Patricia Atalese v. U.S. Legal Services Group, L.P. (072314) , 219 N.J. 430 ( 2014 )

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized).
Patricia Atalese v. U.S. Legal Servs. Grp., L.P. (A-64-12) (072314)
Argued April 9, 2014 -- Decided September 23, 2014
ALBIN, J., writing for a unanimous Court.
In this appeal, the Court considers the enforceability of an arbitration agreement that did not provide notice
to the consumer that, by signing the agreement, she was giving up her right to seek relief in a judicial forum.
Plaintiff, Patricia Atalese, entered into a service contract with defendant, U.S. Legal Services Group, L.P.
(USLSG), for debt-adjustment services. The contract contained an arbitration provision for the resolution of any
dispute between the parties. Plaintiff brought a lawsuit against USLSG in the Special Civil Part alleging violations
of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Truth-in-Consumer Contract, Warranty and
Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18. USLSG moved to compel arbitration based on the arbitration
provision in the service contract.
The trial court granted USLSG’s motion to compel arbitration and dismissed the complaint without
prejudice. The court found the arbitration clause to be “minimally, barely . . . sufficient to put the [plaintiff] on
notice that if [the parties] have any sort of dispute arising out of [the] agreement, it’s going to be heard in
[a]rbitration.” The court also believed that the arbitration clause met the criteria outlined in Curtis v. Cellco
Partnership, 413 N.J. Super. 26, 33-37 (App. Div.), certif. denied, 203 N.J. 94 (2010), which held that an arbitration
provision will be enforced so long as it is “sufficiently clear, unambiguously worded, satisfactorily distinguished
from the other [a]greement terms, and . . . provide[s] a consumer with reasonable notice of the requirement to
arbitrate.” Relying on language in Curtis, the Appellate Division affirmed, finding that “the lack of express
reference to a waiver of the right to sue in court or to arbitration as the ‘exclusive’ remedy” did not bar enforcement
of the arbitration clause. The panel concluded that the arbitration clause gave the “parties reasonable notice of the
requirement to arbitrate all claims under the contract,” and that “a reasonable person, by signing the agreement,
[would have understood] that arbitration is the sole means of resolving contractual disputes.” The Court granted
plaintiff’s petition for certification. 214 N.J. 117 (2013).
HELD: An arbitration provision -- like any comparable contractual provision that provides for the surrendering of a
constitutional or statutory right -- must clearly and unambiguously notify the consumer that he or she is waiving the
right to seek relief in a court of law. The arbitration agreement in this case is unenforceable because it failed to
notify plaintiff that, by entering into the agreement, she was surrendering her right to seek relief in a judicial forum.
1. The Federal Arbitration Act (FAA), 9 U.S.C.A. §§ 1-16, and the nearly identical New Jersey Arbitration Act,
N.J.S.A. 2A:23B-1 to -32, enunciate policies favoring arbitration. Arbitration’s favored status, however, does not
mean that every arbitration clause will be enforceable. The FAA requires courts to “place arbitration agreements on
an equal footing with other contracts” and permits arbitration agreements “to be invalidated by ‘generally applicable
contract defenses.’” AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 1745-46 (2011) (citations omitted)
(quoting Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 687 (1996)). Accordingly, the FAA “permits states to
regulate . . . arbitration agreements under general contract principles,” and a court may invalidate an arbitration clause
“‘upon such grounds as exist at law or in equity for the revocation of any contract.’” Martindale v. Sandvik, Inc., 173
N.J. 76, 85 (2002) (quoting 9 U.S.C.A. § 2). (pp. 8-11)
2. An agreement to arbitrate, like any other contract, “must be the product of mutual assent, as determined under
customary principles of contract law.” NAACP of Camden Cnty. E. v. Foulke Mgmt., 421 N.J. Super. 404, 424
(App. Div.), certif. granted, 209 N.J. 96 (2011), and appeal dismissed, 213 N.J. 47 (2013). Mutual assent requires
that the parties have an understanding of the terms to which they have agreed. “An effective waiver requires a party
to have full knowledge of his legal rights and intent to surrender those rights.” Knorr v. Smeal, 178 N.J. 169, 177
1
(2003) (citing W. Jersey Title & Guar. Co. v. Indus. Trust Co., 27 N.J. 144, 153 (1958)). A waiver of rights --
whether in an arbitration or other clause -- “must be clearly and unmistakably established.” Garfinkel v. Morristown
Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001) (citation and internal quotation marks omitted). “By its
very nature, an agreement to arbitrate involves a waiver of a party’s right to have her claims and defenses litigated in
court.” Foulke, 421 N.J. Super. at 425. But an average member of the public may not know -- without some
explanatory comment -- that arbitration is a substitute for the right to have one’s claim adjudicated in a court of law.
Therefore, an arbitration agreement must make clear to parties “that in electing arbitration as the exclusive remedy,
they are waiving their time-honored right to sue.” Garfinkel, 168 N.J. at 132. (quoting Marchak v. Claridge
Commons, Inc., 134 N.J. 275, 282 (1993)). (pp. 11-15)
3. No particular form of words is necessary to accomplish a clear and unambiguous waiver of rights. Arbitration
clauses -- and other contractual clauses -- will pass muster when phrased in plain language that is understandable to
the reasonable consumer. Our courts have upheld arbitration clauses phrased in various ways when those clauses
have explained that arbitration is a waiver of the right to bring suit in a judicial forum. For example, in Martindale,
this Court upheld an arbitration clause because it explained that the plaintiff agreed “to waive [her] right to a jury
trial” and that “all disputes relating to [her] employment . . . shall be decided by an arbitrator.” 173 N.J. at 81-82,
96. In Griffin v. Burlington Volkswagen, Inc., the Appellate Division upheld an arbitration clause that stated, “[b]y
agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available
resolution processes, such as a court action or administrative proceeding, to settle their disputes.” 411 N.J. Super.
515, 518 (App. Div. 2010). In Curtis, the Appellate Division upheld an arbitration agreement that provided:
“Instead of suing in court, we each agree to settle disputes (except certain small claims) only by arbitration. The
rules in arbitration are different. There’s no judge or jury, and review is limited, but an arbitrator can award the
same damages and relief, and must honor the same limitations stated in the agreement as a court would.” 413 N.J.
Super. at 31 (emphasis omitted). Martindale, Griffin, and Curtis show that, without difficulty and in different ways,
the point can be made that by choosing arbitration one gives up the “time-honored right to sue.” See Garfinkel, 168
N.J. at 135. The waiver-of-rights language must be clear and unambiguous -- that is, the parties must know that
there is a distinction between resolving a dispute in arbitration and in a judicial forum. (pp. 15-17)
4. The arbitration agreement in this case states that either party may submit any dispute to “binding arbitration,” that
“[t]he parties shall agree on a single arbitrator to resolve the dispute,” and that the arbitrator’s decision “shall be
final and may be entered into judgment in any court of competent jurisdiction.” The arbitration provision does not
explain that plaintiff is waiving her right to seek relief in court, what arbitration is, or how arbitration is different
from a proceeding in a court of law. Although an arbitration clause does not have to identify the specific
constitutional or statutory right guaranteeing a citizen access to the courts that is being waived, the clause, at least in
some general and sufficiently broad way, must explain that the plaintiff is giving up her right to bring her claims in
court or have a jury resolve the dispute. After all, “[a]n effective waiver requires a [consumer] to have full
knowledge of [her] legal rights” before she relinquishes them. Knorr v. Smeal, 178 N.J. 169, 177 (2003). The Court
emphasizes that no prescribed set of words must be included in an arbitration clause to accomplish a waiver of
rights. Whatever words compose an arbitration agreement, they must be clear and unambiguous that a consumer is
choosing to arbitrate disputes rather than resolve them in a court of law. The arbitration agreement here is
unenforceable because its wording did not clearly and unambiguously signal to plaintiff that, by entering the
agreement, she was surrendering her right to pursue her statutory claims in court. (pp. 17-21)
The judgment of the Appellate Division is REVERSED, and the matter is REMANDED to the trial court
for proceedings consistent with the Court’s opinion.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, PATTERSON, and FERNANDEZ-VINA;
and JUDGES RODRÍGUEZ and CUFF (both temporarily assigned) join in JUSTICE ALBIN’s opinion.
2
SUPREME COURT OF NEW JERSEY
A-64 September Term 2012
072314
PATRICIA ATALESE,
Plaintiff-Appellant,
v.
U.S. LEGAL SERVICES GROUP,
L.P.,
Defendant-Respondent.
Argued April 9, 2014 – Decided September 23, 2014
On certification to the Superior Court,
Appellate Division.
William D. Wright argued the cause for
appellant.
Thomas M. Barron argued the cause for
respondent.
Jed L. Marcus submitted a brief on behalf of
amicus curiae Pacific Legal Foundation
(Bressler, Amery & Ross, attorneys; Mr.
Marcus and Deborah J. La Fetra, a member of
the California and Arizona bars, on the
brief).
JUSTICE ALBIN delivered the opinion of the Court.
Arbitration provisions are now commonplace in consumer
contracts. Consumers can choose to pursue arbitration and waive
their right to sue in court, but should know that they are
making that choice. An arbitration clause, like any contractual
clause providing for the waiver of a constitutional or statutory
1
right, must state its purpose clearly and unambiguously. In
choosing arbitration, consumers must have a basic understanding
that they are giving up their right to seek relief in a judicial
forum.
Here, plaintiff, Patricia Atalese, contracted with
defendant, U.S. Legal Services Group, L.P. (USLSG), for debt-
adjustment services. The contract contained an arbitration
provision for the resolution of any dispute between the parties,
but the provision made no mention that plaintiff waived her
right to seek relief in court. Plaintiff brought a lawsuit
against USLSG in the Special Civil Part alleging violations of
two consumer-protection statutes.
The trial court granted USLSG’s motion to compel
arbitration pursuant to the service contract. The Appellate
Division affirmed, finding that “the lack of express reference
to a waiver of the right to sue in court” did not bar
enforcement of the arbitration clause.
We now reverse. The absence of any language in the
arbitration provision that plaintiff was waiving her statutory
right to seek relief in a court of law renders the provision
unenforceable. An arbitration provision -- like any comparable
contractual provision that provides for the surrendering of a
constitutional or statutory right -- must be sufficiently clear
to a reasonable consumer. The provision here does not pass that
2
test. We therefore vacate the judgment of the Appellate
Division and remand to the Special Civil Part for proceedings
consistent with this opinion.
I.
A.
This case arises from a civil complaint filed in the
Special Civil Part. Plaintiff alleged that defendant violated
the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the
Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA),
N.J.S.A. 56:12-14 to -18. She sought treble damages, statutory
penalties, and attorney’s fees.
The trial court’s decision to compel arbitration was based
on the pleadings. See R. 4:46-2(c). We briefly review those
pleadings.
B.
Plaintiff entered into a service contract with USLSG, which
promised to provide debt-adjustment services. For those
services, she paid USLSG approximately $5000, which included
$4083.55 in legal fees, $940 in supplemental legal fees, and
$107.50 in other fees. Plaintiff alleged that USLSG
misrepresented that the monies were spent on numerous attorneys
negotiating with creditors on her behalf. She maintained that
the only work done by an attorney was the preparation of a
single one-page answer for a collection action in which she
3
represented herself. Plaintiff also alleged that USLSG settled
only a single debt for her and “knowingly omitted” that it was
not a licensed debt adjuster in New Jersey. Last, plaintiff
contended that USLSG violated New Jersey’s usury law.
USLSG denied the allegations in the complaint.
C.
USLSG moved to compel arbitration based on an arbitration
provision in the twenty-three-page service contract. The
arbitration provision is located on page nine, paragraph
sixteen, of the contract and states:
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. 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. The conduct of the arbitration
shall be subject to the then current rules of
the arbitration service. The costs of
arbitration, excluding legal fees, will be
split equally or be born by the losing party,
as determined by the arbitrator. The parties
shall bear their own legal fees.
4
The trial court granted USLSG’s motion to compel
arbitration and dismissed the complaint without prejudice. The
court found the arbitration clause to be “minimally, barely . .
. sufficient to put the [plaintiff] on notice that if [the
parties] have any sort of dispute arising out of [the]
agreement, it’s going to be heard in [a]rbitration.” The court
also believed that the arbitration clause met the criteria
outlined in Curtis v. Cellco Partnership, 413 N.J. Super. 26,
33-37 (App. Div.), certif. denied, 203 N.J. 94 (2010). There,
the Appellate Division held that an arbitration provision will
be enforced so long as it is “sufficiently clear, unambiguously
worded, satisfactorily distinguished from the other [a]greement
terms, and . . . provide[s] a consumer with reasonable notice of
the requirement to arbitrate.” Id. at 33. The trial court
concluded that although upholding the arbitration provision was
not “a slam dunk,” the policy favoring arbitration compelled the
outcome.
Plaintiff appealed.
II.
In an unpublished opinion, the Appellate Division affirmed
the trial court’s order compelling arbitration, relying heavily
on language in Curtis, supra, 413 N.J. Super. at 33, in reaching
that conclusion. The panel held that “the lack of express
reference to a waiver of the right to sue in court or to
5
arbitration as the ‘exclusive’ remedy” did not bar enforcement
of the arbitration clause. The panel stated that while the
arbitration clause “did not explicitly state that plaintiff
agreed to waive her right to try her dispute in court, it
clearly and unambiguously stated that . . . any dispute relating
to the underlying agreement shall be submitted to arbitration
and the resolution of that forum shall be binding and final.”
It noted that other appellate panels had upheld arbitration
provisions that did not have explicit waiver-of-rights language.
(Citing Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super.
515, 518 (App. Div. 2010); EPIX Holdings Corp. v. Marsh &
McLennan Cos., 410 N.J. Super. 453, 476 (App. Div. 2009),
overruled in part on other grounds by Hirsch v. Amper Fin.
Servs., LLC, 215 N.J. 174, 192-93 (2013)).
The panel concluded that the language of the arbitration
clause gave the “parties reasonable notice of the requirement to
arbitrate all claims under the contract,” and that “a reasonable
person, by signing the agreement, [would have understood] that
arbitration is the sole means of resolving contractual
disputes.”
We granted plaintiff’s petition for certification. Atalese
v. U.S. Legal Servs. Grp., L.P., 214 N.J. 117 (2013). We also
granted Pacific Legal Foundation’s request to participate as
amicus curiae, limited to the filing of a brief.
6
III.
A.
Plaintiff contends that the arbitration clause does not
comply with New Jersey law, specifically Curtis and our decision
in Marchak v. Claridge Commons, Inc., 134 N.J. 275, 281 (1993),
because it “does not clearly and unequivocally state its purpose
in depriving [plaintiff] of her time-honored right to sue.” She
asserts that New Jersey courts do not uphold “arbitration
provisions that fail to: (1) indicate that the parties waive
their right to sue; or (2) indicate that arbitration is the
parties’ exclusive remedy.” Plaintiff does not suggest that an
incantation of “magic words” is necessary for a waiver of rights
but does assert that the language for such a waiver must be
clear and unequivocal.
B.
USLSG contends that the term “arbitration” is universally
understood and that “[n]o reasonable consumer could have any
doubt that arbitration is different than litigation.” USLSG
emphasizes that the Federal Arbitration Act (FAA) reflects a
“liberal federal policy favoring arbitration” and requires
courts to “place arbitration agreements on an equal footing with
other contracts and enforce them according to their terms.”
(Citations and internal quotation marks omitted) (quoting AT&T
Mobility LLC v. Concepcion, 563 U.S. ___, ___, 131 S. Ct. 1740,
7
1745-46, 179 L. Ed. 2d 742, 751 (2011)). It argues that the
language in Marchak, supra -- that an arbitration “clause
depriving a citizen of access to the courts should clearly state
its purpose,” 134 N.J. at 282 -- as construed by plaintiff, is
in conflict with Concepcion and New Jersey case law. Last,
USLSG submits that the arbitration clause is sufficiently clear
and “adequately advised” plaintiff that her lawsuit would be
resolved “in an arbitral forum.”
C.
Pacific Legal Foundation, participating as amicus curiae,
urges this Court to affirm the Appellate Division and enforce
the arbitration agreement. Amicus emphasizes that arbitration
provisions in contracts must be viewed with favor, consistent
with the dictates of federal and state law, and not with
“suspicion or hostility.” Amicus maintains that consumers
entering into contracts with arbitration clauses are “presumed”
to be sufficiently competent to understand what they are signing
and that “the law does not require invocation of particular
terms of art to create an enforceable arbitration contract.” In
short, amicus insists that plaintiff signed an arbitration
agreement “written in standard form and simple language” and
should be bound by it.
IV.
A.
8
The Federal Arbitration Act (FAA), 9 U.S.C.A. §§ 1-16, and
the nearly identical New Jersey Arbitration Act, N.J.S.A.
2A:23B-1 to -32, enunciate federal and state policies favoring
arbitration. Concepcion, supra, 563 U.S. at ___, 131 S. Ct. at
1745, 179 L. Ed. 2d at 751 (describing Section 2 of FAA as
reflecting “a ‘liberal federal policy favoring arbitration’”
(quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460
U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765, 785 (1983)));
Hojnowski v. Vans Skate Park, 187 N.J. 323, 342 (2006) (noting
that Legislature, in enacting New Jersey’s Arbitration Act,
codified existing judicial policy favoring arbitration as “means
of dispute resolution”); Martindale v. Sandvik, Inc., 173 N.J.
76, 92 (2002) (“[T]he affirmative policy of this State, both
legislative and judicial, favors arbitration as a mechanism of
resolving disputes.”).
Section 2 of the FAA provides that
[a] written provision in . . . a contract
evidencing a transaction involving commerce to
settle by arbitration a controversy thereafter
arising out of such contract or transaction .
. . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist
at law or in equity for the revocation of any
contract.
[9 U.S.C.A. § 2.]
The FAA requires courts to “place arbitration agreements on an
equal footing with other contracts and enforce them according to
9
their terms.” Concepcion, supra, 563 U.S. at ___, 131 S. Ct. at
1745-46, 179 L. Ed. 2d at 751 (citations omitted). Thus, “a
state cannot subject an arbitration agreement to more burdensome
requirements than” other contractual provisions. Leodori v.
CIGNA Corp., 175 N.J. 293, 302, cert. denied, 540 U.S. 938, 124
S. Ct. 74, 157 L. Ed. 2d 250 (2003). An arbitration clause
cannot be invalidated by state-law “defenses that apply only to
arbitration or that derive their meaning from the fact that an
agreement to arbitrate is at issue.” Concepcion, supra, 563
U.S. at ___, 131 S. Ct. at 1746, 179 L. Ed. 2d at 751.
Arbitration’s favored status does not mean that every
arbitration clause, however phrased, will be enforceable. See
Hirsch, supra, 215 N.J. at 187 (“[T]he preference for
arbitration ‘is not without limits.’” (quoting Garfinkel v.
Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132
(2001))). Section 2 of the FAA “permits agreements to arbitrate
to be invalidated by ‘generally applicable contract defenses.’”
Concepcion, supra, 563 U.S. at ___, 131 S. Ct. at 1746, 179 L.
Ed. 2d at 751 (emphasis added) (quoting Doctor’s Assocs., Inc.
v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 1656, 134 L.
Ed. 2d 902, 909 (1996)). Accordingly, the FAA “permits states
to regulate . . . arbitration agreements under general contract
principles,” and a court may invalidate an arbitration clause
“‘upon such grounds as exist at law or in equity for the
10
revocation of any contract.’” Martindale, supra, 173 N.J. at 85
(quoting 9 U.S.C.A. § 2); see First Options of Chi., Inc. v.
Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 1924, 131 L. Ed. 2d
985, 993 (1995) (“When deciding whether the parties agreed to
arbitrate a certain matter . . . , courts generally . . . should
apply ordinary state-law principles that govern the formation of
contracts.”); Hojnowski, supra, 187 N.J. at 342 (“[S]tate
contract-law principles generally govern a determination whether
a valid agreement to arbitrate exists.” (citing First Options,
supra, 514 U.S. at 944, 115 S. Ct. at 1924, 131 L. Ed. 2d at
993)).
B.
An agreement to arbitrate, like any other contract, “must
be the product of mutual assent, as determined under customary
principles of contract law.” NAACP of Camden Cnty. E. v. Foulke
Mgmt., 421 N.J. Super. 404, 424 (App. Div.), certif. granted,
209 N.J. 96 (2011), and appeal dismissed, 213 N.J. 47 (2013). A
legally enforceable agreement requires “a meeting of the minds.”
Morton v. 4 Orchard Land Trust, 180 N.J. 118, 120 (2004).
Parties are not required “to arbitrate when they have not agreed
to do so.” Volt Info. Scis. v. Bd. of Trs. of Leland Stanford
Jr. Univ., 489 U.S. 468, 478, 109 S. Ct. 1248, 1255, 103 L. Ed.
2d 488, 499 (1989); see Garfinkel, supra, 168 N.J. at 132
(“‘[O]nly those issues may be arbitrated which the parties have
11
agreed shall be.’” (quoting In re Arbitration Between Grover &
Universal Underwriters Ins. Co., 80 N.J. 221, 228 (1979))).
Mutual assent requires that the parties have an
understanding of the terms to which they have agreed. “An
effective waiver requires a party to have full knowledge of his
legal rights and intent to surrender those rights.” Knorr v.
Smeal, 178 N.J. 169, 177 (2003) (citing W. Jersey Title & Guar.
Co. v. Indus. Trust Co., 27 N.J. 144, 153 (1958)). “By its very
nature, an agreement to arbitrate involves a waiver of a party’s
right to have her claims and defenses litigated in court.”
Foulke, supra, 421 N.J. Super. at 425. But an average member of
the public may not know -- without some explanatory comment --
that arbitration is a substitute for the right to have one’s
claim adjudicated in a court of law.
Moreover, because arbitration involves a waiver of the
right to pursue a case in a judicial forum, “courts take
particular care in assuring the knowing assent of both parties
to arbitrate, and a clear mutual understanding of the
ramifications of that assent.” Ibid.
The requirement that a contractual provision be
sufficiently clear to place a consumer on notice that he or she
is waiving a constitutional or statutory right is not specific
to arbitration provisions. Rather, under New Jersey law, any
contractual “waiver-of-rights provision must reflect that [the
12
party] has agreed clearly and unambiguously” to its terms.
Leodori, supra, 175 N.J. at 302; see, e.g., Dixon v. Rutgers,
the State Univ. of N.J., 110 N.J. 432, 460-61 (1988) (holding
that collective bargaining agreement cannot deprive one of
statutory rights to evidentiary materials in anti-discrimination
case because “[u]nder New Jersey law[,] for a waiver of rights
to be effective it must be plainly expressed”); Red Bank Reg’l
Educ. Ass’n v. Red Bank Reg’l High Sch. Bd. of Educ., 78 N.J.
122, 140 (1978) (explaining, in public-employment labor-
relations context, that any waiver of statutory right to file
grievances “must be clearly and unmistakably established”); W.
Jersey Title & Guar. Co., supra, 27 N.J. at 152-53 (“It is
requisite to waiver of a legal right that there be a clear,
unequivocal, and decisive act of the party . . . . Waiver
presupposes a full knowledge of the right and an intentional
surrender . . . .” (citations and internal quotation marks
omitted)); Christ Hosp. v. Dep’t of Health & Senior Servs., 330
N.J. Super. 55, 63-64 (App. Div. 2000) (requiring “clear and
unmistakable waiver” of statutory right to hearing following
refusal to renew license); Franklin Twp. Bd. of Educ. v.
Quakertown Educ. Ass’n, 274 N.J. Super. 47, 53 (App. Div. 1994)
(holding that waiver of court-ordered, strike-related expenses
must be “clear and unmistakable” (citation and internal
quotation marks omitted)); Otis Elevator Co. v. Stafford, 95
13
N.J.L. 79, 82 (Sup. Ct. 1920) (“Clear and unmistakable evidence
is necessary to hold that the right to file a [mechanics’] lien
has been waived.”); Amir v. D’Agostino, 328 N.J. Super. 141, 160
(Ch. Div. 1998) (holding that waiver of statutory rights under
Condominium Act requires that party “kn[ow] that there [i]s a
statutory protection available and then elect[] to waive it”
because “conduct that purports to constitute a waiver must be
clear and unmistakable”), aff’d o.b., 328 N.J. Super. 103, 105
(App. Div. 2000); cf. Wright v. Universal Mar. Serv. Corp., 525
U.S. 70, 80, 119 S. Ct. 391, 396, 142 L. Ed. 2d 361, 371 (1998)
(holding that “union-negotiated waiver of employees’ statutory
right to a judicial forum for claims of employment
discrimination” must be “clear and unmistakable”).
Arbitration clauses are not singled out for more burdensome
treatment than other waiver-of-rights clauses under state law.
Our jurisprudence has stressed that when a contract contains a
waiver of rights -- whether in an arbitration or other clause --
the waiver “must be clearly and unmistakably established.”
Garfinkel, supra, 168 N.J. at 132 (citation and internal
quotation marks omitted). Thus, a “clause depriving a citizen
of access to the courts should clearly state its purpose.”
Ibid. (quoting Marchak, supra, 134 N.J. at 282). We have
repeatedly stated that “[t]he point is to assure that the
parties know that in electing arbitration as the exclusive
14
remedy, they are waiving their time-honored right to sue.”
Ibid. (quoting Marchak, supra, 134 N.J. at 282); Hirsch, supra,
215 N.J. at 187 (same).
No particular form of words is necessary to accomplish a
clear and unambiguous waiver of rights. It is worth
remembering, however, that every “consumer contract” in New
Jersey must “be written in a simple, clear, understandable and
easily readable way.” N.J.S.A. 56:12-2. Arbitration clauses --
and other contractual clauses -- will pass muster when phrased
in plain language that is understandable to the reasonable
consumer.
Our courts have upheld arbitration clauses phrased in
various ways when those clauses have explained that arbitration
is a waiver of the right to bring suit in a judicial forum. For
example, in Martindale, supra, we upheld an arbitration clause
because it explained that the plaintiff agreed “to waive [her]
right to a jury trial” and that “all disputes relating to [her]
employment . . . shall be decided by an arbitrator.” 173 N.J.
at 81-82, 96 (stating that “arbitration agreement not only was
clear and unambiguous, it was also sufficiently broad to
encompass reasonably plaintiff’s statutory causes of action”).
In Griffin, supra, the Appellate Division upheld an arbitration
clause, which expressed that “[b]y agreeing to arbitration, the
parties understand and agree that they are waiving their rights
15
to maintain other available resolution processes, such as a
court action or administrative proceeding, to settle their
disputes.” 411 N.J. Super. at 518. In Curtis, supra, the
Appellate Division found the arbitration provisions were
“sufficiently clear, unambiguously worded, satisfactorily
distinguished from the other [a]greement terms, and drawn in
suitably broad language to provide a consumer with reasonable
notice of the requirement to arbitrate.” 413 N.J. Super. at 33.
The arbitration agreement in Curtis stated:
Instead of suing in court, we each agree to
settle disputes (except certain small claims)
only by arbitration. The rules in arbitration
are different. There’s no judge or jury, and
review is limited, but an arbitrator can award
the same damages and relief, and must honor
the same limitations stated in the agreement
as a court would.
[Id. at 31 (emphasis omitted).]
Martindale, Griffin, and Curtis show that, without
difficulty and in different ways, the point can be made that by
choosing arbitration one gives up the “time-honored right to
sue.” See Garfinkel, supra, 168 N.J. at 135 (declining to
“suggest that a party need refer specifically to the [Law
Against Discrimination] or list every imaginable statute by name
to effectuate a knowing and voluntary waiver of rights”). The
waiver-of-rights language, however, must be clear and
unambiguous -- that is, the parties must know that there is a
16
distinction between resolving a dispute in arbitration and in a
judicial forum.
With those principles in mind, we turn to the arbitration
provision before us.
V.
Our review of a contract, generally, is de novo, and
therefore we owe no special deference to the trial court’s or
Appellate Division’s interpretation. Kieffer v. Best Buy
Stores, L.P., 205 N.J. 213, 222-23 (2011). Our approach in
construing an arbitration provision of a contract is governed by
the same de novo standard of review. Hirsch, supra, 215 N.J. at
186.
The arbitration clause at issue appears on page nine of a
twenty-three-page contract between plaintiff and USLSG. Under
the terms of the agreement, USLSG promised to provide plaintiff
with debt-adjustment services. In her civil complaint,
plaintiff alleged that USLSG failed to deliver the services
promised, misrepresented that various attorneys were working on
her case, and knowingly omitted that it was not a licensed debt
adjuster in this State. Plaintiff asserted that USLSG violated
two consumer-protection statutes, the CFA and the TCCWNA, both
of which explicitly provide remedies in a court of law. See
N.J.S.A. 56:8-19 (“Any person who suffers any ascertainable loss
. . . may bring an action or assert a counterclaim therefor in
17
any court of competent jurisdiction.”); N.J.S.A. 56:12-17 (“A
consumer also shall have the right to petition the court to
terminate a contract which violates the provisions of section 2
of [the TCCWNA] and the court in its discretion may void the
contract.”).
Nowhere in the arbitration clause is there any explanation
that plaintiff is waiving her right to seek relief in court for
a breach of her statutory rights. The contract states that
either party may submit any dispute to “binding arbitration,”
that “[t]he parties shall agree on a single arbitrator to
resolve the dispute,” and that the arbitrator’s decision “shall
be final and may be entered into judgment in any court of
competent jurisdiction.” The provision does not explain what
arbitration is, nor does it indicate how arbitration is
different from a proceeding in a court of law. Nor is it
written in plain language that would be clear and understandable
to the average consumer that she is waiving statutory rights.
The clause here has none of the language our courts have found
satisfactory in upholding arbitration provisions -- clear and
unambiguous language that the plaintiff is waiving her right to
sue or go to court to secure relief. We do not suggest that the
arbitration clause has to identify the specific constitutional
or statutory right guaranteeing a citizen access to the courts
that is waived by agreeing to arbitration. But the clause, at
18
least in some general and sufficiently broad way, must explain
that the plaintiff is giving up her right to bring her claims in
court or have a jury resolve the dispute.1 Mutual assent to an
agreement requires mutual understanding of its terms. After
all, “[a]n effective waiver requires a [consumer] to have full
knowledge of [her] legal rights” before she relinquishes them.
See Knorr, supra, 178 N.J. at 177.
In the employment setting, we have stated that we would
“not assume that employees intend to waive [their rights under
the Law Against Discrimination] unless their agreements so
provide in unambiguous terms.” Garfinkel, supra, 168 N.J. at
135. We indicated that although a waiver-of-rights provision
need not “list every imaginable statute by name to effectuate a
knowing and voluntary waiver of rights,” employees should at
least know that they have “agree[d] to arbitrate all statutory
claims arising out of the employment relationship or its
termination.” Ibid.
We emphasize that no prescribed set of words must be
included in an arbitration clause to accomplish a waiver of
rights. Whatever words compose an arbitration agreement, they
1 Article I, Paragraph 9 of the 1947 New Jersey Constitution
guarantees that “[t]he right of trial by jury shall remain
inviolate.” That guarantee has appeared in every New Jersey
Constitution. See N.J. Const. of 1776 art. XXII; N.J. Const. of
1844 art. I, § 7.
19
must be clear and unambiguous that a consumer is choosing to
arbitrate disputes rather than have them resolved in a court of
law.2 In this way, the agreement will assure reasonable notice
to the consumer. To be clear, under our state contract law, we
impose no greater burden on an arbitration agreement than on any
other agreement waiving constitutional or statutory rights.
In the matter before us, the wording of the service
agreement did not clearly and unambiguously signal to plaintiff
that she was surrendering her right to pursue her statutory
claims in court. That deficiency renders the arbitration
agreement unenforceable.3
2 Both plaintiff and USLSG reference EPIX Holdings, supra, 410
N.J. Super. 453, in their briefs. There, a panel of the
Appellate Division enforced an arbitration provision that stated
that “[a]ny other unresolved dispute arising out of this
Agreement must be submitted to arbitration,” and that “the
arbitrators would have ‘exclusive jurisdiction over the entire
matter in dispute, including any question as to arbitrability.’”
Id. at 461, 482. The parties in EPIX Holdings did not challenge
whether that language satisfied the standard for a waiver of
rights. We find that the language there is not sufficient to
constitute a clear and unambiguous waiver of a consumer’s right
to sue in court.
3 Our opinion should not be read to approve that part of the
arbitration clause that states: “The costs of arbitration,
excluding legal fees, will be split equally or born by the
losing party, as determined by the arbitrator. The parties
shall bear their own legal fees.” See Delta Funding Corp. v.
Harris, 189 N.J. 28, 44 (2006) (stating that “defendant [] may
not limit a consumer’s ability to pursue the statutory remedy of
attorney’s fees and costs when it is available to prevailing
parties” and explaining that “[b]y agreeing to arbitrate a
statutory claim, a party does not forgo the substantive rights
afforded by the statute; it only submits to their resolution in
20
VI.
The judgment of the Appellate Division is reversed. We
remand to the trial court for proceedings consistent with this
opinion.
CHIEF JUSTICE RABNER; JUSTICES LaVECCHIA, PATTERSON, and
FERNANDEZ-VINA; and JUDGES RODRÍGUEZ and CUFF (both temporarily
assigned) join in JUSTICE ALBIN’s opinion.
an arbitral[,] rather than a judicial forum.”) (internal
quotation marks omitted); see also N.J.S.A. 56:12-16 (stating
that under TCCWNA “[n]o consumer contract . . . shall contain
any provision by which the consumer waives his rights under this
act”); N.J.S.A. 56:8-19 (“In all actions under [the CFA], . . .
the court shall also award reasonable attorneys’ fees, filing
fees and reasonable costs of suit.”).
2
SUPREME COURT OF NEW JERSEY
NO. A-64 SEPTEMBER TERM 2012
ON CERTIFICATION TO Appellate Division, Superior Court
PATRICIA ATALESE,
Plaintiff-Appellant,
v.
U.S. LEGAL SERVICES GROUP,
L.P.,
Defendant-Respondent.
DECIDED September 23, 2014
Chief Justice Rabner PRESIDING
OPINION BY Justice Albin
CONCURRING/DISSENTING OPINIONS BY
DISSENTING OPINION BY
REVERSE AND
CHECKLIST
REMAND
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA X
JUDGE RODRÍGUEZ (t/a) X
JUDGE CUFF (t/a) X
TOTALS 7
1