Summary
The Supreme Court for the State of New Jersey held that the failure to include specific trial by jury waiver language in arbitration clauses renders them unenforceable in consumer contracts, notwithstanding the fact that said clauses may include language that all disputes arising out of the contract are subject to arbitration. This decision will have a significant impact on any consumer focused company doing business in New Jersey.
On April 9, 2014, the Supreme Court for the State of New Jersey reversed an intermediate appellate court’s ruling that upheld an arbitration clause in a consumer contract, holding that the clause was unenforceable because the contract did not contain an acknowledgement by which the consumer was expressly waiving a right to a jury trial.. Patricia Atalese (“Atalese”) entered into a contract with U.S. Legal Services Group L.P. (“Legal Services”), whereby Atalese retained Legal Services to provide debt-adjustment services. The contract included an arbitration clause that stated that either party may submit any dispute arising out of the contract to binding arbitration. During the course of the parties’ relationship, Atalese initiated a suit against Legal Services in the Superior Court of New Jersey. Legal Services moved to compel arbitration. The Superior Court granted its motion, and Atalese appealed the Superior Court’s ruling. On appeal, the Appellate Court affirmed the lower court’s decision. Atalese then appealed the Appellate Court’s decision.
In conducting its analysis, the Supreme Court outlined the preference given by courts to arbitration and arbitration clauses. However, the Supreme Court noted that said preference is not without its limits. An arbitration clause, like any other clause, must be a product of mutual assent. For there to be mutual assent, the parties must have full knowledge of their legal rights. The Supreme Court of New Jersey held that for an arbitration clause to be enforceable in the consumer contract context, the clause must provide the parties with clear notice that the parties are waiving their statutory right to seek relief in a court of law. Simply stating that all disputes arising out of a consumer contract are or may be subject to arbitration is insufficient.
This decision will have a significant impact on any consumer-focused company doing business in New Jersey. For help determining what it may mean for your business, please contact the authors of this alert.
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