The New Jersey State Assembly's Consumer Affairs Committee just cleared a bill that would have a drastic impact on contracts between businesses and consumers. The proposed law would ban contracts that force consumers to give up or limit certain rights, such as the right to sue, to bring a class action, to contact a law enforcement agency to file a consumer complaint, or to secure a jury trial.
Its sponsors say this would be a "return to accountability for companies and peace of mind for consumers." According to Patrick Diegnan (D-Middlesex), one of the bill's sponsors, "many consumers - no matter how thoroughly they read a contract - may not even realize they're signing away their [rights], because the deck is stacked against them." The legislation prevents businesses from "burying key details in the fine print" and "upholds the right of New Jersey consumers to seek redress for grievances," said Charles Mainor (D-Hudson), another sponsor of the bill.
While the benefits to consumers are obvious, the legislation would present severe pitfalls for New Jersey businesses. Any business that violates it is liable to the aggrieved customer for $100 plus court and attorney's fees. But a consumer does not need to show that the business intentionally violated the law, was culpable in any way, or that the consumer had suffered any sort of injury. "[T]he problem is the first time a business may find out that a particular contract or invoice is out of compliance is with a massive class action that potentially puts them out of business with no underlying harm," says Alida Kass of the New Jersey Civil Justice Institute. Likewise, the law, in eliminating arbitration agreements, limits what many consider to be a "reasonable business practice" which has been repeatedly upheld by the U.S. Supreme Court. The impact on New Jersey businesses could be comparable to the class action suits filed under the New Jersey Law Against Discrimination or the federal Americans with Disabilities Act. Under both of these laws, businesses must not discriminate against disabled customers, and must make reasonable accommodations for them. Businesses that fail to provide these protections may without warning find themselves the defendant in a massive class action lawsuit filed on behalf of by "aggrieved" customers. In 2004, Taco Bell paid $5.4 million and agreed to renovate many of its restaurants, after a class action suit by disabled customers who claimed that the restaurants had accessibility barriers that violated the ADA. These massive class actions lawsuits, much like the ones that may come from the new law, force businesses to proactively change their practices or be subject to potentially devastating, civil penalties. Should the bill pass, companies must make sure that their contracts don't have "illegal" terms, or they literally run the risk of being put out of business.