Gibbons Law Alert

Gibbons Law Alert

Author: Leonardo A. Di Stasio

Appellate Division Affirms: Binding Dispute Resolution Provisions in Standard AIA Construction Contracts Are Enforceable

by

Posted in Construction

On May 10, 2023

In a recent unpublished opinion, the New Jersey Appellate Division held that an agreement to arbitrate set forth in the binding dispute resolution provision in a standard form American Institute of Architects (AIA) construction contract between a condominium association and contractor was enforceable. The binding dispute resolution provision appears in the AIA standard form as a series of checkboxes in which the parties may select arbitration, litigation, or another dispute mechanism by placing an “X” in one of the boxes. The AIA standard form also contains language that applies if the parties have selected arbitration as the method of binding dispute resolution, including the rules for conducting that arbitration and finalizing an award. Arbor Green Condo. Ass’n, Inc. v. Start 2 Finish Restoration & Bldg. Servs., LLC et al. arose out of Start 2’s alleged deficient workmanship under a construction contract to restore two buildings damaged by a storm, which resulted in Arbor Green terminating the contract. Start 2 subsequently filed two construction liens and two demands for arbitration (one for each building) in accordance with the selected dispute resolution method in the parties’ AIA form agreement. Arbor Green failed to answer the demands for arbitration, resulting in awards in Start 2’s favor. Start 2 then filed two orders to show cause and verified complaints that...

Delaware’s “Freedom of Contract” Approach to Non-Compete Agreements – Even Between Sophisticated Parties in the Sale-of-Business Context – Has Its Limits

by and

Posted in General Litigation

On March 29, 2023

Non-compete agreements have recently gained a new round of attention with the Federal Trade Commission’s (FTC) proposed rule that would effectively ban employers from imposing non-competes (albeit not in certain sale-of-business scenarios). While lawyers and businesses wait to see whether the FTC rule materializes, the nation’s most prominent business court – the Delaware Court of Chancery – recently issued two decisions demonstrating limits to its contractarian approach to restrictive covenants. Interestingly, both cases arose in the sale-of-business context, in which the court has traditionally enforced relatively broad restrictive covenants negotiated by sophisticated parties. In HighTower Holding, LLC v. Gibson (Vice Chancellor Will, Feb. 9, 2023), the court refused to enforce the parties’ Delaware governing-law provision and, instead, after performing a choice-of-law analysis, applied Alabama law to invalidate the non-compete. In Intertek Testing Services NA, Inc. v. Eastman (Vice Chancellor Will, Mar. 16, 2023), the court found a non-compete provision that prohibited the defendant from competing “anywhere in the world” to be unreasonably broad and, therefore, unenforceable. Delaware governing law provision rejected HighTower Holding, LLC v. Gibson. HighTower, a Delaware limited liability company, purchased a majority interest in an Alabama-based wealth advisory firm owned by Gibson, a licensed financial advisor, and other individuals. As part of the sale, Gibson and his former partners signed a protective agreement...

Express Waiver of Rights in Arbitration Provisions Called Into Question by Recent New Jersey Appellate Decision

by

Posted in Appellate

On February 21, 2023

In an opinion issued on February 8, 2023, the New Jersey Appellate Division carved out an exception to the New Jersey Supreme Court’s requirement in Atalese v. U.S. Legal Services Group, L.P. that arbitration provisions must contain clear and unambiguous waiver-of-rights language, holding that Atalese does not apply to sophisticated commercial parties with relatively equal bargaining power. An agreement that the County of Passaic entered into with Horizon Healthcare Services, Inc. contained a dispute resolution provision simply stating that “the parties shall submit the dispute to binding arbitration under the commercial rules of the American Arbitration Association.” After the trial court granted Horizon’s motion to compel arbitration based on this provision, the county appealed, arguing that the arbitration clause was unenforceable because it lacked an express waiver of access to the courts, as required by Atalese. The Appellate Division affirmed, relying on section 2 of the Federal Arbitration Act, which provides that a written arbitration provision “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” That provision, the Appellate Division reasoned, requires courts to apply standard contract principles, including “notions of unconscionability,” in order to determine whether mutual assent to the arbitration clause exists, thus rendering the arbitration clause enforceable. Importantly, whether such assent...

Proposed Nationwide FTC Ban on Non-Compete Clauses: UPDATE – Virtual Public Forum Scheduled for February 16, 2023

by and

Posted in General Litigation

On February 14, 2023

As we recently reported, in January 2023, the Federal Trade Commission (FTC) announced a proposed nationwide ban on non-compete clauses. The proposed rule would restrict employers from enforcing all existing and future non-compete agreements with their employees. The FTC announced that it will host a free and open public forum on Thursday, February 16, 2023, from 12 p.m. to 3 p.m. EST, examining the proposed rule and providing the public (workers and business owners) with an opportunity to ask questions, express concerns, and share their past experiences with non-competes. Attendees may register to speak at the forum on the FTC’s website. Registration to speak is on a first come, first served basis. Details about the forum and registration may be found here. The public may also submit written comments on the proposed ban through March 20, 2023, at Regulations.gov. Interested parties should monitor the situation accordingly and consider contacting the firm if they have questions about the proposed rule or seek guidance ahead of the forum and comment period deadline.

Proposed Nationwide FTC Ban on Non-Compete Clauses

by and

Posted in General Litigation

On January 6, 2023

On January 5, 2023, the Federal Trade Commission (FTC) announced a proposed rule (“Rule”) that would effectively impose a nationwide ban on all existing and future non-compete clauses between workers and employers. By way of background, a non-compete clause is a type of restrictive covenant that prevents a worker from working for a competitor or starting a competing business, generally within a certain geographical area and time frame after the worker’s employment ends. The FTC’s position, as stated in the Rule’s overview, is that non-compete clauses prevent workers from leaving jobs, lower competition for workers, and reduce wages. According to the FTC, non-compete clauses also stop new businesses from forming, stifle entrepreneurship, and prevent novel innovation that would take place if workers were able to freely share ideas. On the other hand, proponents of non-compete clauses have historically argued, among other things, that they are necessary to protect an employer’s confidential information, trade secrets, and intellectual property and its often considerable investment in the training and development of  its employees. Non-compete agreements are currently subject to state law. Key components of the proposed Rule include: Providing that it is an “unfair method of competition” for an employer to enter into a non-compete clause with a worker, attempt to do so, or inform a worker they...

Connect:

About Gibbons

With 200 attorneys, Gibbons is a leading law firm in New Jersey, New York, Pennsylvania, Delaware, Washington, DC, and Florida, ranked among the nation’s top 200 by The American Lawyer. More…

Subscribe

Archived Blog Posts

Categories