New Jersey Appellate Division Continues to Hold Sky-High Bar for Arbitration Clauses

In determining the enforceability of arbitration agreements, the New Jersey Appellate Division recently considered the interplay of the U.S. Supreme Court’s 2017 decision in Kindred Nursing Ctrs. v. Clark and the New Jersey Supreme Court’s 2014 decision in Atalese v. U.S. Legal Services Grp., L.P. In Defina v. Go Ahead and Jump 1, the Appellate Division held that Kindred Nursing did not abrogate the holding in Atalese.

In Defina, the plaintiff, a minor, broke his ankle while playing trampoline dodgeball at Defendant’s facility. Plaintiff’s father had signed a document entitled “Participation Agreement, Release, and Assumption of Risk,” which contained the following arbitration provision:

If there are any disputes regarding this agreement, I on behalf of myself and/or my child(ren) hereby waive any right I and/or my child(ren) may have to a trial and agree that such dispute shall be brought within one year of the date of this Agreement and will be determined by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. . . .

Plaintiffs sued, and the trial court granted Defendant’s motion to compel arbitration. On appeal, the Appellate Division reversed, holding that “the arbitration clause at issue in this matter did not clearly and unambiguously inform plaintiff that he was giving up his right to bring claims arising out of the participation in activities at [Defendant’s facility] in a court of law and have a jury decide the case,” as required by Atalese. On remand, approximately four months after the Kindred Nursing decision, newly added defendants moved again to compel arbitration, arguing that the Appellate Division’s decision was no longer valid after Kindred Nursing, because New Jersey courts could no longer rely upon the reasoning in Atalese as a basis for refusing to enforce an arbitration agreement. The trial court disagreed, and defendants appealed.

On the case’s second visit to the Appellate Division, the panel held that Kindred Nursing did not abrogate Atalese. Rather, because the Atalese court concluded that “[t]he requirement that a contractual provision be sufficiently clear to place a consumer on notice that he or she is waiving a constitutional or statutory right is not specific to arbitration provisions,” the Appellate Division found that Atalese was consistent with the holding in Kindred Nursing that arbitration agreements should not be singled out for disfavored treatments. Thus, the panel reiterated its prior holding in the case that arbitration clause is not enforceable under Atalese because it “does not clearly and unmistakably inform the party signing it that he or she is agreeing to waive their right to be heard in court or their constitutional right to a trial by jury. Nor does the clause explain what arbitration is or how it differs from bringing a claim in court.” This decision is consistent with the current trend in New Jersey of close scrutiny of the content of arbitration provisions, while relying on contract principles for enforcement.

Caroline E. Oks is an Associate in the Gibbons Commercial & Criminal Litigation Department.
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