In Pace v. Hamilton Cove, the New Jersey Supreme Court reversed the Appellate Division and held that stand-alone, contractual class action waivers, not tied to arbitration agreements, are not per se unconscionable under New Jersey law. The Court cautioned that class action waivers may still be held unconscionable under certain circumstances if the usual tests are met. But the Court held that the specific class action waiver involved in this case was not unconscionable and therefore held that the plaintiff’s putative class claims brought under the Consumer Fraud Act must be dismissed.
Here, NJCJI submitted an amicus brief and participated in oral argument. NJCJI demonstrated to the Court that the Appellate Division’s finding of per se unconscionability made New Jersey a national outlier. Indeed, courts in the neighboring states of New York and Pennsylvania both have enforced stand-alone class action waivers in consumer contracts, as have courts even in California. Moreover, NJCJI’s brief explained that the Appellate Division’s decision conflicted with prior decisions both from the United States Supreme Court and New Jersey Supreme Court. The New Jersey Supreme Court’s decision in the case reflected NJCJI’s arguments, citing the cases we relied upon and making New Jersey part of an increasing national consensus that stand-alone class action waivers may be enforced.
Importantly, the plaintiff in this matter sought thousands of dollars of damages for his individual claim, and the lease contract he signed was one of adhesion. Nevertheless, the Supreme Court noted that he could have found other housing if he did not wish to be bound by the class action waiver. The opinion cautioned that the Court might have reached a different conclusion about unconscionability in a situation where barring class actions might leave a plaintiff without an effective remedy or if a plaintiff lacked a meaningful choice. Thus, although stand-alone class action waivers may be an option for some New Jersey businesses to adopt in their contracts, incorporating class action waivers into arbitration agreements remains the safer course because the United States Supreme Court has held repeatedly that the Federal Arbitration Act makes agreements to arbitrate claims on an individual basis—effectively barring class actions—fully enforceable.
A copy of the Court’s decision can be found here. A copy of NJCJI’s amicus curiae brief can be found here. A link to the January 15th oral argument can be found here. NJCJI thanks Jeffrey S. Jacobson, co-chair of the class action practice group at Faegre Drinker Biddle & Reath, for his efforts drafting and arguing this case on behalf of NJCJI.