Atalese v. U.S. Legal Servs. Grp., L.P.

• Citation: 219 N.J. 430,99 A.3d 306
• Decision Date: 23 September 2014
• Docket Number: A-64 September Term 2012, 072314
• Parties: Patricia ATALESE, Plaintiff–Appellant, v. U.S. LEGAL SERVICES GROUP, L.P., Defendant–Respondent.
• Court: United States State Supreme Court (New Jersey)

219 N.J. 430

99 A.3d 306

Patricia ATALESE, Plaintiff–Appellant

v.U.S. LEGAL SERVICES GROUP, L.P., Defendant–Respondent.

A-64 September Term 2012, 072314

Supreme Court of New Jersey.

Argued April 9, 2014.

Decided Sept. 23, 2014.

William D. Wright argued the cause for appellant.

Thomas M. Barron, Moorestown, argued the cause for respondent.

Jed L. Marcus, Florham Park, submitted a brief on behalf of amicus curiae Pacific Legal Foundation (Bressler, Amery & Ross, attorneys; Mr. Marcus and Deborah J. La Fetra, a member of the California and Arizona bars, on the brief).

Opinion

Justice ALBIN delivered the opinion of the Court.

Arbitration provisions are now commonplace in consumer contracts. Consumers can choose to pursue arbitration and waive their right to sue in court, but should know that they are making that choice. An arbitration clause, like any contractual clause providing for the waiver of a constitutional or statutory right, must state its purpose clearly and unambiguously. In choosing arbitration, consumers must have a basic understanding that they are giving up their right to seek relief in a judicial forum.

Here, plaintiff, Patricia Atalese, contracted with defendant, U.S. Legal Services Group, L.P. (USLSG), for debt-adjustment services. The contract contained an arbitration provision for the resolution of any dispute between the parties, but the provision made no mention that plaintiff waived her right to seek relief in court. Plaintiff brought a lawsuit against USLSG in the Special Civil Part alleging violations of two consumer-protection statutes.

The trial court granted USLSG's motion to compel arbitration pursuant to the service contract. The Appellate Division affirmed, finding that “the lack of express reference to a waiver of the right to sue in court” did not bar enforcement of the arbitration clause.

We now reverse. The absence of any language in the arbitration provision that plaintiff was waiving her statutory right to seek relief in a court of law renders the provision unenforceable. An arbitration provision—like any comparable contractual provision that provides for the surrendering of a constitutional or statutory right—must be sufficiently clear to a reasonable consumer. The provision here does not pass that test. We therefore vacate the judgment of the Appellate Division and remand to the Special Civil Part for proceedings consistent with this opinion.

I.

A.

This case arises from a civil complaint filed in the Special Civil Part. Plaintiff alleged that defendant violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8–1 to –20, and the Truth–in–Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12–14 to –18. She sought treble damages, statutory penalties, and attorney's fees.

The trial court's decision to compel arbitration was based on the pleadings. See R. 4:46–2(c). We briefly review those pleadings.

B.

Plaintiff entered into a service contract with USLSG, which promised to provide debt-adjustment services. For those services, she paid USLSG approximately $5000, which included $4083.55 in legal fees, $940 in supplemental legal fees, and $107.50 in other fees. Plaintiff alleged that USLSG misrepresented that the monies were spent on numerous attorneys negotiating with creditors on her behalf. She maintained that the only work done by an attorney was the preparation of a single one-page answer for a collection action in which she represented herself. Plaintiff also alleged that USLSG settled only a single debt for her and “knowingly omitted” that it was not a licensed debt adjuster in New Jersey. Last, plaintiff contended that USLSG violated New Jersey's usury law.

USLSG denied the allegations in the complaint.

C.

USLSG moved to compel arbitration based on an arbitration provision in the twenty-three-page service contract. The arbitration provision is located on page nine, paragraph sixteen, of the contract and states:

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees.

The trial court granted USLSG's motion to compel arbitration and dismissed the complaint without prejudice. The court found the arbitration clause to be “minimally, barely ... sufficient to put the [plaintiff] on notice that if [the parties] have any sort of dispute arising out of [the] agreement, it's going to be heard in [a]rbitration.” The court also believed that the arbitration clause met the criteria outlined in Curtis v. Cellco Partnership, 413 N.J.Super. 26, 33–37, 992 A. 2d 795 (App.Div.), certif. denied, 203 N.J. 94, 999 A. 2d 462 (2010). There, the Appellate Division held that an arbitration provision will be enforced so long as it is “sufficiently clear, unambiguously worded, satisfactorily distinguished from the other [a]greement terms, and ... provide[s] a consumer with reasonable notice of the requirement to arbitrate.” Id. at 33, 992 A. 2d 795. The trial court concluded that although upholding the arbitration provision was not “a slam dunk,” the policy favoring arbitration compelled the outcome.

Plaintiff appealed.

II.

In an unpublished opinion, the Appellate Division affirmed the trial court's order compelling arbitration, relying heavily on language in Curtis, supra, 413 N.J.Super. at 33, 992 A. 2d 795, in reaching that conclusion. The panel held that “the lack of express reference to a waiver of the right to sue in court or to arbitration as the ‘exclusive’ remedy” did not bar enforcement of the arbitration clause. The panel stated that while the arbitration clause “did not explicitly state that plaintiff agreed to waive her right to try her dispute in court, it clearly and unambiguously stated that ... any dispute relating to the underlying agreement shall be submitted to arbitration and the resolution of that forum shall be binding and final. ” It noted that other appellate panels had upheld arbitration provisions that did not have explicit waiver-of-rights language. (Citing Griffin v. Burlington Volkswagen, Inc., 411 N.J.Super. 515, 518, 988 A. 2d 101 (App.Div.2010) ; EPIX Holdings Corp. v. Marsh & McLennan Cos., 410 N.J.Super. 453, 476, 982 A. 2d 1194 (App.Div.2009), overruled in part on other grounds by Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 192–93, 71 A. 3d 849 (2013) ).

The panel concluded that the language of the arbitration clause gave the “parties reasonable notice of the requirement to arbitrate all claims under the contract,” and that “a reasonable person, by signing the agreement, [would have understood] that arbitration is the sole means of resolving contractual disputes.”

We granted plaintiff's petition for certification. Atalese v. U.S. Legal Servs. Grp., L.P., 214 N.J. 117, 67 A. 3d 1191 (2013). We also granted Pacific Legal Foundation's request to participate as amicus curiae, limited to the filing of a brief.

III.

A.

Plaintiff contends that the arbitration clause does not comply with New Jersey law, specifically Curtis and our decision in Marchak v. Claridge Commons, Inc., 134 N.J. 275, 281, 633 A. 2d 531 (1993), because it “does not clearly and unequivocally state its purpose in depriving [plaintiff] of her time-honored right to sue.” She asserts that New Jersey courts do not uphold “arbitration provisions that fail to: (1) indicate that the parties waive their right to sue; or (2) indicate that arbitration is the parties' exclusive remedy.” Plaintiff does not suggest that an incantation of “magic words” is necessary for a waiver of rights but does assert that the language for such a waiver must be clear and unequivocal.

B.

USLSG contends that the term “arbitration” is universally understood and that “[n]o reasonable consumer could have any doubt that arbitration is different than litigation.” USLSG emphasizes that the Federal Arbitration Act (FAA) reflects a “liberal federal policy favoring arbitration” and requires courts to “place arbitration agreements on an equal footing with other contracts and enforce them according to their terms.” (Citations and internal quotation marks omitted) (quoting AT & T Mobility LLC v. Concepcion, 563 U.S. ––––, ––––, 131 S.Ct. 1740, 1745–46, 179 L.Ed. 2d 742, 751 (2011) ). It argues that the language in Marchak, supra —that an arbitration “clause depriving a citizen of access to the courts should clearly state its purpose,” 134 N.J. at 282, 633 A. 2d 531 —as construed by plaintiff, is in conflict with Concepcion and New Jersey case law. Last, USLSG submits that the arbitration clause is sufficiently clear and “adequately advised” plaintiff that her lawsuit would be resolved “in an arbitral forum.”

C.

Pacific Legal Foundation, participating as amicus curiae, urges this Court to affirm the Appellate Division and enforce the arbitration agreement. Amicus emphasizes that arbitration provisions in contracts must be viewed with favor, consistent with the dictates of federal and state law, and not with “suspicion or hostility.” Amicus maintains that consumers entering into contracts with arbitration clauses are “pre...