Achey v. Cellco Partnership
On September 6, 2023, the New Jersey Supreme Court granted NJCJI’s and the Chamber of Commerce of the United States’ (the “Chamber”) joint application to appear as amici curiae in this important matter. In this case, the plaintiffs filed a class action lawsuit alleging that the defendants violated the New Jersey Consumer Fraud Act (“CFA”) by failing to disclose a $1.95 per month administrative charge in a cellular service agreement. The defendants subsequently moved to compel arbitration and stay proceedings in the trial court based on an arbitration clause contained within that agreement. Among other things, this arbitration clause included a “bellwether” provision that took effect whenever twenty-five or more customers with similar claims provided notice of their disputes. This bellwether provision was aimed to curb abuses associated with so-called “mass arbitration” where plaintiffs’ lawyers file thousands of identical arbitrations at once to generate leverage to force large settlements regardless of the merits of the cases. The trial court granted the defendant’s motion and compelled arbitration.
On appeal, the Appellate Division held that the cellular service agreement contained several unconscionable terms that cumulatively rendered the entire agreement unenforceable. The panel stated that the bellwether provision was unconscionable because it lacked an outer limit on how long the bellwether process could continue and failed to specify the number of cases that would need to be arbitrated before all the remaining cases would settle. Further, the Appellate Division found that this provision unduly prejudiced plaintiffs because it failed to toll the statute of limitations during the bellwether process. The panel held that the “cumulative effect of the various unconscionable terms render[ed] the arbitration agreement unenforceable for lack of mutual assent.” As a result, the Appellate Division reversed the trial court’s order compelling arbitration. Thereafter, the New Jersey Supreme Court granted certification.
Enforceability of bellwether provisions is vital to preventing abusive mass arbitration strategies that are currently running rife in the civil justice system. A broad determination by the Court that such provisions are unconscionable could further encourage this strategy, depriving defendants of the benefits of arbitration while giving plaintiffs’ lawyers a powerful tool for extracting settlements in marginal and unproven cases.
A copy of the Court’s Order granting the joint motion of NJCJI and the Chamber to appear as amici curiae in this matter can be found here. A copy of NJCJI and the Chamber’s amicus curiae brief can be found here. NJCJI thanks Gavin J. Rooney, Esq., of Lowenstein Sandler for his representation of NJCJI and the U.S. Chamber in this matter.
Padilla v. Young Il An
On September 5, 2023, the New Jersey Supreme Court granted NJCJI’s motion to appear as amicus curiae and participate in oral argument in connection with this matter. In this case, the New Jersey Supreme Court must address the scope of liability for owners of vacant lots arising from injuries on public sidewalks. The defendants in this matter owned a vacant lot in Camden, New Jersey. The lot was devoid of any structures and was not used in connection with any commercial or economic activity. The plaintiff fell and injured herself on the public sidewalk abutting the defendants’ property, and subsequently filed suit alleging that the defendants failed to properly maintain the public sidewalk. The trial court granted defendants’ motion for summary judgment, and the Appellate Division subsequently affirmed the trial court’s order.
The Appellate Division observed that while owners of commercial properties generally have a duty to maintain public sidewalks that abut their properties, this was not true for owners of vacant properties, which by their nature generate no economic activity and derive no substantial benefit from access to public sidewalks. Subsequently, the plaintiff petitioned for certification, which the New Jersey Supreme Court granted.
Here, expanding landowners’ duties to include maintenance of public sidewalks abutting vacant commercial properties would result in a substantial expansion of liability for businesses and property owners throughout the State. Such an expansion would be inequitable given that vacant lots produce no income and derive little benefit from the presence of abutting public sidewalks.
NJCJI’s in-house counsel, Alex Daniel, Esq., represents NJCJI in this matter and will appear for oral argument. At this time, oral argument has not been scheduled, but NJCJI anticipates a scheduling order in the coming weeks.
Pace v. Hamilton Cove
On September 6, 2023, the Supreme Court granted the defendants’ motion for leave to appeal in connection with this matter and ordered that NJCJI is permitted to appear as amicus curiae in support of the defendants. In this appeal, the Appellate Division held that stand-alone contractual class action waivers are per se unenforceable in New Jersey. The plaintiffs filed a class action lawsuit against the owners and operators of a luxury apartment complex. The plaintiffs, who are tenants of the complex, alleged that they were deceived by the defendants concerning certain security features the apartments were supposed to have, and claimed that the defendants thereby violated the New Jersey Consumer Fraud Act. In response, the defendants moved to dismiss the complaint or, alternatively, strike the plaintiffs’ class allegations based on class action waivers in the lease agreement, which barred plaintiffs from serving as class representatives or maintaining class claims against the defendants.
The trial court denied the defendants’ motion in its entirety and the Appellate Division affirmed the trial court. The panel acknowledged that “the right to pursue a class action may be waived in an arbitration agreement,” and that the Federal Arbitration Act “preempts states from invalidating class action waiver clauses contained within arbitration agreements on public policy or unconscionability grounds.” However, the panel found that since the lease agreement at issue did not include an arbitration provision and, therefore, the free-standing class action waiver provision was invalid because it violated public policy. The Appellate Division found that “there is no societal interest in enforcing class action waiver in a contract that does not contain a mandatory arbitration provision,” and held that free-standing class action waivers are categorically “unenforceable as a matter of law and public policy.” Following issuance of the Appellate Division’s decision, the defendants sought leave to appeal to the New Jersey Supreme Court, and NJCJI filed a motion to appear as amicus curiae.
The Appellate Division’s bright line rule prohibiting enforcement of free-standing class action waivers constitutes a significant curtailment of businesses’ right to contract. Furthermore, if this ruling remains in place, New Jersey would be out of step with most jurisdictions across the country that have addressed this issue.
A copy of NJCJI’s amicus curiae brief can be found here. The Order granting NJCJI’s motion for leave to appear as amicus curiae can be found here. NJCJI thanks Jeff Jacobson, Esq., of Faegre Drinker for his representation of NJCJI in this matter.
County of Passaic v. Horizon Healthcare Services, Inc.
On September 22, 2023, the New Jersey Supreme Court granted NJCJI’s motion to appear as amicus curiae in this matter and participate in oral argument. This case requires the New Jersey Supreme Court to address whether an arbitration agreement between two sophisticated parties is enforceable in the absence of an express waiver of the right to access the courts. In the instant case, the County of Passaic (“County”) filed a complaint against Horizon Healthcare Services, Inc. (“Horizon”), alleging, among other things, that Horizon breached its agreement to manage the County’s health benefits plan. Horizon subsequently moved to compel arbitration pursuant to a provision in the parties’ contract that provided that they would submit all disputes to binding arbitration under the rules established by the American Arbitration Association. The trial court granted Horizon’s motion and the County appealed.
On appeal, the County maintained that the arbitration agreement was unenforceable because it lacked an explicit waiver of the right to resolve disputes in court as required by the New Jersey Supreme Court’s holding in Atalese v. U.S. Legal Services Group, L.P. The Appellate Division affirmed the trial court’s order, holding that, even though the arbitration provision lacked an explicit waiver, the County was a sophisticated contracting party, and was not an employee or consumer lacking sufficient bargaining power to resist the extraction of an agreement to arbitrate. Thereafter, the County petitioned for certification, which the New Jersey Supreme Court granted.
Unlike traditional consumers, the sophisticated contracting parties in the instant case stood on relatively equal footing, negotiated at arm’s length and were represented by counsel. Here, expanding Atalese to encompass sophisticated commercial parties would be inequitable, would strip the parties of the negotiated benefits of arbitration, and sew confusion and uncertainty into the civil justice system.
NJCJI’s in-house counsel, Alex Daniel, Esq., represents NJCJI in this matter and will appear at oral argument. At this time, oral argument has not been scheduled, but NJCJI anticipates a scheduling order in the coming weeks.
Robey v. SPARC Group LLC
On September 22, 2023, the New Jersey Supreme Court granted NJCJI’s and the Chamber of Commerce of the United States (the “Chamber”) joint application to appear as amici curiae in this matter. In this case, the plaintiffs filed a class action lawsuit alleging that the defendant, a clothing retailer, falsely advertised clothing prices in violation of New Jersey consumer protection laws. Specifically, plaintiffs contend that the defendants fraudulently advertised clothing as being discounted even though it was allegedly never offered at the higher price. The plaintiffs argue that the defendant’s practice of “marking up to markdown” caused them an “ascertainable loss” sufficient to sustain a private right of action under New Jersey’s Consumer Fraud Act (“CFA”). The trial court ultimately dismissed the plaintiffs’ complaint for failure to state claims.
On appeal, the Appellate Division rejected the trial court’s findings and reversed in favor of the plaintiffs. The Appellate Division found that the discounts offered by the defendant were “illusory” and, therefore, constituted deceptive commercial practices. Moreover, the Appellate Division found that the plaintiffs had sufficiently alleged an “ascertainable loss” caused by defendant’s deceptive practice because the plaintiffs “received no value for the offered discount.” Although the defendant argued that the plaintiffs did not suffer a loss because they received exactly what they paid for at the price advertised in their store, the Appellate Division rejected this argument on the basis that the plaintiffs were promised discounts, but they “received no benefit from the discounts.”
Here, the Appellate Division’s opinion expands the scope of damages that businesses may be liable for in a private lawsuit under the CFA by effectively ignoring that the plaintiffs received exactly what they paid for at the agreed-upon price. Ultimately, this holding threatens to greatly expand liability in consumer class action lawsuits by unmooring the plaintiffs’ damages from any real or actual loss.
A copy of NJCJI’s and the Chamber’s joint amici curiae brief can be found here. A copy of the Court’s Order granting the joint motion of NJCJI and the Chamber to appear as amici curiae in this matter can be found here. NJCJI thanks Jeff Jacobson, Esq., of Faegre Drinker for his representation of NJCJI in this matter.