February 24, 2015

Seeking Supreme Court review of anti-arbitration decision

By Deborah J. La Fetra Senior Attorney

In September, we reported on a New Jersey Supreme Court decision that undermines the freedom of contract and treats the state’s consumers like children, unable to choose how to resolve disputes without explanatory language included within the contract itself. The case, Atalese v. U.S. Legal Services Group (a private company), invalided a contract containing a standard arbitration provision that any “claim or dispute shall be submitted to binding arbitration upon the request of either party” and “any decision of the arbitrator shall be final.”

The New Jersey Supreme Court held that although it would not dictate the particular words contracting parties must use, the contract must include language specifically stating that the parties understand that “arbitration” is a different dispute resolution forum than state or federal courts. The court condescendingly explained that consumers cannot be expected to understand the meaning and import of the word “arbitration,” so the contractual language must include legal advice as to the benefits and trade-offs in choosing to resolve disputes in arbitration instead of in court.

This decision flies in the face of both the Federal Arbitration Act and United States Supreme Court decisions that prohibit courts from viewing arbitration contracts with suspicion, treating them with hostility, or disfavoring them in any way when compared to other contracts. Fortunately, U.S. Legal Services Group is asking the Supreme Court to review the case, and PLF filed an amicus brief supporting this request. PLF’s brief argues that the New Jersey rule, demanding that arbitration contracts contain advisory provisions, is intended to discourage consumers from agreeing to contracts that call for arbitration if a dispute should arise. This conflicts with many federal and state courts that hold that the Federal Arbitration Act forbids heightened scrutiny of jury waivers where such scrutiny disproportionately, and adversely, affects arbitration contracts.

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