Clear and Unambiguous: Protecting The Validity of Your Agreement to Arbitrate
New Jersey businesses, take heed. If you are using a contract which contains an arbitration provision, you should take a moment to review it to ensure that, in the event your business finds itself involved in litigation involving that contract, your agreement will withstand the scrutiny of the New Jersey courts and you will be permitted to arbitrate claims as intended. The key concept to keep in mind during your review? Clear and unambiguous. As set forth in a recent decision by the New Jersey Supreme Court, a critical element to an enforceable arbitration provision is that the language of such provision be clear and unambiguous with regard to any constitutional or statutory right being waived.
In Atalese v. U.S. Legal Services Group, L.P., the plaintiff contracted with U.S. Legal Services Group (USLSG) for debt adjustment services. On page 9 of the 23-page contract was an arbitration provision for resolution of any dispute between the parties, which provided as follows:
Arbitration: In the event of any claim or dispute between Client and the USLSG 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. . . . Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction.
When the plaintiff later brought a lawsuit against USLSG, alleging violations of two consumer protection statutes, USLSG moved to compel arbitration. The trial court granted USLSG’s motion, and the Appellate Division subsequently affirmed the trial court’s order. Plaintiff appealed to the New Jersey Supreme Court, arguing that the arbitration clause did not comply with New Jersey law because it did not clearly and unequivocally inform her that she was relinquishing her “time-honored right to sue.”
In a unanimous decision, however, the New Jersey Supreme Court reversed, determining that the contractual arbitration provision was unenforceable because nowhere in the arbitration clause was there any explanation that plaintiff was waiving her right to sue or otherwise seek relief through the court. In rejecting USLSG’s argument that the term “arbitration” was universally understood as being different from litigation, the Court held that an arbitration clause in a consumer contract must provide “clear and unambiguous” notice of the right to a jury trial and that, in electing to undergo arbitration, that right is surrendered. While there is no prescribed set of words that must appear in an arbitration provision in order for it to pass muster, generally, an effective waiver of rights provision in a contract should, in plain language that is understandable to the average consumer, be clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law. Reviewing your contracts under this standard now can save you from a lot of time (and expense) later.
If you want assistance in revising your consumer contracts to be in compliance with New Jersey law, contact Jill Guldin, Esq. (pictured) at 856-579-6040 or firstname.lastname@example.org.