Restaurant.com hopes to avoid penalties as appellate court weighs rulings
Loop North News

LEGAL

Restaurant.com

Restaurant.com hopes to avoid penalties as appellate court weighs rulings

Should court rulings in New Jersey apply retroactively or to future cases only? The difference is worth about a million dollars to a company owned by two River North residents.

13-Nov-14 – There is “simply no good reason” to apply court decisions against Restaurant.com in a way that exposes it to penalties, argue attorneys for the Arlington Heights company.

Both sides have now submitted briefs in the latest round of an on-again, off-again federal lawsuit.

Owned by two River North residents, Restaurant.com has been defending itself since 2010 against the class action suit, filed by two people in New Jersey who bought gift certificates from the company’s website.

Larissa Shelton and Gregory Bohus are suing RDC on behalf of themselves and others over certificates that had expiration dates and a disclaimer in violation of New Jersey law. That is no longer in dispute, after being argued before the New Jersey Supreme Court.

What a United States Court of Appeals will now decide is whether a “new rule of law” was created, meaning RDC is ok as long as its certificates continue to be in compliance, or if the rulings can be applied retroactively, in which case RDC could have to pay a penalty of $100 each for certificates sold in the past – penalties that could total an estimated $1 million.

The $100 penalty is specified by New Jersey’s “Truth in Consumer Contract, Warranty and Notice Act.” The statute permits a consumer to sue a business for that amount if he or she is given a contract in violation of any other law. At one time, Restaurant.com gift certificates expired in one year. The New Jersey Gift Certificate Act, however, prohibits expiration periods of less than two years.

If the appeal is successful and if a district court certifies the case as a class action, RDC could end up owing $100 to every person who purchased a gift certificate – with a one-year expiration period – to a restaurant in New Jersey.

Shelton and Bohus are appealing a United States District Court decision that previous rulings apply to future cases only. Their attorneys say the New Jersey Supreme Court clarified that the rulings apply retroactively. However, in his brief filed on October 29, RDC attorney Michael McDonald (right) says that is not true and it is a decision the New Jersey Supreme Court cannot make, anyway. Michael R. McDonald

Besides being a new rule of law, McDonald says applying the rulings retroactively would “produce substantial inequitable results.”

NIU Today Restaurant.com is owned by Dr. Kenneth Chessick (left), a lawyer, and his wife, Ellen Chessick, who is president of Marina Towers Condominium Association.

New Jersey Supreme Court should clarify ruling, says plaintiff attorney

If anyone has any doubt about whether the rulings should be applied retroactively, says an attorney for Shelton and Bohus, they should take it up with the New Jersey Supreme Court.

Otherwise, says Henry Wolfe in a brief filed on November 12, New Jersey case law is clear about when court decisions should be applied retroactively or to future cases only.

To escape a retroactive application, says Wolfe, Restaurant.com would have to show it relied on a conflicting principle of law. That is, RDC would have to prove that when it was drafting the gift certificates, it relied on an incorrect interpretation of New Jersey’s truth-in-consumer-contract law. Wolfe says RDC has not even claimed this, let alone proven it.

He says a claim by RDC that rulings of the New Jersey Supreme Court and U.S. Court of Appeals apply only to future cases is “remarkable” and the first time the argument has been made in New Jersey.

The reason RDC did not ask for clarification on the issue, he claims, is because they “forum-shopped” the argument rather than take their chances with a court that had not ruled in their favor.

Wolfe says an RDC claim that the New Jersey Supreme Court has liberalized the standard for prospective application of rulings “is self-serving fiction without any basis in actual authority.”

Henry P. Wolfe

Timeline of Shelton v. Restaurant.com, Inc.

January 6, 2010
Plaintiffs Larissa Shelton and Gregory Bohus file a complaint against defendant Restaurant.com in Superior Court of New Jersey, Middlesex County, Law Division.

February 17, 2010
Plaintiff attorneys get the case moved to United States District Court as a federal class action lawsuit.

March 11, 2010
Restaurant.com files a motion to dismiss.

June 15, 2010
District Court grants the motion and dismisses the complaint.

February 10, 2011
United States Court of Appeals for the Third Circuit certifies questions of law for the New Jersey Supreme Court.

July 9, 2013
New Jersey Supreme Court reformulates the certified questions and ultimately concludes the lawsuit may proceed.

November 4, 2013
Third Circuit affirms in part and reverses in part the District Court’s dismissal of plaintiffs’ complaint.

November 25, 2013
Restaurant.com files a motion to dismiss.

July 10, 2014
District Court grants motion and dismisses complaint in its entirety.

July 18, 2014
Plaintiffs file a notice of appeal.

 Previous story: Restaurant.com lawsuit dismissed, appealed, dismissed, and…appealed

By Steven Dahlman | Loop North News | sdahlman@loopnorth.com

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