Although A4097, which would place additional restrictions on contract into the state’s Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), is not on its face an anti-arbitration bill, that is its effect. That much was made clear when the Assembly Consumer Affairs Committee held a hearing on the bill on February 5.
The bill, which is being sponsored by Assembly Members Moriarty (D-4), Diegnan (D-18) & Mainor (D-31), would prohibit consumer contracts from containing provisions that require a consumer to waive or limit:
- any rights under the provisions of the Consumer Fraud Act, the New Jersey Lemon Law or any other federal or state consumer protection law;
- the right to contact a law enforcement agency, state or local government entity or any other entity for the purpose of reporting a consumer complaint;
- the right to bring a complaint or civil action within the six-year statute of limitations afforded under current law;
- the right to have the state of New Jersey serve as the forum, jurisdiction or venue for the resolution of any dispute;
- the right to bring a class action or serve as a class representative in any dispute;
- the right to discovery as provided by the New Jersey Rules of Court;
- the right to bring a claim for injury to person or property; or
- the right to a jury trial, except that a consumer may waive this right upon the advice of counsel, as evidenced by counsel’s signature on the contract.
NJCJI pointed out that some of these prohibitions are not controversial, in fact waivers of consumer protection laws, and contractual agreements not to contact law enforcement agencies to report a consumer complaint are already unenforceable.
However, placing the limitations under TCCWNA means businesses can be subjected to class action litigation over the violations, forcing them to defend against massive potential liabilities in circumstances where there has been no culpable conduct and no actual injury.
Most of the testimony against the bill centered around that fact that many of the provisions that would be prohibited by this bill are core elements of arbitration, an efficient and cost effective alternative dispute mechanism that benefits both retailer and consumer. Federal law prohibits states from adopting rules “that disfavor arbitration.” NJCJI contends that prohibiting arbitration provisions in consumer contracts, and enforcing the prohibition with a $100 fine, would likely be considered “disfavoring” arbitration.