Arafa v. Health Express Corp.

• Decision Date: 14 July 2020
• Docket Number: 083174,083154,A-6 September Term 2019,A-7 September Term 2019
• Citation: 243 N.J. 147,233 A.3d 495
• Parties: Essam ARAFA, on behalf of himself and others similarly situated, Plaintiff-Respondent, v. HEALTH EXPRESS CORPORATION, Defendant-Appellant. Gloria Colon, Diana Mejia and Freddy Diaz, on behalf of themselves and all other similarly situated persons, Plaintiffs-Appellants, v. Strategic Delivery Solutions, LLC, and Myriam Barreto, Defendants-Respondents.
• Court: New Jersey Supreme Court

243 N.J. 147

233 A.3d 495

Essam ARAFA, on behalf of himself and others similarly situated, Plaintiff-Respondent,

v.HEALTH EXPRESS CORPORATION, Defendant-Appellant.

Gloria Colon, Diana Mejia and Freddy Diaz, on behalf of themselves and all other similarly situated persons, Plaintiffs-Appellants,

v.Strategic Delivery Solutions, LLC, and Myriam Barreto, Defendants-Respondents.

A-6 September Term 2019

A-7 September Term 2019

083174

083154

Supreme Court of New Jersey.

Argued March 2, 2020

Decided July 14, 2020

Ivan R. Novich argued the cause for appellant in Essam Arafa v. Health Express Corporation (Littler Mendelson, attorneys; Ivan R. Novich, Newark, and Dylan C. Dindial, Morristown, of counsel and on the briefs, and Michael T. Grosso, Newark, on the briefs).

Ravi Sattiraju argued the cause for respondent in Essam Arafa v. Health Express Corporation and for appellants in Gloria Colon v. Strategic Delivery Solutions, LLC (The Sattiraju Law Firm, attorneys; Ravi Sattiraju, of counsel and on the briefs, and Anthony S. Almeida, Princeton, on the briefs).

Patrick W. McGovern argued the cause for respondents in Gloria Colon v. Strategic Delivery Solutions, LLC (Genova Burns, attorneys; Patrick W. McGovern, Newark, of counsel and on the briefs).

William D. Wright argued the cause for amicus curiae New Jersey Association for Justice in Essam Arafa v. Health Express Corporation and in Gloria Colon v. Strategic Delivery Solutions, LLC (The Wright Law Firm, attorneys; William D. Wright and David T. Wright, on the brief).

Andrew W. Dwyer submitted a brief on behalf of amicus curiae National Employment Lawyers Association of New Jersey in Gloria Colon v. Strategic Delivery Solutions, LLC (The Dwyer Law Firm, attorneys; Andrew W. Dwyer, Newark, of counsel and on the brief).

JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.

These appeals involve arbitration agreements in contracts for employment that, plaintiffs argue, fall within the "exemption clause" of the Federal Arbitration Act (FAA), 9 U.S.C. § 1. The question posed in both cases is whether the disputed arbitration agreements would be enforceable under the New Jersey Arbitration Act (NJAA), N.J.S.A. 2A:23B-1 to -36, if they are exempt from the FAA.

We address Colon v. Strategic Delivery Solutions, LLC, and Arafa v. Health Express Corp. together. Although the facts of the arbitration agreements differ, their overall thrust is the same. In both cases, the plaintiff employees brought suit against their employers in Superior Court, and the employers sought dismissal of the suits in light of the arbitration agreement in the respective employment contracts. Both trial courts granted the employers' motions to dismiss and to compel arbitration.

A panel of the Appellate Division agreed in Colon that the arbitration agreement would be enforceable under the NJAA if, on remand, the trial court found the agreement exempt from the FAA; another Appellate Division panel reversed the dismissal in Arafa, ruling the arbitration agreement in that case null and void.

We now hold that the NJAA applies in the absence of the FAA and that the arbitration agreements at issue are enforceable under the NJAA if the FAA does not apply. We therefore agree with the Appellate Division's decision in Colon and reverse the judgment of the Appellate Division in Arafa.

I.

We begin by summarizing the pertinent facts and procedural history of both matters.

A.

1.

In Colon, defendant Strategic Delivery Systems, LLC (SDS) is a licensed freight forwarder and broker. Plaintiffs Gloria Colon, Diana Mejia, and Freddy Diaz worked for SDS at the Elizabeth, New Jersey facility from approximately February 2015 through March 2016. Their job descriptions included truck driving and delivery functions for customers throughout the state and surrounding areas.

Each plaintiff entered into an identical employment agreement with SDS. Directly at issue are Paragraphs 19, 20, and 24 of the employment agreements.

Paragraph 19, "Governing Law," states:

(a) The laws of the state of residence of the Vendor, without regard to the conflicts of law principles thereof, shall govern this Agreement, including its construction and interpretation, the rights and remedies of the parties hereunder, and all claims, controversies or disputes (whether arising in[ ]contract or tort) between the parties.

(b) The parties voluntarily agree to waive any right to a trial by jury in any suit filed hereunder and agree to adjudicate any dispute pursuant to Paragraph 20 below.

Paragraph 20, "Arbitration and Waiver to Join a Class," states:

(a) Agreement to Arbitrate. The parties agree to comply to be bound by the [FAA]. The parties agree that any dispute, difference, question or claim arising out of or in any way relating to this Agreement or the transportation services provided hereunder shall be subject to binding arbitration in accordance with the Rules for Commercial Arbitration of the American Arbitration Association ("AAA") in effect at the time such arbitration is initiated. The parties agree that the issue of arbitrability shall be determined by the arbitrator applying the law of the state of the Vendor.

....

(b) Voluntary Waiver to Join a Class. Vendor hereby agrees that any arbitration, suit, action or other legal proceedings arising out of or in any way relating to this Agreement or the services provided hereunder shall be conducted and resolved on an individual basis only and not on a class-wide, multiple plaintiff, collective or similar basis unless mutually agreed to in writing by all interested parties. Vendor hereby voluntarily and expressly waives any right it may have to join any suit, action, arbitration or other legal proceeding arising out of or in any way relating to this Agreement or the services provided hereunder on a class-wide, multiple plaintiff, collective or similar basis.

Paragraph 24, "Reformation and Severability," states:

If any provision of the Agreement shall be invalid, illegal or unenforceable, it shall to the extent possible, be modified in such a manner as to be valid, legal[,] and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in[ ]either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby.

2.

Plaintiffs filed a class action complaint against SDS on behalf of themselves and similarly situated persons who performed truck driving and/or delivery services for SDS. Plaintiffs alleged SDS violated the New Jersey Wage and Hour Law by failing to pay overtime wages and violated the New Jersey Wage Payment Law by illegally withholding monies.

SDS filed a motion to dismiss the complaint and compel arbitration on an individual basis pursuant to plaintiffs' arbitration agreements. Because plaintiffs failed to mention the arbitration agreements in their complaint, SDS thus relied on materials not in plaintiffs' complaint, and the trial court applied a summary judgment standard to SDS's motion.

On January 2, 2018, the trial court granted SDS's motion to dismiss and compel arbitration. The trial court found the language of the arbitration agreements was clear and unambiguous, and that plaintiffs were compelled to adjudicate any disputes through arbitration. The trial court addressed only the issue of arbitration and not the other claims raised in the complaint.

The Appellate Division substantially agreed with the trial court, holding in its published decision that plaintiffs waived their right to a jury trial. Colon v. Strategic Delivery Sols., LLC, 459 N.J. Super. 349, 360, 210 A.3d 932 (App. Div. 2019). The court recognized a plaintiff may waive the right to a jury trial in an arbitration agreement so long as the language is clear and unambiguous. Id. at 361, 210 A.3d 932. Here, the Appellate Division found plaintiffs clearly and unambiguously waived their right to a jury trial in Paragraph 19 of the employment agreements. Ibid. The court further found plaintiffs chose to arbitrate their disputes by agreeing to adjudicate any dispute "pursuant to Paragraph 20," which contained the arbitration agreement language. Id. at 361-62, 210 A.3d 932.

The Colon court likewise found that plaintiffs had clearly and unambiguously waived their ability to proceed as a class on their statutory claims. Id. at 363, 210 A.3d 932. The Appellate Division distinguished Colon from Muhammad v. County Bank of Rehoboth Beach, DE, 189 N.J. 1, 15-16, 912 A.2d 88 (2006), in which this Court found unconscionable a class-arbitration waiver embedded in a consumer contract of adhesion. Colon, 459 N.J. Super. at 363, 210 A.3d 932. The panel explained that "this case does not involve a class-arbitration waiver and it was not a consumer contract." Ibid.

As to the legal question of whether the NJAA may apply to an agreement exempt from the FAA, the Colon panel held that it may: the FAA does not "occupy the entire field of arbitration," id. at 359, 210 A.3d 932 (citing Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford, Jr., Univ., 489 U.S. 468, 477, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ), and it therefore does not "preempt[ ] the enforcement of state arbitration statutes," id. at 359-60, 210 A.3d 932 (quoting Palcko v. Airborne Express, Inc., 372 F.3d 588, 595 (3d Cir. 2004) ). The Appellate Division thus determined that "the NJAA could be applied even if the FAA did not apply." Id. at 360, 210 A.3d 932.

The appellate court found, however, that a key issue remained to be resolved: "[t]he trial court did not determine whether plaintiffs were providing transportation services on an interstate basis." Id. at 358, 210 A.3d 932. Because the FAA exempts "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce," ibid. (quoting 9 U.S.C. § 1 ), the panel found it essential to determine, in the...