N.J. Supreme Court Rules That Consumer Arbitration Pact Is Invalid

The court found that the arbitration agreement failed to clearly and unambiguously advise that the plaintiff was giving up the right to pursue statutory claims in court.

The New Jersey Supreme Court unanimously held in Atalese v. U.S. Legal Services Group, L.P. that the absence of language in a consumer arbitration provision that clearly and unambiguously stated that the signer was waiving his or her right to seek relief in court rendered the agreement unenforceable.1 The decision, made on September 23, represents a departure from federal precedent in this area and arises in the consumer context. Nonetheless, in an abundance of caution, companies drafting arbitration agreements applicable to New Jersey consumers and employees should consider preparing agreements that will pass muster under this decision, and companies with existing arbitration agreements applicable to New Jersey consumers and employees should review their agreements to determine whether any revisions are necessary or appropriate.

Atalese Case

Plaintiff Patricia Atalese contracted with a debt-resolution service to help manage her financial difficulties. The contract between Atalese and U.S. Legal Services Group (USLSG) contained the following arbitration provision:

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. 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 Client 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.

After Atalese sued USLSG, alleging a variety of statutory claims, USLSG successfully moved to compel arbitration. On appeal, the New Jersey Superior Court, Appellate Division, affirmed, finding that the contract adequately advised the plaintiff that arbitration was the sole means of resolving the parties' disputes.

The New Jersey Supreme Court granted Atalese's petition for certification and reversed...