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Opinions in Other Areas of New Jersey Law Provide Guidance When Challenging Arbitration Agreements in New Jersey Employment Contracts

It is interesting that the trend in New Jersey employment law is to enforce arbitration agreements in employment contracts, while at the same time finding them unenforceable in consumer and commercial contracts.  However, the law is the same: whatever the area, arbitration agreements are interpreted and enforced – or not enforceable – under New Jersey contract law.  It’s therefore worth looking at two recent opinions in these areas to see what can be learned.

 

The Knight Case:  Consumer Contracts and Consumer Fraud

In the first, a published opinion in case of Knight v. Vivint Solar Developer, LLC, the Appellate Division of the Superior Court of New Jersey stuck down an arbitration agreement which the defendants tried to enforce in a consumer fraud lawsuit over the sale of solar panels.  After Knight sued, Vivint filed a motion to courthouse-1223280__340-300x200dismiss her complaint and enforce an arbitration agreement which required the parties to arbitrate their disputes.

In support of its motion to enforce the arbitration agreement, Vivint produced two contracts, one of which had a check mark selecting the arbitration provision, and one of which did not.  Knight admitted that she signed an agreement to pay for the solar panels, but she maintained that she did not check the arbitration selection.  In fact, she testified that she did not sign a hard copy, but only a blank signature screen on the sales person’s iPad.  The company agreed she did not see the agreement, but alleged that it was thoroughly explained to her.  She never received a copy of that agreement.  She claimed that never had the opportunity to read it and it was not explained to her.

Under the circumstances, the judges concluded that there were questions of fact about whether Knight knowingly and voluntarily agreed to waive her right to go to court and submit to arbitration.

 

The Navigators Case

The second case, Navigators Specialty Ins. Co. v. Jangho Curtain Wall Americas Co. Ltd., was an unpublished opinion by the Appellate Division in an insurance subrogation action for injuries on a construction site.  Navigators insured AJD Construction Co., general contractor on a construction project in Jersey City.  Jangho Curtain Wall Americas Co. Ltd.and Blade Contracting, Inc. were AJD’s subcontractors on the project.  One of Jangho’s employees was injured on the job allegedly because of cinder blocks Blade left on the job site.  Navigators settled with the employee on AJD’s behalf.  Navigators then file a claim against Jangho and Blade seeking to have them indemnify it for what it paid to the employee because of Jangho’s and Blade’s alleged.  (The suit was a subrogation action, where Navigators right to sue was based upon standing in AJD’s shoes since it paid the employee on AJD’s behalf.)

Blade sought to dismiss the complaint and compel arbitration based on the arbitration agreement in its subcontract with AJD – since it was a subrogation action, Navigators had only those rights that AJD had.  In this case, once again there were two version of the contract, one selecting arbitration and the other not selecting it.  Both parties claimed that a different version was the final and controlling one.  The Appellate Division found that a question of fact existed which the motion judge should have allowed discovery on before holding a hearing on the merits and making credibility determinations about witness testimony.

 

The Takeaway

The Appellate Division panels in both cases relied on the 2014 case of Atalese v. U. S. Legal Service Group, L.P.  In that opinion, in a consumer contract case, the New Jersey Supreme Court explicitly held that “arbitration requires mutual consent.”  To be enforceable, the Supreme Court explained, the evidence must show that the parties clearly and unambiguously agreed to arbitration, and that they knowingly waived their rights having full knowledge of them.

One telling detail sticks out in the Navigators case.  In that case, the opinion contained the following.

To be sure, Blade’s claim that its version of the contract was the true final version relied, in part, on assertions obvious from the document itself. Most notably, on Blade’s version, the inserted price of the contract was initialed by both parties’ representatives; AJD’s version only included its representative’s initials. Logically, one would assume that the final version of a nearly $2 million contract would include the initials of both parties’ representatives next to the amount inserted in the form agreement.

That statement is undeniably true and logical.  However, it gives the benefit of the doubt to the party challenging arbitration because of the sophistication of the parties which negotiated it and the size of the money at stake.  In employment cases, however, the amount at stake in the contract is usually significantly lower, and the employee significantly less sophisticated in drafting and negotiating employment contracts.  It therefore makes no sense that courts generally tend to give less benefit of the doubt to employees challenging arbitration agreements than to businesses.

In any event, employees and their lawyers challenging arbitration provisions in employment contracts should look to cases under consumer and business law.

 

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