In Atalese v. U.S. Legal Services Group, LP, No. A-64-12 (N.J. Sept. 23, 2014) (click here to see a copy of the decision), the New Jersey Supreme Court found a consumer arbitration clause was not enforceable because the clause did not explicitly state that the consumer was waiving a right to seek relief in court. The plaintiff consumer in this case was trying to sue her debt-adjustment company for consumer protection violations.
The following standard arbitration clause appeared in the contract between the plaintiff consumer and the defendant debt-adjustment company: In the event of any claim or dispute between [the customer] and the [the company] related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which [the customer] resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction.
The New Jersey Supreme Court found that the above language was not sufficiently clear to put a consumer on notice that he or she was waiving a right to sue in court. In attempting to avoid FAA preemption of its holding, the court stated that under New Jersey law, waiver provisions must express a “clear and unambiguous assent” to the waiver, and all consumer contracts must be written in simple and clear language. The court noted that it had generally approved of arbitration clauses that explicitly refer to waiver of a jury trial or right to court. However, because the arbitration clause at issue did not clearly indicate that the consumer was waiving a right to court, the arbitration clause was not enforceable.
It seems that under this standard set forth by the New Jersey Supreme Court, many routine arbitration agreements may not be enforceable in the consumer context. For example, a standard clause from the AAA states the following and includes no reference to a waiver of a jury trial or right to court: Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.