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New Jersey Courts Enforce Mandatory, Unambiguous Arbitration Clauses

Thomas W. Hartmann
The Hartmann Law Firm LLC
[email protected]

One of the options that contracting parties may consider in deciding how to resolve potential disputes is arbitration. Some believe that arbitration is a faster, less expensive and less costly way to resolve controversies. If parties agree to this, they should be careful to document this agreement clearly. They should also understand that if they sign such an agreement, the court is likely to assume the parties read and understood what they signed.

While courts in this state favor arbitration and tend to enforce unambiguous, mandatory arbitration clauses, courts should not be expected to enforce purely optional, barebones arbitration clauses such as: "Either the Owner or the Contractor may submit any dispute related to this Contract to Arbitration in accordance with the American Arbitration Association's Construction Industry Arbitration Rules." Such a provision lacks the "mandatory" language courts require.

In the employment context, an agreement to arbitrate "must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim." Leodori v. CIGNA Corp., 175 N.J. 293, 302 (2003);

In Garfinkel v. Morristown Obstetrics & Gynecology Associates, 168 N.J. 124, 135 (2001), the Court went on: "in the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be. In respect of specific contractual language, a clause depriving a citizen of access to the courts should clearly state its purpose. The point is to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue."

These principals were recently confirmed in Delle Fave v. The Neiman Marcus Group, 25-2-3866, App. Div. (2014). In this case, the plaintiff asserted claims for violation of the Law Against Discrimination and the Conscientious Employee Protection Act, as well as for retaliation for having filed a workers' compensation claim. Neiman Marcus sought to compel arbitration pursuant to the employee handbook and a free-standing Mandatory Arbitration Agreement, both of which plaintiff acknowledged receiving. The plaintiff wanted to litigate.

The appellate court found that plaintiff accepted the Mandatory Arbitration Agreement and handbook's mandatory arbitration provisions, despite her claims that she did not read or understand what she acknowledged receiving.

As with all legal documents, contracts that involve the requirement that disputes be submitted to arbitration must be carefully drafted, reviewed, read and understood.

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