LESROY E. BROWNE, ETC. VS. CAPITAL ONE BANK (USA), N.A. (L-5583-15, MIDDLESEX COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2102-19T1
LESROY E. BROWNE,
on behalf of himself and
those similarly situated,
Plaintiff-Appellant,
v.
CAPITAL ONE BANK (USA), N.A.
and CAVALRY SPV I, LLC,
Defendants-Respondents.
Argued telephonically June 2, 2020 –
Decided July 20, 2020
Before Judges Yannotti, Hoffman, and Currier.
On appeal from an interlocutory order of the Superior
Court of New Jersey, Law Division, Middlesex County,
Docket No. L-5583-15.
Bharati Olga Sharma argued the cause for appellant
(The Wolf Law Firm LLC, and Kim Law Firm, LLC,
attorneys; Bharati Olga Sharma and Andrew R. Wolf,
on the briefs).
Brian D. Schmalzbach (McGuireWoods LLP) of the
Virginia bar, admitted pro hac vice, argued the cause
for respondents (McGuireWoods LLP, attorneys; Philip
Andrew Goldstein, on the brief).
PER CURIAM
On leave granted, we consider plaintiffs'1 appeal from a December 10,
2019 order which denied reconsideration of a prior order denying class
certification. In this matter, plaintiffs sought statutory damages under the New
Jersey Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA),
N.J.S.A. 56:12-14 to -18. Because it is unclear whether the trial court
considered the issue of harm under the TCCWNA and other statutory
requirements for certification under Rule 4:32-1(b)(3), we reverse and remand
for reconsideration of the motion for class certification.
In 2006, Browne opened a credit card account for his personal use with
defendant Capital One Bank (U.S.), N.A. (Capital One). In 2010, Capital One
mailed Browne an updated Customer Agreement that contained the terms and
conditions applicable to his use of the credit card. The Customer Agreement
contained the following terms pertinent to this appeal:
The Law that Applies to Your Agreement.
1
We refer to Lesroy Browne and the putative class members collectively as
"plaintiffs."
A-2102-19T1
2
We make decisions to grant credit and issue you a
[c]ard from our offices in Virginia. This Agreement
will be interpreted using Virginia law. Federal law will
be used when it applies.
You waive any applicable statute of limitations as the
law allows. Otherwise, the applicable statute of
limitations period for all provisions and purposes under
this Agreement (including the right to collect debt) will
be the longer period provided by Virginia or the
jurisdiction where you live. If any part of this
Agreement is found to be unenforceable, the remaining
parts will remain in effect.
....
Assignment.
This Agreement will be binding on, and benefit, any of
your and our successors and assigns.
....
We may transfer your Account and this Agreement to
another company or person without your permission
and without prior notice to you. They will take our
place under this Agreement. You must pay them and
perform all of your obligations to them and not us. If
you pay us after you are informed or learn that we have
transferred your Account or this Agreement, we can
handle your payment in any way we think is reasonable.
This includes returning the payment to you or
forward[ing] the payment to the other company or
person.
Browne defaulted on his payments in October 2010. Capital One "charged
off" Browne's account in 2012. Thereafter, Capital One assigned its rights, title
A-2102-19T1
3
and interest in Browne's account, along with other charged-off Capital One
credit card accounts, to defendant Calvary SPV I, LLC (Calvary) in July 2014.2
On May 22, 2015, Cavalry, as assignee of Capital One, filed a collection
action against Browne for the unpaid balance of $4022.70 on his credit card and
attorney's fees. The complaint included a copy of the Customer Agreement. In
Browne's answer, he raised fourteen affirmative defenses, including the
assertion that Calvary's claims were "barred by the applicable statute of
limitations."
In September 2015, Browne filed a class action complaint and jury
demand against Capital One and Cavalry on behalf of himself and a class of
similarly situated consumers. 3 The proposed class under Rule 4:32-1(b)(3)
consisted of all consumers who resided in or were otherwise citizens of New
Jersey on the date the complaint was filed, who were issued a Customer
Agreement containing a "The Law that Applies to Your Agreement" term at any
time within six years prior to the date the complaint was filed, and whose
2
In a certification supporting defendants' opposition to plaintiffs' motion for
certification, Calvary asserted it owned 17,370 Capital One accounts as of May
25, 2017. Of those accounts, 511 were in litigation, and 2273 accounts were
reduced to judgment.
3
The two actions were consolidated in Middlesex County in February 2016.
A-2102-19T1
4
consumer account was assigned to Cavalry. The proposed class excluded class
members "who filed for Chapter 7 Bankruptcy relief and received a discharge in
Chapter 7 Bankruptcy up to and including the date the class is certified."
Plaintiffs alleged the Customer Agreement term at issue – "The Law that
Applies to Your Agreement" – violated the TCCWNA. The complaint asserted
defendants were liable to the putative class under the TCCWNA as "the seller,
lessor, creditor, lender or bailee that issued the Capital One Customer
Agreement and/or as the assignee of the Capital One Customer Agreement."
Plaintiffs further alleged the Customer Agreement: (1) "fail[ed] to inform
the consumer whether the purported waiver of the statute of limitations is
permitted by law in New Jersey"; (2) "does not set forth the applicable statute
of limitations in Virginia, which inhibits the cardholder from comparing the
Virginia statute of limitations to the statute of limitations in the cardholder's
jurisdiction"; and (3) "does not set forth the applicable statute of limitations in
New Jersey, which inhibits a cardholder from New Jersey from comparing the
Virginia statute of limitations to the statute of limitations in New Jersey."
Virginia's statute of limitations for collection actions is three years for
unwritten contracts and five years for written contracts. Va. Code Ann. § 8.01-
246. New Jersey's statute of limitations for contract actions is six years,
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regardless of whether a contract is written or unwritten. N.J.S.A. 2A:14-1.
Therefore, Browne asserted the applicable statute of limitations was material to
his defense of the collection action because Cavalry's complaint was filed more
than three years after Browne became delinquent in his payments.
Browne and each member of the putative class sought the $100 minimum
statutory civil penalty permitted under the TCCWNA and reasonable attorneys'
fees and costs.
Plaintiffs initially moved for class certification in November 2016 but
withdrew the application after the parties agreed to engage in settlement
discussions. When mediation was unsuccessful, plaintiffs refiled their motion
in April 2017. Thereafter, Browne was deposed.
During his deposition, Browne testified that he recalled receiving the
Customer Agreement in the mail. Although he did not think he read the whole
agreement, he recalled reading the section in which he agreed to waive the
applicable statute of limitations. He said the language violated the TCCWNA
because he was not provided "sufficient information to be able to make a proper
decision as to . . . the statutes of limitation here in New Jersey and Virginia."
He clarified that he could not decide whether to sign the Customer Agreement
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because he did not know how long the statute of limitations was in New Jersey
or Virginia.
Browne stated he signed the Customer Agreement but did not have a
specific recollection of doing so. He admitted his use of the credit card meant
he accepted the terms of the Customer Agreement. Browne was unsure if he
had incurred any monetary damages arising from defendants' TCCWNA
violation.
Although the court heard oral argument on the second class certification
motion, the application was later withdrawn without prejudice. Thereafter, the
court issued several case management orders, further discovery took place, and
settlement discussions continued.
When the settlement negotiations failed again, plaintiffs filed a third
motion for class certification in November 2017. 4 Defendants opposed the
motion, relying on the Supreme Court's decision in Dugan v. TGI Friday's, Inc.,
231 N.J. 24 (2017). In the alternative, defendants requested the court stay any
decision pending the Supreme Court's ruling in Spade v. Select Comfort Corp.,
232 N.J. 504 (2018).
4
In all three applications, plaintiffs moved for class certification under Rule
4:32-1(b)(3).
A-2102-19T1
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After the Court issued its decision in Spade,5 the trial court permitted the
parties to submit supplemental briefing and heard oral argument on the
application. Defendants argued that Browne and the members of the putative
class could not establish they were aggrieved consumers under the TCCWNA
as articulated in Dugan and Spade.
On June 29, 2018, the court denied the motion for class certification. In
its oral decision, the court stated:
I just want to capture one portion of [defendants']
opposition . . . with regard to the requirements for class
certification.
Specifically with the Supreme Court's decisions in
Dugan and Spade/Wenger this is where the [c]ourt
wants to focus. . . .
The defendant asserts the [c]ourt should deny class
certification because without undertaking highly
individualized inquiries[,] plaintiff cannot prove that
each class member is an aggrieved consumer as
required by N.J.S.A. 56:12-17.
Under TCCWNA, only [an aggrieved] consumer . . .
can bring a claim. . . .
Certainly the Supreme Court in Spade/Wenger defined
what an aggrieved consumer constitutes. The
defendant asserts that in Dugan the plaintiff sought to
certify a class challenging the restaurant['s] practice of
omitting beverages prices from the menus as violating
5
Spade was consolidated with the appeal in Wenger v. Bob's Discount
Furniture, LLC, No. 16-1572 (3d Cir. 2016). Spade, 232 N.J. at 508.
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[a] clearly established legal right of the putative class
and . . . the Supreme Court denied [class] certification
because . . . there was no way to prove that each
member had received a menu . . . .
Here the defendant asserts that the plaintiffs could not
in that case prove receipt of the menus through
circumstantial evidence such as server training
materials or customer receipts and that Dugan also
recognized an interaction requirement.
[Defendants contend plaintiffs must show p]roof of the
plaintiff[s'] interact[ion] with the alleged offending
writing and the particular provisions of that writing.
Further, the defendant asserts that with regard to the
Spade/Wenger decision like in Dugan[,] addressing the
receipt interaction here would require the [c]ourt to
analyze the particular circumstances surrounding each
putative class member[']s individual TCCWNA claim.
At a minimum the [c]ourt would need to determine who
received the customer agreement, actually read it, and
specifically th[e] part . . . that read . . . the law that
applies to your agreement.
The defendant also asserts that under [Spade/Wenger]
the class could only constitute aggrieved consumers[,]
that is consumers who have actual harm[,] [to] obtain a
remedy under TCCWNA.
Here although the defendants assert that it can be
beyond a monetary claim[;] the defendant points out
. . . at most the claims that the language at issue
hampered . . . plaintiff's ability to determine the
applicable statute of limitations, but the plaintiff has
shown nothing regarding the effect [of] [h]is supposed
inability to do so.
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Well, the [c]ourt feels that this . . . would be an
aggrieved consumer in terms of the ability to determine
the applicable statute of limitations.
I mean, that is a right that cannot be minimized. Where
the [c]ourt had difficulty with this present application
seeking class certification is that other portion under
Dugan and that is the proofs that would be required as
to individual plaintiffs and whether or not then under
that analysis under Dugan and under Spade/Wenger
whether or not a class certification can be made at this
time.
It's for that reason[] . . . that the [c]ourt . . . is denying
this present application for class certification and
invites the plaintiffs to seek to renew their motion when
they can address the issues raised by the [c]ourt as a
result of the Spade/Wenger decision and also Dugan.
So at this time, the motion for class certification is
denied. I will ask the special master to schedule a
conference if that will assist [the plaintiffs] in getting
. . . to seek class certification again and whether they
need any class certification discovery in that regard.
I know you've had discovery, but I don't know if there
is anything else that you would need to address the
concerns the [c]ourt has in granting class certification
at this time.
On January 8, 2019, plaintiffs moved for reconsideration of the court's
June 29, 2018 decision. On December 10, 2019, the court denied the motion for
reconsideration without prejudice for failing to provide a copy of the transcript
of the June decision. On the same day, plaintiffs' counsel wrote a letter to the
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court advising that the transcript of the June decision was previously provided
in a February 22, 2019 supplemental certification.
On December 11, 2019, the court vacated its December 10, 2019 order
and entered a new order denying the motion for class certification. The judge
wrote on the order:
Plaintiff waited approximately six months to file this
motion for reconsideration. The court invited this
motion in the event plaintiff sought discovery as
contemplated by the court's June 29, 2018 ruling. No
discovery has been conducted. The court relies, and
adopts herein, by reference, its decision of June 29,
2018. This motion is untimely.
On December 31, 2019, plaintiff filed a motion for leave to file an
interlocutory appeal. We granted the motion. During the pendency of the
appeal, plaintiff filed a motion before the trial court for leave to file an amended
class action complaint. The trial court granted the motion. Thereafter, plaintiff
filed an amended class action complaint, adding a claim for injunctive relief and
seeking class certification under Rules 4:32-1(b)(2) and (b)(3).6
On appeal, plaintiffs argue the trial court erred in denying the motion for
reconsideration because the court misconstrued Dugan in its application of the
6
During oral argument on the appeal, plaintiffs' counsel advised they intended
to pursue class certification under Rules 4:32-1(b)(2) and (b)(3).
A-2102-19T1
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"interaction" requirement in the June 2018 ruling. In addition, plaintiffs contend
the court further erred in its determination that the reconsideration motion was
untimely.
We can quickly dispose of the second argument. The order denying
plaintiffs' motion for class certification was an interlocutory order. Despite the
denial of class certification, Browne still retained his individual claims.
Under Rule 1:7-4(b), a motion for reconsideration of an interlocutory
order is determined pursuant to Rule 4:42-2. An interlocutory order is "subject
to revision at any time before the entry of final judgment in the sound discretion
of the court in the interest of justice." R. 4:42-2; cf. R. 4:49-2 (providing that a
motion for reconsideration of a final order must be filed within twenty days of
service of the order); Sullivan v. Coverings & Installation, Inc., 403 N.J. Super.
86, 96 (App. Div. 2008) (noting that "the time prescriptions set forth in Rule
4:49-2 apply to final judgments and orders, not interlocutory orders, which are
reviewable at any time" until final judgment).
Moreover, the June 29, 2018 order permitted plaintiffs to conduct
additional discovery and renew their motion for class certification. The court
did not set deadlines for the renewal of the motion. The motion was not
untimely.
A-2102-19T1
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We turn then to plaintiffs' contention that the trial judge erred in denying
class certification because she misconstrued the "interaction" requirement under
Dugan and failed to consider facts showing class members interacted with the
Customer Agreement. We review the court's order for an abuse of discretion.
Dugan, 231 N.J. at 50.
Specifically, plaintiffs contend that, under Dugan and Spade, to establish
a violation of the TCCWNA, Browne and the putative class members must
demonstrate only that they received the Customer Agreement, not that they
"actually read" the Customer Agreement and "The Law that Applies to Your
Agreement" provision. Plaintiffs assert the evidence that the Customer
Agreement was mailed to class members is sufficient to prove receipt of and
interaction with the Customer Agreement. Furthermore, once Browne and the
class members opened credit card accounts with Capital One, and used their
credit cards, they established a contractual relationship and accepted the terms
of the Customer Agreement.
In addition, plaintiffs allege that individualized inquiries are not necessary
to prove the actual harm requirement under Spade. Browne claims he was
harmed because the language of the Customer Agreement did not inform him
whether New Jersey law permitted the waiver of a statute of limitations defense.
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Because it was unclear whether and how to defend himself in the collection
lawsuit, Browne contends he was forced to hire counsel.
Defendants reassert that Browne and each class member must show they
"received the document, read it, and acted or failed to act to his or her detriment
because of the alleged failure to disclose." (emphasis omitted). They contend
a putative class member could establish harm only by proving that he or she
suffered an adverse effect as a result of reading (i.e., interacting with) the "Law
that Applies to Your Agreement" provision. Defendants maintained they would
need to conduct individualized inquiries of each putative class member as to
whether he or she received and read – interacted – with the Customer
Agreement.
In addition, defendants contend there are other barriers to class
certification requiring the denial of plaintiffs' motion. They assert there are
individualized issues regarding their debt-related compulsory counterclaims and
setoff defenses that would predominate over common questions.
Furthermore, defendants argue the trial court would need to assess the
affirmative defenses of all 13,192 putative class members with outstanding
balances. And, if a class were certified, many class members would suffer "a
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net loss," making class certification an inferior method of adjudicating their
claims.7
When considering a motion for class certification, a court is required to
examine "the claims, defenses, relevant facts, and applicable substantive law."
Dugan, 231 N.J. at 49-50 (quoting Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88,
107 (2007)). The court "must 'accept as true all of the allegations in the
complaint,' and consider the remaining pleadings, discovery . . . , and any other
pertinent evidence in a light favorable to [the] plaintiff . . . ." Lee v. Carter-
Reed Co., LLC, 203 N.J. 496, 505 (2010) (citations omitted).
Although the court "must undertake a 'rigorous analysis'" to determine if
the requirements of Rule 4:32-1 have been satisfied, Dugan, 231 N.J. at 49
(quoting Iliadis, 191 N.J. at 106-07), the court must also "liberally indulge the
allegations of the complaint [and] 'liberally construe[]' Rule 4:32-1 in favor of
class certification" to achieve the goal that "a class action 'should lie unless it is
clearly infeasible.'" Daniels v. Hollister Co., 440 N.J. Super. 359, 363 (App.
Div. 2015) (second alteration in original) (quoting Iliadis, 191 N.J. at 103).
7
Because, under the Customer Agreement, class members would be liable for
defendants' collection expenses, attorney's fees and court costs, defendants
assert many members would incur a "net loss."
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To certify a class action, the putative class plaintiff must first establish the
requirements stated under Rule 4:32-1(a):
(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.
These requirements are commonly referred to as "numerosity,
commonality, typicality and adequacy of representation." Dugan, 231 N.J. at 47
(quoting Lee, 203 N.J. at 519). Once the named plaintiff has established the
requirements in Rule 4:32-1(a)(1), he or she must also satisfy either Rule 4:32-
1(b)(1), (2) or (3).
On appeal, defendants have not argued plaintiffs did not meet the Rule
4:32-1 requirements of numerosity, commonality, typicality and adequacy of
representation. The court did not address those conditions in its June 2018
decision. We consider then only whether plaintiff satisfied the prerequisites for
class certification under Rule 4:32-1(b)(3), which requires the court to consider
whether:
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
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to other available methods for the fair and efficient
adjudication of the controversy.
To determine predominance under Rule 4:32-1(b)(3), a court determines
whether the proposed class is "sufficiently cohesive to warrant adjudication by
representation." Dugan, 231 N.J. at 48 (quoting Iliadis, 191 N.J. at 108).
Here, plaintiffs allege "The Law that Applies to Your Agreement"
provision in the Customer Agreement violated the TCCWNA. We are guided
by several recent Supreme Court decisions.
The TCCWNA was enacted "to prevent deceptive practices in consumer
contracts." Dugan, 231 N.J. at 67-68 (quoting Kent Motor Cars, Inc. v. Reynolds
& Reynolds Co., 207 N.J. 428, 457 (2011)). The statute provides that it is
unlawful for a "seller, lessor, creditor, lender or bailee" to "offer to any
consumer[8] . . . or enter into any written consumer contract . . . 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 . . . ." N.J.S.A. 56:12-15. Any person who violates
the TCCWNA "shall be liable to the aggrieved consumer for a civil penalty of
8
TCCWNA defines "consumer" as "any individual who buys, leases, borrows,
or bails any money, property or service which is primarily for personal, family
or household purposes." N.J.S.A. 56:12-15.
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not less than $100.00 or for actual damages, or both . . . together with reasonable
attorney's fees and court costs." N.J.S.A. 56:12-17.
To prevail on a TCCWNA claim, a plaintiff must prove four elements:
first, that the defendant was a "seller, lessor, creditor,
lender or bailee or assignee of any of the aforesaid";
second, that the defendant offered or entered into a
"written consumer contract or [gave] or display[ed] any
written consumer warranty, notice or sign"; third, that
at the time that the written consumer contract is signed
or the written consumer warranty, notice or sign is
displayed, that writing contains a 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;
and finally, that the plaintiff is an "aggrieved
consumer."
[Spade, 232 N.J. at 516 (alterations in original)
(quoting N.J.S.A. 56:12-15, -17).]
The Spade Court sharpened the term "aggrieved consumer," defining it as
"a consumer who has suffered some form of harm as a result of the defendant's
conduct." Id. at 522 (citations omitted). "In the absence of evidence that the
consumer suffered adverse consequences as a result of the defendant's regulatory
violation, a consumer is not an 'aggrieved consumer' for purposes of the
TCCWNA." Id. at 524. The Court cautioned that "harm" or "adverse
consequences" does not necessarily mean that the plaintiff must have incurred
"monetary damages." Id. at 523. The Court stated:
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Proof of harm resulting from contract language
prohibited by N.J.S.A. 56:12-15 may warrant a civil
penalty under N.J.S.A. 56:12-17, even if the harm is not
compensable by damages.
In the absence of evidence that the consumer suffered
adverse consequences as a result of the defendant's
regulatory violation, a consumer is not an "aggrieved
consumer" for purposes of the TCCWNA.
[Id. at 524.]
In reviewing the court's decision against that backdrop, we cannot discern
whether the court found Browne and the putative class demonstrated harm
sufficient to deem them "aggrieved consumers" under the TCCWNA.
Therefore, we are constrained to reverse and remand for reconsideration of
plaintiffs' motion.
In her oral decision on June 29, 2018, the judge recited defendants'
arguments. Specifically, she noted defendants contended Browne, as the
putative class representative, could not prove each class member was an
aggrieved consumer under N.J.S.A. 56:12-17 "without undertaking highly
individualized inquiries." She referred to defendants' assertion that plaintiffs
would have to prove that each class member interacted with the "alleged
offending writing and the particular provisions of that writing." She then stated:
"At a minimum the [c]ourt would need to determine who received the customer
A-2102-19T1
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agreement, actually read it, and specifically th[e] part . . . that read . . . the law
that applies to your agreement." It is unclear whether the court is still referring
to defendants' arguments or making a finding on the "interaction" requirement
or referring to the predominance requirement under Rule 4:32-1(b)(3).
The judge continued to refer to defendants' arguments in her next
sentence, noting their assertion that, under the TCCWNA, the putative class can
only constitute aggrieved consumers who have incurred actual harm. The judge
stated, "Well, the [c]ourt feels that this . . . would be an aggrieved consumer in
terms of the ability to determine the applicable statute of limitations."
That statement seems to be a finding that defendants' conduct violated the
TCCWNA, but as stated, that is not sufficient to find plaintiffs are aggrieved
consumers. Furthermore, the court did not address the second requirement under
Spade – whether plaintiffs suffered any adverse consequences or harm from the
violation.
On remand, the court should consider plaintiffs' motion for
reconsideration of the June 2018 decision anew. The analysis must include a
determination whether class certification is appropriate under Rule 4:32-1 to
determine whether plaintiffs are aggrieved consumers under the TCCWNA. The
court should specifically address whether the court would be required to
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undertake individualized inquiries to determine whether the putative class
members "interacted" with the disputed contract term, and whether the putative
class members sustained any actual harm or adverse consequences as a result of
the claimed TCCWNA violation, as required by Spade.
The court must also determine the issue of predominance under Rule 4:32-
1(b)(3) – whether common questions of law and fact predominate over
individual questions. Because the court permitted plaintiffs to amend its
complaint to add an injunctive class, on remand the court must determine
whether plaintiffs have satisfied class certification under both Rules 4:32-
1(b)(2) and (b)(3).
Reversed and remanded for further proceedings in accordance with this
decision. We do not retain jurisdiction.
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