Third Circuit Holds Truth in Consumer Contract Notice and Warranty Act Claim May Not Be Based Upon Omission of Price Information

In Watkins v. DineEquity, Inc., the Third Circuit recently considered whether the District Court properly dismissed a putative class action brought against Applebee’s and International House of Pancakes, in which Plaintiff claimed that Defendants violated the New Jersey Truth in Consumer Contract Notice and Warranty Act (“TCCNWA”) by failing to disclose beverage prices on their menus. In affirming the District Court’s dismissal, a divided Third Circuit panel ruled that the “TCCNWA encompasses only illegal provisions in writings covered by the statute, and does not make actionable omissions, including the omission of beverage prices from a restaurant menu.”

The TCCNWA prohibits a seller from displaying a “written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by law.” Plaintiff asserted that Defendants’ omission of drink prices from their menus constituted a violation of the New Jersey Consumer Fraud Act (“CFA”), and that such a violation was a predicate for a claim under the TCCNWA, despite the fact it stemmed from an omission, rather than an inclusion, of information. The District Court rejected this argument, concluding that “[b]ecause omitting certain prices from restaurant menus does not pose the same risk of misleading a consumer into failing to enforce her legal rights as an affirmative misrepresentation,” the TCCWNA was not applicable to a price omission. Following the dismissal of Plaintiff’s complaint and amended complaint, and the denial of Plaintiff’s motion for reconsideration, Plaintiff appealed to the Third Circuit.

The Third Circuit found, as a matter of first impression, that a plain reading of the TCCNWA, which provides for a statutory penalty in instances in which a Defendant displays a sign that “includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller[,]” indicates that the Legislature intended the TCCNWA to penalize only the inclusion of illegal provisions and not omissions.

In his dissenting opinion, Circuit Judge Greenway held that the majority opinion effectively undermines the TCCNWA’s impact. He noted that the TCCNWA does not expressly preclude reliance on an omission-based claim as the predicate. Moreover, in light of New Jersey’s long history of consumer protection, recognition that an omission of information may form the basis of a CFA claim, and holdings that a CFA violation may form the requisite underlying predicate to prevail on a TCCNWA claim, Circuit Judge Greenway found that Plaintiff satisfied the pleading requirements of the TCCNWA.

Although Watkins is a non-precedential case, it signals that for now in the Third Circuit a TCCNWA claim requires substantially more than merely an omission, even if that omission is clearly a violation of the CFA.