Diana v. LVNV Funding, LLC, ___ N.J. ___ (2026). [Disclosure: I represented amici curiae Consumers League of New Jersey and National Association of Consumer Attorneys in this appeal]. In a unanimous opinion by Justice Hoffman, the Supreme Court held that plaintiff, suing on behalf of a putative class, could not assert an implied private right of action to void a loan contract, pursuant to the New Jersey Consumer Finance Licensing Act, CFLA, N.J.S.A. 17:11C-1 to -49 (“CFLA”), against institutional debt-buyer defendants that allegedly purchased his credit card debt without a requisite license.

The Law Division granted a defense motion to dismiss for failure to state a claim. The Appellate Division affirmed. The Supreme Court also affirmed.

The Court applied a three-part test drawn from prior New Jersey and federal cases. ““To determine if a statute confers an implied private right of action,” New Jersey courts, like federal courts, consider whether: (1) the ‘plaintiff is a member of the class for whose special benefit the statute was enacted’; (2) there is ‘evidence that the Legislature intended to create a private right of action under the statute’; and (3) ‘it is consistent with the underlying purposes of the legislative scheme to infer the existence of such a remedy.’”

Plaintiff relied on section 33(b) of the CFLA, which states that a consumer lender who violates (among other things) the licensing requirement of the CFLA “shall be guilty of a crime of the fourth degree. A contract of a loan not invalid for any other reason, in the making or collection of which any act shall have been done which constitutes a crime of the fourth degree under this section, shall be void and the lender shall have no right to collect or receive any principal, interest or charges . . . .”

All parties agreed that plaintiff satisfied the first prong of the three-part test. But the Court held that he failed to meet the other two criteria. “The history of the CFLA and its predecessor statutes offers no evidence that the Legislature intended to create a private right of action to void loan contracts. An implied right of action would likewise be inconsistent with the broader penal scheme in which Subsection 33(b)’s voiding provision is situated” (citations and certain punctuation omitted).

The Court went through the history of the CFLA and predecessor statutes involving licensing for lenders. Though plaintiff contended that an implied private right of action would be consistent with those prior statutes, the Court disagreed. “[T]hose laws have never contained an independent private right to void loan contracts. Rather, the ability to affirmatively void a loan contract has always been dependent upon an express private right of action to “recover from the lender” -- a right that the Legislature pointedly omitted from the … CFLA.”

The Court also focused on the use of the phrase “constitutes a crime” in section 33(b). “The phrase “constitutes a crime” -- far from conveying an intent to create a private right of action -- is instead most commonly used by the Legislature in defining the degrees of a crime and, thus, the appropriate penalty for such conduct.” The Court observed that “[s]ubsection 33(b)’s voiding provision is therefore part of a broader penal scheme…. [and] that New Jersey courts generally will not allow private plaintiffs to sue for injunctions to enforce the state penal laws. Violations of these laws are left to the agencies charged with the enforcement of the criminal laws” (citations and internal quotation marks omitted).

The Court’s opinion appears to leave open, however, a consumer’s ability to use the lender’s non-licensure as an affirmative defense, even though the consumer cannot use the non-licensure as an affirmative weapon. Permitting an affirmative defense is unquestionably the correct result.

The Court’s opinion includes some language that, read in isolation, could arguably foreclose implied private rights of action going forward. “While courts were once ‘alert to provide [private] remedies,’ they have since ‘abandoned that understanding’ and ‘[h]av[e] sworn off the habit of venturing beyond [the Legislature’s] intent.’ [Alexander v.] Sandoval, 532 U.S.[275] at 287 [(2001)] (quoting J.I. Case Co. v. Borak, 377 U.S. 426, 433 (1964)). ‘New Jersey courts have been reluctant to infer a statutory private right of action where the Legislature has not expressly provided for such action.’ R.J. Gaydos [Ins. Agency, Inc. v. Nat’l Consumer Ins. Co.,] 168 N.J. [255,] 271 [(2001)].” But that would be the wrong reading of this opinion, as the decision reaffirms the three-part test for implied private rights of action and would afford a private right to parties who meet that test.

Finally, the Court’s opinion contains a logical fallacy that often plagues decisions about private right of action. “Moreover, because courts have become less eager to effectuate private enforcement of statutes where the Legislature has not so provided, see Sandoval, 532 U.S. at 287, we typically rely on the Legislature to clarify that a criminal statute confers a concurrent private right of action, see, e.g., [Citations]. Absent such a clarifying statement here, we infer the ‘underlying purpose[] of the legislative scheme’ to be the establishment of criminal penalties, not an implied private right of action to void a contract. R.J. Gaydos, 168 N.J. at 272.”

The very premise of implied rights of action, a fixture of the law for many decades, is that legislative bodies may have intended private rights without having explicitly so stated. That is the definition of “implied.” Requiring the Legislature to provide “a clarifying statement” about private rights of action would confirm that there is an express private right of action but would, if taken seriously, read out of the law the idea of an implied right of action. This fallacy did not change the result in this case, but it still has no place in the law.