Shelton v. Restaurant.Com

• Decision Date: 10 July 2014
• Docket Number: Civil Action No. 10-824 (JAP) (DEA)
• Court: U.S. District Court — District of New Jersey
• Parties: LARISSA SHELTON AND GREGORY BOHUS, on behalf of themselves and others similarly situated, Plaintiffs, v. RESTAURANT.COM, Defendant.

LARISSA SHELTON AND GREGORYBOHUS, on behalf of themselves and otherssimilarly situated, Plaintiffs, v. RESTAURANT.COM, Defendant.

Civil Action No. 10-824 (JAP) (DEA)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Dated: July 10, 2014

NOT FOR PUBLICATION

OPINION

PISANO, District Judge.

This matter returns to the Court on remand from the United States Court of Appeals for the Third Circuit. Defendant, Restaurant.com ("Defendant" or "Restaurant.com"), moves to dismiss the Complaint, arguing that the Third Circuit opinion, adopting the New Jersey Supreme Court's answer to certain certified questions of law, should be applied prospectively only. The named Plaintiffs, Larissa Shelton and Gregory Bohus (together, "Plaintiffs"), oppose this motion. The Court decides these matters without oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, the Court grants Defendant's motion.

I. Background

This case has traversed the Third Circuit, the New Jersey Supreme Court for two rounds of briefing and oral argument, and back to the Third Circuit, before returning "home" to this Court. Because numerous courts have now summarized the factual background of this case, the Court will recite only those facts that are pertinent to this current motion.

Restaurant.com is an internet business that sells certificates, which it calls "gift certificates" (the "Certificates"). These Certificates provide a credit for the holder for purchases of food and beverages at the restaurant named on the Certificate. While Restaurant.com markets and sells these Certificates, the third-party restaurant is the issuer of the Certificates and provides whatever goods are subject to the discount. Restrictions apply to the use of the Certificates, including limitations imposed on the redemption of the Certificate by the restaurant and Restaurant.com's standard provisions. Accordingly, Resturant.com sells a contingent right to use the Certificate to obtain a future discount, if all the conditions are satisfied.

In 2010, Plaintiffs filed this putative class action against Restaurant.com, claiming that its Certificates contain certain language that is in violation of certain New Jersey statutes, specifically the New Jersey Gift Card Act (N.J. Stat. Ann. § 56:8-110) ("GCA"), the New Jersey Consumer Fraud Act (N.J. Stat. Ann. §§ 56:8-1 to 8-20) ("CFA"), and the Truth-in-Consumer Contract, Warranty, and Notice Act (N.J. Stat. Ann. §§ 56:12-14 to 12-18) ("TCCWNA"). Restaurant.com removed the matter to this Court, and filed a motion to dismiss. This Court dismissed the Complaint in its entirety, finding that Plaintiffs had failed to supply any factual allegations sufficient to support the "ascertainable loss" requirement under the CFA. The Court noted that Plaintiffs had failed to allege any loss other than a purely theoretical one:

Plaintiffs do not allege that they attempted to use such certificates and were refused by a restaurant, that their certificates in fact had 'expired,' that certificates were destroyed or remained unused based on a false belief regarding the expiration date or that they suffered any other type of economic injury arising out of the purchase of these certificates.

Shelton v. Restaurant.com, CIV. A. No. 10-824, 2010 U.S. Dist. LEXIS 59111, at *10 (D.N.J. June 15, 2010) [hereinafter Shelton I].

The Court then turned to the TCCWNA count. In order to have stated a viable claim under the TCCWNA, the Certificates must constitute "consumer contracts" within the meaning of the TCCWNA, and Plaintiffs themselves must be considered "consumers" as defined under the TCCWNA. While a consumer contract is notably not defined in the TCCWNA, the TCCWNA does limit a "consumer" to "any individual who buys, leases, borrows, or bails any money, property or service which is primarily for personal, family or household purposes." N.J. Stat. Ann. § 56:12-15. This Court dismissed the claim, finding that the plain language of the TCCWNA limits a "consumer" to "one who buys services or property primarily for personal purposes, not one who buys a contingent right to services from a third party." Shelton I, 2010 U.S. Dist. LEXIS 59111, at *15. The Court's statutory interpretation was based upon its reading of the plain language of the statute, and the Court concluded that the TCCWNA applies "only to non-contingent tangible property and services sold directly by the provider." Id.

Plaintiffs appealed this Court's dismissal of their Complaint to the Third Circuit. After a full round of briefing and oral argument on the appeal, the Third Circuit found no guidance on the question of how the term "property" is defined in the TCCWNA. The Third Circuit found that the answer to this question not only was determinative of an issue in the case before it, but would "have broad-based application in myriad circumstances." Shelton v. Restaurant.com, No. 10-2980, 2011 U.S. App. LEXIS 26594, at *4-5 (3d Cir. May 17, 2011) [hereinafter Shelton II]. Accordingly, the Third Circuit certified two questions to the New Jersey Supreme Court, pursuant to New Jersey Court Rule ("N.J. Ct. R.") 2:12A-1:

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?

Id. at *12-13.

Thereafter, the New Jersey Supreme Court conducted briefing and oral argument on the certified questions. For reasons not articulated in the Supreme Court's opinion, the Supreme Court reformulated the questions, and requested a second round of briefing and an additional oral argument on the reformulated questions. See Shelton v. Restaurant.com, 70 A.3d 544, 548-49 (N.J. 2013) [hereinafter Shelton III]. These reformulated questions were:

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. Stat. Ann. §§] 56:12-14 to -18;

2) If the coupons constitute "property," whether they are "primarily for personal, family or household purposes," [N.J. Stat. Ann. §] 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. Stat. Ann. §] 56:12-15.

Id. at 549. The Supreme Court's effort to answer the certified questions was complicated because it found that no language in the TCCWNA could clearly be applied. In order to construe the statute, then, the Supreme Court considered the State's general statutory body of work, concluding that the statute is remedial and therefore should be applied broadly, in order to complement New Jersey's expansive consumer protection regime. The New Jersey Supreme Court "conclude[d] that the TCCWNA covers the sale of tangible and intangible property" and "that certificates issued by participating restaurants and offered for purchase by an internet marketer are intangible property primarily for personal, family, or household use, thereby qualifying plaintiffs as consumers." Id. at 547.

On November 4, 2013, the Third Circuit issued its decision on Plaintiffs' appeal. The Third Circuit affirmed the part of this Court's Order dismissing the CFA count, agreeing that Plaintiffs had failed to allege or raise any other argument regarding an ascertainable loss suffered when Restaurant.com violated the GCA, which is part of the CFA, by providing that its Certificates expire within one year. See Shelton v. Restaurant.com Inc., 543 F. App'x 168, 170 (3d Cir. 2013) [hereinafter Shelton IV]. The Third Circuit then vacated the decision of this Court as it related to the TCCWNA count, and remanded to this Court "for further proceedings consistent with the decision of the New Jersey Supreme Court." Id. at 171. Restaurant.com has moved to dismiss the Complaint, arguing that retroactive application of the Shelton decision is not appropriate. While this Court is constrained to follow the Supreme Court's interpretation of the TCCWNA, this Court now must decide whether the Supreme Court's decision created a new rule of law that should be applied prospectively, in order to prevent inequitable results.

II. Discussion

Under New Jersey law, decisions are ordinarily applied retroactively.¹ Courts, however, "depart from that general principle and turn to prospective application when 'considerations of fairness and justice, related to reasonable surprise and prejudice to those affected' counsel[] us to do so." Selective Ins. Co. of America v. Rothman, 34 A.3d 769, 773 (N.J. 2012) (quoting Malinowski v. Jacobs, 915 A.2d 513 (N.J. 2007) (quoting N.J. Election Law Enforcement Comm'n v. Citizens to Make Mayor-Council Gov't Work, 526 A.2d 1069 (N.J. 1987))). Accordingly, a judgment should be limited to prospective application "when (1) the decision establishes a new rule of law, by either overruling past precedent or deciding an issue of first impression, and (2) when retroactive application could produce substantial inequitable results."Id. (quoting Velez v. City of Jersey City, 850 A.2d 1238, 1246 (N.J 2004)). Prospective application is particularly appropriate in those instances where the court addresses a "first-instance or clarifying decision in a murky or uncertain area of law, or when a member of the public could reasonably have relied on a different conception of the state of the law." SASCO 1997 NI, LLC v. Zudkewich, 767 A.2d 469, 477 (N.J. 2001) (internal quotations and citation omitted); see also Henderson v. Camden...