Important Victory for Access to the Courts in New Jersey
Yesterday, there was a major victory for supporters of the right to a day in court. A decision by the New Jersey Supreme Court prohibited the use of binding arbitration agreements to strip the right of consumers to file class action lawsuits in New Jersey.
Class action lawsuits are the primary, if not the only, means by which low-income consumers can bring suit for corporate misconduct for claims the value of which does not reach into the thousands. The class action mechanism is essential because it allows a few attorneys to work on behalf of thousands of plaintiffs on a contingency fee basis. Without this mechanism, it is often prohibitively expensive to file suit against a large corporation for relatively minor, but very real sums of money such as two hundred dollars.
Read more details below:
Trial Lawyers for Public Justice and a team of consumer rights advocates won an enormous victory in a consumer rights battle of national significance: the New Jersey Supreme Court held that corporations cannot use class action bans in their consumer contracts to avoid liability for cheating consumers. In Muhammad v. County Bank of Rehoboth Beach, Delaware, the Court rejected an attempt by a payday lender charging 608% interest to use a class action ban to avoid accountability and struck down the ban as "unconscionable and unenforceable."
Today's decision in Muhammad preserves the right of cheated customers to use class actions to hold corporations accountable. The ruling is crucial. As Legal Services of New Jersey told the state's high court in an amicus brief, "From the perspective of low-income New Jersey consumers, this is one of the most important cases ever to reach this Court."
In a 5-1 decision, the court protected consumers by preserving class actions. The Court's opinion, written by Justice Jaynee LaVecchia, affirmed the value of class actions to consumers and the public interest: "The public interest at stake in [the plaintiff's] ability and the ability of her fellow consumers effectively to pursue their statutory rights under this State's consumer protection laws overrides the defendants' right to seek enforcement of the class arbitration bar in their agreement."
The case was brought by Jaliyah Muhammad, a New Jersey woman who took out a $200 loan from a payday lender called "Easy Cash". Because Muhammad had to "roll over" the loan twice, she had to pay a total of $180 in interest on a $200 two-month loan -- a 608% annual percentage rate (APR) -- despite a New Jersey law that makes it a crime to charge interest above 30% APR. Muhammad sued on behalf of New Jersey borrowers, alleging that Easy Cash and two other companies were the true lenders and were violating New Jersey's usury statute, Consumer Fraud Act, and civil racketeering statute.
"This is an enormous victory for low-income consumers who were charged interest rates of 600 percent and higher," said plaintiff's counsel Michael J. Quirk, now of Williams, Cuker & Berezofsky in Philadelphia (and formerly of TLPJ), who argued the appeal for Ms. Muhammad before the New Jersey Supreme Court on February 14, 2006, while he was serving as TLPJ's Power-Cotchett Attorney. "By allowing these borrowers to bring their claims for class-wide relief, the Court ensured that high-cost payday lenders like these can be held accountable under New Jersey's consumer protection laws."
TLPJ Staff Attorney F. Paul Bland, Jr., also assisted in the case. Lead counsel in the case are Mark Cuker of Williams, Cuker & Berezofsky and Donna Siegel Moffa of Trujillo, Rodriguez & Richards in Haddonfield, New Jersey.
To read TLPJ's press release about this victory, click here.
To read the New Jersey Supreme Court's decision, and TLPJ's key briefs in Muhammad v. County Bank of Rehoboth Beach, Delaware, click here.
To read the amici brief filed by the state's Attorney General and Division of Consumer Affairs in support of our position, click here. To read Legal Services of New jersey's amicus brief, click here. To read the amici brief filed by National Association of Consumer Advocates, AARP, and Consumers League of New Jersey, click here.
To see a complete listing of my previous posts on civil justice issues, click here.
If you or your organization is interested in learning more about or working on these types of civil justice issues, please feel free to contact me at firstname.lastname@example.org.
Senior Fellow in Civil Justice
Drum Major Institute for Public Policy