Gibbons Law Alert

Gibbons Law Alert

Tagged: Arbitration

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

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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In a recent unpublished opinion, the New Jersey Appellate Division held that an agreement to arbitrate set forth in the binding dispute resolution provision in a standard form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...

New Appellate Division Decision Highlights Limited Scope of Review of Arbitration Awards

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Posted in General Litigation

On March 8, 2023

In a recent to-be-published opinion, the New Jersey Appellate Division held that parties may not agree to expand the scope of judicial review of an arbitral award in an arbitration agreement governed by the Federal Arbitration Act (FAA), which does not permit courts to vacate or modify awards for errors of fact or law. The case, Strickland v. Foulke Management Corp., arose out of the plaintiffs’ purchase of a used car from the defendant. The parties executed an arbitration agreement, which provided that it was governed by the FAA except as provided elsewhere in the agreement. The agreement also stated that the arbitrator should render a decision only in conformity with New Jersey law and that a court may reverse the award based on “mere errors of New Jersey law.” The defendant repossessed the vehicle after the plaintiffs missed several monthly payments. The plaintiffs filed an arbitration demand asserting violations of the New Jersey Consumer Fraud Act and other state and federal statutes, as well as common law fraud. Following an arbitration hearing, the arbitrator entered an award dismissing all of the plaintiffs’ claims, finding that the claims were barred by contractual limitations periods contained in the arbitration agreement and other purchase documents and also that they lacked merit. The plaintiffs sought to vacate the...

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

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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...

The Federal Speak Out Act and Implications for Employers

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Posted in Employment Agreements

On January 10, 2023

In December 2022, President Biden signed into law the Speak Out Act (the “Act”), which has become effective. As discussed below, the Act prohibits pre-dispute nondisclosure and nondisparagement agreements relating to sexual assault and sexual harassment disputes. In connection with the new law, Congress presented, inter alia, the following findings: Sexual harassment and assault continue to be pervasive in the workplace. 81 percent of women and 43 percent of men experience some type of sexual harassment or assault in their lifetime. One in three women has encountered sexual harassment in the workplace, yet an estimated 87 to 94 percent of those who have experienced harassment never file any type of formal complaint. Many women leave their job or industry or pass up advancement opportunities as a result of sexual harassment. To combat sexual harassment and assault, victims must be able to report and publicly disclose such issues. Nondisclosure and nondisparagement provisions in agreements between employers and employees can allow harassment and assault to continue by silencing victims and those with knowledge of the conduct, while protecting those engaging in such conduct, thus allowing it to continue. Prohibiting nondisclosure and nondisparagement clauses will provide transparency around unlawful conduct, allow victims to come forward, hold perpetuators accountable, and make workplaces safer. Explanation of the Act The Act...

Third Circuit Holds That Non-Signatory Medical Practices Were Bound by Arbitration Agreements Entered Into by Practices’ Purchasing Agents

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Posted in Class Action Defense

On July 11, 2022

In In re Rotavirus Vaccines Antitrust Litigation, Merck Sharp & Dohme Corp. secured a victory in the Third Circuit, which held in a precedential decision that the plaintiffs’ antitrust bundling claims must be arbitrated. The medical practice plaintiffs contracted with “Physician Buying Groups” (PBGs) that arranged for the purchase of Merck’s vaccines at a discount through the drugmaker’s loyalty program. The matter involved two sets of contracts. The first set, between Merck and the PBGs, entitled participating PBG members to discounts if they purchased a threshold quantity of vaccines from Merck. These contracts contained an arbitration provision. The second set of contracts, between the PBGs and the medical practice plaintiffs, gave the plaintiffs discounts on Merck vaccines for enrolling in the PBGs. Thus, the PBGs operated as middlemen: the plaintiffs bought their vaccines directly from Merck but received discounts for belonging to PBGs. The plaintiffs were not parties to the contracts between Merck and the PBGs; as such, the plaintiffs did not sign on to the relevant arbitration provisions. The District Court for the Eastern District of Pennsylvania held that the PBGs did not have authority to bind the plaintiffs to the arbitration agreements, in part because the plaintiffs were not aware of those agreements. Reversing, the Third Circuit held that the PBGs, as agents,...

Third Circuit Enforces Delegation Provision in Arbitration Agreement

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Posted in Alternative Dispute Resolution

On August 23, 2021

A “delegation provision” in an arbitration agreement authorizes the arbitrator to decide issues concerning the arbitrator’s own jurisdiction over disputes before him or her. Absent a delegation provision, such jurisdictional issues are for courts to decide when adjudicating motions to compel arbitration. In its recent decision in Carrone v. United Health Care Group Inc., the United States Court of Appeals for the Third Circuit clarified the circumstances under which courts may entertain challenges to arbitration agreements with delegation provisions. Background Michele Carrone filed suit in federal district court in New Jersey charging her employer and coworkers with discrimination. The defendants moved to compel arbitration. The parties’ arbitration agreement incorporated by reference the Employment Dispute Resolution Rules of the American Arbitration Association (AAA). Rule 6(a) of those rules sets forth a “delegation” provision, to wit: “The arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement”; and, further: “The arbitrator shall have the power to determine the existence or validity of a contract of which an arbitration clause forms a part.” Carrone opposed the motion to compel arbitration on the grounds that “(1) the arbitration agreement’s amendment provision rendered the agreement illusory, (2) the arbitration agreement as a...

New Jersey Appellate Division Finds Parties’ Agreement for Arbitrator to Participate in Settlement Discussions and Continue as Arbitrator Need Not Be in Writing

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Posted in Appellate

On August 10, 2021

In Pami Realty, LLC v. Locations XIX Inc., the New Jersey Appellate Division, in a to-be-published opinion, reversed a trial court’s determination that an agreement between litigants that an arbitrator could participate in settlement discussions and then continue as arbitrator must be in writing. After commencing litigation over a construction contract dispute, the parties agreed to participate in arbitration proceedings to resolve their dispute. On the second day of arbitration, the parties discussed settlement. When the settlement negotiations were unsuccessful, the arbitration resumed for a final day of testimony. Six weeks after the submission of post-hearing briefs, the arbitrator reported that he had finished his opinion and would be finding in favor of the defendant. Plaintiff’s counsel responded that the arbitrator “had no authority to act as a mediator in this matter and then re-assume the role of arbitrator,” and his “decision to act as mediator created a conflict of interest that neither party waived through the arbitration agreement.” After the arbitrator issued an award in favor of the defendant, the defendant moved to confirm the award. The plaintiff filed a cross motion to vacate the award, again arguing that the arbitrator had “exceeded his powers when he resumed the role of arbitrator after acting as a mediator mid-arbitration.” In a one-page statement of reasons,...

New Jersey Appellate Division Holds Semblance of Acknowledgement Needed for Internet-Based Terms and Conditions Arbitration Clause to Apply

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Posted in Appellate

On July 16, 2021

In Wollen v. Gulf Streams Restoration and Cleaning LLC, the New Jersey Appellate Division, in a to-be-published opinion, reversed a trial court’s determination that a plaintiff was bound to an arbitration provision found on an internet-based company’s website. Specifically, the Appellate Court found that the plaintiff did not “knowingly and voluntarily agree to waive her right to resolve her disputes in court.” Defendant HomeAdvisor is an internet-based home improvement website that refers potential customers to third-party local service providers. A potential customer would log on to the HomeAdvisor website and create an online account in order to submit a service request. The customer was then required to provide information about the project before reaching the final webpage, which featured a button for the user to press requesting “free project cost information” from contractors in the area. An orange button with the words “View Matching Pros” was at the bottom of the page, with a line of text beneath it stating “[b]y submitting this request, you are agreeing to our Terms & Conditions.” The phrase “Terms & Conditions” was in blue and contained a hyperlink to a separate document entitled “HomeAdvisor Terms and Conditions.” However, a customer could click “View Matching Pros” without viewing the terms and conditions. Further, there was nothing to indicate that a...

New Jersey Supreme Court Confirms Enforceability of Arbitration Agreements Concerning Transportation Workers Under the NJAA

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Posted in Alternative Dispute Resolution / Employment Agreements

On September 24, 2020

In Colon v. Strategic Delivery Solutions, LLC and Arafa v. Health Express. Corp., plaintiffs contracted with corporate defendants to provide transportation and delivery services as independent contractors and signed arbitration agreements governing the terms and conditions under which they were to provide services. The agreements at issue explicitly referenced the Federal Arbitration Act (“FAA”), but neither referenced the New Jersey Arbitration Act (“NJAA”). In both cases, plaintiffs brought claims in New Jersey Superior Court asserting they were misclassified as independent contractors and alleging violations of wage payment and wage hour laws, and in both cases, defendants sought to compel arbitration and dismiss the lawsuits. Both trial courts granted the respective employers’ motions to dismiss the claims and compel arbitration, and plaintiffs appealed these decision to the Appellate Division of the New Jersey Superior Court. As detailed in a prior blog post, in June 2019, different panels of the Appellate Division issued divergent holdings concerning the appeals. The Colon panel observed that both the FAA and NJAA “favor arbitration” as a way to resolve disputes, and that the NJAA “governs all agreements to arbitrate” entered into on or after January 1, 2003 (with limited exceptions that did not apply). It further found that the FAA “does not occupy the entire field of arbitration” and, therefore, the...

New Jersey Appellate Panels Disagree on Enforceability of Arbitration Agreements Concerning Transportation Workers

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Posted in Alternative Dispute Resolution

On July 1, 2019

On June 4 and June 5, 2019, separate panels of the Appellate Division of the New Jersey Superior Court issued diametrically opposed decisions calling into question the enforceability of arbitration agreements involving employees and independent contractors who provide transportation services. In Colon v. Strategic Delivery Solutions, LLC and Arafa v. Health Express Corporation, two Appellate Division panels considered the same legal question: are arbitration agreements enforceable under New Jersey law where one of the signatories is exempt from arbitration under the Federal Arbitration Act (FAA)? Despite the uniformity of the issue considered, the respective holdings stand in stark contrast to one another, creating confusion as to how to interpret arbitration agreements moving forward. Colon and Arafa involved strikingly similar facts. Both the Colon and Arafa plaintiffs contracted with the respective corporate defendants to provide transportation and delivery services on their behalf with regard to pharmaceutical products. Both defendants classified the plaintiffs as independent contractors; and both plaintiffs executed arbitration agreements governing the terms and conditions under which they were to provide transportation services. Most significantly, in both cases the arbitration agreements at issue explicitly stated that they were to be governed pursuant to the FAA (The Arafa agreement stated that it “is governed by the Federal Arbitration Act,” while the Colon agreement stated that the...

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