Appellate Division Enforces Provision Prohibiting Class Arbitration

In Curiale v. Hyundai Capital America Inc., the New Jersey Appellate Division reversed an order denying a motion to compel arbitration by Hyundai’s financing company (“HCA”), based on an arbitration clause in a motor vehicle retail order. The Appellate Division rejected the trial court’s finding that the arbitration clause was ambiguous because it stated that the parties must arbitrate any claims and then explicitly stated that the provision bars “class action arbitration.”

The Arbitration clause provided:

AGREEMENT TO ARBITRATE ANY CLAIMS. READ THE FOLLOWING ARBITRATION PROVISION CAREFULLY, IT LIMITS YOUR RIGHTS, INCLUDING THE RIGHT TO MAINTAIN A COURT ACTION.

The parties to this agreement agree to arbitrate any claim, dispute, or controversy, including all statutory claims and any state or federal claims, that may arise out of or relating to the sale or lease identified in this agreement. By agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes. … The parties also agree to waive any right (i) to pursue any claims arising under this agreement including statutory, state or federal claims, as a class action arbitration, or (ii) to have an arbitration under this agreement consolidated with any other arbitration or proceeding. … THIS ARBITRATION PROVISION LIMITS YOUR RIGHTS, INCLUDING YOUR RIGHT TO MAINTAIN A COURT ACTION. PLEASE READ IT CAREFULLY, PRIOR TO SIGNING. [(Emphasis in original).]

The foregoing provision was included in a motor vehicle retail order (MVRO) between dealership Freehold Kia and the plaintiffs with respect to their lease of a 2015 Kia Forte in July 2014. At that time, the plaintiffs also executed a lease agreement and a gap waiver addendum, both of which said the dealership’s interest in the lease would be assigned to a Hyundai financing subsidiary. Plaintiffs later defaulted on the lease, and Kia Motors sent Plaintiffs a condition report and an invoice for $250 for excessive wear and tear on the vehicle, as well as for fees associated with the repossession of the vehicle following default. Plaintiffs then filed a putative class action complaint against the financing company alleging violations of the New Jersey Consumer Fraud Act and the Truth-in-Consumer Contract, Warranty, and Notice Act.

Defendant moved to compel arbitration and stay the action. Plaintiffs contended they contracted with Freehold Kia, not its parent company, HCA, and therefore the arbitration clause in the MVRO was not enforceable. They asserted HCA was only a party to the lease agreement. The trial judge rejected plaintiffs’ argument that there was no mutual assent and that defendant lacked authority to enforce the arbitration agreement, but held that the arbitration clause was ambiguous because the language did not give plaintiffs notice they were waiving their right to bring a class action lawsuit in court. Defendant appealed.

The Appellate Division reversed and, relying in part on the often-cited New Jersey Supreme Court’s decision in Atalese, held that there was “no ambiguity, under the clause, that plaintiffs waived their rights to bring any claims that arose under the agreement, including class actions, in court and waived their rights to pursue a class action in arbitration.” The court relied on the plain language of the arbitration provision, which unequivocally stated that the parties agree “to arbitrate any claim, dispute, or controversy, including all statutory claims … that may arise out of or relating to the sale or lease identified in this agreement.” As the Court explained, “there is no contradiction or confusion caused by the broad waiver of court actions for all claims arising under the agreement and the specific waiver of the right to class action arbitration. The waiver of the right to maintain a ‘class action arbitration’ only applies to the arbitration process. A party’s action must be arbitrated individually.” Accordingly, the Appellate Division remanded the action to the trial court for entry of an order dismissing plaintiffs’ complaint without prejudice and compelling arbitration.

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