New Jersey Appellate Division Affirms Grant Of Permissive Intervention To Void Settlement Obtained By Legally Invalid Class Action
On June 24, 2014, the New Jersey Appellate Division rendered its decision in Local Baking Products, Inc, et al. v. Westfield Rental Mart, Inc. The Court upheld the trial court’s grant of permissive intervention to the defendant’s insurer for purposes of decertifying plaintiff’s class action and voiding an almost $15,000,000 settlement. The Court again affirmed that Telephone Consumer Protection Act class actions are not valid in the State of New Jersey.
THE TELEPHONE CONSUMER PROTECTION ACT
The Telephone Consumer Protection Act (TCPA) is a federal statute which prohibits the use of any electronic device to send an unsolicited facsimile advertisement to another. A violation of the TCPA creates a private right of action in the recipient of the facsimile and fixes damages for each violation at $500 or actual damages, whichever is greater.
In 2011, the Appellate Division decided the matter of Local Baking Products, Inc. v. Kosher Bagel Munch, Inc., 421 N.J. Super. 268 (App. Div. 2011) (the “Kosher Bagel” matter). In Kosher Bagel, the Appellate Division affirmed the trial court’s decertification of a class action comprised of individual TCPA claims and held that such a class action was not certifiable under New Jersey law. The New Jersey Supreme Court subsequently denied certification of this issue.
LOCAL BAKING PRODUCTS, INC. V. WESTFIELD RENTAL MART, INC.
In 2009, Local Baking, the same class action plaintiff in Kosher Bagel, filed a separate TCPA class action against Westfield Rental Mart in the Superior Court of New Jersey (the “Westfield” matter). Westfield’s insurer, Farmers Insurance Company of Flemington, denied coverage for the claim. Following this denial, Local Baking and Rental Mart entered into a $14,999,99 consent judgment against Rental Mart which the two parties agreed could be enforced only against Rental Mart’s policy with Farmers. Local Baking sought and obtained court approval of the class action settlement. This approval was obtained subsequent to the trial court’s decertification of Local Baking’s TCPA class actionin Kosher Bagel.
Upon learning of the class action settlement, Farmers promptly filed a declaratory judgment action against Local Baking seeking a ruling that coverage was not available for the judgment against Rental Mart. However, Local Baking refused to participate in discovery and delayed resolution of the declaratory judgment action significantly.
Shortly after the Appellate Division decided Kosher Bagel, Farmers successfully moved to intervene in the Westfield matter and decertified that matter’s TCPA class action based upon the holding of Kosher Bagel. Local Baking appealed this decision arguing that intervention post-judgment was untimely and that Kosher Bagel should not be applied retroactively.
The Appellate Division held that Farmers' application to intervene was timely for several reasons. First, Local Baking and Rental Mart did not notify Farmers of the $14,999,99 settlement to be enforced against Farmers' policy. Upon discovering the existence of the settlement, Farmers responded by promptly filing a declaratory judgment action which should have resolved the issue were it not for Local Baking’s discovery delay tactics.
Second, Farmers’ application to intervene would not have been proper until appellate review of the Kosher Bagel matter was complete. Once the New Jersey Supreme Court denied certification, Kosher Bagel conclusively held that a TCPA class action was not permitted and Farmers’ right to intervene was ripe. On this point, the Appellate Division noted with displeasure that Local Baking chose not to disclose the unfavorable holding of Kosher Bagel when seeking court approval of its class action settlement in the Westfield matter.
Third, intervention would not prejudice any of the parties. The individual class members retained the right to pursue their individual claims. Moreover, voiding the class action settlement would not prejudice either Local Baking or Rental Mart. The court noted that no challenge was made to the validity of Local Baking’s class action, notwithstanding the law of Kosher Bagel, and Rental Mart’s almost immediate consent to entry of a large settlement suggested an almost collusive result.
Lastly, the Court declined to view Farmers’ use of Kosher Bagel as improper retroactive application of case law. Local Baking was aware of and involved in the Kosher Bagel matter, which was decided by a trial court before judgment was entered in Westfield. As the plaintiff in Kosher Bagel, Local Baking knew its use of a class action had already been found legally invalid.
The holding of Westfield is instructive on multiple issues. Most importantly, the Appellate Division has again affirmed that a class action comprised of multiple TCPA claims is not certifiable in New Jersey and any settlement or judgment in favor of such a class is void.
Second, intervention after judgment or settlement can be timely depending on the facts. In matters where another party delays discovery significantly or a party is aware of and fails to disclose adverse legal authority, post-judgment intervention may be appropriate.