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Shelton v. Inc.

2010 WL 2384923 (U.S. Dist. Ct. D. N.J. 2010) (Unpublished)

TCCWNA — Where a gift certificate actually only provides an individual with a contingent right for discounted services, it does not constitute a consumer contract covered by the Truth-in-Consumer Contract, Warranty, and Notice Act.

Two New Jersey consumers separately purchased internet gift certificates from a company that sold certificates in various amounts for local restaurants. They were sold at a substantial discount off the face value. The consumers paid online for the discounted gift certificates and then received an electronic link to an internet page where the gift certificates could be printed. Both consumers’ certificates contained the following standard provisions: 1) “Expires one (1) year from date of issue, except in California and where otherwise provided by law” and (2) Void to the extent prohibited by law.” During the period of their purchases, all of the company’s gift certificates sold to New Jersey residents, and redeemable at New Jersey restaurants, contained these provisions.

The consumers filed a class action suit against the company claiming the gift certificates were in violation of the New Jersey Gift Card Act (GCA), the Consumer Fraud Act (CFA), and the Truth-in-Consumer Contract, Warranty, and Notice Act (TCCWNA). The case was removed from state court to federal district court on the diversity grounds. The company then filed a motion to dismiss the complaint for failure to state a claim upon which relief could be granted. The United States District Court granted the motion to dismiss the complaint in its entirety.

The Court held that when assessing the sufficiency of a civil complaint, the complaint will be dismissed unless it contains sufficient factual matter that states a claim to relief that is plausible on its face. It said that under both the CFA and GCA, the issue turned upon whether the consumers had adequately pled an ascertainable loss resulting from alleged violations of those statutes. An ascertainable loss is experienced when a consumer receives less than what was promised. The Court indicated that to withstand a motion to dismiss, the consumers had to plead more than just broad, conclusory allegations.

In this matter, the consumers argued the gift certificates purchased were more valuable to consumers without the applicable two year expiration date, but the court found they failed to supply any factual allegations to show a loss or reduction in value, such as if a restaurant rejected the certificates. Additionally, the Court concluded the language on the gift certificate placed a consumer on notice that the expiration date in New Jersey would be governed by New Jersey law which enforced a two year expiration date.

The Court also concluded the complaint failed to state a claim for which relief could be granted under the TCCWNA. The TCCWNA mandates that a consumer contract may not state that any of its provisions are or may be void, unenforceable or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within New Jersey. Under that law, the Court found that a consumer is defined as one who buys services or property primarily for personal purposes, but not one who purchases a contingent right to services from a third party. The Court had found the company’s gift certificates provided an individual with a contingent right for discounted services at a selected restaurant. Therefore, the gift certificates sold by the company did not constitute a consumer contract covered by the TCCWNA.

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