Shelton v. Restaurant.com, Inc.

• Decision Date: 09 July 2013
• Citation: 70 A.3d 544,214 N.J. 419
• Parties: Larissa SHELTON and Gregory Bohus, on behalf of themselves and others similarly situated, Plaintiffs–Appellants, v. RESTAURANT.COM, INC., Defendant–Respondent.
• Court: New Jersey Supreme Court

214 N.J. 419

70 A.3d 544

Larissa SHELTON and Gregory Bohus, on behalf of themselves and others similarly situated, Plaintiffs–Appellants,

v.RESTAURANT.COM, INC., Defendant–Respondent.

Supreme Court of New Jersey.

Argued March 27, 2012.

Reargued Oct. 22, 2012.

Decided July 9, 2013.

Bruce D. Greenberg argued the cause for appellants (Lite DePalma Greenberg, The Wolf Law Firm, and Christopher J. McGinn, attorneys; Mr. Greenberg, Mr. McGinn, Andrew R. Wolf, Henry P. Wolfe, North Brunswick, Katrina Carroll, Newark, and Elliot M. Gardner, on the briefs).

Michael R. McDonald argued the cause for respondent (Gibbons, attorneys; Mr. McDonald and Damian V. Santomauro, Newark, on the briefs).

Mark R. Cuker submitted a brief on behalf of amicus curiae Consumers League of New Jersey (Williams Cuker Berezofsky, attorneys).

CUFF, Judge (temporarily assigned) delivered the opinion of the Court.

This matter presents questions of law certified and submitted by the United States Court of Appeals for the Third Circuit pursuant to Rule 2:12A–1. We have been asked whether the Truth–in–Consumer Contract, Warranty and Notice Act (TCCWNA or Act), N.J.S.A. 56:12–14 to –18, applies to tangible and intangible property and whether a certificate purchased through an internet marketer for use at restaurants participating in the marketer's network is within the scope of the statute. We conclude that the TCCWNA covers the sale of tangible and intangible property. We also conclude 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.

I.

We commence our discussion with the facts presented by the parties, as to which there is no dispute.¹ Restaurant.com, Inc. (Restaurant.com) is an internet business that markets, advertises, and sells certificates redeemable at participating restaurants. Each certificate contains specific terms and conditions of use. Restaurant.com sells the restaurant-specific certificates directly through its website. Customers, such as plaintiffs, 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. Once payment is received, Restaurant.com provides the customer with a link to an internet page that displays the certificate, and the customer prints the document for redemption at the participating restaurant.

A participating restaurant may impose conditions, such as prohibiting the use of a certificate on weekends or for the purchase of alcoholic beverages. Each certificate provides on its face the value of the certificate stated in dollars, the name and address of the restaurant where the certificate may be redeemed, any limitations on redemption imposed by the restaurant, and a standard set of provisions imposed by Restaurant.com.

Plaintiff Larissa Shelton purchased ten certificates for various restaurants in New Jersey through the Restaurant.com website from December 9, 2007, to September 9, 2009. Each certificate had a face value of $25 and was redeemable at a specific restaurant in New Jersey. Shelton paid Restaurant.com from $1 to $6 for each certificate. Plaintiff Gregory Bohus purchased one Restaurant.com certificate with a $10 face value for $4. 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 Shelton and Bohus purchased 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.” Plaintiffs alleged, and we accept as true, that since April 4, 2006, all or substantially all certificates redeemable at participating restaurants in New Jersey contain those provisions.

II.

Plaintiffs Shelton and Bohus, individually and on behalf of a class described as New Jersey residents who purchased a certificate from Restaurant.com after April 4, 2006, filed a complaint in the Superior Court of New Jersey. Plaintiffs further limited the class to purchasers whose certificate, redeemable at a restaurant in New Jersey, contained: (1) a provision identifying an expiration period less than twenty-four months from the date of issue or sale of the certificate; (2) a provision that the expiration period or any other term in the certificate is applicable except where “prohibited by law” without specifying whether or not that term was applicable in New Jersey; or (3) a statement that the certificate is void to the extent prohibited by law without specifying the extent to which it is void or valid in New Jersey. In their complaint, plaintiffs allege that the certificates sold by Restaurant.com violate the New Jersey Gift Certificate Statute (GCS), N.J.S.A. 56:8–110 to –112; the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8–1 to –20; and the TCCWNA. Plaintiffs seek treble damages for violations of the GCS, statutory penalties in the amount of $100 for each class member pursuant to the TCCWNA, equitable relief in the nature of an injunction prohibiting future violations of the GCS and TCCWNA, and attorneys' fees and costs.

Restaurant.com removed the matter to the United States District Court for the District of New Jersey and filed a motion to dismiss. The federal district court judge determined that plaintiffs failed to supply any factual allegations to support an ascertainable loss as required by the CFA. The district court judge noted that plaintiffs did not allege any facts to support a finding that the certificates purchased by them were worth less than their face value, were refused by the participating restaurant, had expired at the time of presentation, or were not used based on the false belief of the expiration date. In short, plaintiffs did not allege a loss of any kind. Concluding that plaintiffs “failed to set forth either out of pocket losses or demonstrate loss of value sufficient to satisfy the ascertainable loss requirement under the CFA and GC[S,]” the district court judge dismissed those counts.

The district court judge also determined that plaintiffs were not “consumers” as defined in the TCCWNA because the certificates purchased by them were not property. The judge concluded that the certificates purchased by plaintiffs “provide an individual with a contingent right for discounted services at a selected restaurant[,]” but such a contingent right does not constitute the purchase of “property or service which is primarily for personal, family or household purposes.” Therefore, the judge concluded that plaintiffs are not “consumers” as defined by the TCCWNA and that the certificates are not “consumer contracts,” and he granted the motion to dismiss.

Plaintiffs appealed, and the United States Court of Appeals for the Third Circuit certified two questions to this Court in accordance with Rule 2:12A–1:

(1) Does the New Jersey Truth–in–Consumer Contract, Warranty, and Notice Act (N.J.S.A. 56:12–14 to 12–18) (“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?

Following briefing and oral argument, this Court reformulated the questions pursuant to Rule 2:12A–2, accepted further briefing, and conducted oral argument on the reformulated questions. The reformulated questions are 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.

III.

In 1981, the Legislature enacted the TCCWNA. L. 1981, c. 454. The Act provides:

No seller ... shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign ... which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal law at the time the offer is made or the consumer contract is signed or the warranty, notice or sign is given or displayed.

[N.J.S.A. 56:12–15.]

The TCCWNA also prohibits any provision in a consumer contract requiring a consumer to waive his or her rights under the Act. N.J.S.A. 56:12–16. That section further provides that a contract or notice must clearly identify which provisions are void, inapplicable, or unenforceable in New Jersey. Ibid. In other words, a contract or notice cannot simply state in a general, nonparticularizedfashion that some of the provisions of the contract or notice may be void, inapplicable, or unenforceable in some states. See ibid.

The rights, remedies, and prohibitions conferred by the TCCWNA are “in addition to and cumulative of any other right, remedy or prohibition accorded by common law, Federal law or statutes of this State.” N.J.S.A. 56:12–18. As explained in Kent Motor...