(NOTE: The status of this decision is Published.)
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
DOCKET NO. A-2580-17T1
APPROVED FOR PUBLICATION
October 17, 2018
v. APPELLATE DIVISION
JENNY CRAIG, INC., LILLIAS
PIRO, individually, and DENISE
JC USA, INC.,
Submitted September 24, 2018 – Decided October 17, 2018
Before Judges Messano, Fasciale and Rose.
On appeal from Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-6238-17.
Zatuchni & Associates, LLC, attorneys for appellant
(David Zatuchni, on the brief).
Ogletree, Deakins, Nash, Smoak & Stewart, PC,
attorneys for respondent (Sharon P. Margello and
Jocelyn A. Merced, on the brief).
The opinion of the court was delivered by
This appeal requires us to decide whether to invalidate an arbitration
agreement because the parties failed to identify any arbitration forum and any
process for conducting the arbitration. In general, a forum is the mechanism –
or setting – that parties use to arbitrate their dispute. They could have
designated an arbitral institution (like the American Arbitration Association
(AAA) or the Judicial Arbitration and Mediation Services (JAMS)), or they
could have communicated a general method for selecting a different arbitration
setting. The process is important because the rights associated with arbitration
forums differ depending on which is chosen, or how the arbitral process is
defined. Here, the agreement ignored the subject altogether.
We hold that the parties lacked a "meeting of the minds" because they
did not understand the rights under the arbitration agreement that ostensibly
foreclosed plaintiff's right to a jury trial. We therefore reverse the order
compelling arbitration for lack of mutual assent.
At the time of her termination, plaintiff was eighty-two years old. She
had worked for defendant JC USA, INC. – a weight loss, weight management,
and nutrition company – for twenty-six years. During that time, plaintiff
provided weight loss counseling. Defendant gradually reduced plaintiff's full-
time hours to only three hours per week. The substantial reduction in hours
led to her termination.
Plaintiff filed her complaint alleging (1) age discrimination and
harassment in violation of the New Jersey Law Against Discrimination
(NJLAD), N.J.S.A. 10:5-1 to -49; (2) discriminatory discharge and/or
constructive termination in violation of the NJLAD; and (3) aider and abettor
liability under the NJLAD. Defendant then filed its motion to compel
arbitration relying on the parties' arbitration agreement.
Plaintiff has no recollection of signing the document that contained the
arbitration agreement, which the parties did not execute when defendant hired
her. Rather, in 2011, twenty years after she was hired, defendant presented
plaintiff with the document, which she signed to maintain her employment. In
pertinent part, the agreement provides:
Any and all claims or controversies arising out
of or relating to [plaintiff's] employment, the
termination thereof, or otherwise arising between
[plaintiff] and [defendant] shall, in lieu of a jury or
other civil trial, be settled by final and binding
arbitration. This agreement to arbitrate includes all
claims whether arising in tort or contract and whether
arising under statute or common law including, but not
limited to, any claim of breach of contract,
discrimination or harassment of any kind.
. . . [Plaintiff] will pay the then-current Superior
Court of California filing fee towards the costs of the
arbitration (i.e., filing fees, administration fees, and
arbitrator fees) . . . .
If enforceable, plaintiff gave up her right to a jury trial by executing the
agreement. That is not an issue. The agreement, however, said nothing about
what forum generally replaced that right (although it confusingly referred to
California court filing fees). The judge recognized this important omission
when he suggested that "the choice of which arbitral body would conduct the
arbitration would be turned over to the [p]laintiff." In other words, the judge –
not the parties – decided who would pick the forum.
On appeal, plaintiff primarily argues that the arbitration agreement
lacked mutual assent and is therefore invalid as a matter of contract law. She
maintains that the parties did not reach a "meeting of the minds" as to the
rights that replaced her right to a jury trial. She also argues that the arbitration
agreement is unconscionable. 1
Appellate courts exercise de novo review of a judge's decision on the
enforceability of contracts, such as an arbitration clause. Morgan v. Sanford
We need not reach the question of whether the arbitration agreement is
otherwise unconscionable because we have invalidated the agreement for lack
of mutual assent.
Brown Inst., 225 N.J. 289, 302-03 (2016). Whether a contractual arbitration
clause is enforceable is a legal issue; therefore, this court affords no special
deference to the judge's determination of that issue. Hirsch v. Amper Fin.
Servs., LLC, 215 N.J. 174, 186 (2013).
We begin by addressing plaintiff's contention that the arbitration
agreement is invalid as a matter of law. Plaintiff emphasizes that there are
significant consequences to the absolute absence of any reference in the
arbitration agreement as to the process for generally selecting an arbitration
forum. She asserts that without that information communicated somehow in
the agreement – whether it be by designating AAA, JAMS, or some other
mechanism intended to replace her right to a jury trial – there exists no mutual
Longstanding principles of law govern our analysis. The Federal
Arbitration Act (FAA), 9 U.S.C.A. §§ 1 to 16, and the New Jersey Arbitration
Act, N.J.S.A. 2A:23B-1 to -32, reflect federal and state policies favoring
arbitration of disputes. Roach v. BM Motoring, LLC, 228 N.J. 163, 173-74
(2017). Congress enacted the FAA "to 'reverse the longstanding judicial
hostility' towards arbitration agreements and to 'place arbitration agreements
upon the same footing as other contracts.'" Id. at 173 (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)).
In Atalese v. United States Legal Services Group, L.P., the New Jersey
Supreme Court recognized that "[t]he FAA requires courts to 'place arbitration
agreements on an equal footing with other contracts and enforce them
according to their terms.'" 219 N.J. 430, 441 (2014) (quoting AT&T Mobility
v. Concepcion, 563 U.S. 333, 339 (2011)). As to the application of contract
law principles to arbitration agreements, the Court stated:
"[A] state cannot subject an arbitration agreement to
more burdensome requirements than" other
contractual provisions. An arbitration clause cannot
be invalidated by state-law "defenses that apply only
to arbitration or that derive their meaning from the
fact that an agreement to arbitrate is at issue."
Arbitration's favored status does not mean that
every arbitration clause, however phrased, will be
enforceable. . . . Section 2 of the FAA "permits
agreements to arbitrate to be invalidated by 'generally
applicable contract defenses.'" Accordingly, the FAA
"permits states to regulate . . . arbitration agreements
under general contract principles," and a court may
invalidate an arbitration clause "'upon such grounds as
exist at law or in equity for the revocation of any
[Ibid. (citations omitted).]
Indeed the Supreme Court of the United States recently proclaimed that the
FAA requires that courts place arbitration agreements "on equal footing with
all other contracts." Kindred Nursing Ctrs. Ltd. P'ship v. Clark, 581 U.S. ___,
137 S. Ct. 1421, 1424 (2017).
New Jersey law governing the enforceability of arbitration agreements is
well settled. Like any contract, the parties must reach such an agreement by
mutual assent. Atalese, 219 N.J. at 442. There must be a "meeting of the
minds" for the agreement to be enforceable. Ibid. The party from whom an
arbitration clause has been extracted, must "clearly and unambiguously" agree
to waive his or her statutory rights. Id. at 443 (quoting Leodori v. Cigna
Corp., 175 N.J. 293, 302 (2003)). "[C]ontractual language alleged to
constitute a waiver [of statutory rights] will not be read expansively."
Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132
(2001). "[B]ecause arbitration involves a waiver of the right to pursue a case
in a judicial forum, courts take particular care in assuring the knowing assent
of both parties to arbitrate, and a clear mutual understanding of the
ramifications of that assent." Atalese, 219 N.J. at 442-43 (emphasis added).
Following basic principles of contract law, our courts have previously
invalidated arbitration agreements. See, e.g., id. at 445-48 (concluding the
agreement failed to clearly identify the waiver of a jury trial); Leodori, 175 N.J. at 302-07 (finding there existed no evidence that an employee consented
to an arbitration provision in an employee handbook); Garfinkel, 168 N.J. at
132-36 (invalidating an arbitration agreement as ambiguous); Kleine v.
Emeritus at Emerson, 445 N.J. Super. 545, 552-53 (App. Div. 2016) (reversing
for lack of mutual assent because the arbitration process contemplated by the
clause in question was unavailable when the parties executed their contract).
Kleine is similar to our facts but not directly on point. In Kleine,
although the parties designated AAA as the arbitral forum, AAA was not
available when they executed the arbitration agreement. 445 N.J. Super. at
550, 552. Applying the requirement for mutual assent to the enforceability of
the agreement, we stated that
when the parties contracted, their exclusive forum for
arbitration was no longer available; there being no
agreement to arbitrate in any other forum, arbitration
could not be compelled. In short, . . . there was no
meeting of the minds as to an arbitral forum if AAA
was not available. As Atalese instructs, the party from
whom such a provision has been extracted must be
able to understand — from clear and unambiguous
language — both the rights that have been waived and
the rights that have taken their place.
[Id. at 552-53 (emphasis added).]
The difference between Kleine and our case is that, here, the parties omitted
any reference whatsoever to an arbitral forum. See, e.g., NAACP of Camden
Cty. E. v. Foulke Mgmt., 421 N.J. Super. 404, 431 (2011) (voiding an
agreement for a number of reasons, including the fact that "the documents do
not clearly and consistently express the nature and locale of the arbitration
We now address the important consequences of failing to identify the
process for selecting an arbitration forum, such as designating in the contract
an arbitral institution itself or otherwise identifying a general method for
selecting an arbitration forum.
Selecting an arbitral institution informs the parties, at a minimum, about
that institution's arbitration rules and procedures. Without knowing this basic
information, parties to an arbitration agreement will be unfamiliar with the
rights that replaced judicial adjudication. That is, the parties will not reach a
"meeting of the minds."
For example, AAA uses certain procedures for arbitrating employment
disputes.2 AAA adheres to due process safeguards, which at a minimum meet
the standards outlined in the National Rules for the Resolution of Employment
Disputes. Ordinarily, when parties select AAA, they make AAA's rules part of
their arbitration agreement. Such rules address, but are not limited to,
For an analysis of AAA's employment arbitration rules, see www.adr.org.
This site identifies AAA's rules amended as of November 1, 2009, with a
revised introduction as of October 1, 2017.
notification requirements, the initiation of the proceedings, management
conferences, discovery, the location of the hearing(s), the number of
arbitrators, communications with the arbitrator(s), attendance at the hearings,
dispositive motions, evidence, modification of awards, applications to court,
fees, expenses, and costs. Picking AAA, for example, helps the parties reach a
"meeting of the minds" as to the rights that replace the right to a jury trial in
Similarly, JAMS provides its own set of arbitration rules and procedures
applicable to its alternative dispute resolution (ADR) services, such as JAMS '
employment arbitration rules and procedures. 3 We need not detail those rules
here. The point is that selection of JAMS as an arbitral institution – or any
other ADR forum – informs parties about the rights that replace those that they
waived in the arbitration agreement. We are not talking about insignificant
aspects of the arbitration process. The associated rights connected with the
selection of an arbitral forum generally establish the substantive and
procedural setting for the entire arbitration process.
Take, for example, the relevant part of the arbitration agreement reached
by the parties in Atalese. They identified AAA, JAMS, and the applicable
rules. The agreement stated in part:
[T]he claim or dispute shall be submitted to binding
arbitration . . . . The parties shall agree on a single
arbitrator to resolve the dispute. The matter may be
arbitrated either by [JAMS] or [AAA] . . . . The
conduct of the arbitration shall be subject to the then
current rules of the arbitration service.
[Atalese, 219 N.J. at 437 (emphasis added).]
We do not mean to imply that there must be "magic words" in the agreement as
to the rights that replace the right to judicial adjudication. Imposing such a
requirement would upset the "equal footing" that arbitration contracts enjoy
with all other contracts. But it is important, as explained by Atalese, that the
arbitration agreement reflect a "clear mutual understanding of the
ramifications" of the parties' mutual assent to waive adjudication by a court of
law. Id. at 443. In some fashion, the agreement must communicate that.
Although not binding on us, an issue similar to the one in Kleine arose in
another jurisdiction where the Court was unwilling to permit a judge to select
– or, like here, unilaterally allow one party to do so after the fact – an
arbitration forum when the one selected by the parties in their arbitration
agreement became unavailable. In Covenant Health & Rehabilitation of
Picayune v. Moulds, 14 So. 3d 695, 706 (Miss. 2009), the arbitration clause
provided that the parties would arbitrate any dispute following "[AAA] and its
rules and procedures." AAA then became unavailable. Ibid. The Mississippi
Supreme Court refused to "select a forum not anticipated by either of the
parties." Id. at 707. Similar to Kleine, the Court invalidated the arbitration
clause. Id. at 706. To do otherwise would be re-writing the arbitration
agreement, as the judge attempted to do here.
The failure to identify in the arbitration agreement the general process
for selecting an arbitration mechanism or setting – in the absence of a
designated arbitral institution like AAA or JAMS – deprived the parties from
knowing what rights replaced their right to judicial adjudication. Again, we do
not impose any special language that parties must use in an arbitration
agreement. Imposing such an obligation would violate Kindred Nursing,
Atalese, and the other cases that preclude subjecting arbitration agreements to
more burdensome requirements than other contractual agreements.
For an example of how to generally communicate this important missing
information, we cite Oasis Health & Rehabilitation of Yazoo City, LLC, v.
Smith, 42 F. Supp. 3d 821 (S.D. Miss. 2014). In Smith, the parties picked an
arbitral institution that, unbeknownst to them, was non-existent. But in their
agreement, they identified a general process for selecting an arbitration forum
if the institution they selected became unavailable. Id. at 824. In Smith, the
parties agreed to
participate in formal . . . Arbitration to be conducted
by ADR Associates, LLC through its Dispute
Resolution Process for Consumer Healthcare Disputes
("ADR Associates Rules"), which are incorporated
herein b[y] reference, and as more fully set forth
below. If ADR Associates, LLC is unable or
unwilling to conduct the ADR process at the time of
the dispute, the parties shall mutually agree upon an
alternative organization that is regularly engaged in
providing ADR services to conduct the . . .
Arbitration. If the [p]arties cannot agree on a[n] . . .
arbitrator, each party shall select one . . . arbitrator
and they together shall choose a third . . . arbitrator
who shall conduct the ADR Process.
In enforcing the arbitration agreement, the court noted that the parties
"explicitly contemplate[d] that the[y] . . . might not agree [on an arbitral
institution] and prescribe[d] an agreed method for selection in that event . . . ."
Id. at 826. That is, they reached a "meeting of the minds" as to what rights
replaced the right to a jury trial.
Like Smith, and without requiring specific language, an arbitration
agreement might generally reflect a desire for the participation of a neutral
arbitrator, who would participate with a panel of arbitrators selected by the
parties to the arbitration. In such an instance, the arbitration agreement might
permit each party to pick an arbitrator and then those arbitrators would select
the neutral arbitrator. Or the parties might agree to some other process, so
long as they express in some fashion what that process is. To have a "meeting
of the minds," the parties must mutually understand what rights replace those
that they gave up.
In a contract in which one gives up a right – a jury trial for example –
expecting to resolve a dispute in a some other forum, one must know about
that other forum. Without that knowledge, they are unable to understand the
ramifications of the agreement. If the parties do not identify an arbitral
institution (such as AAA or JAMS), then they should identify the process for
selecting an alternate forum. Without doing that, they have no realistic idea
about the rights that replaced judicial adjudication because not all arbitration
forums, mechanisms, or settings are alike.
Reversed and remanded to the trial court for further proceedings. We do
not retain jurisdiction.