Credit Contract Provision That Another State’s Law Applies Is Not Valid In New Jersey if Contrary to Public Policy
A recent trend by credit card companies has been to include a provision in their credit agreements that states that the parties agree to be bound by the laws of a particular state, called a ”choice of law” provision. The credit card companies then choose a state with laws that are very favorable to credit card companies and make the customer agree that the foreign state’s laws will apply to any dispute between the customer and the credit card company. A New Jersey consumer fraud lawyer may be able to help you navigate around these provisions and get recourse for losses you may have suffered as a result of consumer fraud.
In Homa v. American Express, the Third Circuit Court of Appeals held that these provisions are not valid if the result of applying the provision will violate a fundamental public policy of the state where the dispute occurred. Mr. Homa applied for an American Express “Blue Cash” credit card based on a promise by the credit card company that he could earn 5% cash back on purchases made with the card. When American Express failed to pay Mr. Homa the rewards that he had been promised, Mr. Homa sought to bring a class action lawsuit against American Express on behalf of himself and other similarly-situated plaintiffs in New Jersey. The purpose of a class action is to provide a remedy in cases where each individual plaintiffs damages are small, but the damages suffered by a group of similarly-situated individuals is large.
In responding to the lawsuit, American Express argued that the credit agreement contained a provision that stated that all disputes between the parties would have be resolved by arbitration, and that the customer does not have the right to litigate or arbitrate any disputes as a class action. The credit agreement also contained a provision that the laws of the State of Utah would apply to any dispute between the parties. Utah has passed a statute the says that provisions in credit agreements that prohibit class action lawsuits or arbitrations are valid. American Express argued that Utah law applied to the dispute with Mr. Homa, and because the provision prohibiting class actions was valid under Utah law, the court had to order Mr. Homa to submit to arbitration and to argue his case as an individual, not as part of a class action.
However, New Jersey law says that clauses in credit agreements that prohibit a plaintiff from litigating or arbitrating a dispute as part of a class action are unconscionable and against the fundamental public policy of New Jersey. The Third Circuit Court of Appeals held that New Jersey law, and not Utah law, would apply to the dispute because if they were to apply Utah law, the result would be a violation of a fundamental public policy in New Jersey and New Jersey has a stronger interest in this litigation than Utah.
If you believe that you are a victim of consumer fraud, there may be recourse even if the agreement with the merchant provides that the laws of a state with weaker consumer protection laws than New Jersey apply. Contact a New Jersey consumer fraud lawyer to discuss potential recourse based on the facts and circumstances of your case.
