Kernahan v. Home Warranty Administrator of Florida, Inc.

Annotate this Case

Plaintiff Amanda Kernahan purchased a “home service agreement” from defendants Home Warranty Administrator of Florida, Inc., and Choice Home Warranty. When she became dissatisfied, she filed a complaint in Superior Court seeking statutory and common law relief. Plaintiff claimed that the agreement misrepresented its length of coverage and that the deceptively labelled “MEDIATION” section of the agreement failed to inform her that she was waiving her right to a jury trial and would be deterred from seeking the additional remedies of treble damages, punitive damages, and attorney’s fees and costs. Defendants filed a motion to dismiss the complaint with prejudice in favor of arbitration, citing the "mediation" provision. The trial court denied defendants’ motion to dismiss, concluding that the arbitration provision was unenforceable. The court found the provision both ambiguous and noncompliant with Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), “in either its form or its function.” The court subsequently denied defendants’ motion for reconsideration, rejecting defendants’ argument that language stating that all claims will be resolved “exclusively” by arbitration would or should have adequately informed plaintiff that she is waiving her right to proceed in court, as opposed to use of other available dispute resolution processes. The Appellate Division affirmed the trial court’s refusal to dismiss the complaint, and the New Jersey Supreme Court also affirmed.

SYLLABUS

This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the
Clerk for the convenience of the reader. It has been neither reviewed nor approved by the
Court. In the interest of brevity, portions of an opinion may not have been summarized.

Amanda Kernahan v. Home Warranty Administrator of Florida, Inc.
(A-15-17) (079680)

Argued September 12, 2018 -- Decided January 10, 2019

LaVECCHIA, J., writing for the Court.

In this appeal, the Court addresses whether parties to a consumer contract intended to
create an agreement to arbitrate through the insertion of language within an alternative
dispute resolution provision.

Plaintiff Amanda Kernahan purchased a “home service agreement” from defendants
Home Warranty Administrator of Florida, Inc., and Choice Home Warranty (collectively,
defendants). When she became dissatisfied, she filed a complaint in Superior Court seeking
statutory and common law relief. Plaintiff claimed that the agreement misrepresented its
length of coverage and that the deceptively labelled “MEDIATION” section of the
agreement failed to inform her that she was waiving her right to a jury trial and would be
deterred from seeking the additional remedies of treble damages, punitive damages, and
attorney’s fees and costs. Defendants filed a motion to dismiss the complaint with prejudice
in favor of arbitration, citing the alternative dispute resolution provision.

The trial court denied defendants’ motion to dismiss, concluding that the arbitration
provision is unenforceable. The court found the provision both ambiguous and noncompliant
with Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), “in either its form or
its function.” The trial court reasoned that the provision does not contain clear language that
would inform the consumer she is agreeing to arbitrate all disputes and that she is waiving
her right to a jury trial. The court cited the provision’s failure to convey unambiguously to a
consumer that there is a difference between resolving a dispute in court and resolving it in
arbitration. The court subsequently denied defendants’ motion for reconsideration, rejecting
defendants’ argument that language stating that all claims will be resolved “exclusively” by
arbitration would or should have adequately informed plaintiff that she is waiving her right to
proceed in court, as opposed to use of other available dispute resolution processes.

The Appellate Division affirmed the trial court’s refusal to dismiss the complaint, and
this Court granted certification. 231 N.J. 334 (2017).

HELD: The so-called “arbitration agreement” within this consumer contract fails to support
a finding of mutuality of assent to form an agreement to arbitrate. The provision’s language
is debatable, confusing, and contradictory -- and, in part, misleading. The “arbitration
1
agreement” is also obscure when this consumer contract is viewed as a whole. The provision
does not fairly convey to an ordinary person that arbitration would be the required method of
dispute resolution. Accordingly, this arbitration agreement is not enforceable.

1. Federal and state law governing arbitration agreements guide this matter. Both the
Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 to 16, and the New Jersey Arbitration Act,
N.J.S.A. 2A:23B-1 to -32, value the benefits from arbitration of disputes and encourage
enforcement of arbitration agreements. In a recent opinion, the Supreme Court emphasized
the FAA’s “equal-treatment principle,” stating that the FAA not only preempts any state rule
that facially discriminates against arbitration but also “displaces any rule that covertly
accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the
defining features of arbitration agreements.” Kindred Nursing Ctrs. L.P. v. Clark, 581 U.S.
___, 137 S. Ct. 1421, 1426 (2017). The Court cautioned that state court decisions that rest on
general principles may violate the FAA if they implicitly “rely on the uniqueness of an
agreement to arbitrate as [their] basis.” Ibid. (pp. 2-3, 16-18)

2. New Jersey codifies its own hospitable approach toward arbitration in the New Jersey
Arbitration Act, using terms nearly identical to those of the FAA. The statutory policies of
the FAA and New Jersey law are in synchronicity. In this state, when called on to enforce an
arbitration agreement, a court’s initial inquiry must be -- just as it is for any other contract --
whether the agreement to arbitrate all, or any portion, of a dispute is “the product of mutual
assent, as determined under customary principles of contract law.” Atalese, 219 N.J. at 442.
And, equivalent to federal law, parties may not be compelled “to arbitrate when they have
not agreed to do so.” Ibid. (pp. 19-20)

3. In Atalese, this Court relied on mutuality of assent as its animating principle when
considering the enforceability of an agreement to arbitrate in a consumer contract for debt-
adjustment services. 219 N.J. at 442. At bottom, the judgment in Atalese, which declined to
enforce the arbitration provision at issue, is rooted in the notion that mutual assent had not
been achieved because the provision did not, in some fashion, explain that it was intended to
be a waiver of the right to sue in court. Id. at 436. Because the provision could not be
deemed a knowing waiver of the right to sue in court, a meeting of the minds did not occur.
Id. at 435, 447. The consumer context of the contract mattered. (pp. 20-21)

4. Here, the Court again reviews consumer contract language to determine whether there
was mutuality of assent to form an agreement to arbitrate. But, unlike in Atalese, the
question in this case is whether mutuality of assent is achieved when a provision confusingly
and unpredictably shifts between the terms “arbitration” and “mediation” and the procedures
for those proceedings. The parties and amici disagree on whether the term arbitration is self-
defining. The Court examines the use of the word “arbitration” in the context of the contract
to determine if its meaning is apparent, and whether it can supply the mutual assent required
for the provision to constitute a meeting of the minds. In this matter, the meaning of the
provision is not apparent from the manner in which it relayed information to the consumer
who signed the contract. Although the Court does not expect a specific recitation of words to
effect a meeting of the minds to create an agreement to arbitrate, the construct and wording
2
of the instant provision are too confusing and misleading to meet simple plain wording
standards demanded by the public policy of this state for consumer contracts. (pp. 21-23)

5. Atalese stands for the proposition that an arbitration agreement is clearly enforceable
when its terms affirmatively state, or unambiguously convey to a consumer in a way that he
or she would understand, that there is a distinction between agreeing to resolve a dispute in
arbitration and in a judicial forum. 219 N.J. at 442-44. Here, the ambiguity that affects the
mutuality of assent question focuses on the overall language of the provision and whether the
plaintiff-consumer fairly should have known that by signing her contract, she was knowingly
assenting to arbitration as an exclusive remedy. On a macro level, the contract fails to signal
to consumers that it contains an arbitration provision affecting their rights because the
alternative dispute resolution provision’s “arbitration agreement” is located within a section
labeled “MEDIATION.” Even when located, the small size of the print makes the provision
burdensome to read and appears to violate the font size requirements of the Plain Language
Act, N.J.S.A. 56:12-1 to -13. As for the substance of the provision, its terms are
contradictory. Mediation and arbitration are distinct and different procedures. (pp. 23-27)

6. Defendants initially petitioned asking the Court to hold that Atalese runs afoul of Kindred
Nursing. However, defendants have abandoned that argument. Even if defendants
maintained that argument, the Court would not need to address any perceived conflict
between those cases because the threshold issue of whether the instant provision’s language
contains sufficient clarity to form any agreement about arbitration is easily answered. This
provision does not meet the rudiments for showing a mutual assent to have arbitration be the
only means of dispute resolution permitted to plaintiff, necessarily foreclosing her from
pursuing her right to bring an action in court. Reading the provision as a whole, the
references to arbitration cannot be harmonized with the title of the section (“MEDIATION”)
and the intended use of the Commercial Mediation Rules in order to give rise to an
enforceable agreement to arbitrate. Because the contract contains material discrepancies that
call into question the essential terms of the purported agreement to arbitrate, mutual assent is
lacking. Accordingly, the arbitration agreement is not enforceable. (pp. 27-31)

AFFIRMED AS MODIFIED.

JUSTICE ALBIN, CONCURRING, agrees that the purported arbitration clause in
this consumer contract case is unenforceable. However, Justice Albin would address the
issue of whether Atalese runs afoul of Kindred Nursing and the FAA, and he is confident
that, when presented with the issue, the Court will reaffirm the continued vitality of New
Jersey’s long-established jurisprudence.

CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON, FERNANDEZ-
VINA, SOLOMON, and TIMPONE join in JUSTICE LaVECCHIA’s opinion.
JUSTICE ALBIN filed a separate, concurring opinion.

3
SUPREME COURT OF NEW JERSEY
A-
15 September Term 2017
079680

Amanda Kernahan,

Plaintiff-Respondent,

Home Warranty Administrator of Florida, Inc.
and Choice Home Warranty,

Defendants-Appellants.

On certification to the Superior Court,
Appellate Division.

Argued Decided
September 12, 2018 January 10, 2019

Lori Grifa argued the cause for appellants (Archer &
Greiner, attorneys; Lori Grifa, of counsel and on the
briefs, and Michael J. Plata and Josiah Contarino, on
the briefs).

John E. Keefe, Jr., argued the cause for respondent
(Keefe Law Firm and Law Office of Jonathan
Rudnick, attorneys; Stephen T. Sullivan, Jr., and
Jonathan Rudnick, on the briefs).

David R. Kott argued the cause for amici curiae New
Jersey Business and Industry Association, Commerce
and Industry Association of New Jersey and New
Jersey Chamber of Commerce (McCarter & English,
attorneys; David R. Kott, Edward J. Fanning, Jr., and

1
Zane C. Riester, of counsel and on the briefs, and
Steven H. Del Mauro, on the briefs).

James A. Barry argued the cause for amicus curiae
New Jersey Association for Justice (Locks Law Firm
and Law Offices of Charles N. Riley, attorneys; James
A. Barry, Michael Galpern, Andrew P. Bell and
Charles N. Riley, on the brief).

George W. Conk argued the cause for amicus curiae
New Jersey State Bar Association (New Jersey State
Bar Association, attorneys; Robert B. Hille, President,
of counsel and on the brief, and George W. Conk and
Timothy E. Dinan, on the brief).

JUSTICE LaVECCHIA delivered the opinion of the Court.

In this appeal, we address whether parties to a consumer contract

intended to create an agreement to arbitrate through the insertion of language

within an alternative dispute resolution provision. See Atalese v. U.S. Legal

Servs. Grp., L.P., 219 N.J. 430, 435 (2014) (observing that inclusion of

arbitration provisions in consumer contracts is now “commonplace”) .

Both the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 to 16, and the

New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32, value the benefits from

arbitration of disputes and encourage enforcement of arbitration agreements.

See Roach v. BM Motoring, LLC, 228 N.J. 163, 173-74 (2017). In determining

whether to give effect to the disputed alternative dispute resolution provision

here, we are mindful that federal law requires that arbitration agreements be

2
placed “on equal footing with all other contracts.” Kindred Nursing Ctrs. L.P.

v. Clark, 581 U.S. ___, 137 S. Ct. 1421 (2017) (quoting DIRECTV, Inc. v.

Imburgia, 577 U.S. ___, 136 S. Ct. 463, 465 (2015)). Our case law recognizes

that obligation as well. See Atalese, 219 N.J. at 440-41 (collecting cases).

In dispensing even treatment to arbitration agreements, basic contract

formation and interpretation principles still govern, for there must be a validly

formed agreement to enforce. See Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 478 (1989); Garfinkel v. Morristown Obstetrics & Gynecology

Assocs., P.A., 168 N.J. 124, 132 (2001). We apply state law principles of

contract formation in that analysis. See First Options of Chi., Inc. v. Kaplan,

514 U.S. 938, 944 (1995) (“When deciding whether the parties agreed to

arbitrate a certain matter . . . , courts generally . . . should apply ordinary state -

law principles that govern the formation of contracts.”).

In this matter, plaintiff Amanda Kernahan entered into an agreement

with defendants for a home maintenance warranty. When she became

dissatisfied, she filed a complaint in Superior Court seeking statutory and

common law relief. Defendants sought dismissal of the action, arguing that

the contract’s alternative dispute resolution provision, labeled “MEDIATION,”

contained language that required plaintiff to proceed with her claims

exclusively through arbitration.

3
The trial court refused to dismiss plaintiff’s complaint, finding in the

language of the provision no mutuality of assent to have formed an agreement

to arbitrate. The Appellate Division affirmed. We granted certification to

review defendants’ argument that an overly demanding review resulted in a

prohibited hostility to arbitration. Defendants also contended that our recent

decision in Atalese, which examined a contract for mutuality of assent to

arbitrate, thereby waiving one’s right to pursue claims in court, violated recent

United States Supreme Court pronouncements in Kindred Nursing about FAA

requirements. Because defendants have retreated from their argument that our

decision in Atalese transgresses the FAA under Kindred Nursing, we do not

address that contention. We will not address an argument that, at this time, is

advanced only by amici.

In our de novo review of the pivotal provision at issue in the disputed

contract, we conclude that the so-called “arbitration agreement” within this

consumer contract fails to support a finding of mutuality of assent to form an

agreement to arbitrate. The provision’s language is debatable, confusing, and

contradictory -- and, in part, misleading. The “arbitration agreement” touted by

defendants is also obscure when this consumer contract is viewed as a whole.

The provision does not fairly convey to an ordinary person that arbitration

would be the required method of dispute resolution.

4
Accordingly, for the reasons expressed herein, we concur in the judgment

that declined to enforce this provision as an understandable mutual agreement

to arbitrate disputes, which, thereby, allowed plaintiff to proceed with her

claims in the action she filed in court.

I.
A.
Because this appeal arises from a denial of a motion to dismiss, we recite

the facts as alleged in plaintiff’s November 30, 2015 putative class action

complaint. In the spring of 2015, plaintiff purchased a “home service

agreement” from defendants Home Warranty Administrator of Florida, Inc.,

and Choice Home Warranty (collectively, defendants). The agreement was

essentially a consumer contract whereby defendants would pay for and arrange

for a certified contractor to repair or replace certain home appliances at

plaintiff’s property in Orlando, Florida, in exchange for the contract term price

of $1050.

Becoming dissatisfied, plaintiff cancelled the contract in June 2015 and

received a refund of the purchase price. 1 In November 2015, she filed the

1
Plaintiff secured that portion of her relief by notifying defendants of her
claim, as the alternative dispute resolution provision requires. The defendants
agreed to the cancellation and refunded plaintiff the full purchase price to her
credit card a few days later.

5
instant complaint alleging that defendants violated the Consumer Fraud Act

(CFA), N.J.S.A. 56:8-1 to -20; the Truth-in-Consumer Contract, Warranty and

Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18; and the implied covenant of

good faith and fair dealing. She claimed that the agreement misrepresented its

length of coverage and that the deceptively labelled “MEDIATION” section of

the agreement failed to inform her that she was waiving her right to a jury trial

and would be deterred from seeking the additional remedies of treble damages,

punitive damages, and attorney’s fees and costs.2 Defendants filed a motion to

dismiss the complaint with prejudice in favor of arbitration, citing the

agreement’s alternative dispute resolution provision.

The alternative-dispute-resolution section of the agreement that is the

focus of this appeal appears on the fifth and last page of the contract, and it

reads in full as follows:

G. MEDIATION
In the event of a dispute over claims or coverage You
agree to file a written claim with Us and allow Us thirty
(30) calendar days to respond to the claim. The parties
agree to mediate in good faith before resorting to
mandatory arbitration in the State of New Jersey.
Except where prohibited, if a dispute arises from or relates
to this Agreement or its breach, and if the dispute cannot
be settled through direct discussions you agree that:

2
We note that plaintiff filed an amended complaint before the trial court later
during the proceedings, in which she alleged additional evidence of asserted
wrongful conduct and harm suffered by plaintiff.
6
1. Any and all disputes, claims and causes of action
arising out of or connected with this agreement shall be
resolved individually, without resort to any form of class
action.

2. Any and all disputes, claims and causes of action
arising out of or connected with this Agreement (including
but not limited to whether a particular dispute is arbitrable
hereunder) shall be resolved exclusively by the American
Arbitration Association in the state of New Jersey under
its Commercial Mediation Rules. Controversies or claims
shall be submitted to arbitration regardless of the theory
under which they arise, including without limitation
contract, tort, common law, statutory, or regulatory duties
or liability.

3. Any and all claims, judgments and awards shall be
limited to actual out-of-pocket costs incurred to a
maximum of $1500 per claim, but in no event attorneys
fees.

4. Under no circumstances will you be permitted to obtain
awards for, and you hereby waives [sic] all rights to claim,
indirect, punitive, incidental and consequential damages
and any other damages, other than for actual out-of-pocket
expenses, and any and all rights to have damages
multiplied or otherwise increased. All issues and
questions concerning the construction, validity,
interpretation and enforceability of this Agreement, shall
be governed by, and construed in accordance with, the
laws of the State of New Jersey, U.S.A. without giving
effect to any choice of law or conflict of law rules (whether
of the State of New Jersey or any other jurisdiction), which
would cause the application of the laws of any jurisdiction
other than the State of New Jersey.

[(bolded emphasis in original) (underlined emphases
added).]

7
Before the trial court, defendants argued that the contract’s “arbitration

provision” is valid and enforceable, containing several clauses that put

plaintiff on notice that she is waiving her right to a jury trial, even though the

provision does not explicitly reference a jury trial. Defendants maintained that

the provision satisfied this Court’s prior case law, including Atalese, because

the provision’s language is “clear on [its] face” and without ambiguity.

Plaintiff argued that the arbitration requirement is ambiguous and that it

is not conspicuous in the written document. She further argued that the

arbitration language in the alternative dispute resolution provision does not

satisfy the requirements for a knowing waiver of rights, citing Atalese and

emphasizing the provision’s failure to convey what arbitration is or how it is

different from a court proceeding. Plaintiff maintained, in sum, that the failure

to include language amounting to a knowing waiver coupled with the lack of

conspicuousness of the arbitration language, buried in this contract’s small

font, precluded enforcement of defendants’ asserted “arbitration agreement.”

The trial court denied defendants’ motion to dismiss in an oral opinion,

concluding that the arbitration provision is unenforceable. The court found the

provision both ambiguous and noncompliant with Atalese “in either its form or

its function.” The trial court reasoned that the provision does not contain clear

language that would inform the consumer she is agreeing to arbitrate all

8
disputes and that she is waiving her right to a jury trial. The court cited the

provision’s failure to convey unambiguously to a consumer that there is a

difference between resolving a dispute in court and resolving it in arbitration.

Defendants filed for reconsideration, adding to their argument that the

provision adequately informs the consumer that she is waiving her right to a

court proceeding by stating that all claims will be resolved “exclusively” by

arbitration. Plaintiff countered that the word “exclusively” was insufficient,

alone, to clarify defendants’ desired message because the clause remained

ambiguous. Plaintiff emphasized the provision’s confusing references to

mediation and arbitration in discussing proceedings and rules of procedure.

In a written opinion, the trial court denied reconsideration. Relying on

Atalese, the court reasoned once again that the arbitration provision was not

sufficiently clear to have created an agreement to arbitrate, thereby waiving

the right to proceed in court. The court noted ambiguities in the provision

before concluding that the provision’s language is not clear and

straightforward, is not satisfactorily conspicuous or distinguished from the

other contract terms, and does not convey that there is a difference between

arbitration and judicial proceedings. The court rejected the argument that the

provision’s placement of the word “exclusively” would or should have

9
adequately informed plaintiff that she is waiving her right to proceed in court,

as opposed to use of other available dispute resolution processes.

On appeal to the Appellate Division, see R. 2:2-3(a) (orders denying

arbitration appealable as of right as a final judgment), defendants again argued

that the arbitration provision is enforceable. Plaintiff advanced largely the

same arguments that she did before the trial court.

In an unpublished opinion, the Appellate Division affirmed the trial

court’s refusal to dismiss the complaint. Relying on Atalese, the panel

reasoned that “[a]n arbitration provision that fails to 'clearly and

unambiguously signal’ to parties that they are surrendering their right to

pursue a judicial remedy renders such an agreement unenforceable.” The

panel determined the provision to be unenforceable because “[j]ust stating that

arbitration is the 'exclusive’ remedy . . . is not sufficient” to inform a

consumer that she is waiving her right to a jury trial. The panel added that

there must be explanatory comment to notify an average member of the public

that arbitration is a substitute for the right to adjudicate a claim in court.

We granted defendants’ petition for certification. 231 N.J. 334 (2017).

We also granted amicus curiae status to the New Jersey State Bar Association

(NJSBA); the New Jersey Association for Justice (NJAJ); the New Jersey

Business & Industry Association, the Commerce and Industry Association of

10
New Jersey, and the New Jersey Chamber of Commerce (collectively, “the

Industry Associations”).

II.
A.
In their petition for certification, defendants asserted that Atalese

requires a valid arbitration clause to contain a “clear and unambiguous”

statement that waives the right to proceed in court. Thus, according to

defendants, Atalese was preempted by the FAA in light of the United States

Supreme Court’s decision in Kindred Nursing.3 Kindred Nursing was decided

roughly one month before the Appellate Division’s decision in this matter.

However, in oral argument before the Court, defendants clarified that

their argument does not advance the position that Atalese is in conflict with

Kindred Nursing. In withdrawing from their earlier position, defendants

instead note, expressly, that Atalese does not impose a requirement for the type

3
As discussed infra in Section III. B. 1., in Kindred Nursing, the Supreme Court
reviewed a Kentucky Supreme Court holding that required an explicit statement in
a power of attorney agreement to the effect that the attorney-in-fact has authority to
waive the principal’s state constitutional rights to access the courts and to a jury
trial (its “clear-statement rule”). See generally Kindred Nursing, 137 S. Ct. at 1421-29. The Supreme Court concluded that the Kentucky Supreme Court’s
holding contravened the FAA because, by imposing an extra hurdle to enforcement
of an arbitration agreement, the Kentucky ruling failed to keep arbitration
agreements on equal footing with other contracts. Id. at 1426-27.
11
of formal waiver language stricken in Kindred Nursing. Therefore, defendant

is no longer asking us to overturn Atalese in this appeal.

Instead, defendants now maintain that the Appellate Division decision

worked an improper expansion of Atalese by imposing a requirement of formal

waiver language in arbitration agreements, in violation of Kindred Nursing and

the FAA. Defendants reason that, by finding that necessary waiver language

was absent from the arbitration provision, the Appellate Division effectively

created a Kindred Nursing-prohibited clear-statement rule.

Further, defendants argue that the Appellate Division should have

recognized that an arbitration provision that explicitly states that it is the

exclusive remedy to resolve disputes satisfies clarity requirements, thereby

placing consumers on notice that their only remedy is arbitration. Defendants

assert that the Appellate Division erred in not reading the provision as a whole

and instead parsing the provision improperly by focusing on the word

“exclusively.”

B.
Much of plaintiff’s argument involves responding to defendants’ initial

position. Suffice it to say that, in distinguishing Kindred Nursing from

Atalese, plaintiff points out that Atalese reflects “New Jersey’s long-standing

12
and neutral requirement” that contractual waivers of rights be contextually

understandable to meet essential requirements for mutual assent.

Further, plaintiff argues that the arbitration provision in her contract is

ambiguous. Because the provision failed to convey what she was agreeing to

by signing a contract with that provision in it, plaintiff asserts that there was

no basis for mutual assent and understanding about arbitration. Plaintiff adds

that the provision neither distinguishes arbitration from a proceeding in court -

- or, for that matter, from other dispute resolution mechanisms -- nor contains

any waiver language. At the hearing on defendant’s motion to dismiss,

plaintiff’s counsel also emphasized the “extraordinarily small font” of the

arbitration provision.

C.
Amicus NJSBA urges that we affirm of the Appellate Division decision

because the arbitration provision contains misleading terms and lacks waiver

language. The NJSBA also distinguishes Kindred Nursing from our decision

in Atalese. The NJSBA warns that reversing Atalese will cause consumers to

be “presented with confusing and difficult to understand arbitration provisions

that fail to place the consumer on notice that he or she is waiving a

constitutional or statutory right.”

13
The NJAJ urges that we affirm of the Appellate Division judgment

because the alternative dispute resolution provision fails to satisfy the

prerequisites for the formation of a valid contract. The NJAJ asserts that no

meeting of the minds could have occurred here for three reasons: (1) the

provision at issue is misleadingly titled “MEDIATION,” “creating the

impression that the mechanism being established is non-binding settlement

discussions”; (2) the provision lacks waiver language; and (3) the provision

uses “mandatory” language but does not address the right to go to court, the

very right the clause seeks to waive.

The NJAJ points out that the “MEDIATION” provision fails to comply

with New Jersey’s Plain Language Act, N.J.S.A. 56:12-1 to -13 (PLA),

applicable to all consumer contracts in this state as noted in Atalese, because

“it is not written in a simple, clear, understandable, and easily readable way.”

Amicus reasons that the arbitration provision in this consumer contract is

buried in a section labeled “MEDIATION” and is printed in a smaller font-size

than that required by the PLA. The NJAJ asserts that the provision is in size

6. 5 Helvetica font 4 In other words, the provision fails the conspicuousness

test. The NJAJ further agrees with the NJSBA’s position that Atalese is

4
Defendants concede that the font is less than 10 point, as required by the
PLA, but do not know its actual size and so cannot agree to the size asserted
by the NJAJ.
14
distinguishable from Kindred Nursing because “New Jersey has long applied

its waiver of rights analysis to all contracts.”

E.
Amici, the Industry Associations, ask us to overrule Atalese even if

defendants no longer advance that argument. They maintain that “[t]he same

impermissible justifications used by the Kentucky Supreme Court were also

used by this Court in Atalese . . . when it required that all arbitration

agreements contain 'clear and unambiguous language’ that an individual is

waiving her right 'to bring her claims in court or have a jury resolve the

dispute.’” The Industry Associations contend that the FAA preempts Atalese

because, by requiring specialized language of waiver, the Atalese decision

disregards “the fundamental characteristic of arbitration -- the waiver of the

right to resolve a dispute in a court before a jury.” That, they contend, results

in Atalese’s placing arbitration clauses on unequal footing with other

contracts.

Here, the Industry Associations ask us to enforce the instant arbitration

provision because they maintain that the provision clearly states that any and

all claims will be resolved through arbitration.

III.

15
De novo review applies when appellate courts review determinations

about the enforceability of contracts, including arbitration agreements. Hirsch

v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013). Whether a contractual

arbitration provision is enforceable is a question of law, and we need not defer

to the interpretative analysis of the trial or appellate courts unless we find it

persuasive. Morgan v. Sanford Brown Inst., 225 N.J. 289, 302-03 (2016)

(citing Atalese, 219 N.J. at 445-46).

Federal and state law governing arbitration agreements guide this matter.

In 1925, Congress enacted the FAA “to place arbitration agreements

upon the same footing as other contracts.” Gilmer v. Interstate/Johnson Lane

Corp., 500 U.S. 20, 24 (1991). The FAA was intended, in part, to curb a

perceived “widespread judicial hostility to arbitration agreements.” AT&T

Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011); see also Epic Sys.

Corp. v. Lewis, ___ U.S. ___, 138 S. Ct. 1612, 1621 (2018) (same). As stated

further in Concepcion, the FAA’s “'principal purpose’ . . . is to 'ensur[e] that

private arbitration agreements are enforced according to their terms.’” 563 U.S. at 344 (quoting Volt, 489 U.S. at 478) (alteration in original).

16
Section two of the FAA promotes those goals by prescribing that

arbitration agreements are “valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of any contract.”

9 U.S.C. § 2. Section two’s savings clause “permits agreements to arbitrate to

be invalidated by 'generally applicable contract defenses, such as fraud,

duress, or unconscionability,’ but not by defenses that apply only to arbitration

or that derive their meaning from the fact that an agreement to arbitrate is at

issue.” Concepcion, 563 U.S. at 339 (quoting Doctor’s Assocs., Inc. v.

Casarotto, 517 U.S. 681, 687 (1996)).

An arbitration agreement is valid only if the parties intended to arbitrate

because parties are not required “to arbitrate when they have not agreed to do

so.” Volt, 489 U.S. at 478. Section four of the FAA requires courts to compel

arbitration “in accordance with the terms of the agreement,” assuming that the

“making of the arbitration agreement” is not in issue. Concepcion, 563 U.S. at
344 (quoting 9 U.S.C. § 4).5 The Supreme Court instructs that “[w]hen

deciding whether the parties agreed to arbitrate a certain matter . . . , courts

5
In light of sections three (providing for a stay of litigation pending
arbitration “in accordance with the terms of the agreement”) and four of the
FAA, the Supreme Court has “held that parties may agree to limit the issues
subject to arbitration, to arbitrate according to specific rules, and to limit with
whom a party will arbitrate its disputes.” Concepcion, 563 U.S. at 344
(citations omitted) (emphasis in original).
17
generally . . . should apply ordinary state-law principles that govern the

formation of contracts.” First Options, 514 U.S. at 944.

In a recent opinion, the Supreme Court emphasized the FAA’s “equal-

treatment principle,” stating that the FAA not only preempts any state rule that

facially discriminates against arbitration but also “displaces any rule that

covertly accomplishes the same objective by disfavoring contracts that (oh so

coincidentally) have the defining features of arbitration agreements.” Kindred

Nursing, 137 S. Ct. at 1426. The Supreme Court held that a Kentucky

Supreme Court ruling requiring specific authority for an attorney-in-fact to

waive her principal’s right to a jury trial “singles out arbitration agreements

for disfavored treatment . . . [and] violates the FAA.” Id. at 1425. The Court

cautioned that state court decisions that rest on general principles may violate

the FAA if they implicitly “rely on the uniqueness of an agreement to arbitrate

as [their] basis.” Ibid. (quoting Concepcion, 563 U.S. at 341). 6

6
In reversing the Kentucky Supreme Court holding in Kindred Nursing, the
Supreme Court concluded that Kentucky “did exactly what Concepcion barred:
adopt a legal rule hinging on the primary characteristic of an arbitration
agreement -- namely, a waiver of the right to go to court and receive a jury
trial.” Id. at 1427. The Supreme Court called the Kentucky rule “too tailor-
made to arbitration agreements -- subjecting them, by virtue of their defining
trait, to uncommon barriers -- to survive the FAA’s edict against singling out
those contracts for disfavored treatment.” Ibid.

18
New Jersey codifies its own hospitable approach toward arbitration in

the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32, using terms nearly

identical to those of the FAA. See Roach, 228 N.J. at 173-74 (citing Atalese,

219 N.J. at 440). The statutory policies of the FAA and New Jersey law are in

synchronicity.

In this state, when called on to enforce an arbitration agreement, a

court’s initial inquiry must be -- just as it is for any other contract -- whether

the agreement to arbitrate all, or any portion, of a dispute is “the product of

mutual assent, as determined under customary principles of contract law.”

Atalese, 219 N.J. at 442 (internal quotation marks and citation omitted). And,

equivalent to federal law, parties may not be compelled “to arbitrate when they

have not agreed to do so.” Ibid. (quoting Volt, 489 U.S. at 478); see also

Garfinkel, 168 N.J. at 132 (“[O]nly those issues may be arbitrated which the

parties have agreed shall be.”) (quoting In re Arbitration Between Grover &

Universal Underwriters Ins. Co., 80 N.J. 221, 228 (1979)). As a general

principle of contract law, there must be a meeting of the minds for an

agreement to exist before enforcement is considered. See Johnson & Johnson

v. Charmley Drug Co., 11 N.J. 526, 538 (1953) (“[A] contract does not come

into being unless there be a manifestation of mutual assent by the parties to the

same terms . . . . [I]t is elementary that there can be no operative acceptance

19
by acts or conduct unless the offeree’s assent to the offer according to its terms

is thereby unequivocally shown.”).

In Atalese, this Court relied on mutuality of assent as its animating

principle when we considered the enforceability of an agreement to arbitrate in

a consumer contract for debt-adjustment services. 219 N.J. at 442. We were

guided essentially by twin concerns. First, the Court was mindful that a

consumer is not necessarily versed in the meaning of law-imbued terminology

about procedures tucked into form contracts. Ibid. The decision repeatedly

notes that it is addressing a form consumer contract, not a contract individually

negotiated in any way; accordingly, basic statutory consumer contract

requirements about plain language implicitly provided the backdrop to the

contract under review. Id. at 444. And, second, the Court was mindful that

plain language explanations of consequences had been required in contract

cases in numerous other settings where a person would not be presumed to

understand that what was being agreed to constituted a waiver of a

constitutional or statutory right. Id. at 442-44.

At bottom, the judgment in Atalese, which declined to enforce the

arbitration provision at issue, is rooted in the notion that mutual assent had not

been achieved because the provision did not, in some fashion, explain that it

was intended to be a waiver of the right to sue in court. Id. at 436. Because

20
the provision could not be deemed a knowing waiver of the right to sue in

court, a meeting of the minds did not occur. Id. at 435, 447. The consumer

context of the contract mattered. Id. at 444 (referencing N.J.S.A. 56:12-2).

That said, the decision imposes no talismanic recitations, acknowledging that a

meeting of the minds can be accomplished by any explanatory comment that

achieves the goal of apprising the consumer of her rights. Id. at 445, 447.

IV.

In this matter, we again review consumer contract language to determine

whether there was mutuality of assent to form an agreement to arbitrate. But,

unlike in Atalese, the question in this case is whether mutuality of assent is

achieved when a provision confusingly and unpredictably shifts between the

terms “arbitration” and “mediation” and the procedures for the two types of

proceedings.

A court’s objective in construing a contract is to determine the intent of

the parties. Kieffer v. Best Buy, 205 N.J. 213, 223 (2011). “In the quest for

the common intention of the parties to a contract the court must consider the

relations of the parties, the attendant circumstances, and the objects they were

trying to attain.” Tessmar v. Grosner, 23 N.J. 193, 201 (1957). In New Jersey,

we have a Plain Language Act that imposes certain simple principles on

21
consumer contracts generally -- to wit, they must use plain language that is

commonly understood by the wide swath of people who comprise the

consuming public. By doing so, we then can confidently state that, even in the

consumer context, “[a] party who enters into a contract in writing, without any

fraud or imposition being practiced upon him, is conclusively presumed to

understand and assent to its terms and legal effect.” Rudbart v. N. Jersey Dist.

Water Supply Comm’n, 127 N.J. 344, 353 (1992) (quoting Fivey v. Pa. R.R.,

67 N.J.L. 627, 632 (E. & A. 1902)).

A basic tenet of contract interpretation is that contract terms should be

given their plain and ordinary meaning. Roach, 228 N.J. at 174; M.J. Paquet,

Inc. v. DOT, 171 N.J. 378, 396 (2002). Here, the parties and amici have

varying positions on whether the term arbitration is self-defining. Atalese

recognizes that “[b]y its very nature, an agreement to arbitrate involves a

waiver of a party’s right to have her claims and defenses litigated in court.”

219 N.J. at 442 (citation and internal quotation marks omitted). However, in

the context of that decision, we were unwilling to attribute knowledge of that

definition to consumers in part because “an average member of the public may

not know -- without some explanatory comment -- that arbitration is a

substitute for the right to have one’s claim adjudicated in a court of law.” Ibid.

22
In this instance, we examine the use of the word “arbitration” in the

context of the contract to determine if its meaning is apparent, and whether it

can therefore supply the mutual assent required for the provision to constitute

a meeting of the minds. We find that the meaning of the provision is not

apparent from the manner in which it relayed information to the consumer who

signed the contract. Although we are not expecting a specific recitation of

words to effect a meeting of the minds to create an agreement to arbitrate, the

construct and wording of the instant provision are too confusing and

misleading to meet simple plain wording standards demanded by the public

policy of this state for consumer contracts.

Plaintiff has argued throughout these proceedings that the arbitration

agreement lacks sufficient clarity to be enforced. She points to the multiple

ambiguities and inconsistencies within the provision. She advances a

compelling argument that “the arbitration provision’s inconspicuous location

and confusing, inconsistent and contradictory terms are unenforceable.” We

discuss those points in turn.

A consumer cannot be required to arbitrate when it cannot fairly be

ascertained from the contract’s language that she knowingly assented to the

provision’s terms or knew that arbitration was the exclusive forum for dispute

23
resolution. In light of that concern, Atalese stands for the proposition that an

arbitration agreement is clearly enforceable when its terms affirmatively state,

or unambiguously convey to a consumer in a way that he or she would

understand, that there is a distinction between agreeing to resolve a dispute in

arbitration and in a judicial forum. 219 N.J. at 442-44.

Where Atalese discussed the distinction between resolving suits in

arbitration versus a judicial forum, here, the ambiguity that affects the

mutuality of assent question focuses on the overall language of this provision

and whether the instant plaintiff-consumer fairly should have known that by

signing her contract, she was knowingly assenting to arbitration as an

exclusive remedy. We think not.

On a macro level, the contract fails to signal to consumers that it

contains an arbitration provision affecting their rights because the alternative

dispute resolution provision’s “arbitration agreement” is located within a

section labeled “MEDIATION.” Even when located, the small size of the print

makes the provision burdensome to read and appears to violate the font size

requirements of the PLA.

As for the substance of the provision, its terms are contradictory. The

internal sentences refer to the use of the AAA’s Commercial Mediation Rules,

which cannot be reconciled with arbitration. The provision’s terms cannot be

24
read to provide clarity to a consumer that she was agreeing to arbitration, or

what that term, in the context of confusing references to mediation or

mediation rules, actually meant. Indeed, mediation and arbitration are distinct

and different procedures.

Under N.J.S.A. 2A:23C-2, mediation is “a process in which a mediator

facilitates communication and negotiation between parties to assist them in

reaching a voluntary agreement regarding their dispute.” As a facilitator, a

mediator does not reach a final decision on the matter. Instead, the mediator,

albeit remaining neutral, encourages the participants to resolve their

differences and reach an agreement. See R. 1:40-2(c) (“'Facilitative Process,’

which includes mediation, is a process by which a neutral third party facilitates

communication between parties in an effort to promote settlement without

imposition of the facilitator’s own judgment regarding the issues in dispute.”).

Mediation sessions “are not conducted under oath, do not follow traditional

rules of evidence, and are not limited to developing the facts.” State v.

Williams, 184 N.J. 432, 447 (2005) (quoting Rinaker v. Superior Court, 62 Cal. App. 4th 155, 162 (1998)). Mediation communications are privileged

under N.J.R.E. 519 because honesty in communications is imperative in order

to reach a settlement. Public policy favors settlement of disputes in part

because it “spares the parties the risk of an adverse outcome and the time and

25
expense -- both monetary and emotional -- of protracted litigation.”

Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215 N.J. 242, 253-54

(2013) (citing Williams, 184 N.J. at 441). Of utmost importance, if mediation

sessions fail, the parties can proceed in court to resolve their dispute.

On the other hand, “[t]he object of arbitration is the final disposition, in

a speedy, inexpensive, expeditious, and perhaps less formal manner, of the

controversial differences between the parties.” Hojnowski v. Vans Skate Park,

187 N.J. 323, 343 (2006) (citation omitted). Arbitration involves a process

that results in an adverse outcome for one party. See Williams, 184 N.J. at 447

(stating goal of both formal adjudication and arbitration “is to uncover and

present evidence of claims and defenses in an adversarial setting”).

Unless superseded by the parties’ agreement, the New Jersey Arbitration

Act prescribes the rules governing the conduct of the proceeding. See N.J.S.A.

2A:23B-4; Fawzy v. Fawzy, 199 N.J. 456, 469-70 (2009). The Act grants an

arbitrator significant discretion over evidentiary matters in order to advance

the goal of quick and fair disposition of the parties’ dispute. See N.J.S.A.

2A:23B-15. The “arbitrator’s role is evaluative, requiring the parties to

present their evidence for a final determination.” Minkowitz v. Israeli, 433 N.J. Super. 111, 144 (App. Div. 2013) (citing R. 1:40-2(b)(2)). Much like a

judicial factfinder, “[a]rbitrators essentially weigh evidence, assess credibility,

26
and apply the law when determining whether a party has proven his or her

request for relief.” Ibid.

In sum, mediation stands in “stark contrast” to formal adjudication and

arbitration. Williams, 184 N.J. at 447.

As noted, defendants initially petitioned asking this Court to hold that

our decision in Atalese runs afoul of Kindred Nursing -- an argument now

abandoned. Even if defendants maintained that argument, we would not need

to address any perceived conflict between those cases because the threshold

issue of whether the instant provision’s language contains sufficient clarity to

form any agreement about arbitration is easily answered. This provision does

not meet the rudiments for showing a mutual assent to have arbitration be t he

only means of dispute resolution permitted to plaintiff, necessarily foreclosing

her from pursuing her right to bring an action in court.

“To be enforceable as a contractual undertaking, an agreement must be

sufficiently definite in its terms that the performance to be rendered by each

party can be ascertained with reasonable certainty.” Borough of West

Caldwell v. Borough of Caldwell, 26 N.J. 9, 24-25 (1958) (citing Friedman v.

Tappan Dev. Corp., 22 N.J. 523, 531 (1956)). The shortcomings of the

provision in issue here are, as noted, three-fold: (1) the inconspicuous location

27
of the agreement to arbitrate under a section labeled “MEDIATION”; (2) its

small-font text and confusing ordering of sentences; and (3) the invocation of

the Commercial Mediation Rules.

As noted, mediation and arbitration are “distinctly different

proceedings.” Minkowitz, 433 N.J. Super. at 146. Yet, the provision’s terms

blur any distinction. To the extent a lay reader perceives that there are two

procedures being proposed through this confusing alternative dispute

resolution provision labeled “MEDIATION,” the provision’s discussion of the

arbitration process is misleading. An arbitration provision that purports to

utilize mediation procedures is unenforceable because the parties cannot be

said to have reached a meeting of the minds on whether the proceeding will

result in a binding award. Here, if a court were to compel arbitration pursuant

to the provision’s terms, there would be no binding resolution of the parties’

disputes. Although arbitration by definition involves the issuance of a final

award by a neutral third party, see R. 1:40-2(a)(1), the references to arbitration

in defendants’ provision lack sufficient clarity to preclude resort to judicial

relief should the parties’ good-faith settlement negotiations fail.

Despite the title “MEDIATION,” the bold-faced text that follows

prescribes a two-step dispute resolution process: “The parties agree to mediate

in good faith before resorting to mandatory arbitration in the State of New

28
Jersey.” The provision does not next outline the scope of the proceedings, but

instead first includes a waiver of class proceedings. The provision then

prescribes that

[a]ny and all disputes, claims and causes of action arising
out of or connected with this Agreement (including but not
limited to whether a particular dispute is arbitrable
hereunder) shall be resolved exclusively through the
American Arbitration Association in the state of New
Jersey under its Commercial Mediation Rules.
Controversies or claims shall be submitted to arbitration
regardless of the theory under which they arise, including
without limitation contract, tort, common law, statutory,
or regulatory duties or liability.

[(emphasis added).]

The provision seemingly envisions the issuance of an award. In the third

subsection, the provision limits “[a]ny and all claims, judgments and awards”

to “actual out-of-pocket costs incurred to a maximum of $1500 per claim.”

(emphasis added). The final subsection dictates that “[u]nder no

circumstances will you be permitted to obtain awards for, and you hereby

waive[],” any other form of damages and multiplied damages. (emphasis

added).

Reading the provision as a whole, the references to arbitration cannot be

harmonized with the title of the section and the intended use of the

Commercial Mediation Rules in order to give rise to an enforceable agreement

29
to arbitrate. Should a diligent and prudent consumer read defendants’ form

contract in full, a reader could, and most likely would, reasonably understand

subsection two to prescribe that the Commercial Mediation Rules

“exclusively” govern “any and all disputes.” The small typeface, confusing

sentence order, and misleading caption exacerbate the lack of clarity in

expression. It is unreasonable to expect a lay consumer to parse through the

contents of this small-font provision to unravel its material discrepancies.

Our Plain Language Act requires that more be done in the setting of

consumer contracts to make them understandable for a lay person. See

N.J.S.A. 56:12-10(b)(3) (prescribing, for consumer contracts, that

“[c]onditions and exceptions to the main promise of the agreement shall be

given equal prominence with the main promise, and shall be in at least 10

point type”); see also Morgan, 225 N.J. at 310 n.8 (noting that in judging

whether consumer contract meets standard of being written in clear and

understandable manner, “courts must 'take into consideration the guidelin es

set forth in [N.J.S.A. 56:12-10]’” (alteration in original) (quoting N.J.S.A.

56:12-2)).

Because the contract contains material discrepancies that call into

question the essential terms of the purported agreement to arbitrate, mutual

30
assent is lacking. Accordingly, we hold that this arbitration agreement is not

enforceable.

The judgment of the Appellate Division is affirmed as modified.

CHIEF JUSTICE RABNER and JUSTICES ALBIN, PATTERSON,
FERNANDEZ-VINA, SOLOMON, and TIMPONE join in JUSTICE
LaVECCHIA’s opinion. JUSTICE ALBIN filed a separate, concurring opinion.

31
Amanda Kernahan,

Plaintiff-Respondent,

Home Warranty Administrator of Florida, Inc.
and Choice Home Warranty,

Defendants-Appellants.

JUSTICE ALBIN, concurring.

I concur with my colleagues that the purported arbitration clause in this

consumer contract case is unenforceable because its confusing and

contradictory provisions do not demonstrate that the parties mutually assented

to arbitrate their dispute. Unlike my colleagues, however, I would not sidestep

the issue on which this Court granted certification: whether Atalese v. U.S.

Legal Services Group, L.P., 219 N.J. 430 (2014), cert. denied, ___ U.S. ___,

135 S. Ct. 2804 (2015), runs afoul of Kindred Nursing Centers Ltd.

Partnership v. Clark, 581 U.S. ___, 137 S. Ct. 1421 (2017), and the Federal

Arbitration Act (FAA), 9 U.S.C. §§ 1 to 16.

Although defendants’ petition for certification contended that Atalese

could not be reconciled with Kindred Nursing, defendants conceded at oral

argument that those two cases were not in conflict with each other. In

1
response to a question from the Court, “So your contention is that Atalese in

and of itself does not violate Kindred Nursing but the Appellate Division

overread it,” defendants’ counsel replied, “Yes, absolutely.” Instead,

defendants argued that the arbitration agreement did not violate Atalese.

Defendants’ concession did not deprive this Court of its authority to

decide the issue raised in defendants’ petition -- an issue argued forcefully

from different vantage points by the amici curiae before us. 1 That issue will

not go away. Tomorrow is not a better time to resolve an issue on which

courts need emphatic guidance. In my view, our jurisprudence, including

Atalese, conforms to the FAA, and Kindred Nursing has not altered that

equation.

Indeed, the Court reaffirms the fundamental principle animating Atalese

-- an arbitration clause in a consumer contract is unenforceable unless the

contract’s language conveys in some manner “that there is a distinction

between agreeing to resolve a dispute in arbitration and in a judicial forum.”

Ante at ___ (slip op. at 24) (citing Atalese, 219 N.J. at 442-44). The Court

also acknowledges that mutual assent -- the basic element of a contract --

1
“We have often declined . . . to dismiss a matter on grounds of mootness, if
the issue in the appeal is an important matter of public interest.” Nini v.
Mercer Cty. Cmty. Coll., 202 N.J. 98, 105 n.4 (2010) (quoting Reilly v. AAA
Mid-Atl. Ins. Co. of N.J., 194 N.J. 474, 484 (2008)).

2
requires that consumers have an understanding that arbitration means their

disputes will be resolved out of court in an alternative forum. Ante at ___ (slip

op. at 20-21). If Kindred Nursing were antithetical to the simple precept that

consumers have a right to know what they are signing, then much of the

reasoning of today’s opinion would be rendered a nullity.

But Kindred Nursing is not in conflict with Atalese and the state-law

jurisprudence on which Atalese is founded.

The United States Supreme Court in Kindred Nursing applied the well-

established FAA requirement that arbitration agreements must be placed “on

equal footing with all other contracts.” 137 S. Ct. at 1424 (quoting DIRECTV,

Inc. v. Imburgia, 577 U.S. ___, 136 S. Ct. 463, 465 (2015)). In doing so, the

Court struck down a new rule adopted by the Kentucky Supreme Court

concerning powers of attorney that singled out arbitration agreements for

disfavored treatment. Id. at 1429.

In Kindred Nursing, a husband conveyed to his wife and a mother

conveyed to her daughter powers of attorney granting them broad authority to

manage their loved ones’ affairs, including the legal right to enter into

contracts. Id. at 1425. The husband and mother were admitted as residents

into a Kindred nursing home. Ibid. Exercising their powers as legal

3
representatives of their loved ones, the wife and daughter signed documents,

including arbitration agreements, required by the nursing home. 2 Ibid.

Later, they sued the nursing home for substandard care that they alleged

caused the deaths of their husband and mother. Ibid. The Kentucky Supreme

Court declared the arbitration agreements invalid because the powers of

attorney -- despite the broad grants of authority to the family-member

representatives to act on behalf of their loved ones -- did not specifically

authorize those representatives to enter arbitration agreements. Id. at 1425-26.

That precise authorization was necessary, the Kentucky high court asserted,

because arbitration denied the nursing home residents (and their estates) access

to the courts. Id. at 1426.

The Kentucky Supreme Court’s newly adopted power-of-attorney “clear-

statement rule” violated the FAA because it was “too tailor-made to arbitration

agreements” and singled out arbitration agreements “for disfavored treatment.”

Id. at 1426-27. The United States Supreme Court observed that “[n]o

Kentucky court . . . ha[d] ever before demanded that a power of attorney

2
Notably, the nursing home’s arbitration clause fully complied with New
Jersey law because the clause explained that “[b]inding arbitration means that
the parties are waiving their right to a trial, including their right to a jury trial,
their right to trial by a Judge and their right to appeal the decision of the
arbitrator(s).” See Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306, 317
(Ky. 2015) (alteration in original), judgment rev’d in part, vacated in part sub
nom. Kindred Nursing, 137 S. Ct. 1421.

4
explicitly confer authority to enter into contracts implicating constitutional

guarantees.” Id. at 1427. Despite the Kentucky Supreme Court’s assertions,

its clear-statement rule, in reality, applied only to arbitration agreements. Id.

at 1427-28 (noting “the arbitration-specific character of the rule, much as if it

were made applicable to arbitration agreements and black swans”). For that

reason, “[t]he Kentucky Supreme Court specially impeded the ability of

attorneys-in-fact to enter into arbitration agreements,” and therefore its clear-

statement rule did not pass muster under the FAA. Id. at 1429.

Unlike the Kentucky Supreme Court’s decision in Kindred Nursing, New

Jersey case law does not disfavor or discriminate against arbitration

agreements.

II.

In Atalese, this Court reaffirmed principles long embedded in our

jurisprudence. Under the FAA, state courts may construe arbitration

agreements under general contract principles, provided arbitration agreements

are treated no differently from other agreements. Atalese, 219 N.J. at 441.

Although the FAA promotes a national policy favoring arbitration, an

arbitration agreement, like any other agreement, may be invalidated “upon

such grounds as exist at law or in equity for the revocation of any contract.”

Ibid. (quoting Martindale v. Sandvik, Inc., 173 N.J. 76, 85 (2002) (quoting, in

5
turn, 9 U.S.C. § 2)). The FAA “permits agreements to arbitrate to be

invalidated by generally applicable contract defenses,” so long as those

defenses do not discriminate against arbitration. Ibid. (internal quotation

marks omitted) (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333,

339 (2011)).

Like all contractual agreements, an arbitration agreement must be the

product of mutual assent. Atalese, 219 N.J. at 442. In turn, “[m]utual assent

requires that the parties have an understanding of the terms to which they have

agreed.” Ibid.

Atalese wove together two interconnected strands of our state-law

jurisprudence in assessing the validity of an arbitration agreement -- both of

which applied neutral principles of state contract law. One strand involves

contracts in which individuals waive their statutory or constitutional rights.

Our Court has consistently maintained that a person who enters into an

arbitration agreement should understand that he is waiving his right to

prosecute or defend his claim in a civil court or judicial forum. See Morgan v.

Sanford Brown Inst., 225 N.J. 289, 308-09 (2016) (“[W]hen a contract

contains a waiver of rights -- whether in an arbitration or other clause -- the

waiver must be clearly and unmistakably established.” (internal quotation

marks omitted) (quoting Atalese, 219 N.J. at 444)); Leodori v. CIGNA Corp.,

6
175 N.J. 293, 302 (2003) (“[A] waiver-of-rights provision must reflect that an

employee has agreed clearly and unambiguously to arbitrate the disputed

claim.”); Martindale, 173 N.J. at 95 (stating in reference to arbitration

agreements that “[t]he Court will not assume that employees intend to waive

[their statutory rights] unless their agreements so provide in unambiguous

terms” (second alteration in original) (quoting Garfinkel v. Morristown

Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 135 (2001))); Garfinkel,

168 N.J. at 136 (“[W]e will not assume that an employee intends to surrender

[his] choice [of an administrative or judicial forum in an LAD case] in favor of

arbitration unless that intention has been 'clearly and unmistakably

established[.]’” (fourth alteration in original) (quoting Red Bank Reg’l Educ.

Ass’n v. Red Bank Reg’l High Sch. Bd. of Ed., 78 N.J. 122, 140 (1978)));

Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993) (“A clause

depriving a citizen of access to the courts should clearly state its purpose. The

point is to assure that the parties know that in electing arbitration as the

exclusive remedy, they are waiving their time-honored right to sue.”).3

3
Significantly, the United States Supreme Court uses the same language
found in our State’s waiver-of-rights jurisprudence in determining whether
parties have agreed to arbitrate the threshold question of arbitrability. In
Henry Schein, Inc. v. Archer & White Sales, Inc., the Court reaffirmed that
“courts 'should not assume that the parties agreed to arbitrate arbitrability
unless there is clear and unmistakable evidence that they did so.’” 586 U.S.
___ (2019) (slip op. at 8) (quoting First Options of Chi., Inc. v. Kaplan, 514

7
“The requirement that a contractual provision be sufficiently clear to

place a consumer on notice that he or she is waiving a constitutional or

statutory right is not specific to arbitration provisions.” Atalese, 219 N.J. at
443. In Atalese, we catalogued a non-exhaustive list of non-arbitration cases

involving a party’s waiver of statutory rights in which our courts have required

that the waiver be clear and unmistakable. Id. at 443-44 (citing examples). In

light of the general applicability of this doctrine to the waiver-of-rights line of

cases, we emphasized in Atalese that “[a]rbitration clauses are not singled out

for more burdensome treatment than other waiver-of-rights clauses under state

law.” Id. at 444.

The other strand of our jurisprudence involves the modest

acknowledgement that the term arbitration is not self-defining. Id. at 442.

This Court has recognized that “[t]he meaning of arbitration is not self-evident

to the average consumer.” Morgan, 225 N.J. at 308. “[A]n average member of

the public may not know -- without some explanatory comment -- that

arbitration is a substitute for the right to have one’s claim adjudicated in a

court of law.” Atalese, 219 N.J. at 442. Notably, “[o]ne statistical study

concluded 'that consumers have no idea what they are agreeing to when they

U.S. 938, 944 (1995)). In other words, in the absence of clear and
unmistakable evidence otherwise, the parties have not waived a court
resolution of the issue.

8
enter into contracts containing arbitration clauses’ and that many consumers

believe that access to 'court will be available to them, if only as a last resort.’”

Morgan, 225 N.J. at 308 n.7 (quoting Jeff Sovern et al., “Whimsy Little

Contracts” with Unexpected Consequences: An Empirical Analysis of

Consumer Understanding of Arbitration Agreements,
75 Md. L. Rev. 1, 63

(2015)).4

Underscoring the ambiguity about the precise meaning of arbitration are

court-adopted schemes that allow for judicial review of an arbitrator’s

decision. For example, Rule 4:21A-1 requires parties to arbitrate automobile

negligence actions, other personal injury actions, and non-personal injury

actions. R. 4:21A-1(a)(1) to (3). Under Rule 4:21A-6, however, arbitration

may be only the first step in the dispute resolution process. A party

disappointed with the result of arbitration can still have the dispute decided by

a jury or the court. After an arbitration decision, “[a]n action in which a

timely trial de novo has been demanded by any party shall be returned, as to all

4
A “study by the Consumer Financial Protection Bureau similarly concluded
that a majority of credit-card consumers whose agreements contained
arbitration clauses did not understand that they could not file suit in court.”
Morgan, 225 N.J. at 308 n.7 (citing Consumer Fin. Prot. Bureau, Arbitration
Study Report to Congress, Pursuant to Dodd–Frank Wall Street Reform and
Consumer Protection Act § 1028(a), § 3 at 3 (2015), http://files.
consumerfinance.gov/f/201503_cfpb_arbitration-study-report-to-congress-
2015.pdf).

9
parties, to the trial calendar for disposition.” R. 4:21A-6(c). Under our court

rules, a mandatory arbitration proceeding does not necessarily result in a

binding outcome. Ibid.

Accordingly, nothing better illustrates that arbitration is not a self-

defining term than our court rules. There is no reason to believe that the

average consumer would understand that the term arbitration -- without some

explanation -- means that court review or relief is unavailable.

Not only because of our waiver-of-rights case law, but also, separately,

because of the uncertainty that may arise from the bare use of the term

arbitration, this Court in Atalese came to the unremarkable conclusion that the

parties to a consumer contract involving an arbitration clause “must know that

there is a distinction between resolving a dispute in arbitration and in a judicial

forum.” 219 N.J. at 445. An arbitration clause should at least be clear about

its meaning; mutual assent is not achieved through ignorance. See Marchak,

134 N.J. at 282 (“A[n arbitration] clause depriving a citizen of access to the

courts should clearly state its purpose.”); see also N.J.S.A. 56:12-2 (“A

consumer contract . . . shall be written in a simple, clear, understandable and

easily readable way.”).

We have stressed that to accomplish the goal of allowing a consumer to

make an informed choice about the forum in which a dispute will be resolved,

10
no “magic words” or “prescribed set of words must be included in an

arbitration clause.” Atalese, 219 N.J. at 439, 447. “Our courts have upheld

arbitration clauses phrased in various ways when those clauses have explained

that arbitration is a waiver of the right to bring suit in a judicial forum. ” Id. at

444-45 (citing examples); see also Morgan, 225 N.J. at 309. However an

arbitration agreement is worded, it must simply make clear that the “consumer

is choosing to arbitrate disputes rather than have them resolved in a court of

law.” Atalese, 219 N.J. at 447.

This sensible, neutral, nondiscriminatory application of our state law

does not burden legitimate arbitration agreements; it simply requires

reasonable notice to the consumer of the meaning of an arbitration agreement.

Most arbitration agreements comply with the exceedingly low bar set by

Atalese and inform consumers of what they need to know.

The United States Supreme Court’s FAA precedents, such as

Concepcion, are not hostile to an informed citizenry. Those cases do not bar

an undemanding state-law requirement that allows consumers a minimal

understanding that in choosing arbitration they will not have access to a

judicial forum. Nothing in Kindred Nursing changes that landscape or

undermines the efficacy of decades of our jurisprudence, including Atalese.

III.

11
The Court today has bypassed the opportunity to put the issue on which

it granted certification to rest. I am confident, however, that the Court, when

next presented with this issue, will reaffirm the continued vitality of our long-

established jurisprudence. In Atalese, we held, consistent with that

jurisprudence, that an arbitration clause must simply explain to the average

consumer what it forecloses -- the right to a judicial forum for the resolution of

a dispute. Every contract must explain in some way its purpose. We do not

discriminate against an arbitration agreement by requiring it to do the same.

Kindred Nursing does not hold otherwise.

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