NJ Supreme Court Clarifies Pleading Standard for Class-Action Suits

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In Baskin v. P.C. Richard & Son, LLC (A-77-19/(084257) (Decided May 5, 2021), the Supreme Court of New Jersey clarified the requirements for maintaining a class-action lawsuit. Applying these standards, it held that the plaintiffs sufficiently pled a class action against defendants for noncompliance with the Fair and Accurate Credit Transactions Act of 2003 (FACTA).

Facts of Baskin v. P.C. Richard & Son, LLC

Plaintiffs filed a putative class action on behalf of themselves and “[a]ll consumers to whom [d]efendants, after November 17, 2013, provided an electronically printed receipt” listing the expiration date of the consumer’s credit or debit card in violation of the Fair and Accurate Credit Transactions Act of 2003 (FACTA). Plaintiffs’ only alleged injury was exposure to an increased risk of identity theft and credit/debit card fraud. The complaint alleged that “there are, at a minimum, thousands (i.e., two thousand or more) of members that comprise the Class.” The complaint also noted that common questions — including whether defendants’ receipts violated FACTA, whether defendants’ conduct was willful, and whether the class is entitled to damages — predominated over any individual questions. It further alleged that a class action is superior to other means of adjudicating these claims because the prospective damages are too small to incentivize individual litigation and because numerous small claims give rise to inconsistent results, redundancy, and delay. The complaint sought an order certifying the class, as well as statutory and punitive damages and costs and attorney’s fees.

The trial court granted defendants’ motion to dismiss plaintiffs’ complaint based on its determination that plaintiffs could not satisfy New Jersey Court Rule 4:32-1’s numerosity, predominance, or superiority requirements for class certification. The Appellate Division affirmed the dismissal as it pertained to the class action claims.

Rules 4:32-1 and -2 govern class actions in New Jersey. Rule 4:32-1(a) requires a putative class to satisfy four general prerequisites: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. Plaintiffs pursuing class certification must also satisfy one of the three requirements of Rule 4:32-1(b). Most notably, the court must “find[] that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.”

NJ Supreme Court’s Decision in Baskin v. P.C. Richard & Son, LLC

The New Jersey Supreme Court reversed. “Giving plaintiffs the benefit of all favorable inferences here, we find they sufficiently pled the class certification requirements to survive a motion to dismiss,” Justice Faustino Fernandez-Vina wrote. “Specifically, we conclude that: (1) an exact or specific number of class members need not be pled to satisfy numerosity; (2) questions as to whether defendants were willfully noncompliant with FACTA and programmed their equipment to print credit or debit card expiration dates predominated because plaintiffs are seeking only statutory and punitive damages; and (3) the class action vehicle seems to be the superior means of adjudicating plaintiffs’ claims because it is unlikely a plaintiff will have the financial wherewithal to bring these claims individually in small claims court.”

First, the New Jersey Supreme Court found plaintiffs’ allegation that there are a minimum of two thousand members of the class sufficient to survive a motion to dismiss with respect to Rule 4:32-1(a)’s numerosity requirement. “Giving the plaintiffs’ that benefit here requires us to accept as true plaintiffs’ allegation that there are a minimum of two thousand members of the class. That estimate is also supported by the class period pled, which spanned two years and nine months. In that time period, it is reasonable that the class could contain at minimum two thousand members, given that anyone who received a noncompliant receipt from one of defendants’ stores would be an eligible member,” Justice Fernandez-Vina wrote. “Additionally, absent discovery of defendants’ sales records, plaintiffs have no way to know how many credit and debit card transactions defendants conducted during the relevant period.”

The New Jersey Supreme Court next concluded that the plaintiffs pled sufficient facts to withstand a motion to dismiss on the issue of predominance because the class is seeking statutory damages. “[T]he common nucleus of operative facts is, as plaintiffs pled, whether defendants programmed their equipment to print the expiration dates of customers’ credit/debit cards on receipts; the answer to that question will apply to all class members,” Justice Fernandez-Vina wrote. “Put differently, if plaintiffs are successful in establishing defendants’ willful noncompliance with FACTA, then statutory damages are available to all class members uniformly.”

Finally, the New Jersey Supreme Court found that plaintiffs sufficiently pled superiority to survive a motion to dismiss. “The imposition of the willfulness requirement makes it more difficult for an individual plaintiff to bring a FACTA claim for statutory damages because it is unlikely a plaintiff appearing pro se in small claims court will know how to demonstrate willfulness,” Justice Fernandez-Vina wrote. He also noted that because individual damages are likely to be small, individual class members are unlikely to have the financial wherewithal or incentive to bring a claim.

While it reversed the Appellate Division decision, the New Jersey Supreme Court did not certify the class. Rather, it remanded the matter for class action discovery to be conducted pursuant to Rule 4:32-2(a) so that the trial court may determine whether to certify the class.

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