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.
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.”
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.