Rebecca Tushnet

Dugan v. TGI Fridays, Inc., 171 A.3d 620 (N.J. 2017)

Plaintiffs alleged that the defendants failed to fairly
disclose prices charged to customers for alcoholic and non-alcoholic beverages.
The New Jersey Supreme Court held that one set of plaintiffs failed to show
that common issues of law and fact predominated because they argued a price
inflation theory that New Jersey law didn’t support. However, other claims that
the restaurants violated New Jersey’s consumer protection law (the NJCFA) by
increasing the price charged to a customer for the same brand, type, and volume
of beverage in the course of the customer’s visit to the restaurant, without
notifying the customer of the change.  Consumers with that specific claim could
proceed with class certification.

The first set of plaintiffs alleged that TGIF had a practice
of offering certain beverages in New Jersey TGIF restaurants’ menus without
listing their prices of those beverages, violating the NJCFA as well as a
regulatory provision governing “merchandise that is not price marked at the
point of purchase.”  In the original
complaint, named plaintiff Dugan claimed that during a visit to a TGIF
restaurant she was charged $2.00 for a beer at the bar and later charged $3.59
for the same brand of beer after moving to a table.  Dugan admitted that during the visit to a TGIF
restaurant in which she paid different prices for two orders of identical
beverages at the bar and at the table, she did not read the beverage section of
the menu, though she later submitted she had looked at the TGIF menu on many
occasions and expected to pay the same price at the bar that she paid when she
sat at a table. Training materials for TGIF servers stated that servers seating
customers should hand opened menus to customers.  Plaintiffs also submitted a TGIF consultant’s
analysis of consumer behavior in the ordering of beverages in restaurants in
which customers informed of beverage prices spent an average of $1.72 less per
visit than the customers to whom the prices were not disclosed.

This group couldn’t show commonality; they didn’t claim what
they bought was defective, deficient, or worthless, but rather received what
they ordered.  However, they couldn’t
prove that every claimant in their multi-million-member class would have
purchased fewer or less expensive beverages, or none at all, had TGIF informed
him or her of the beverage prices. The research underlying the $1.72 per visit
damages claim wasn’t similar to anything else that had been accepted as a
method of proving ascertainable loss and causation in a CFA class action; it
was too similar to rejected “fraud on the market”/price inflation damages
calculations.

For the second group (the Bozzi class), there were common
questions of fact relating to the defendant’s pricing practices and “at least
one common question of law—whether increasing the price of a beverage during a
customer’s restaurant visit without informing the customer constitutes an
unlawful practice.”  Existing records
would apparently enable the parties to determine where and when each class
member was charged disparate prices for the same brand, type, and volume of
beverage on the same restaurant visit, allowing them to account for happy hours
and other restaurant-specific practices.

However, neither group could proceed under the Truth-in-Consumer
Contract, Warranty and Notice Act (TCCWNA), a statute enacted “to prevent
deceptive practices in consumer contracts” that contained unenforceable or
invalid terms that nonetheless deceived consumers into thinking the terms were
enforceable and deterred them from asserting their rights. Thus, covered
entities must not use “any provision that violates any clearly established
legal right of a consumer or responsibility of a seller ….” Plaintiffs argued
that by failing to list prices for beverages on the menus, the defendant
restaurants violated plaintiffs’ “clearly established” legal rights and
defendants failed to meet their “clearly established” legal responsibilities
requiring the prices to be plainly marked. However, there were too many
individual questions.  The TCCWNA
addressed “contract[s],” “warrant[ies],” “notice[s],” and “sign[s]” and didn’t apply
when a defendant failed to provide the consumer with a required writing. At a
minimum, a claimant would have to prove that he or she was presented with a
menu during his or her visit to the restaurant in order to establish liability,
which couldn’t be resolved by customer receipts or other documents. It wasn’t
enough to show evidence that TGIF servers were instructed to hand menus to
customers; that didn’t even prove that any individual consumer received a menu.  The majority thought that inferring that
servers complied with corporate policy would be to wrongly allow a claim
element to be proven for the class as a whole with a single piece of evidence; the
dissent would allow such an inference, but even the plaintiffs conceded that
not all customers received the menu at issue. 
The majority also doubted whether defendants violated a “clearly
established legal right” or a “clearly established … legal responsibility.” No
published opinion held that restaurants and other food service businesses couldn’t
offer food or beverages to customers without listing the prices for those items
on their menu. “Moreover, as plaintiffs acknowledge, many food-service
businesses in New Jersey—ranging in size from corporate chain restaurants to
family-owned delicatessens and diners—routinely offer customers food and
beverage specials and other items without designating in writing the prices for
those items.” Even if a menu lacking beverage prices were a relevant writing
within the meaning of TCCWNA, that was a dubious result because a penalty of
$100 per violation would lead to a total of more than a billion dollars.

Justice Albin dissented, arguing that the majority wrongly raised
barriers to class actions.  TGIF could
charge what it wanted, but it couldn’t fail to list beverage prices when it
knew through its own study that consumers would pay, on average, $1.72 more per
meal without such prices.  “TGIF does not
pretend to be in compliance with the law; rather, its defense is that a class
action is not a proper vehicle to be used by the patrons victimized by TGIF’s
practices. However, a single consumer, even if defrauded, cannot engage in
costly litigation over a sum involving, at most, several dollars. Only through
a class action that aggregates thousands of small claims of similarly defrauded
patrons can a viable lawsuit proceed.” 

Justice Albin pointed out that TGIF itself labeled the price
consumers were willing to pay the “fair” price, as opposed to the “think-twice”
price; “the beauty of not placing beverage prices on menus in violation of the
CFA is that uninformed patrons do not know when their purchases have exceeded
the ‘fair’ price and reached the ‘think-twice’ price. TGIF learned through the
study what is commonly known—that an informed consumer will make rational
pricing decisions.”  To prevent that,
TGIF made the corporate decision not to put alcohol prices on the menu: “TGIF
determined that it did not pay to conform to the law and that it was more
profitable to capitalize on the ignorance of its patrons. From TGIF’s own
statistical analysis comes the calculation of ascertainable loss to its patrons
and the gain to itself.” 

This common issue was qualitatively more important than the
others, and individual differences could be addressed later on; the statistical
evidence here was acceptable evidence of ascertainable loss.  Plaintiffs’ theory wasn’t “fraud on the
market.”  First, the CFA didn’t require
proof of reliance, but only a causal connection between the unlawful practice
and ascertainable loss. Second, plaintiffs weren’t trying to avoid their burden
of proving a causal nexus between TGIF’s statutory violation and the
ascertainable loss suffered by TGIF’s patrons. 

“Moreover, the majority is mistaken if it is suggesting that
the CFA does not protect consumers from price gouging.  The purpose of requiring that the price of
merchandise be listed at the point of sale … is to allow consumers to make
informed decisions in making purchases.”  Justice Albin also would have allowed the
TCCWNA claims to proceed. At the pleading stage, the fair inference was that
TGIF’s servers complied with corporate policy and that patrons received menus.  Moreover, “[t]he plain and simple statutory
language clearly indicates that TGIF is required to list beverage prices on its
menus”: the law prohibits the sale of “merchandise” without a price at the
point of sale; merchandise included goods; clearly, beverages were goods, and
at the very least, were included in “anything offered … to the public for
sale.” “TGIF did not have to wait for a published opinion by this Court to
reach this common-sense conclusion.”  The
majority hinted that the law might not apply to beverages on menus, meaning
that restaurants wouldn’t be required to post any prices, since there’s no difference between a hamburger and a
milkshake. Even if the Attorney General has never sued to enforce this
provision, the CFA vests individuals with the power to act as private attorneys
general as a separate enforcement mechanism. There’d be no point in remanding
the Bozzi class-certification case for further proceedings, as the majority
did, if there was still a question about whether restaurants must place
beverage prices on their menus.  Further,
the majority didn’t explain why in the Bozzi case it vacated the trial court’s
injunction, which mandated that the relevant defendant restaurants list
beverage prices on menus. If the law was too broad, the legislature could act
to fix it.  Now, however, any relief from
TGIF’s violation of consumer fraud law would have to come from the AG.