New Jersey Supreme Court Rights Course of Arbitrability

On March 12, 2019, an ADR Committee article, “New Jersey Court Puts Brakes on Arbitration after Car Deals are Called Off,” reported on the precedential Appellate Division opinion in Goffe v. Foulke Management Corp. 454 N.J. Super 260 (App. Div. 2018), declining to compel arbitration because the car purchases were said to have been “rescinded.” When disputes arose regarding the transaction, and the customers returned the cars, the sales agreements were deemed to have been rescinded, either by their terms or based on a subsequent agreement rescinding the purchase. The Appellate Division held that the legal effect of the rescission was to “return [the parties] to square one—in legal terms, the status quo ante . . . .” As the article stated: “Just as the rescission nullified the parties’ obligations concerning the car purchase, [the court held] ‘there can be no doubt that the arbitration provisions [in the original contracts] were discarded in the process.’” The court also found that the dealer may have failed to comply with the Consumer Fraud Act requirement to provide a copy of the purchase agreement at the time of the transaction, in which case the purchase agreement would be unenforceable. It remanded to the trial court to require discovery and determine whether the allegations of fraud were substantiated and, based on those findings resolve the motion to compel arbitration anew. The broader implications of the Goffe decision were discussed in a May 24, 2018 article, “New Jersey Holds That Rescission Defeats Arbitration.”