Action Item: The Superior Court of New Jersey - Appellate Division reversed a trial court’s class certification decision in a consumer class action arising from whether TGI Friday’s decision to not post drink prices on its menus violated New Jersey’s Consumer Fraud Act and the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”). The Court’s decision is important for any client facing a consumer class action because it (1) reinforces that defendants must aggressively conduct class discovery, (2) that the trial court must conduct a rigorous analysis which includes evaluating plaintiff’s conduct, and (3) it is not enough to establish causation under the New Jersey Consumer Fraud Act or presentment under TCCWNA by relying solely on a defendant’s policies and procedures.

On March 24, 2016, in Debra Dugan v. TGI Fridays, Inc., the Appellate Division of the Superior Court of New Jersey issued a published opinion reversing the trial court’s order granting class certification. In so doing, the Appellate Division clarified that in terms of evaluating a class, the court must look not only to the defendant’s conduct, but to the plaintiffs’ as well. In Dugan, plaintiffs alleged that TGI Friday’s committed consumer fraud by not posting the drink prices of alcohol (excluding wine) and soft drinks on its menus. Because the menus did not include drink prices, plaintiffs argued that any patron of a TGI Friday’s who ordered a drink and did not know its price was a victim of consumer fraud, and thus a member of the class. The trial court granted class certification. On appeal, the Appellate Division reversed finding that the trial court failed to undertake the rigorous analysis required by New Jersey Court Rule 4:32-1. In particular, the Appellate Division reasoned that the court must undertake an in-depth analysis of plaintiffs’ conduct. In so doing, the Appellate Division found that a class action was inappropriate because each consumer’s experience at TGI Friday’s could be different, and therefore, individual issues predominated over class-wide issues. As a result, the Appellate Division reversed the trial court’s class certification decision.

Dugan addresses several critical issues that have been the subject of much debate in the onslaught of putative consumer fraud and TCCWNA class actions in New Jersey. First, it highlights that plaintiffs in consumer class action cases cannot simply rely on the conduct of the defendant to establish predominance under a class action analysis. As was the case in Dugan, plaintiffs proceeded on the presumption that consumers suffered an ascertainable loss because TGI Friday’s did not include drink prices on their menus. In other words, it is not sufficient to claim there is an unlawful or deceptive practice, rather plaintiffs must show that the alleged practice caused the harm alleged. Similarly, under the TCCWNA, the court found that a class was inappropriate because each plaintiff would have to show that he or she was presented with the offending contract, which in this case was the menu. That analysis necessarily requires an individualized inquiry as to whether each class member received the offending contract.

Second, it makes clear that class discovery must be consistent with plaintiff’s pleadings. In Dugan, as the Appellate Division acknowledged, the class representatives’ testimony differed from that which was pled. Thus, developing a comprehensive and complete factual record prior to class certification is of paramount importance so the court can properly conduct its rigorous analysis as required under Rule 4:32-1.

Third, Dugan again reinforces that a plaintiff must prove causation under the Consumer Fraud Act, and that causation is not simply presumed based on a defendant’s conduct alone. This highlights the importance of having sharp, detailed pleadings explaining how the alleged wrongful conduct caused a loss. In Dugan, the Appellate Division held that causation (i.e., whether the lack of drink prices on the menu caused a loss) was an individualized issue that was inappropriate for a class action.