The New Jersey Supreme Court refused to allow a respondent to
benefit from its refusal to pay arbitration fees in Roach v. BM
Motoring, LLC, 2017 WL 931430 (NJ March 9, 2017).
First, Ms. Jackson filed a demand for arbitration
against a New Jersey car dealership with the AAA. The
parties' arbitration agreement required the dealership to
"advance both party's [sic] filing, service,
administration, arbitrator, hearing or other fees, subject to
reimbursement by decision of the arbitrator."
Nevertheless, the dealership refused to pay any filing fees
or even respond to the claim and the AAA dismissed the case for
non-payment. (Sing it: "Sorry Ms. Jackson, I am for
real...") Another buyer, Ms. Roach, also had her claim
dismissed due to the dealership's failure to comply with the
Ms. Jackson and Ms. Roach then filed a putative class action in
New Jersey state court. The dealership had the nerve to move
for dismissal, due to the arbitration clause. The trial court
granted the dealership's motion, and the high court
The NJ Supreme Court had no patience for the dealership's
arguments. It first disposed of the
dealership's argument that the consumers were wrong to take
their arbitration demand to the AAA. The agreement provided
that "arbitration shall be conducted in accordance with the
rules of the" AAA. The court noted that Rule R-2 of the
AAA's Commercial Rules provides that parties who agree to use
the AAA rules also consent to AAA administration, and the
plaintiff's choice of forum is granted deference.
Second, the court found the dealership materially breached the
arbitration agreement by failing to pay AAA fees and respond to the
arbitration demands, and as a result, the dealership could no
longer compel arbitration. Otherwise "the result would
be a 'perverse incentive scheme'–a company could
ignore an arbitration demand, and if the claimant did not abandon
the claim, later compel arbitration." (internal quotes
from a Ninth Circuit decision on the topic).
As long as we're on the subject of state courts, I will
share that Georgia's high court enforced an arbitration
agreement in the context of an allegation of wrongful death at a
nursing home. United Health Services of Georgia, Inc. v.
Norton, 2017 WL 875035 (Ga. March 6, 2017). That's not
the direction that
many state courts have taken recently.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).