Unenforceable Terms Can Cut Both Ways: TCCWNA Case Gets Tossed on Standing Grounds

Published On March 28, 2017 | By Anna Hsia | General

Does a consumer have standing to sue under New Jersey’s Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”) simply on the basis that the consumer believes a company’s website Terms contain provisions that violate the TCCWNA? No, said a New Jersey federal court in Hite v. Lush Internet Inc., No. 16-1533 (D.N.J. March 22, 2017).

The plaintiff, Norris Hite, purchased a cosmetic online from Lush. Despite having no apparent complaints about the product she purchased, Hite sued, claiming violations of the TCCWNA. In particular, she argued that the Terms of Use for Lush’s website contained exculpatory clauses that unlawfully disclaimed all tort liability and otherwise limited consumer rights under various New Jersey laws.

Lush moved to compel arbitration under the binding arbitration provision in the Lush Terms of Use and alternatively, to dismiss for failure to state a claim. The court denied Lush’s motion to compel arbitration but granted its motion to dismiss with prejudice, finding Plaintiff lacked standing.

Lush lost its bid to compel arbitration because it could not establish that Plaintiff assented to the Lush Terms of Use containing the arbitration provision. Those Terms were accessible only through a hyperlink at the bottom of defendant’s website. At no point was Plaintiff made aware of the existence of the Terms, nor was she required to demonstrate assent to such Terms during the checkout process. Plaintiff also submitted a declaration stating she never read the Terms and was otherwise not aware of their existence. Against that backdrop, the court found that Lush could not establish that Plaintiff agreed to arbitrate disputes.

Despite losing the motion to compel arbitration, Lush achieved a larger victory on its motion to dismiss. Making lemonade out of lemons, Lush argued that Plaintiff lacked standing to sue based on the Lush Terms, because Plaintiff admitted she was unaware of the Terms and never assented to them. The court agreed, ruling that Plaintiff could not be aggrieved by Terms of Use that she never read.

While Lush benefited from its unenforceable Terms, most (if not all) companies would of course prefer a different avenue of attack against TCCWNA claims. Fortunately, the court also ruled that Plaintiff lacked standing because she did not allege a concrete harm. Merely seeking to bring website terms into compliance with the TCCWNA does not confer standing where Plaintiff does not seek to enforce any actual rights. Businesses plagued by TCCWNA complaints premised solely on alleged technical violations can use this decision to seek dismissal of such claims that are divorced from actual harm.

 

About The Author

Anna Hsia maintains a diverse practice litigating complex business disputes and counseling clients on privacy issues. With broad litigation experience in unfair competition, false advertising, class actions, and other complex litigation, Anna guides clients through disputes in federal and state courts. As a Certified Information Privacy Professional, Anna has assisted clients with product development and compliance with privacy regulations such as the TCPA, HIPAA, COPPA, state-specific privacy regulations, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act.

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