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Robert E. Smith, On Behalf of Himself and All Others Similarly Situated v. Vanguard Dealer Services


December 21, 2010


On appeal from Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-3215-09.

Per curiam.


Submitted December 6, 2010 - Decided Before Judges Grall, C.L. Miniman and LeWinn.

By leave granted, defendants Rassas Pontiac, Inc. (Rassas) and Vanguard Dealer Services, L.L.C. (Vanguard) appeal an order refusing to dismiss plaintiff Robert E. Smith's complaint as to them for failure to state a claim upon which relief can be granted. R. 4:6-2(e). At issue are Smith's claim against Rassas under the Truth-in-Consumer-Contract, Warranty, and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18, and Smith's claims alleging that Rassas and Vanguard have been unjustly enriched.*fn1 Because a searching and liberal reading of the complaint suggests viable causes of action, we affirm. See Banco Popular N. Am. v. Gandi, 184 N.J. 161, 183 (2004); Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989).

Smith's complaint, filed on his own behalf and that of others similarly situated, includes these assertions.*fn2

Defendants Vanguard and Royal Guard are affiliated entities that share a principal place of business in New Jersey. Vanguard and Royal Guard, along with Rassas and other dealerships acting as their agents, "orchestrate the manufacture, distribution, sale and administration" of a theft- protection plan known as Royal Guard Etch.

In 2004, Smith purchased a car from the Rassas dealership and paid $109 for the Royal Guard Etch. The plan includes an alpha-numeric etching on the car's windows and a warranty for a buyer who pays the fee to register the etching. The anti-theft etching is placed on the windows of all vehicles offered for sale at the dealership at no additional cost to the buyer, but the warranty is supplied only if the buyer registers the etch and pays a fee.

The benefit of the warranty is a credit payable if the theft-prevention system fails and results in a total loss. The credit is payable only at the selling dealership and only if "used toward the purchase" of a replacement vehicle from that dealership.

Smith purchased the warranty and signed the registration form at the dealership when he bought his car. The registration form lists Rassas as the dealer and includes blanks for the signatures of the customer and Rassas's representative.

Smith alleges that the provision of the warranty limiting the remedy to a credit that can only be used at Rassas is a "tying arrangement" prohibited by the Magnuson-Moss Warranty Act (Magnuson-Moss), 15 U.S.C.A. § 2302(c). Defendants did not seek dismissal of Smith's complaint on the ground that Magnuson-Moss permits this tying arrangement, and, quite properly, they do not seek reversal on that ground here.*fn3 Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234 (1973).

On appeal defendants argue that even if the warranty violates Magnuson-Moss, Smith's complaint does not state a cause of action against Rassas under TCCWNA. Assuming, without deciding, that this warranty violates a consumer right established by federal law, we disagree.

The conduct proscribed by TCCWNA and pertinent here is set forth in N.J.S.A. 56:12-15:

No seller . . . shall in the course of his business offer . . . or enter into any written consumer contract or give or display any written consumer warranty, notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer . . . 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.

Interpretation of the statute is a question of law reviewable de novo. In re Liquidation of Integrity Ins. Co., 193 N.J. 86, 94 (2007). Although the statute permits liability on proof of one or more of several grounds, only one is required. Because we conclude that Smith's complaint states a claim based on Rassas's "display" of the warranty "in the course of [its] business," within the meaning of N.J.S.A. 56:12-15, we need not consider defendants' objections to the trial judge's reasons or the arguments that they did not offer or enter into the warranty contract or give the warranty.

In construing TCCWNA on a motion to dismiss, the court must determine if the Legislature intended to prohibit the conduct alleged. See DiProspero v. Penn, 183 N.J. 477, 492 (2005) (discussing the role of courts construing statutes); Higgins v. Pascack Valley Hosp., 158 N.J. 404, 418 (1999) (same). The inquiry begins with the language of the statute, which generally controls when the meaning is clear. Higgins, supra, 158 N.J. at 418.

The term "display" and the phrase "in the course of his business" are not defined in TCCWNA, but the Legislature has stated general rules to guide interpretation of statutory language. In pertinent part, N.J.S.A. 1:1-1 directs:

In the construction of the laws and statutes of this state . . . words and phrases shall be read and construed with their context, and shall, unless inconsistent with the manifest intent of the legislature or unless another or different meaning is expressly indicated, be given their generally accepted meaning, according to the approved usage of the language.

Our courts follow this guidance by "ascrib[ing] to the statutory words their ordinary meaning and significance and read[ing] them in context with related provisions so as to give sense to the legislation as a whole." DiProspero, supra, 183 N.J. at 492 (citation omitted).

The ordinary meaning of "display" is "[t]o put forth for viewing." Webster's II New College Dictionary 328 (1995). Thus, a seller who presents a manufacturer's warranty for a buyer's review, consideration and purchase has, within the common understanding of the word, "displayed" the warranty to the buyer.

The ordinary meaning of the phrase "in the course of" is broad. N.J.S.A. 56:12-15; see Hornyak v. Great Atl. & Pac. Tea Co., 63 N.J. 99, 101-02 (1973) (describing the phrase "in the course of employment" as a "sweeping generality"). It is commonly used to refer to actions related to an undertaking and done while engaged in that undertaking. See, e.g., ibid. (noting that the phrase "in the course of the employment," used to define compensable accidents in N.J.S.A. 34:15-7, is read to include accidents "while the employee is doing what [one] so employed may reasonably do within a time during which he is employed, and at a place where he may reasonably be during that time" (internal quotations omitted)).

On occasion, the Legislature has crafted language to expand or narrow the commonly understood meaning of the phrase "in the course of." See N.J.S.A. 2C:15-1 (expanding the time frame by defining "in the course of committing a theft" to include acts after the commission of the theft); N.J.S.A. 2A:58C-8 (narrowing the reach of a phrase defining a seller as one who sells "in the course of a business conducted for that purpose" to exclude "a provider of professional services" whose sale "is incidental to the transaction").

There is nothing in TCCWNA indicating that the Legislature intended anything other than the ordinary meaning of the phrase "in the course of his business." It sweeps in a seller who displays a product's warranty while making a sale of the product to a customer.

The fact that the seller's business is sale of a finished product does not insulate the seller who displays a warranty on a component like Royal Guard Etch, which might be viewed as incidental to the sale of the car, from liability. Under N.J.S.A. 56:12-15, liability requires only a display of a warranty to the seller's customer. If the Legislature had intended to exclude warranties on components as "incidental" to and not made "in the course of" the seller's business, we assume it would have done so, as it has elsewhere. N.J.S.A. 2A:58C-8.

By its plain terms, N.J.S.A. 56:12-15 is not limited to sellers who "give" a warranty, i.e. the warrantor, or are a party to the warranty contract. It applies to any seller who "give[s] or display[s] any written consumer warranty" in the course of his business. See N.J.S.A. 56:12-15 (emphasis added).

We have no doubt that Smith's allegations against Rassas suggest a cause of action for violation of N.J.S.A. 56:12-15. As a matter of necessity, Rassas had to "display the warranty" - put the warranty forth for Smith's viewing - in order to have Smith sign the registration form on which the warranty is printed and pay the fee to purchase its protection. Rassas is in the business of selling cars and displayed the Royal Guard warranty to Smith while conducting that business, selling Smith a car. See N.J.S.A. 56:12-15.

While not a party to the warranty, Rassas was not a stranger to the transaction. The registration form bore the name of the dealership and was presented by an employee of Rassas who collected the $109 fee. The form called for the signature of a representative of Rassas, and the benefit of the warranty to Smith had no worth unless used to buy a vehicle from Rassas. The nexus between the warranty and the dealer's business is clear, and we reject Rassas's claim that N.J.S.A. 56:12-15 requires more.

Rassas argues that if we read N.J.S.A. 56:12-15 to include what Smith alleges Rassas did, then every seller who simply passes on a manufacturer's warranty will be required to "police" the validity of every warranty given on a product the merchant sells. The argument understates Rassas's role in this transaction. TCCWNA requires an affirmative act. Jefferson Loan Co., Inc. v. Session, 397 N.J. Super. 520, 540-41 (App. Div. 2008). In this case, the affirmative act is the display of the warranty to a customer buying a car. Rassas did something more than pass along a manufacturer's warranty on a component; it lent its assistance to the transaction. While not essential to liability under TCCWNA, it is worth noting that Rassas obtained a benefit by displaying the warranty that is no more speculative than the benefit Smith obtained by buying it.

In the end, Rassas's objections to the burdens imposed on sellers are policy arguments for the Legislature. When a statute is clear, our courts apply it as written and not on the courts' view of the wisdom or benefits of the measure. See DiProspero, supra, 183 N.J. at 506. Moreover, the imposition of these burdens is consistent with the Legislature's intent to deter the use of contracts and warranties that violate consumers' rights. That legislative purpose is evidenced not only in the clear and broad language of N.J.S.A. 56:12-15 but also in the Legislature's creation of private actions to recover civil penalties without regard to the consumer's loss, N.J.S.A. 56:12-17, and as a remedy in addition to any other the consumer may have, N.J.S.A. 56:12-18.

We turn to consider whether Smith's complaint states a cause of action for unjust enrichment against Rassas and Vanguard. "To establish unjust enrichment, a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust." VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994).

Rassas and Vanguard contend they received compensation for the sale and distribution of the etch, not for sale of the warranty. As we understand it, they claim they have no ill-gotten gain.

The allegations in a complaint, not the plaintiff's ability to prove them, are determinative of a motion to dismiss for failure to state a claim. Printing Mart, supra, 116 N.J. at 746 (directing courts to consider obscure statements in the complaint and the opportunity for amendment in deciding whether a cause of action can "be gleaned"). Smith alleges Rassas, Vanguard and Royal Guard "orchestrate the manufacture, distribution, and sale and administration of the Royal Guard Vehicle Theft Etch Protection Warranty." He also alleges that he paid only for the unlawful etch warranty, not the etching. Viewed liberally, the allegations suggest cooperation resulting in receipt of benefits defendants should not, in good conscience, retain. The inference that the participants benefit from the illegal warranty flows from their alleged business relationship. Ibid.

Defendants' denial of profit related to the allegedly illegal warranty depends upon evidence establishing its truth. They may present that evidence on a motion for summary judgment or at trial, but their denial does not entitle them to an order of dismissal on this motion, which was not treated as one for summary judgment. See R. 4:6-2.


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