Most complex litigation ends with a settlement agreement and most settlements of complex litigation include an arbitration clause to address any disputes over the settlement. New Jersey's Supreme Court over the past fifteen years has repeatedly made clear that arbitration clauses are not automatically enforceable and has interpreted them narrowly.
In Garfinkel v. Morristown Obstetrics and Gynecology Associates, PA, 168 N.J. 142 (2001), New Jersey's Supreme Court made clear that arbitration agreements will not compel the arbitration of statutory employment claims unless the agreement conspicuously states that the former employee is waiving his right to jury trial and to assert such statutory employment claims.
In Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), the New Jersey Supreme Court again struck down an arbitration clause, this time because it was not sufficiently clear to a reasonable consumer.
In a recent decision, Morgan v. Sanford Brown Institute Career Ed. Corp., 2016 WL 3248016 (June 14, 2016), the New Jersey Supreme Court held that the court, not the arbitrator, should determine whether a dispute is arbitrable, unless the arbitration agreement clearly and unmistakably delegates to the arbitrator the authority to decide whether the claim is arbitrable.
In short, arbitration clauses must be carefully drafted particularly when statutory employment or consumer claims are implicated. Although arbitration has been traditionally favored by the courts in most states, the modern trend in New Jersey seems to be to the contrary.
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