Who decides whether an arbitration agreement is enforceable – the trial court or the arbitrator?  The state Appellate Division recently waded back into the cesspool of “the arbitrability of arbitrability.”  Knight v. Vivint Solar Developer, LLC, ___ N.J. Super. ___ (App. Div. Dec. 2, 2020).

In Knight, the Appellate Division held that where there is a factual dispute as to whether the plaintiff signed the contract, including the box indicating assent to arbitration, the trial court, not the arbitrator, should decide whether the plaintiff agreed to arbitrate.

The Appellate Division distinguished the New Jersey Supreme Court’s decision in Goffe v. Foulke Management Corp., 238 N.J. 191 (2019), where the Court held that a dispute over the enforceability of an arbitration contract should be decided by the arbitrator, not the trial court.  According to the Appellate Division in Knight, Goffe applies where there is no dispute that the plaintiffs signed the contract and plaintiffs allege only that they were fraudulently induced into signing the contract.  But where there is a dispute as to whether the plaintiffs signed the contract, the trial court should decide whether the plaintiff agreed to arbitrate.  Op. at 14-16.

“In sum, the arbitrator cannot decide the validity of the [contract], unless and until the trial court initially resolves the issues of fact pertaining to the formation of the arbitration provision, and determines the parties agreed to arbitrate their claims. Absent that agreement, the arbitrator is not empowered to determine plaintiff’s issues concerning the formation and execution of the [contract]. In that regard, we are unpersuaded by defendants’ argument that because the arbitration agreement is contained within the [contract], which plaintiff also challenges, the arbitrator must determine its validity. In our view, that procedure puts the cart before the horse.”  Op. at 16-17.

Should you wish to discuss this matter in further detail please contact Shalom Stone, Stone Conroy, 973-400-4182 or sstone@stoneconroy.com.