Sep 23

New Jersey Supreme Court Tightens Requirements for Enforcing Arbitration Agreements

General counsel should stop what they’re doing and review their company’s arbitration provisions in light of the New Jersey Supreme Court’s recent decision in Atalese v. U.S. Legal Services Group, L.P., 2014 WL 4689318 (N.J. Sept. 23, 2014). In Atalese, the Supreme Court rejected the enforceability of an arbitration provision because it did not explicitly state that the consumer plaintiff was waiving her right to bring suit in court.

The provision, which appeared on the ninth page of a twenty-three page service contract, provided that “[i]n the event of any claim or dispute between Client and USLSG related to this Agreement or related to any performance of any service related to this Agreement, the claim or dispute shall be submitted to binding arbitration.” The import of this language might seem clear enough. But it wasn’t. The provision did not state the inverse was true—that the consumer was waiving his or her right to bring suit in court. The court found this omission fatal.

The court explained that “[o]ur courts have upheld arbitration clauses … when those clauses have explained that arbitration is a waiver of the right to bring suit in a judicial forum.” Although the court emphasized that no “particular form of words” is required to accomplish a clear and unambiguous waiver of rights, it offered several examples that pass muster:

  • An arbitration provision making clear the plaintiff agrees “to waive her right to a jury trial” and that “all disputes relating to [her] employment … shall be decided by an arbitrator.”
  • An arbitration provision making clear the plaintiff understands that by “agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes.”
  • An arbitration provision stating that “Instead of suing in court, we each agree to settle disputes … only by arbitration.”

The lesson here is clear: companies, particularly those that do business in New Jersey, should carefully review their arbitration provisions. If the provisions do not make clear the consumer is waiving his or her right to bring suit in court, the provisions should be revised. And they should be revised in such a way that upon reading the agreement, the consumer (1) would know an amendment is being made to his or her agreement, and (2) would reasonably understand he or she is choosing to arbitrate disputes rather than having them resolved in a court of law.

Leave a Reply