The Senate Environment Committee considered S697, legislation that would dramatically expand public nuisance doctrine this week.  After considering testimony from NJCJI and other friends from the business community, the Committee declined to vote to release the legislation.

For the second time in less than a year, the legislation sponsored by Senator Ruiz was again considered in Senate Environment.  As we explained in oral and written testimony, we appreciate the desire to mitigate the harm of lead paint, but Senate Bill 697 violates basic tenets of public nuisance doctrine under the common law in three distinct ways:

• As explained by the New Jersey Supreme Court in In re Lead Paint Litigation, a public nuisance by definition is limited to conduct “performed in a location within the actor’s control, which has an adverse effect on a common right.” None of the locations currently afflicted with deteriorating lead paint are under the control of paint manufacturers, nor does a hazardous condition in interior residential space affect a “common right.”

• Second, monetary damages for a public nuisance are specifically limited to “a private party who has suffered a special injury” – in other words, an injury of a kind different from that suffered by other members of the public. This legislation expressly eliminates the requirement of a special injury.

• Third, the public entity which proceeds “against the one in control of the nuisance may only seek to abate, at the expense of the one in control of the nuisance.” But because the legislation targets the manufacturers who produced lead paint several decades earlier and have no control over any existing nuisance, the historic limitation on public authorities to seek only abatement is also discarded.

As the New Jersey Supreme Court explained in its decision, these constraints on public nuisance claims are not arbitrary.  The doctrine exists for the specific purpose of addressing damage to property that belongs to the public, so that private persons  lack the incentive or capacity to correct – giving the State the opportunity to step in to eliminate those generally applicable injuries, and allowing those private individuals uniquely affected to sue for compensation for special injury.  

The Court emphasized the changes that would be accomplished by this legislation would “stretch the concept of public nuisance far beyond recognition and create new and entirely unbounded tort antithetical to the meaning and inherent theoretical limitations of the tort of public nuisance.”

NJCJI will continue to oppose legislative efforts to dismantle longstanding constraints on public nuisance litigation.  Opening the door to such litigation in any context risks setting dangerous precedent for many different industries operating in New Jersey and across the country.  Please contact Alida Kass if you would like to discuss such efforts further.

The newest justice on the New Jersey Supreme Court was confirmed this week by a vote of 39-0.  Fabiana Pierre Louis will take the seat of Justice Walter Timpone, who is retiring after just over four years on the Court.  He is retiring a few months shy of the mandatory retirement age of 70.  Pierre-Louis, by contrast, joins the Court as a 39 year old.  Governor Murphy effused that she will potentially serve “for decades to come.”

A former partner in the Cherry Hill office of Montgomery, McCracken, Walker and Rhoads, she previously worked as an Assistant U.S. Attorney and served as the attorney-in-charge of the U.S. Attorney’s Camden branch.  A graduate of Rutgers-Camden Law School, she clerked for Justice John Wallace. 

Although her Senate Judiciary Committee hearing was largely without controversy, she faced questions regarding her apparent advocacy on issues that might come before the Court.  On the day her nomination was announced, she wore an orange ribbon associated with an advocacy group that promotes policy changes that include extending liability to gun manufacturers for those injured by criminal gun violence.  She responded that she had believed the ribbon was only to honor of gun violence victims. 

She gave few clues regarding her judicial philosophy.  Asked if she agreed with the analogy that a judge should act like an umpire, calling balls or strikes and not advocating for one team, she replied, “I think it simplifies the role of a judge.  If you put ten umpires in a room and they look at the same close pitch, half might say it’s a ball, half might say it’s a strike.”

Senator Scutari, Chairman of the Senate Judiciary Committee, has said that Pierre-Louis could be sworn-in in the next few days, and should be on the Court by September 1, when the Court reconvenes.

Legislation that will shift the cost of the COVID pandemic onto New Jersey businesses and taxpayers has been on the Governor’s desk since it was voted out of the Assembly on July 30^th.  Governor Murphy has until September 14^th to sign, veto, or conditionally veto the legislation. If the Governor takes no action after 45 days the bill automatically becomes law. 

A3999 dictates that “essential workers” who contract COVID are presumed to have caught the virus on the job.  The presumption applies to an assertion of COVID infection, without a requirement of a positive test or even physician diagnosis.  It applies to all employees working at “essential businesses” who contracted COVID during the public health emergency declared by an executive order of the Governor and any extension of the order, without regard to their interaction with the general public.  And it applies equally to employees who became sick during the initial stay-home order, as well as to employees who become sick when a wide range of retail establishments are open, travel, dining, and – looking ahead – even gyms have reopened.

The data has never supported the presumption that essential employees are catching COVID on the job.  But since the stay-home order has been lifted, the Governor himself has repeatedly and emphatically identified the most common cause of new infections: out of state travel and house parties.  

Perhaps recognizing the disconnect between the presumption created in the bill, and observable reality, even the advocates have been unwilling to own the full scope of the legislation.  AFL-CIO advocate Eric Richard claimed in committee testimony that the legislation was already limited to workers who had contact with the general public.  The Assembly sponsor claimed the legislation is about ensuring that “essential workers who stepped up in the crisis” are compensated should they contract COVID-19.

We continue to urge the Governor to conditionally veto the legislation to align with advocates’ representations and his own observations.  Limiting the presumption to essential workers who “stepped up” during the shut-down, requiring evidence that they actually contracted COVID-19, and requiring some contact with the general public would be consistent with what other states have done to address the workers’ comp presumption.  And it would be consistent with basic fairness.

Please contact Alida if you would like to discuss this legislation further.

There was some good news from the New Jersey Supreme Court this week, as the Court overturned the Appellate Division decision below to uphold an arbitration agreement in Skuse v. Pfizer.

NJCJI participated as amicus at both the Appellate Division and Supreme Court.

Our participation at the Appellate Division was prompted by the surprise decision to even hear arguments that the trial court had improperly enforced the agreement and ordered the case to arbitration.  And indeed, our concern was warranted.  The decision authored by Judge Sabatino departed from state and US Supreme Court precedent to throw out the agreement.

Pfizer had distributed the agreement at issue via email as a training module, requiring employees to click through several slides.  The slides explained the nature of arbitration, and further explained that agreeing to arbitrate any employment-related disputes would be a condition of employment going forward, and that by continuing to work for 60 days following receipt of the agreement, the employee would be deemed to have consented to arbitrate any employment-related disputes.

Skuse argued that she was asked only to acknowledge the Agreement, not to assent to it, and that she never agreed to arbitrate her claims. 

Majority Decision

Justice Patterson wrote for the majority, joined by Justices LaVecchia, Fernandez-Vina, and Solomon.  Justice Albin concurred in the judgment to offer a roadmap of how subsequent arbitration challenges should be framed.  Chief Justice Rabner was in dissent, arguing the objections raised in Judge Sabatino’s decision below.  Justice Timpone did not participate.

Justice Patterson explained that existing New Jersey contract law recognizes that conduct can constitute contractual consent.  Under Kindred Nursing, courts must “place arbitration agreements on equal footing with all other contracts.”  So the clear and unambiguous language in the Pfizer agreement, indicating that continued employment after the policy’s effective date would be deemed consent to arbitration, is sufficient to create a binding agreement under generally applicable New Jersey law. 

The Court also addressed the suggestion from the Appellate Division that emailing such an agreement was insufficient to establish a binding contract, given the “volume of emails” addressed to the plaintiff.  “No principle of New Jersey contract law bars enforcement of a contract because that contract is communicated by e-mail,” and “contrary to the Appellate Division’s suggestion that an employee could easily miss the Agreement because it was sent by email, these communications could not be ignored because every employee was required to access and complete the module by a stated deadline.”

The Court also emphasized the general rule that “one who does not choose to read a contract before signing it cannot later relieve himself of its burdens.” 

Concurrence

Justice Albin concurred in the judgment to address arguments not raised by Skuse, writing what appears to be a guide for future litigants to challenge arbitration agreements.

Acknowledging that to date, the Court’s attention has been focused on whether employees or consumers have “clearly and unmistakably waived their right to seek relief in a judicial forum,” he warned ominously that the time is coming “soon” when “employers and corporations will develop the perfect, unassailable arbitration clause.”  And at that point, “we will have to address a more profound question.  Are such contracts of adhesion contrary to New Jersey’s most fundamental public policy – the constitutional right to a civil jury trial – and therefore unconscionable and unenforceable under the Federal Arbitration Act and its state counterpart?”

The argument that such contracts should be considered “illicit, industry-wide contract of adhesion,” rests on two propositions: that they are “offered on a take-it-or-leave-it basis,” and that they “impose unconscionable terms.”

As precedent for holding such contracts unenforceable despite the preemptive contract protections of the FAA, he points to Henningsen v. Bloomfield Motors.  Henningsen involved waivers of warranties of merchantability for automobiles that were understood to be used industry-wide, giving consumers “no real freedom of choice.”  “The absence of freedom of contract was central to our holding that the warranty-waiver provision violated public policy and therefore was invalid.” 

Having established that industry-wide contract practices involving waivers of rights have, in at least one instance, been determined to be unenforceable as against public policy, Justice Albin suggests that prevalent arbitration agreements should be viewed through the same “prism of general contract principles.”  He argues that arbitration agreements could be “voided on that non-discriminatory basis” in a way that “would not appear to offend either the FAA or the NJAA.”

And yet, this theory necessarily runs into the principle enunciated in Concepcion, cited by Justice Patterson’s majority decision.  The “take-it-or-leave-it” contract is not generally unenforceable in New Jersey.  It must also impose “unconscionable” terms.  But as Concepcion explained, Federal Arbitration Act does not leave to the states the policy choice of determining that binding arbitration is an “unconscionable” term. 

And Justice Albin’s ringing endorsement of the trial by jury in civil cases, which is “deeply rooted in New Jersey’s history and predates the founding of our Republic” notwithstanding, Kindred Nursing answered that question.  The Kentucky Supreme Court had affirmed “in ringing terms” the jury right’s “unsurpassed standing in the State Constitution,” explaining “that right and that right alone as a divine God-given right,” “the only thing” that must be “held sacred and inviolate.”  No matter.  Justice Kagan wrote for an 7-1 majority to remind states that even generally applicable contract defenses may not be applied “in a fashion that disfavors arbitration.”

Nevertheless, Justice Albin has left a trail of breadcrumbs for future litigants seeking to disavow agreements to arbitrate, laying out an argument that at least one member of the Court finds compelling.

Please contact Alida if you would like to discuss this decision, or the ongoing NJCJI litigation in defense of employment arbitration rights.

The New Jersey Supreme Court issued a notable decision this week in Sun Chemical Corporation v. Fike Corporation and Suppression Systems, Inc.

The decision came in response to a certified question from the Third Circuit, asking whether “a Consumer Fraud Act claim can be based, in part or exclusively, on a claim that also might be actionable under the Products Liability Act.”  Justice Solomon wrote for a unanimous Court, though Justices Patterson and Timpone did not participate.

The Court held that claims involving malfunctioning products were not necessarily subsumed by the PLA, drawing a line between harm caused by the product, and harm resulting from fraud and misrepresentation.  Irrespective of the nature of the damages, a CFA claim alleging “express or affirmative misrepresentations” may be brought in the same action as a PLA claim premised upon product manufacturing, warning, or design defects.

The case involved an “explosion isolation and suppression system” purchased by ink manufacturer Sun Chemical to prevent and contain potential explosions in their dust collection system. 

On the first day the Suppression System was operational, a fire occurred in the dust collection system.  An alarm on the system activated but was not audible.  An explosion then occurred in the dust collection system, injuring employees and causing damage to the Sun Chemical facility.

Sun Chemical brought a complaint under the CFA alleging that Fike had made several affirmative misrepresentations about the system: that it would prevent explosions; that it would have an audible alarm; that it complied with industry standards; and that the system had never failed.

The District Court held the claims are governed by the PLA, and that the plaintiff may not avoid its application by “artfully crafting its claims under the CFA.”  On appeal, the Third Circuit certified clarifying questions to the New Jersey Supreme Court.

Sun Chemical argued that even the physical damage to property was not governed by the PLA because it was not caused by actual product defects – they were the result of Fike’s misrepresentations. 

In reaching its decision, the Court distinguished the facts of Sun Chemical from the kinds of claims at issue in In re Lead Paint Litigation, as well as Sinclair v. Merck & Co., which involved Vioxx.

The Court noted that the harms alleged in Lead Paint – physical damage to property and personal injury – as well as the failure to warn of those harms, were of the type intended to be addressed by the PLA.  Similarly, in Sinclair, the Court noted, the “heart” of plaintiffs’ case was the “potential for harm caused by the drug”, an allegation that “clearly falls within” the scope of the PLA.

So claims premised on “a product’s manufacturing, warning, or design defect” must be brought under the PLA, and “CFA claims for the same conduct are precluded.”  But claims for “deceptive, fraudulent, misleading, and other unconscionable commercial practices” may be brought under the CFA.  It is not “the nature of the plaintiff’s damages” that determines whether the cause of action falls under the CFA or PLA, but “the theory of liability underlying the claim.”

NJCJI will be hosting a webinar with Gavin Rooney of Lowenstein Sandler and Jeff Jacobson of Faegre Drinker to discuss the implications of this decision in greater detail.  Please contact Alida Kass if you would be interested in participating in this event.

Legislation that will shift the cost of the COVID pandemic onto New Jersey businesses and taxpayers moved quickly in the Assembly this week.  A3999 dictates that “essential workers” who contract COVID are presumed to have caught the virus on the job.

The legislation was voted out of the Senate in May but was held in the Assembly.  With the stay-at-home order lifted and Governor Murphy emphasizing the prevalence of COVID transmission primarily at house parties and travel to out-of-state hotspots, it seemed we were past the time when an ongoing presumption of workplace transmission would be taken seriously.

It was opposed by NJCJI as well as many of our friends in the business community.  Recognizing the legislation was expected to move quickly to a floor vote, we emphasized the need for two significant amendments.

First, we argued the presumption should be limited to COVID cases diagnosed within two weeks of the lifting of the stay-at-home order.

The data has never supported the presumption that essential employees are catching COVID on the job, but there is even less validity to the presumption since Governor Murphy’s stay-at-home order was lifted June 9^th.  And with a variety of “non-essential” businesses now opening alongside those characterized as “essential,” it’s hard to see why the employees currently working at the drug store should have a different presumption of workplace infection than the hairdressing shop next door.

We also argued that the scope of “essential employee” should be limited to those employees who have actual interaction with the general public.

On this point, we seemed to be aligned with advocates for the bill.  Eric Richard of the AFL-CIO accused us of having mischaracterized the legislation, claiming the legislation already limited the scope of “essential employee” to those with contact with the general public.

Several committee members of both parties expressed concern about scope of the legislation and support for the amendments we were requesting.

The legislation was nevertheless posted for a floor vote on Thursday.  Assemblymen Jay Webber, Brian Bergen, and Ned Thomson all raised numerous concerns about the legislation, and noted the utter absence of data to support the presumption.  

When the final tally was read, the bill had passed by a one vote margin, 41-27-7.  However, one legislator who had been recorded as an Abstention changed his vote to Yes after the vote was closed, so the tally has switched to 42-27-6.  The bill is now on the Governor’s desk.  NJCJI and many of our friends in the business community are urging the Governor to conditionally veto the bill to incorporate the requested amendments discussed above.

One final note: It’s telling that even the advocates have been unwilling to own the full scope of this legislation.

In addition to Eric Richard’s claim that “essential employee” was already limited to workers who had contact with the general public, Assemblyman Giblin has commented that the bill is about ensuring “that essential workers who stepped up in the crisis — everyone from first responders to grocery store workers — are fairly compensated should they contract COVID-19.” 

A presumption limited to essential workers who “stepped up” when everyone else was staying home is precisely what we have been asking for.  Unfortunately, we’re creating one standard for the drug store clerk, and a different standard for the employee at the hair salon working next door, for reasons the advocates themselves seem unable to explain.

Please contact Alida Kass if you would like to discuss this legislation further.

NJCJI has had our disagreements with the reluctance by NJ courts to enforce arbitration agreements.  So it is worth noting when thoughtful and appropriate analysis arrives at the right outcome.

This week, in an opinion by Justice Fernandez-Vina, the New Jersey Supreme Court addressed a pair of arbitration cases – Arafa v. Health Express Corporation and Colon v. Strategic Delivery Solutions, LLC.  Justice Albin concurred with the judgment in part and dissented in part.

Both appeals involved arbitration agreements, with well-drafted waivers of class action and jury trial that would pass the heightened requirements of Atalese v. U.S. Legal Services Group, which normally would be the end of the analysis. 

But these cases involved individuals working as drivers – one in trucking, the other in medical and pharmaceutical product delivery.  To the extent these drivers are engaging in interstate transportation, they are exempted from the contractual protections of the Federal Arbitration Act, which excludes “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  The US Supreme Court has further determined that the statutory reference to “employees” is not a term of art distinct from independent contractors, but rather applies to the workers in general.

So the question turned on the applicability of the New Jersey Arbitration Act, which mirrors the FAA in most respects, but which does not include the exemption language excluding interstate transportation.  The analysis to have the NJAA apply was straightforward, and the appellate division decision in Arafa, which held the arbitration agreement null and void, was overturned. 

But it was also notable that Justice Albin was alone in dissent on the enforceability of the class waiver.  In the 2006 decision of Muhammad v. County, the NJ Supreme Court held class action waivers unconscionable, at least in consumer contracts of adhesion.  In 2011, the US Supreme Court decided AT&T Mobility v. Concepcion, holding that class actions were incompatible with arbitration and rejecting such state “unconscionability” doctrines as preempted under the FAA. 

Justice Albin noted that Concepcion “in no way restricts” the state court’s application of Muhammad to the NJAA, and Muhammad therefore still controls class-arbitration waivers under the NJAA.  He further argued that for individual employees “pursuing small statutory wage claims,” class-waiver provisions should similarly be considered unconscionable and unenforceable. 

If you are interested in more about these cases or NJCJI’s engagement on matters regarding arbitration please contact Alida Kass.