November 24, 2020 Articles

New Jersey’s Supreme Court Upholds Automatic Application of NJAA in the Event of an FAA Exemption

Arbitration agreements exempt under the Federal Arbitration Act remain subject to enforcement under the New Jersey Arbitration Act.

By Kelly A. Ringston

On July 14, 2020, the New Jersey Supreme Court issued a joint decision in the matters of Colon v. Strategic Delivery Solutions, LLC and Arafa v. Health Express Corp., 243 N.J. 147, and conclusively held that arbitration agreements exempt under section 1 of the Federal Arbitration Act (FAA) can still be enforced under the New Jersey Arbitration Act (NJAA), even where the parties’ agreement expressly provides for the application of the FAA and makes no mention of the applicable state law.

Colon and Arafa both involved arbitration agreements in the contracts of pharmaceutical transportation workers and addressed the issue of whether those agreements could be enforced under the NJAA if they were exempt under section 1 of the FAA. The cases raised eyebrows when different panels of New Jersey’s Appellate Division reached opposite conclusions just one day apart. 

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