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.