Flanzman v. Jenny Craig, Inc., 091120 NJSC, A-66-18

Docket NºA-66-18
Opinion JudgePATTERSON JUSTICE
Party NameMarilyn Flanzman, Plaintiff-Respondent, v. Jenny Craig, Inc., Lillias Piro, individually, and Denise Shelley, individually, Defendants, and JC USA, Inc., Defendant-Appellant.
AttorneySharon P. Margello argued the cause for appellant (Ogletree, Deakins, Nash, Smoak & Stewart, attorneys; Sharon P. Margello and Jocelyn A. Merced, on the briefs). David Zatuchni argued the cause for respondent (Zatuchni & Associates, attorneys; David Zatuchni, on the brief). William D. Wright argu...
Judge PanelPATTERSON, J., CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-VINA, and SOLOMON join in JUSTICE PATTERSON's opinion. CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-VINA, and SOLOMON join in JUSTICE PATTERSON's opinion.
Case DateSeptember 11, 2020
CourtSupreme Court of New Jersey

Marilyn Flanzman, Plaintiff-Respondent,

v.

Jenny Craig, Inc., Lillias Piro, individually, and Denise Shelley, individually, Defendants,

and

JC USA, Inc., Defendant-Appellant.

No. A-66-18

Supreme Court of New Jersey

September 11, 2020

Argued November 19, 2019

On certification to the Superior Court, Appellate Division, whose opinion is reported at 456 N.J.Super. 613 (App. Div. 2018).

Sharon P. Margello argued the cause for appellant (Ogletree, Deakins, Nash, Smoak & Stewart, attorneys; Sharon P. Margello and Jocelyn A. Merced, on the briefs).

David Zatuchni argued the cause for respondent (Zatuchni & Associates, attorneys; David Zatuchni, on the brief).

William D. Wright argued the cause for amicus curiae New Jersey Association for Justice (The Wright Law Firm, attorneys; William D. Wright and David T. Wright, on the brief).

Andrew Dwyer argued the cause for amicus curiae National Employment Lawyers Association of New Jersey (Dwyer & Barrett, attorneys; Andrew Dwyer, of counsel and on the brief).

PATTERSON, J., writing for the Court.

In this appeal, the Court considers whether the Arbitration Agreement (Agreement) signed by plaintiff Marilyn Flanzman and her former employer compels arbitration of Flanzman's discrimination claims given that the Agreement did not name the arbitrator, designate an arbitration organization to conduct the proceeding, or set forth a process for the parties to choose an arbitrator.

In approximately July 1991, Jenny Craig, Inc., a weight loss, weight management, and nutrition company, hired Flanzman to work as a weight maintenance counselor. In May 2011, Flanzman signed a document entitled "Arbitration Agreement" in connection with her employment. In February 2017, when the dispute that led to this appeal arose, Flanzman was eighty-two years old. Flanzman's managers informed her that her hours would be reduced from thirty-five to nineteen hours per week. In April 2017, Flanzman's managers further reduced her hours to approximately thirteen hours per week. In June 2017, they reduced her hours to three hours per week, at which point she left her employment.

Flanzman brought suit, asserting claims for age discrimination, constructive discharge, discriminatory discharge, and harassment. Relying on the Agreement, defendants moved to dismiss the complaint and to compel arbitration. Defendants contended that California law governed the Agreement and that the Agreement was enforceable. The trial court granted the motion to dismiss and ordered the parties to arbitrate Flanzman's claims. It held that California law governed the arbitration and that the arbitral forum is assumed to be California.

The Appellate Division reversed. 456 N.J.Super. 613, 630 (App. Div. 2018). The Appellate Division invalidated the Agreement because it did not designate an "arbitral forum." Id. at 623-24. The court held that if the parties select no "arbitral institution," they must at least identify "the general process for selecting an arbitration mechanism or setting" in order for their agreement to be binding. Id. at 628-29.

The Court granted certification. 237 N.J. 310 (2019).

HELD: The New Jersey Arbitration Act (NJAA), which provides a default procedure for the selection of an arbitrator and generally addresses the conduct of the arbitration, clearly expresses the Legislature's intent that an arbitration agreement may bind the parties without designating a specific arbitrator or arbitration organization or prescribing a process for such a designation. N.J.S.A. 2A:23B-11(a), -15. Under principles of New Jersey law that generally govern contracts, the Agreement at issue is valid and enforceable.

1. Section 2 of the Federal Arbitration Act (FAA) represents a congressional declaration of a liberal federal policy favoring arbitration agreements, notwithstanding any state substantive or procedural policies to the contrary. The FAA preempts any state rule discriminating on its face against arbitration. In the FAA, Congress also promoted arbitration by addressing the selection of an arbitrator. Section 5 of the statute authorizes a court to designate an arbitrator on the application of any party if no contractual provision governs the designation of an arbitrator, and an arbitrator or arbitrators appointed by the court in accordance with the FAA "shall act under the [arbitration] agreement with the same force and effect as if he or they had been specifically named therein." 9 U.S.C. § 5. (pp. 13-15)

2. The New Jersey Arbitration Act (NJAA) is nearly identical to the FAA and enunciates the same policies favoring arbitration. The NJAA's legislative history confirms the Legislature's view that the statute would operate as a "default" provision, deferring in most respects to the terms agreed upon by the parties but mandating certain provisions that the Legislature viewed to be critical. As did Congress when it enacted 9 U.S.C. § 5, the Legislature ensured in the NJAA that a court can act when the parties have not agreed on a specific arbitrator or designated a method of choosing an arbitrator, or when an agreed-upon selection process has failed. See N.J.S.A. 2A:23B-11(a). The NJAA thus codifies the Legislature's intent that an arbitration agreement may be valid and enforceable even if the parties have not chosen a specific arbitrator or set forth a process for the selection of the arbitrator. The NJAA also provides general guidance as to how the arbitration will proceed. See N.J.S.A. 2A:23B-15(a) to (e). (pp. 15-18)

3. In light of the NJAA's default provisions supplying terms missing from an arbitration agreement, a court's enforcement of an agreement supplemented by those terms comports with common-law principles of New Jersey contract law. Although the parties may choose to agree upon an arbitrator or arbitral organization or set forth a plan for such a designation, the NJAA's default provisions are available to parties who leave those issues unresolved. (pp. 18-20)

4. When a New Jersey court is called on to enforce an arbitration agreement, its 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. Conducting that inquiry in Atalese v. U.S. Legal

Services Group, L.P., the Court observed that "under New Jersey law, any contractual 'waiver-of-rights provision must reflect that [the party] has agreed clearly and unambiguously' to its terms." 219 N.J. 430, 443 (2014). The Arbitration Agreement at issue in this appeal meets the standard of Atalese. (pp. 20-22)

5. When it invalidated the Agreement, the Appellate Division set forth a requirement for arbitration agreements that was not imposed in Atalese, mandating either the designation in the agreement of an "arbitral institution" or a description of "the general process for selecting an arbitration mechanism or setting." 456 N.J.Super. at 628-29. That principle is not among the "grounds as exist at law or in equity for the revocation of any contract." Atalese, 219 N.J. at 441. No New Jersey statutory provision or prior decision has elevated the selection of an "arbitral institution" or the designation of a "general process for selecting an arbitration mechanism or setting" to the status of essential contract terms, without which an arbitration agreement must fail. To the contrary, the NJAA makes clear that its default provision for the selection of an arbitrator may operate in the absence of contractual terms prescribing such procedures. See N.J.S.A. 2A:23B-11(a). The Court shares the Appellate Division's view that a detailed description of the contemplated arbitration in an arbitration agreement enhances the clarity of that agreement and agrees that it may be advantageous for parties to designate in their agreement an arbitral organization but also provide an alternative method of choosing an organization should the parties' primary choice be unavailable. See 456 N.J.Super. at 626-30. But the parties' omission of a designated arbitral institution or general process for selecting an arbitration mechanism or setting does not warrant the invalidation of an arbitration agreement. Should the parties prove unable or unwilling to agree upon an arbitrator, the court may exercise its appointment authority in accordance with N.J.S.A. 2A:23B-11 on the application of either party, and the designated arbitrator may conduct the arbitration in accordance with the procedures described in N.J.S.A. 2A:23B-15. In short, the Agreement at issue in this appeal meets the standards imposed by New Jersey contract law and is therefore valid and enforceable. (pp. 22-27)

6. The Court finds the Agreement to be silent as to the governing law and the jurisdiction in which the arbitration should be held. The Court therefore vacates the trial court's judgment insofar as it designates California law as the governing law and concludes that the parties agreed that California would provide the forum of the arbitration. That issue is for the arbitrator to resolve. (pp 27-28)

The judgment of the Appellate Division is REVERSED, and the judgment of the trial court is REINSTATED AS MODIFIED.

CHIEF JUSTICE RABNER and JUSTICES LaVECCHIA, ALBIN, FERNANDEZ-VINA, and SOLOMON join in JUSTICE PATTERSON's opinion.

OPINION

PATTERSON JUSTICE

In this appeal, we determine whether the Arbitration Agreement (Agreement) signed by plaintiff Marilyn Flanzman and her former employer, defendant JC USA, Inc. (JC USA), compels arbitration of Flanzman's discrimination claims. In the Agreement, Flanzman and JC USA agreed to resolve their disputes by "final and binding arbitration" that would take the place of "a jury or...

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