JOHNSON v. WYNN'S EXTENDED CARE, INC. et al

Filing 46

OPINION. Signed by Judge Renee Marie Bumb on 10/15/2014. (TH, )

NOT FOR PUBLICATION

[Docket No. 29]

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE

TIJUANA JOHNSON, on behalf of
herself and other persons
similarly situated,
Plaintiff,

Civil No. 12-cv-00079
(RMB/KMW)
OPINION

v.
WYNN’S EXTENDED CARE, INC. and
NATIONAL CASUALTY COMPANY,
Defendants.

Appearances
Andrew P. Bell
Michael A. Galpern
Locks Law Firm LLC
457 Haddonfield Road
Suite 500
Cherry Hill, New Jersey 08002
Charles N. Riley
Riley & Shaine
900 N. Kings Highway
Cherry Hill, New Jersey 08034
Attorneys for Plaintiff
Kevin M. McKeon
Marshall, Dennehey, Warner, Coleman & Goggin, PC
Woodland Falls Corporate Park
200 Lake Drive East
Suite 300
Cherry Hill, New Jersey 08002
Attorney for Defendants

BUMB, United States District Judge:
Before the Court is a motion to dismiss the Second Amended
Complaint filed by Defendants Wynn’s Extended Care, Inc.
(“Wynn”) and National Casualty Company (“National”)
(collectively, the “Defendants”). (Docket No. 29.) For the
reasons set forth below, Defendants’ motion is GRANTED in part,
and DENIED in part.
BACKGROUND
Plaintiff Tijuana Johnson (the “Plaintiff”) brings this
putative class action on behalf of herself and other similarlysituated individuals. The case was commenced in state court and
removed to this Court pursuant to the Class Action Fairness Act
(“CAFA”), 28 U.S.C. § 1332(d). Plaintiff’s First Amended
Complaint asserted violations of the New Jersey Consumer Fraud
Act, N.J. Stat. Ann. §§ 56:8-1, et seq. (“CFA”), the New Jersey
Truth in Consumer Contract, Warranty and Notice Act, N.J. Stat.
Ann. §§ 56:12-14, et seq. (“TCCWNA”), and the New Jersey Plain
Language Act (the “PLA”), N.J. Stat. Ann. §§ 56:12-1, et seq. It
also sought declaratory and injunctive relief.
Initially, Defendants filed a motion to dismiss the First
Amended Complaint, which the Court granted in part, dismissing
the CFA and PLA claims as well as the request for declaratory
and injunctive relief. Plaintiff thereafter filed a Second
Amended Complaint that asserts violations of the CFA (Count I)
2

and the TCCWNA (Count II). 1 The Court heard oral argument and the
parties submitted supplemental briefs. The matter is ripe for
this Court’s decision.
A. The Second Amended Complaint
On February 12, 2011, Plaintiff purchased a used 2007
Saturn from Smitty’s Auto, a car dealership. At the same time,
she purchased a “Used Vehicle Service Contract” (the “Service
Contract”) from Defendants Wynn and National. (See Second
Amended Complaint, Ex. B.) The Service Contract was entered into
by Smitty’s Auto and Plaintiff, but provided that, upon
acceptance of the application by Defendant Wynn, it would become
Plaintiff’s contract. Plaintiff alleges that she paid a $1,380
premium for the purchase of coverage.
In May 2011, Plaintiff’s car stopped operating. At the
direction of Smitty’s Auto, Plaintiff had her vehicle taken to
Exclusive Auto in Burlington, New Jersey, to determine what
repairs were needed. Exclusive Auto, after taking apart the
engine, determined that the vehicle needed a new engine.
Plaintiff then requested that Wynn repair the vehicle. Wynn
refused to authorize the repair and denied that the Service
Contract provided coverage on the basis that the vehicle was
covered under the manufacturer’s warranty. Specifically,
1

Although the Court dismissed the PLA claim without
prejudice, Plaintiff abandoned this claim in the Second Amended
Complaint.
3

Plaintiff alleges that “Defendants refused to authorize repair
of the vehicle by denying without any basis that the [Service
Contract] provided coverage and by misrepresenting to [her] that
the vehicle was also covered under a manufacturer’s warranty
after Defendants already knowingly voided any manufacturer’s
warranty.” (Second Amended Complaint, Docket No. 28 ¶ 28
(emphasis added).) Plaintiff, relying upon Defendants’
misrepresentations, contacted the manufacturer of the car,
General Motors, to seek coverage and repair. General Motors,
however, denied coverage because Exclusive Auto had taken apart
the engine “at the direction of Defendants,” thereby voiding the
warranty. (Second Amended Complaint ¶ 30 (emphasis added).)
Plaintiff again contacted Defendants and demanded coverage under
the Service Contract. According to Plaintiff, Defendants,
“knowing that the [Service Contract’s] arbitration provision
made it financially impossible for Plaintiff (or any consumer)
to pursue any legal remedies against Defendants, again refused
to pay and denied coverage without any basis whatsoever, but
solely to save Defendants money.” (Second Amended Complaint
¶ 32.)
B. Procedural History
Plaintiff filed suit on November 15, 2011. On January 5,
2012, Defendants removed the matter to this Court, citing CAFA
jurisdictional grounds. After Plaintiff commenced this action in
4

state court, Defendants agreed to pay for the repair, and the
repairs were subsequently completed. 2 Despite the paid-for
repairs, Plaintiff claims here that she sustained additional
losses, e.g., she lost the use of her car for at least five
months during which time she paid $2,103 to the finance company,
$185 for automobile insurance, and $130 in towing costs.
C. Plaintiff’s Claims
Plaintiff’s Second Amended Complaint alleges one Count
under the CFA and one Count under the TCCWNA. Defendants now
move before this Court to dismiss the Second Amended Complaint
in its entirety. As an initial matter, the Court notes that the
parties have waived enforcement of the arbitration provision in
the Service Contract. Because it was unclear whether the parties
intended to pursue arbitration, the Court had questioned whether
Defendants’ Motion to Dismiss the First Amended Complaint was,
in effect, a motion to compel arbitration. (See Docket No. 16.) 3
Defendants responded that they, along with Plaintiff, had, in
fact, waived arbitration and agreed that this case should be
submitted to this Court for adjudication. (Docket No. 17, at 1

2

This fact is not averred in the Second Amended Complaint
but Plaintiff does not dispute that Defendant paid for the
repair of the car.
3

Motions to compel arbitration are treated as a motion to
dismiss for failure to state a claim. Palko v. Airborne Express,
Inc., 372 F.3d 588, 597 (3d Cir. 2004).

5

(“In the instant matter, neither the plaintiff nor defendants
have requested that this matter be compelled to arbitration.”).) 4
That the parties have waived their right to have this
matter presented to an arbitrator, however, does not mean that
the arbitration provision itself is not at issue in this case.
To the contrary, Plaintiff’s claims challenge the arbitration
clause as being in violation of both the CFA and TCCWNA. The
Court now turns to the parties’ arguments.
STANDARD
“To survive a motion to dismiss, ‘a complaint must contain
sufficient factual matter, accepted as true, to state a claim to
relief that is plausible on its face.’” Sheridan v. NGK Metals
Corp., 609 F.3d 239, 262 n.27 (3d Cir. 2010) (quoting Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009)). “‘A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.’” Id. (quoting
Iqbal, 556 U.S. at 678).
The Court conducts a three-part analysis when reviewing a
claim:

4

Parties may agree to waive their agreement to arbitration.
See Ehleiter v. Grapetree Shores, Inc., 482 F.3d 207, 222-25 (3d
Cir. 2007) (acknowledging parties may waive right to compel
arbitration); see also 21 Williston on Contracts §57:16 (4th
ed.) (“It has been repeatedly held that a covenant in a contract
providing for arbitration may be waived.”).
6

First, the court must “tak[e] note of the elements a
plaintiff must plead to state a claim.” Iqbal, 129 S.
Ct. at 1947. Second, the court should identify
allegations that, “because they are no more than
conclusions, are not entitled to the assumption of
truth.” Id. at 1950. Finally, “where there are wellpleaded factual allegations, a court should assume
their veracity and then determine whether they
plausibly give rise to an entitlement for relief.” Id.
Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010);
see also Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir.
2009) (“[A] complaint must do more than allege the plaintiff’s
entitlement to relief. A complaint has to ‘show’ such an
entitlement with its facts.”).
In addition, the Federal Rules of Civil Procedure require
that a party alleging fraud “must state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ.
P. 9(b). “A plaintiff must ‘state the circumstances of the
alleged fraud with sufficient particularity to place the
defendant on notice of the precise misconduct with which [it is]
charged.’” Baker v. Inter Nat’l Bank, No. 08-5668, 2012 WL
174956, at *6 (D.N.J. Jan. 19, 2012) (quoting Frederico v. Home
Depot, 507 F.3d 188, 200 (3d Cir. 2007)). “The heightened
pleading standards of Rule 9(b) apply to claims of fraud brought
under New Jersey law.” Id. (citing Frederico, 507 F.3d at 200).
ANALYSIS
The Second Amended Complaint alleges violations of the CFA
and the TCCWNA based primarily upon the theory that the
7

arbitration provision in the Service Contract violates
Plaintiff’s rights under these consumer protection statutes and
makes it financially impossible for consumers to pursue any
legal remedies against Defendants. (See, e.g., Second Amended
Complaint ¶¶ 32, 43.) The Second Amended Complaint also alleges
a CFA violation based on the theory that Defendants denied
warranty coverage after knowingly voiding the manufacturer’s
warranty by directing the repair shop to take apart the engine. 5
(See discussion infra.) The Court will address these claims in
reverse.
A. Consumer Fraud Act
To state a cause of action under the CFA, a plaintiff must
allege: (1) an unlawful practice by the defendant; (2) an
ascertainable loss by the plaintiff; and (3) a causal nexus
between the defendant’s unlawful practice and the plaintiff’s
ascertainable loss. Lee v. Carter-Reed Co., Inc., 203 N.J. 496,
521 (2010); Int’l Union of Operating Eng’rs Local No. 68 Welfare
Fund, 929 A.2d 1076, 1086 (N.J. 2007). 6

5

Since the putative class still has not been certified, the
Court evaluates the Second Amended Complaint as to the
particular plaintiff. Green v. Green Mountain Coffee Roasters,
279 F.R.D. 275, 281 (D.N.J. 2011) (citing Rolo v. City of
Investing Co. Liquidating Trust, 155 F.3d 644, 659 (3d Cir.
1998), abrogation on other grounds recognized, Forbes v.
Eagleson, 228 F.3d 471 (3d Cir. 2000)); Luppino v. Mercedes-Benz
USA, LLC, No. 09-5582, 2010 WL 3258259, at *4 (D.N.J. Aug. 13,
2010)).
6

The CFA provides in relevant part:
8

In essence, as clarified by counsel at oral argument, the
Second Amended Complaint alleges two unlawful practices under
the CFA. First, Plaintiff alleges that Defendants fraudulently
denied warranty coverage by claiming that the vehicle was
covered by a manufacturer’s warranty but at the same time
directing the repair shop to tear out the engine so that the
manufacturer’s warranty would be voided. Second, Plaintiff
alleges that Defendants engaged in a marketing scheme to deceive
Plaintiff by, inter alia, burying the arbitration provision in
the Service Contract and preventing Plaintiff from pursuing her
rights under the CFA and TCCWNA.
1. Defendants’ Denial of Warranty Coverage
With respect to Defendants’ denial of warranty coverage,
New Jersey courts have held that a breach of contract or
warranty alone is not an unlawful practice under the CFA in the
absence of “substantial aggravating factors.” See, e.g.,
D’Ercole Sales, Inc. v. Fruehauf Corp., 501 A.2d 990, 1001 (N.J.
Super. Ct. App. Div. 1985) (“We do not deem that the disavowal
by Fruehauf, offensive though it may be, is deplorable enough to

Any person who suffers any ascertainable loss of moneys or
property, real or personal, as a result of the use or
employment by another person of any method, act, or
practice declared unlawful under this act or the act hereby
amended and supplemented may bring an action or assert a
counterclaim therefor in any court of competent
jurisdiction.
N.J. Stat. Ann. § 56:8-19.
9

constitute an ‘unconscionable commercial practice’ under the
Consumer Fraud Act nor do we deem that the conduct, unjustified
as it may be, transcends an ‘unconscionable commercial practice’
under the facts and circumstances of this commercial
transaction.”); Cox v. Sears, Roebuck & Co., 647 A.2d 454, 462
(N.J. 1994) (“However, ‘a breach of warranty, or any breach of
contract, is not per se unfair or unconscionable . . . and a
breach of warranty alone does not violate a consumer protection
statute.’” (quoting Fruehauf, 501 A.2d at 998)). In Fruehauf,
the court addressed the question of whether a seller’s refusal
to rectify a product defect, thereby breaching a warranty in a
commercial sales transaction, constituted an unconscionable
commercial practice under the CFA. After examination of the CFA
and New Jersey’s Uniform Consumer Sales Practice Act, the
Fruehauf court held that in consumer goods transactions,
“unconscionability must be equated with the concepts of
deception, fraud, false pretense, misrepresentation, concealment
and the like which are stamped unlawful under [the CFA].” 501
A.2d at 31. In sum, the court held there must be “substantial
aggravating circumstances.” Id. (citation omitted).
Hence, while every breach of warranty or contract is
inherently unfair to the non-breaching party who does not
receive the benefit of his bargain, under New Jersey law there
must be substantial aggravating circumstances in order to make
10

available to consumers the CFA’s “powerful” remedies. Id. Here,
Plaintiff alleges that Defendants denied coverage and
misrepresented to Plaintiff that her vehicle was covered by a
manufacturer’s warranty when they knew that any such warranty
had been voided by their instructions to Exclusive Auto to tear
out the engine. (Second Amended Complaint ¶¶ 28 & 30.) 7 As
clarified at oral argument, Plaintiff argued that her Complaint,
and specifically paragraphs 28 and 30, should be interpreted to
allege the following: that Defendants (1) misrepresented to
Plaintiff that her vehicle was covered under a manufacturer’s
(General Motors) warranty; (2) thereafter directed Exclusive
Auto take Plaintiff’s car engine apart (Second Amended Complaint
¶ 30); (3) then sent Plaintiff to Exclusive Auto; (4) Exclusive
Auto dismantled the engine at Wynn’s direction; (5) the
manufacturer (General Motors) denied the warranty because the
engine had been torn apart and the warranty voided; and (6)
Wynn, thereafter, denied coverage without any basis.
While the Court questioned the plausibility of these
allegations – and Defendants have labeled these allegations as
“fantasy” (Defs.’ Supp. Reply, Docket No. 44, at 4) - it is not
7

While “[a] plaintiff need not demonstrate ‘aggravating factors’
[for a CFA claim] when the ‘unlawful practice’ is an affirmative
misrepresentation”, Belmont Condo. Ass’n, Inc. v. Geibel, No. A2584-10T3, 2013 WL 3387636, at *14 (N.J. Super. Ct. App. Div.
July 9, 2013), here, it is the Defendants’ denial of coverage
rather than solely the accompanying misrepresentation that forms
the basis of this CFA claim.
11

the Court’s role at the motion to dismiss stage to decide the
merits. 8 Because the allegation, as understood by the Court, and
confirmed by Plaintiff’s counsel at oral argument, is a very
serious one, Plaintiff has pled substantial aggravating
circumstances. Plaintiff has also adequately pled an
ascertainable loss causally connected to the denial of coverage.
She was forced to initiate suit against Defendants in order to
obtain payment for the repairs to her vehicle. This part of
Plaintiff’s CFA claim may proceed, and Defendants’ motion is
DENIED as to this claim.

8

Although Defendants characterize the allegations as
fantasy, all pleadings are governed by Federal Rule of Civil
Procedure 11. See Fed. R. Civ. P. 11(b)(3) (“By presenting to
the court a pleading, written motion, or other paper—whether by
signing, filing, submitting, or later advocating it—an attorney
or unrepresented party certifies that to the best of the
person’s knowledge, information, and belief, formed after an
inquiry reasonable under the circumstances: . . . the factual
contentions have evidentiary support or, if specifically so
identified, will likely have evidentiary support after a
reasonable opportunity for further investigation or
discovery . . . .”). Thus, the Court expects that these very
serious allegations comply with Rule 11(b)(3)’s pleading
requirements. The Court hastens to note that the Service
Contract provides “You are responsible for authorizing and
paying for any teardown or diagnostic time needed to determine
if Your Vehicle has a Covered Breakdown.” (Service Contract at
2.) Clearly, the teardown of the engine could easily result in a
dispute between the manufacturer and the dealer over coverage.
But, Plaintiff’s allegations allege much more than a
manufacture-dealer dispute, i.e., that Wynn not only directed
the teardown of the engine but also fraudulently denied coverage
on the basis of the manufacturer’s warranty that had been voided
as a result of the teardown.
12

2. Defendants’ Inclusion of an Allegedly Unconscionable
Arbitration Provision
Plaintiff also asserts that the inclusion of the
arbitration provision in the Service Contract, which precludes
certain statutory relief and establishes arbitration costs and
procedures that are “unconscionable, contradictory and
confusing,” constitutes an unlawful practice. (Opp., Docket No.
34, at 22.) The Court dismisses this claim for the same reasons
it did so previously.
As an initial matter, parties may arbitrate a consumer’s
statutory rights under the CFA. See Epix Holdings Corp. v. Marsh
& McLennon Co., Inc., 982 A.2d 1194, 1207-09 (N.J. Super. Ct.
App. Div. 2009), overruled in part on other grounds, Hirsch v.
Amper Fin. Servs., 71 A.3d 849, 861 (N.J. 2013). In Epix
Holdings Corp. v. Marsh & McLennon Co., Inc., the court held,
“[i]n finding such [CFA] claims arbitrable, we found no inherent
conflict between the CFA’s underlying public policy ‘to root out
consumer fraud,’ and the ‘competing and compelling public policy
favoring arbitration as a means of dispute resolution and
requiring liberal construction of contracts in favor of
arbitration.’” Id. (citation omitted); see also Gras v. Assocs.
First Capital Corp., 786 A.2d 886, 891-92 (N.J. Super. Ct. App.
Div. 2001), cert. denied, 794 A.2d 184 (N.J. 2002); Caruso v.

13

Ravenswood Developers, Inc., 767 A.2d 979, 984-85 (N.J. Super.
Ct. App. Div. 2001). 9
As she did in her First Amended Complaint, Plaintiff
asserts numerous “unlawful practices” to support the CFA claim
based on the arbitration provision. First, Plaintiff’s
contention that the arbitration provision is “imbedded,
obscured, and/or unreadable” (Second Amended Complaint ¶ 2(a)),
or somehow rendered unconscionable due to the size of the print
and the location of the provision within the Service Contract
(Opp. at 25), is belied by the Service Contract itself.
Plaintiff, in signing the Service Contract, acknowledged that
she had read and understood certain sections of the four-page
contract, including the section that contains the arbitration
provision. Just above the customer signature line, the Service
Contract contains the following statement:
I have agreed to and acknowledge the maintenance
schedule, the claim process, the coverage provided,
the time and mileage limitations, the exclusions of
coverage, the cancellation provisions of this Contract
including the “Other Important Contract
Provisions/Limitations” exceptions section, and have
read and understood said provisions. It is understood
that the purchase of this [Service Contract] is NOT a
requirement to purchase or obtain financing. . . .

9

But see Rockel v. Cherry Hill Dodge, 847 A.2d 621, 623-24
(N.J. Super. Ct. App. Div. 2004) (concluding that the public
policy concerns under CFA outweighed public policy favoring
arbitration in highly ambiguous arbitration provision), cert.
denied, 859 A.2d 689 (N.J. 2004).
14

(Service Contract at 2); see also Ramey v. Burlington Car
Connection, Inc., No. 10-1445, 2010 WL 4320407, at *1-2 (D.N.J.
Oct. 25, 2010) (highlighting that arbitration provision found to
be valid appeared above signature line); Muhammad v. Cnty. Bank
of Rehoboth Beach, Delaware, 912 A.2d 88, 93 (N.J. 2006)
(emphasizing obviousness of arbitration provision located
directly above signature line). The arbitration provision is a
subsection listed under the heading “OTHER IMPORTANT CONTRACT
PROVISIONS/LIMITATIONS,” and is further identified by the
subheading “Arbitration.” (Service Contract at 4.) 10 Thus, by
including this acknowledgment, the Service Contract specifically
calls the signatory’s attention to the section containing the
arbitration provision. The provision is also written in the same
font as the other terms of the four-page contract – none of
which Plaintiff contends were unreadable. Moreover, Plaintiff’s
conclusory assertions to the contrary notwithstanding, the
arbitration provision is not imbedded as it is the last

10

Plaintiff unconvincingly argues that the underlined
heading modifies the phrase “cancellation provisions,” which
does not include the arbitration provision, and that the heading
is located in a separate column from the arbitration clause.
(Opp. at 25-26 n.5.) The Court disagrees and, in any event,
Plaintiff has not otherwise persuaded the Court that the
arbitration provision included in the Service Contract was
confusing.
15

provision in the contract and is set apart from the prior
provisions by the label “Arbitration”. 11
Second, Plaintiff argues that the arbitration provision
unlawfully required consumers to pay their own attorney’s fees
and costs in violation of the CFA. Plaintiff argues that this
violates the CFA’s provision of mandatory treble damages and
attorney’s fees if she were to prove a CFA violation. 12 See N.J.
Stat. Ann. § 56:8-19; Cox, 647 A.2d at 465. The arbitration
provision, however, does not bar treble damages. Although the
treble damages provision of the CFA is “a punitive measure,”
Daaleman v. Elizabethtown Gas Co., 390 A.2d 566, 569 (N.J.
1978), there is nothing in the arbitration clause that bars a
three-time multiplier of actual damages. As for the attorney’s
fees provision,

the Court finds that this provision, which may

or may not be enforceable depending on the claim asserted, does
11

Plaintiff also points to other portions of the
arbitration provision that ostensibly create ambiguity, such as
the statement that if the dispute is between the “Lienholder”
and the “Vehicle owner” then a different arbitration provision
will govern. (Service Contract at 4.) Plaintiff argues that an
unsophisticated customer would not know what a lienholder is and
that it is unconscionable to apply an “unknown” arbitration
clause. (Opp. at 5-6.) However, these terms are all defined in
the Service Contract and the contract containing the alternative
arbitration clause is identified by name.
12

Defendants argue that Plaintiff cannot show that she
suffered an ascertainable loss and, therefore, is not entitled
to treble damages. However, even if she cannot show an
ascertainable loss, Plaintiff would still be entitled to
attorney’s fees if she can prove that Defendants committed an
unlawful practice. Cox, 647 A.2d at 465.
16

not constitute an unlawful practice for essentially the same
reasons the provision is not violative of the TCCWNA. See infra.
Third, Plaintiff alleges no facts in support of her
conclusory assertions that Defendants “require[d] customers to
pay prohibitively excessive costs and fees [to] discourage
and/or prohibit consumers from prosecuting any claims and/or
disputes against Defendants” (Second Amended Complaint ¶ 2(c)).
Indeed, this allegation is belied by the record here. Not only
did Plaintiff file a lawsuit, but also Defendants did not seek
to compel arbitration. Thus, Plaintiff has failed to allege any
of the elements of her cause of action.
Fourth, Plaintiff’s contention that the arbitration
provision “[e]xtinguish[ed] [her] right to a jury trial without
adequate and/or proper notice” (Second Amended Complaint ¶ 2(d))
must also fail because a party can voluntarily waive its rights
to a jury trial, as Plaintiff did here, and agree to arbitrate
any claims. See Great W. Mortg. Corp. v. Peacock, 110 F.3d 222,
231 (3d Cir. 1997) (“[B]y agreeing to arbitration . . .
[Plaintiff] effectively waived her right to a jury trial.”).
Further, Plaintiff provided no facts to show she lacked adequate
or proper notice, and the Court already dismissed any
allegations that any part of the arbitration provision was
“imbedded, obscured, and/or unreadable” (Second Amended
Complaint ¶ 2(a)).
17

Fifth, there are no facts aside from Plaintiff’s conclusory
assertions that Defendants established California as the forum
in which disputes were to be resolved as a means of discouraging
the pursuit of legitimate claims. Cf. Carnival Cruise Lines,
Inc. v. Shute, 499 U.S. 585, 595 (1991). Further, any bad-faith
motive is belied by the terms of the contract itself which
permit the parties to agree to an alternative forum. (Service
Contract at 3 (“The arbitration shall take place in Orange
County, California, unless the parties agree otherwise.”)
(emphasis added).) Plaintiff has not even alleged that she had
requested the arbitration take place outside of California or
that Defendants unreasonably had refused to acquiesce to such a
change of venue. Instead, Plaintiff filed the within lawsuit.
Sixth, Plaintiff’s allegation that the arbitration
provision’s bar of punitive damages constitutes an unlawful
practice (Second Amended Complaint ¶ 2(f)) also fails because,
like with a jury trial, a party can voluntarily waive its rights
to punitive damages. See, e.g., Great Western Mortg. Corp., 110
F.3d at 232 (recognizing punitive damages may be waived); see
also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52
(1994) (finding parties could agree to include punitive damages
within the issues to be arbitrated regardless of state law that

18

otherwise precluded arbitrators from awarding punitive
damages). 13
Accordingly, Defendants’ motion to dismiss is GRANTED as to
this claim.
B. TCCWNA
Defendants also move to dismiss Plaintiff’s claim under the
TCCWNA, which prohibits contract provisions that violate clearly
established legal rights under federal or state law. Plaintiff
claims the arbitration provision violated the TCCWNA in two
ways: first, because the provision’s bar on recovery of
attorney’s fees and costs violates the CFA’s fee-shifting
framework, and second, because the provision was so imbedded and
obscure as to be unreadable in violation of the PLA. 14 The Court
previously rejected the PLA claim brought by Plaintiff, finding
13

Even if this bar to punitive damages was unconscionable,
a court could sever the provision and enforce the rest of the
arbitration agreement. See, e.g., Pyo v. Wicked Fashions, Inc.,
No. CIV09-2422, 2010 WL 1380982, at *7 (D.N.J. Mar. 31, 2010)
(severing provision in arbitration agreement precluding award of
punitive damages, but enforcing remainder of arbitration
agreement, because provision was unconscionable as it
incorrectly stated that New Jersey law forbade arbitrators from
awarding punitive damages); Coiro v. Wachovia Bank, N.A., No.
11-3587, 2012 WL 628514, at *5 (D.N.J. Feb. 27, 2012); see also
Spinetti v. Serv. Corp. Int’l, 324 F.3d 212, 219-223 (permitting
excision of offending provision precluding award of attorney’s
fees).
14

Although the Second Amended Complaint does not state the
basis of the claim clearly, Plaintiff articulated the basis at
oral argument and in her written submissions. Because the Court
dismisses this claim, amending the count would be futile for the
reasons expressed herein.
19

that the Service Contract was written in a simple, clear, and
understandable way. (Docket No. 25.) Thus, for the same reasons,
Defendants’ motion to dismiss the TCCWNA claim based upon these
allegations is GRANTED.
The Court next addresses Plaintiff’s remaining claim that
Defendants violated the TCCWNA by the insertion of an attorney’s
fees provision that requires each party to pay its own
attorney’s fees. Plaintiff alleges that such language is in
contravention of the CFA, which awards mandatory attorney’s fees
and costs to the prevailing party.
The TCCWNA provides:
No seller, lessor, creditor, lender or bailee shall in
the course of his business offer to any consumer or
prospective consumer or enter into any written
consumer contract or give or display any written
consumer warranty, notice or sign after the effective
date of this act which includes any provision that
violates any clearly established legal right of a
consumer or responsibility of a seller, lessor,
creditor, lender or bailee as established by State or
Federal law at the time the offer is made or the
consumer contract is signed or the warranty, notice or
sign is given or displayed. . . .
N.J. Stat. Ann. § 56:12-15.
By its plain terms, the TCCWNA applies to a seller who, in
the course of his business, offers, gives, or displays a written
consumer warranty that includes a provision that violates any
clearly established legal right of a consumer. Smith v. Vanguard
Dealer Services, LLC, No. L-3215-09, 2010 WL 5376316, at *3

20

(N.J. Super. Ct. App. Div. Dec. 21, 2010) (citing N.J. Stat.
Ann. § 56:12-15). Here, the Service Contract was entered into by
Smitty’s Auto, referred to as the “Selling Dealer,” and
Plaintiff. 15 (Service Contract at 1.) Smitty’s Auto, however, is
not a named defendant. The Service Contract provides that once
the application is accepted, if at all, by Defendant Wynn, it
becomes a contract. The parties have not addressed whether
Defendant Wynn meets the definition of “seller, lessor,
creditor, lender or bailee,” and there appears to be good reason
to find that Defendant does not meet such definition, see, e.g.,
Ogbin v. GE Mooney Bank, No. 10-5651, 2011 WL 2436651, at *4
(D.N.J. June 13, 2011). The Court, nonetheless, assumes without
deciding that Defendant Wynn falls within this definition. To
the extent this claim is against National Casualty, however, the
claim fails as there is no plausible allegation that it entered
into a written warranty/contract with Plaintiff. 16
Although the TCCWNA prohibits inclusion in written
contracts and warranties of provisions that violate a consumer’s
15

Defendants also contend that Plaintiff does not qualify
as a consumer within the statute because she was not an
“aggrieved consumer.” Because the Court dismisses this count on
other grounds, it does not reach this issue.
16

Although the Service Contract permits the customer to
make a claim directly against Defendant National in the event
that a claim is not settled within sixty days (Service Contract
at 1), Plaintiff does not allege that she made such a claim
against Defendant National after Defendant Wynn refused to
repair the vehicle. (See Second Amended Complaint ¶ 26.)
21

“clearly established legal right,” N.J. Stat. Ann. § 56:12-16,
the Act does not define what constitutes such a right. In
enacting the TCCWNA, the legislature listed several examples of
the types of provisions that it believed violated clearly
established rights:
Examples of such provisions are those that deceptively
claim that a seller or lessor is not responsible for
any damages caused to a consumer, even when such
damages are the result of the seller’s or lessor’s
negligence. These provisions provide that the consumer
assumes all risks and responsibilities, and even
agrees to defend, indemnify and hold harmless the
seller from all liability. Other provisions claim that
a lessor has the right to cancel the consumer contract
without cause and to repossess its rental equipment
from the consumer’s premises without liability for
trespass. Still other provisions arbitrarily assert
the consumer cannot cancel the contract for any cause
without punitive forfeiture of deposits and payment of
unfounded damages. Also, the consumer’s rights to due
process is often denied by deceptive provisions by
which he allegedly waives his right to receive legal
notices, waives process of law in the repossession of
merchandise and waives his rights to retain certain
property exempted by State or Federal law from a
creditor’s reach.
McGarvey v. Penske Auto Grp., Inc., 486 F. App’x 276, 280 (3d
Cir. 2012) (citing Statement, Bill No. A1660, 1981 N.J. Laws,
Chapter 454, Assembly No. 1660, at 2–3).
The TCCWNA prohibits “certain affirmative actions . . . ,
which violate a substantive provision of law.” Jefferson Loan
Co., Inc. v. Session, 938 A.2d 169, 182 (N.J. Super. Ct. App.
Div. 2008); see also Bosland v. Warnock Dodge, Inc., 964 A.2d
741 (N.J. 2009); United Consumer Fin. Servs. Co. v. Carbo, 982
22

A.2d 7, 22-23 (N.J. Super. Ct. App. Div. 2007). It is clear from
the legislative history of the Act that any contract that
provides that a seller or lessor is not liable for his own
negligence is unenforceable and violates the TCCWNA. Plaintiff,
however, does not contend that the arbitration provision is
violative of the TCCWNA because it similarly purports to
inoculate Defendant Wynn from all liability. Rather, she
contends that the arbitration provision prevents her from
recovering her attorney’s fees in the event that she is a
prevailing party on her CFA claim. This, she says, violates the
CFA, which in turn violates the TCCWNA. The Court rejects
Plaintiff’s arguments for several reasons.
First, the allegedly offending language provides that “each
party shall pay the fees of its own attorneys, the expenses of
its witnesses, and all other expenses connected with the
presentation of its case.” (Service Contract at 3.) On its face,
the arbitration provision states what has long been referred to
as the “American Rule.” Walker v. Giuffre, 209 N.J. 124, 127-28
(2012). “Courts in New Jersey have traditionally adhered to the
American Rule as the principle that governs attorneys’ fees.
This guiding concept provides that, absent authorization by
contract, statute or rule, each party to a litigation is
responsible for the fees charged by his or her attorney.” Id.
Indeed, New Jersey has long “disfavor[ed] the shifting of
23

attorneys’ fees.” Litton Indus., Inc. v. IMO Indus., Inc., 200
N.J. 372, 385 (2009).
In this regard, arbitration agreements traditionally
contain language whereby parties agree to pay their own fees. 17
Indeed, the New Jersey Supreme Court has held that “[w]hen the
fee-shifting is controlled by a contractual provision, the
provision should be strictly construed in light of [the] general
17

See, e.g., Coiro, 2012 WL 628514, at *5 (arbitration
provision mandated plaintiff’s payment of own costs and fees);
Herrera v. Katz Commc’ns, Inc., 532 F. Supp. 2d 644, 647
(S.D.N.Y. 2008) (“The Company will pay the actual costs of
arbitration excluding attorney’s fees. Each party will pay its
own attorney’s fees and other costs incurred by their respective
attorneys.”); see also O’Brien v. Travelers Prop. & Cas. Ins.
Co., 65 F. App’x 853, 855-56 (3d Cir. 2003) (“As the Supreme
Court has made clear, in the absence of an agreement or statute
providing for attorney’s fees, the American rule is that ‘the
prevailing litigant is ordinarily not entitled to collect a
reasonable attorneys’ fee from the loser.’” (quoting Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247
(1975); Penn. v. Flaherty, 40 F.3d 57, 60 (3d Cir. 1994))).
In some circumstances, courts in the Third Circuit have
found that a plaintiff presented sufficient evidence
demonstrating that arbitration would be prohibitively expensive
due to cost-splitting or cost-shifting provisions. See Hall v.
Treasure Bay Virgin Islands Corp., 371 F. App’x 311, 313 (3d
Cir. 2010) (finding plaintiff had demonstrated that “loser pays”
provision rendered arbitration prohibitively expensive); see
also Green Tree Fin. Corp.-Ala. V. Randolph, 531 U.S. 79, 90
(2000) (noting that prohibitively expensive arbitration may but
does not necessarily render a clause in an arbitration provision
unenforceable). But see Shapiro v. Baker & Taylor, Inc., No. 073153, 2009 WL 1617927, at *8 (D.N.J. June 9, 2009) (upholding
arbitration provision containing cost-sharing and cost-shifting
provision where plaintiff failed to demonstrate inability to
pay); Blair v. Scott Specialty Gases, 283 F.3d 595, 605-10 (3d
Cir. 2002) (presence of cost-sharing provision in arbitration
agreement insufficient to hold unenforceable absent evidence of
plaintiff’s limited financial resources).
24

policy disfavoring the award of attorneys’ fees.” Litton, 200
N.J. at 385. Thus, the provision - the “American Rule” - as
plainly written, does not violate the TCCWNA or any consumer’s
clearly established right. It is only because the language of
this arbitration provision could be read so as to preclude an
award of attorney’s fees upon the successful assertion of a CFA
claim that the long-established “American Rule” somehow becomes
an alleged violation of the TCCWNA according to Plaintiff. Such
an as-applied application cannot stand. 18 A contractual provision
cannot be the basis for a TCCWNA claim where the provision does
not violate a consumer’s clearly established rights when applied
in the context of certain causes of action (such as standard
breach of contract or negligence claims) but could be read to
violate a consumer’s clearly established rights when applied in
the context of other causes of action (such as a CFA claim). The
New Jersey Legislature could not have possibly intended this
result. 19

18

This is not to say that a CFA violation may not
constitute a TCCWNA violation as well. Certain affirmative
statements may be encompassed under both statutes. See Bosland
v. Warnock Dodge, Inc., 933 A.2d 942, 949 (N.J. Super. Ct. App.
Div. 2007) (“Those allegations are therefore sufficient to
establish a potential violation of the TCCWNA because a consumer
contract that violates a clearly established legal right under
the CFA regulations is also a violation of the TCCWNA.”). As
discussed herein, Plaintiff’s CFA allegations do not support a
TCCWNA violation.
19

As discussed below, however, Plaintiff is not without a

remedy.
25

Moreover, if the TCCWNA were to prohibit the insertion of
the “American Rule” in arbitration agreements as Plaintiff
appears to suggest, such prohibition would contravene and be
preempted by the Federal Arbitration Act, 9 U.S.C. § 1 et seq.
(“FAA”). In effect, such a holding would stand as an obstacle to
the accomplishment of the FAA’s objectives.
The FAA provides that an agreement to arbitrate is “valid,
irrevocable, and enforceable, save upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C.
§ 2. The Supreme Court has declared that the principle purpose
of the FAA is to “ensure that private arbitration agreements are
enforced according to their terms.” AT&T Mobility LLC v.
Concepcion, 131 S. Ct. 1740, 1748 (2011) (citing Volt Info.
Scis., Inc. v. Bd. of Tr. of Leland Stanford Junior Univ., 489
U.S. 468, 478 (1989)). The statute was enacted to overcome
courts’ refusals to enforce agreements to arbitrate and evinces
a liberal federal policy favoring arbitration agreements:
The ‘liberal federal policy favoring arbitration
agreements,’ Moses H. Cone Memorial Hospital v.
Mercury Construction Corp., 460 U.S. 1, 24, 103 S. Ct.
927, 941, 74 L.Ed.2d 765 (1983), manifested by this
provision and the Act as a whole, is at bottom a
policy guaranteeing the enforcement of private
contractual arrangements: the Act simply ‘creates a
body of federal substantive law establishing and
regulating the duty to honor an agreement to
arbitrate.’ Id. at 25, n.32, 103 S. Ct., at 942, n.32.
As this Court recently observed, ‘[t]he preeminent
concern of Congress in passing the Act was to enforce
private agreements into which parties had entered,’ a
26

concern which ‘requires that we rigorously enforce
agreements to arbitrate.’ Dean Witter Reynolds Inc. v.
Byrd, 470 U.S. 213, 221, 105 S. Ct. 1238, 1242, 84
L.Ed.2d 158 (1985).
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 625-26 (1985). The Supreme Court has therefore
concluded that “courts must place arbitration agreements on an
equal footing with other contracts . . . and enforce them
according to their terms.” Concepcion, 131 S. Ct. at 1745
(citing Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440,
443 (2006); Volt, 489 U.S. at 478); see also Allied-Bruce
Terminix Cos. v. Dobson, 513 U.S. 265, 271-72 (1995) (noting the
legislature “intended courts to enforce [arbitration] agreements
into which parties had entered, and to place such agreements
upon the same footing as other contracts”) (internal citations
and quotations omitted). This policy extends to disputes based
on both contractual and state statutory rights. Mitsubishi, 473
U.S. at 626-27 (noting absent general contract defenses, the FAA
“provides no basis for disfavoring agreements to arbitrate
statutory claims”).
Indeed, New Jersey public policy strongly favors
arbitration as a method of dispute resolution. See, e.g., Alfano
v. BDO Seidman, LLP, 925 A.2d 22, 31 (N.J. Super. Ct. App. Div.
2007); Epix Holdings, 982 A.2d at 1204-05; see also N.J. Stat.
Ann. 2A:24-1 (“A provision in a written contract to settle by

27

arbitration a controversy . . . shall be valid, enforceable and
irrevocable, except upon such grounds as exist at law or in
equity for the revocation of a contract.”); Gras v. Assocs.
First Capital Corp., 786 A.2d 886, 892 (N.J. Super. Ct. App.
Div. 2001) (“[P]laintiffs can vindicate their statutory rights
in the arbitration forum.”). Even the TCCWNA contains a
provision that it should be applied in connection with other
statutes. See N.J. Stat. Ann. § 56:12-18 (“The rights, remedies
and prohibitions accorded by the provisions of this act are
hereby declared to be in addition to and cumulative of any other
right, remedy or prohibition accorded by common law, Federal law
or statutes of this State, and nothing contained herein shall be
construed to deny, abrogate or impair any such common law or
statutory right, remedy or prohibition.”).
In practice, then, “the FAA preempts all state laws that
impermissibly burden arbitration agreements.” Yee v. Roofing by
Classic Restorations, No. 3:09CV00311, 2010 WL 7864919, at *3
(D. Conn. June 8, 2010) (citing Doctor’s Assoc.’s, Inc. v.
Hamilton, 150 F.3d 157, 162 (2d Cir. 1998)). State laws that
stand as an obstacle to the accomplishment of the FAA’s
objectives are impermissible. Concepcion, 131 S. Ct. at 1748.
Here, if the traditional “American Rule” language had to be
either deleted or amended to free itself from a TCCWNA
challenge, such a law would impermissibly burden arbitration
28

agreements. The purpose of the TCCWNA is to prohibit violations
of clearly established rights, not the voluntary waiver of such
rights 20 or the frustration of parties’ agreements. See Salvadori
v. Option One Mortgage Corp., 420 F. Supp. 2d 349, 355 (D.N.J.
2006). Plaintiff’s reading of the TCCWNA would, in essence,
prohibit the traditional “American Rule” language in arbitration
agreements in consumer contracts. This expansive reading is
wrong. Even attempts to incorporate the “American Rule” in
arbitration agreements, but limit its application to certain
contexts, would be burdensome. For example, although the
addition of the phrase “unless inconsistent with applicable law”
to the “American Rule” may avoid a TCCWNA challenge based on a
CFA claim (or any other mandatory fee-shifting claim), such
additional phrase would still be susceptible to a challenge
based on other claims that provide a discretionary award of
attorney’s fees. See Delta Funding Corp. v. Harris, 912 A.2d
104, 113-14 (N.J. 2006).
The New Jersey Supreme Court’s decision in Delta Funding
illustrates how contracting parties who desire to include the
“American Rule” in their arbitration clauses face a dilemma to
avoid a TCCWNA challenge like here. In Delta Funding, the
20

As set forth infra, had Plaintiff pursued a CFA claim in
arbitration, this provision would have been rendered
unconscionable to the extent it would have prevented the
arbitrator the power to award attorney’s fees to the prevailing
party. Delta, 912 A.2d at 113-14.
29

plaintiff brought a complaint alleging violations of the Truth
in Lending Act (“TILA”), the Real Estate Settlement Procedures
Act (“RESPA”), and the CFA. The defendant moved to compel
arbitration. The arbitration agreement provided that “[u]nless
inconsistent with applicable law, each party shall bear the
expense of that party’s attorneys’, experts’ and witness fees,
regardless of which party prevails in the arbitration.” Delta
Funding, 912 A.2d at 114. The Court held that the CFA and TILA
claims, which provided mandatory attorney’s fees to prevailing
parties, were clearly recoverable under the arbitration
agreement as written. However, the court held, that because
under RESPA whether a prevailing party will be awarded
attorney’s fees and costs is discretionary, the arbitration
agreement, as written, was unconscionable. As the court stated,
the language as written “suggests that the arbitrator may not
have the power to award attorneys’ fees when the statutory
remedy is merely discretionary.” Id.
It is clear that the only way to write such an arbitration
agreement free from a TCCWNA challenge under Plaintiff’s theory
is to set forth all the various scenarios that an arbitrator
might face in awarding fees under various claims. 21 Such an

21

There would be no practical way for a party to draft an
arbitration provision that sets forth the applicability of the
“American Rule” but exempts cases involving claims brought
pursuant to a fee-shifting statute. New Jersey has more than 100
30

onerous burden would stand as an impermissible obstacle to the
accomplishment of the FAA.
Finally, it is worth noting that Plaintiff is not without a
remedy. Had the parties gone to arbitration, and the Plaintiff
prevailed on a CFA claim, the arbitrator could have declared
unconscionable the attorney’s fees provision and awarded such
fees. 22 See Delta Funding, 912 A.2d at 114. That matter, however,
is not before the Court.
For all the foregoing reasons, Defendants’ motion to
dismiss Count II, the TCCWNA claim, is GRANTED.
CONCLUSION
For the reasons stated herein, the Defendant’s motion to
dismiss Count 1 (the CFA Count) is GRANTED, in part, and DENIED,
in part. Defendants’ motion to dismiss Count 2 (the TCCWNA
Count) is GRANTED. The Court’s prior Opinion and Order (Docket
Nos. 25 and 26), finding that Plaintiff stated a TCCWNA claim,
is vacated.

such statutes, several of which are applicable to consumer
contracts. See New Jersey Fee Shifting Statutes, available at
https://www.judiciary.state.nj.us/civil/
NJFeeShiftingStatute.pdf.
22

Many of the arguments made by Plaintiff go to the
unconscionability of the arbitration provision. See, e.g., Pl.’s
Supp. Opp. at 10 (“The lack of any rules for selecting the three
arbitrators again permits the Defendants to delay or deny access
to the arbitration forum by not agreeing to arbitrators named by
the consumer.”).
31

s/Renée Marie Bumb__________
RENÉE MARIE BUMB
United States District Judge
Dated: October 15, 2014

32