NJ Supreme Court Further Tightens Rules for Arbitration Agreements

By Robert E. Bartkus

On June 14, 2016, the New Jersey Supreme Court found, in Morton v. Sanford Brown Institute, A-31-14, the arbitration clause in an enrollment agreement unenforceable because it did not include language required by Atalese v. U.S. Legal Services Group, 219 N.J. 430 (2014), indicating a clear waiver of the plaintiff’s right to resolve her claims in court before a jury.

Moreover, the Court held that the clause language was not sufficient to delegate to an arbitrator the arbitrability decision.

The Sanford Brown arbitration clause stated that “any disputes” regarding (among other things) the gateway issues of arbitrability, jurisdiction and contract formation were to be “resolved pursuant to this paragraph (the ‘Arbitration Agreement’).”

The Court found that this was not as clear as the language that the U.S. Supreme Court found sufficient in Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63 (2010). There, the Court said, “The Arbitrator, and not any federal, state, or local court or agency, shall have the exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement.”

Furthermore, in what the state Supreme Court held was the “key” issue before it, the defendant had not requested the trial court with sufficient clarity to find that the relief sought was for the arbitrator to decide these issues in the first instance. Although the arguments included references to the delegation issue, the order presented did not ask for that relief – only that the case be dismissed and the claims sent to arbitration, which thus seemed to ask the Court to decide the arbitrability issues.

Parties and counsel are therefore cautioned to review arbitration agreements to include the necessary language and to clearly request the proper relief when moving to dismiss a case in favor of arbitration.

Robert E. Bartkus, of counsel at Anselmi & Carvelli, LLP in Florham Park, NJ, concentrates on multiparty business and international arbitration and litigation.

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