurant.com's coupons, which were issued to plaintiffs and redeemable at particular restaurants, constitute “property” under the New Jersey Truth–in–Consumer Contract, Warranty, and Notice Act, N.J.S.A. 56:12–14 to –18;

2. If the coupons constitute “property,” whether they are “primarily for personal, family or household purposes,” N.J.S.A. 56:12–15 ; [and]

3. Whether the sale of the coupons by Restaurant.com to plaintiffs constituted a “written consumer contract,” or whether the coupons “gave or displayed any written consumer warranty, notice, or sign,” under N.J.S.A. 56:12–15.

Shelton III, 70 A.3d at 549 (alteration in original).

The New Jersey Supreme Court then determined in a thorough and carefully crafted opinion—Shelton III —that the term “property” as used in the TCCWNA encompasses intangible property such as the gift certificates issued by Restaurant.com, id. at 554, 558–59, that the gift certificates were primarily for personal, family, or household purposes, id. at 555, 558–59, that the sale of the gift certificates constituted a written consumer contract, id. at 556, 559, and that the terms listed on the gift certificates constituted notice, id. at 558–59. In sum, the court concluded, “The statute as drafted ... covers the certificates in question.” Id. at 559.

Next, we vacated the District Court's dismissal of the TCCWNA count and remanded for further proceedings consistent with the New Jersey Supreme Court's explication of the law in Shelton III. Shelton IV, 543 Fed.Appx. at 171. Upon remand, Restaurant.com again filed a motion to dismiss, arguing that Shelton III should apply only prospectively. The District Court agreed. It acknowledged that decisions are ordinarily applied retroactively under New Jersey law. But it concluded that retroactive application was inappropriate here because Shelton III established a new rule of law by resolving an issue of first impression, and retroactive application would yield substantial inequitable results. The District Court acknowledged the fact-sensitive nature of its analysis of the equities, but it rejected the Plaintiffs' argument that an evidentiary record was needed to reach a decision. It instead decided that, because the Plaintiffs “have not suffered any actual, non-theoretical damages” (App. at 12)—in fact, there was “no allegation that Plaintiffs were unable to enjoy the bargained-for discounts at the third-party restaurants that they selected”—they should not be entitled to “windfall statutory damages and attorneys' fees.” (Id. at 13.) In the District Court's view, “common sense” dictated that the many “unsuspecting companies” that would be subject to the new law should be given a chance to change their conduct before being exposed to “extraordinary statutory penalties.” (Id. at 11.) In such a situation, the District Court concluded, even limited retroactive application to the plaintiffs in this case would be inequitable.

The Plaintiffs timely appealed the District Court's order.

II. Discussion²

The Plaintiffs raise three main arguments challenging the District Court's retroactivity ruling. First, as a preliminary matter, they argue that the Supreme Court of New Jersey has already conducted a retroactivity analysis and determined that its decision was to apply to the parties in this case, and hence we need not revisit the issue. Alternatively, they suggest that we certify the question of retroactivity to the Supreme Court of New Jersey. Second, they argue that the question of retroactivity need not even arise because the rule announced in Shelton III is not new. Finally, they argue that even if the rule announced in Shelton III is new, the District Court should have applied the general rule that litigants who bring about a change or clarification in the law are entitled to the benefit of...