Will a New Jersey court compel arbitration under this clause?
An agreement in a record to submit an existing or subsequent controversy to arbitration is valid, enforceable and irrevocable except on a ground that exists at law or in equity for the revocation of a contract. But New Jersey adds an assent requirement: because an arbitration clause waives the right to have a claim decided in court, the waiver-of-rights language must be clear and unambiguous (the parties must know that there is a distinction between resolving a dispute in arbitration and in a judicial forum), and the clause must be clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law. Two procedural sentences from the Act: a challenge to the existence or scope of the agreement does not stop the arbitration, which "may continue pending final resolution of the issue by the court, unless the court otherwise orders" (§ 2A:23B-6(d)); and on a summary action to compel, "The court may not refuse to order arbitration because the claim subject to arbitration lacks merit" (§ 2A:23B-7(d)). The Act's own reach: it governs all agreements to arbitrate made on or after January 1, 2003, and on or after January 1, 2005 it governs an agreement to arbitrate whenever made (in each case excepting an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement), and it does not apply at all to agreements to arbitrate made before July 4, 1923 (§ 2A:23B-3).
The trap
A clause drafted to the specimen a drafter outside New Jersey would think sufficient (all disputes shall be resolved by binding arbitration, and nothing more) can fail in New Jersey even though it would be enforced in most states. Atalese held exactly that: the clause there said disputes go to 'binding arbitration' and did not explain that the consumer was giving up the right to go to court, and the Court held it unenforceable. No particular form of words is required. Flanzman v. Jenny Craig (2020) later refused to add a further requirement that the agreement name an arbitral institution or describe the selection process. The second trap is allocation: under § 2A:23B-6(b) THE COURT decides whether an agreement to arbitrate exists, while the ARBITRATOR decides whether a condition precedent to arbitrability has been fulfilled and whether the containing contract is enforceable, and § 2A:23B-7, which § 2A:23B-4(c) makes non-waivable, requires the court itself to decide that issue summarily. Third, § 2A:23B-4(b) makes several New Jersey Arbitration Act protections non-waivable BEFORE a controversy arises (including § 6a. itself), so a pre-dispute clause cannot bargain around them.
15 authorities
- statuteN.J. Stat. Ann. § 2A:23B-6enactment date not established
The words that state the rule
a. An agreement contained in a record to submit to arbitration any existing or subsequent controversy arising between the parties to the agreement is valid, enforceable, and irrevocable except upon a ground that exists at law or in equity for the revocation of a contract. b. The court shall decide whether an agreement to arbitrate exists or a controversy is subject to an agreement to arbitrate. c. An arbitrator shall decide whether a condition precedent to arbitrability has been fulfilled and whether a contract containing a valid agreement to arbitrate is enforceable.
The words that state the rule
The waiver-of-rights language, however, must be clear and unambiguous -- that is, the parties must know that there is a 16 distinction between resolving a dispute in arbitration and in a judicial forum.
The words that state the rule
Whatever words compose an arbitration agreement, they 1 Article I, Paragraph 9 of the 1947 New Jersey Constitution guarantees that “[t]he right of trial by jury shall remain inviolate.” That guarantee has appeared in every New Jersey Constitution. See N.J. Const. of 1776 art. XXII; N.J. Const. of 1844 art. I, § 7. 19 must be clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law
The words that state the rule
No particular form of words is necessary to accomplish a clear and unambiguous waiver of rights. It is worth remembering, however, that every “consumer contract” in New Jersey must “be written in a simple, clear, understandable and easily readable way.” N.J.S.A. 56:12-2.
- statuteN.J. Stat. Ann. § 2A:23B-4enactment date not established
The words that state the rule
b. Before a controversy that is subject to an agreement to arbitrate arises, a party to the agreement may not: (1) waive or agree to vary the effect of the requirements of section 5a., 6a., 8, 17a., 17b., 26, or 28 of this act; (2) agree to unreasonably restrict the right to notice of the initiation of an arbitration proceeding pursuant to section 9 of this act; (3) agree to unreasonably restrict the right to disclosure of any facts by an arbitrator pursuant to section 12 of this act; or (4) waive the right of a party to an agreement to arbitrate to be represented by a lawyer pursuant to section 16 of this act at any proceeding or hearing pursuant to this act.
- statuteN.J. Stat. Ann. § 2A:23B-6enactment date not established
The words that state the rule
d. If a party to a judicial proceeding challenges the existence of, or claims that a controversy is not subject to, an agreement to arbitrate, the arbitration proceeding may continue pending final resolution of the issue by the court, unless the court otherwise orders.
- statuteN.J. Stat. Ann. § 2A:23B-7enactment date not established
The words that state the rule
c. If the court finds that there is no enforceable agreement, it may not, pursuant to subsection a. or b. of this section, order the parties to arbitrate. d. The court may not refuse to order arbitration because the claim subject to arbitration lacks merit or grounds for the claim have not been established.
- caseNo. 082207 (N.J. Sept. 11, 2020)Flanzman v. Jenny Craig, Inc.decided date not established
The words that state the rule
The NJAA, which provides a default procedure for the selection of an arbitrator and generally addresses the conduct of the arbitration, clearly expresses the Legislature’s intent that an arbitration agreement may bind the parties without designating a specific arbitrator or arbitration organization or prescribing a process for such a designation. N.J.S.A. 2A:23B-11(a), -15. Applying principles of New Jersey law that generally govern contracts, we hold that the Agreement at issue is valid and enforceable. We modify the 3 trial court’s judgment as to the governing law and forum for the arbitration, and we reinstate that judgment as modified.
The words that state the rule
Nowhere in the arbitration clause is there any explanation that plaintiff is waiving her right to seek relief in court for a breach of her statutory rights. The contract states that either party may submit any dispute to “binding arbitration,” that “[t]he parties shall agree on a single arbitrator to resolve the dispute,” and that the arbitrator’s decision “shall be final and may be entered into judgment in any court of competent jurisdiction.” The provision does not explain what arbitration is, nor does it indicate how arbitration is different from a proceeding in a court of law.
The words that state the rule
We now reverse. The absence of any language in the arbitration provision that plaintiff was waiving her statutory right to seek relief in a court of law renders the provision unenforceable.
- statuteN.J. Stat. Ann. § 2A:23B-4enactment date not established
The words that state the rule
a. Except as otherwise provided in subsections b. and c. of this section, a party to an agreement to arbitrate or to an arbitration proceeding may waive or, the parties may vary the effect of, the requirements of this act to the extent permitted by law.
- statuteN.J. Stat. Ann. § 2A:23B-4enactment date not established
The words that state the rule
c. A party to an agreement to arbitrate or arbitration proceeding may not waive, or the parties may not vary the effect of, the requirements of this section or section 3a., 3c., 7, 14, 18, 20d., 20e., 22, 23, 24, 25a., 25b., 29, 30, 34 or 35. Provided however, that nothing in this act shall preclude the parties from expanding the scope of judicial review of an award by expressly providing for such expansion in a record.
- statuteN.J. Stat. Ann. § 2A:23B-7enactment date not established
The words that state the rule
a. On filing a summary action with the court by a person showing an agreement to arbitrate and alleging another person's refusal to arbitrate pursuant to the agreement: (1) if the refusing party does not appear or does not oppose the summary action, the court shall order the parties to arbitrate; and (2) if the refusing party opposes the summary action, the court shall proceed summarily to decide the issue and order the parties to arbitrate unless it finds that there is no enforceable agreement to arbitrate.
- statuteN.J. Stat. Ann. § 2A:23B-3enactment date not established
The words that state the rule
a. This act governs all agreements to arbitrate made on or after January 1, 2003 with the exception of an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement.
- statuteN.J. Stat. Ann. § 2A:23B-3enactment date not established
The words that state the rule
c. On or after January 1, 2005, this act governs an agreement to arbitrate whenever made with the exception of an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement. d. This act shall not apply to agreements to arbitrate made before July 4, 1923.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.