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June 19, 2019 Practice Points

New Jersey: Time to Review Those Arbitration Clauses Again?

Some highlights from New Jersey court rulings that are important for transaction lawyers drafting arbitration clauses.

By Robert E. Bartkus

In the past few weeks, New Jersey courts have made a number of rulings that are important for transaction lawyers drafting arbitration clauses. Here are some of the highlights.   

One court reaffirmed that clauses purporting to indicate agreement to arbitration by having employees “acknowledge” receipt of the arbitration policy will not be enforced, especially when the agreement is part of a “training” web video. Skuse v. Pfizer, Inc., 457 N.J. Super. 539 (App. Div. 2019). The clear lesson is that arbitration agreements should not ask employees to acknowledge the policy but to “agree” to arbitration so that the arbitration clause is enforceable.

The New Jersey Supreme Court made the obvious point that using the heading “Mediation” for an arbitration clause might cause the average reader some confusion, especially when the clause said the arbitration would be governed by the designated forum's non-existent “Commercial Mediation Rules.” Kernahan v. Home Warranty Admin. of Fla., Inc., 236 N.J. 301 (2019). Here the lesson is an old one: use clear language and do not mix up mediation and arbitration!

Transaction lawyers should also be sure to use the font size that meets the requirements of New Jersey’s Plain Language Act, N.J.S.A. 56:12-10, for all consumer contracts.

On remand from the New Jersey Supreme Court, in light of Alexander Defina v. Go Ahead and Jump 1, LLC, 2019 N.J. Super. Unpub. LEXIS 1404 (N.J. Super. Ct. App. Div. 2019), held that language waiving a “trial” in favor of arbitration did not sufficiently inform a consumer or employee that arbitration is different from having his or her claim determined by a court or jury, the test set out in Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014). To avoid such challenges, drafters should adhere closely to the terminology described in Atalese, including contrasting arbitration to a resolution by a court, judge or jury. 

A federal district court allowed discovery, as required by Guidotti v. Legal Helpers Debt Resolution, LLC, 716 F.3d 764 (3d Cir. 2013), to determine if the parties understood language mandating arbitration of malpractice claims to also include the arbitration of statutory claims. Abedi v. New Age Med. Clinic, P.A., 2019 U.S. Dist. LEXIS 67903 (D.N.J. 2019). The lesson here is to be clear (and expansive) in identifying the kinds of disputes subject to arbitration.

Recently, the New Jersey Appellate Division held that, in a multi-contract relationship between sophisticated parties, language in the most recent contract saying that the parties “may” arbitrate disputes using specified rules and other parameters meant that arbitration was permissive rather than mandatory. Medford Township School District v. Schneider Electric Buildings America’s, Inc., A-5798-17, — N.J. Super. —, 2019 N.J. Super. LEXIS 54 (N.J. Super. Ct. App. Div. Apr. 26, 2019). The court said it might have enforced the agreement if it had said “either party may . . .” or if the parties had not used “shall” in so many other parts of the contracts. This is another example demonstrating the need for clarity and consistency: Say what you mean.

Robert E. Bartkus is of counsel to McCusker, Anselmi, Rosen & Carvelli, P.C. in Florham Park, New Jersey.

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