New Jersey Supreme Court Holds that Consumers Cannot Pursue Class Action Claims Against TGI Fridays for Inflated Drink Prices, But May Do So Against Carrabba’s Italian Grill

The New Jersey Supreme Court issued a decision on two consumer class actions under the New Jersey Consumer Fraud Act (“CFA”) and the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”).  In two separate cases, consumers sought damages against TGI Fridays and the operator of several Carrabba’s Italian Grill, respectively, alleging unlawful practices with respect to the disclosure of prices for alcoholic and non-alcoholic beverages to customers.

With respect to TGI Fridays, the Court held that the named plaintiffs failed to show that common questions of law and fact predominate over individual issues.  The plaintiff had advanced a “price inflation” theory – that the fraudulent marketing drove up the cost of the drinks – but the Court rejected it noting that its prior decisions had found this theory did not support a claim under the CFA.

With respect to Carrabba’s, on the other hand, the plaintiff’s allegations focused on specific pricing practices, which plaintiff claimed are supported by receipts showing that each customer making this claim was charged different prices for the same brand, type, and volume of beverage in the course of a single visit. Because the proposed class had been redefined to only include customers who make that specific CFA claim, they met the predominance requirement for class certification.

In both cases, the Court found that the plaintiffs had failed to meet the standards for a class action as to their TCCWNA claims. Under TCCWNA, a claimant must prove that they received a written sign (here, a menu), which contained information in violation of a consumer law.  Because each individual claimant would have to prove that they received a menu, the Court held, the cases were not suitable for resolution as a class action.

For more information on class actions, the CFA or TCCWNA, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

 

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N.J. Supreme Court Finds Material Breach by Company That Knowingly Refused to Cooperate with Arbitration Demands Filed in Compliance with the Arbitration Agreement

The New Jersey Supreme Court has ruled that a company’s refusal to cooperate with plaintiffs’ arbitration demands was a material breach of their arbitration agreement, which barred the company from later compelling arbitration. Tahisha Roach v. BM Motoring, LLC 

The plaintiffs had purchased cars from BM Motoring, LLC and Federal Auto Brokers, Inc. d/b/a BM Motor Cars (BM).  As part of the transaction, each plaintiff signed an arbitration agreement requiring resolution of disputes through arbitration in accordance with the rules of the American Arbitration Association (AAA).  The plaintiffs had filed demands for arbitration against BM with AAA.  In one case, despite repeated requests by AAA, BM refused to advance the filing fees that the arbitration agreement obligated BM to pay, resulting in dismissal of the arbitration for nonpayment of fees. In another case, a plaintiff’s claims were dismissed based on BM’s failure to comply with AAA’s rules and procedures.  The plaintiffs then jointly filed the present action against BM, who moved to dismiss the complaint in favor of arbitration.

Ruling in the plaintiffs’ favor, the Court noted that arbitration agreements are governed by general principles of contract law.  BM’s arbitration agreement required arbitration in accordance with AAA’s rules and therefore permitted arbitration before the AAA.  The Court held that BM’s failure to pay the AAA fees or to respond to plaintiffs’ arbitration demands violated BM’s duty of good faith and fair dealing that New Jersey law implies in all contracts.  Specifically, BM’s actions destroyed the benefit plaintiffs expected in signing the arbitration agreement, namely, the ability to arbitrate claims.  Accordingly, BM was barred from later compelling arbitration.

The New Jersey Supreme Court refused to enact a bright-line rule on the issue, emphasizing the fact-sensitive nature of its determination.  Nonetheless, businesses that include standard arbitration clauses in their agreements, should be aware that a failure to cooperate in bringing the case before an arbitrator may result in a waiver of the arbitration agreement.

For more information, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

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