Kernahan v. Home Warranty Adm'r of Fla., Inc.
Decision Date | 10 January 2019 |
Docket Number | 079680,A-15 September Term 2017 |
Citation | 236 N.J. 301,199 A.3d 766 |
Parties | Amanda KERNAHAN, Plaintiff-Respondent, v. HOME WARRANTY ADMINISTRATOR OF FLORIDA, INC. and Choice Home Warranty, Defendants-Appellants. |
Court | New Jersey Supreme Court |
Lori Grifa, Hackensack, argued the cause for appellants (Archer & Greiner, attorneys; Lori Grifa, of counsel and on the briefs, and Michael J. Plata, Hackensack, and Josiah Contarino, Hackensack, on the briefs).
John E. Keefe, Jr., Red Bank, argued the cause for respondent (Keefe Law Firm and Law Office of Jonathan Rudnick, attorneys; Stephen T. Sullivan, Jr., Red Bank, and Jonathan Rudnick, Red Bank, on the briefs).
David R. Kott, Newark, argued the cause for amici curiae New Jersey Business and Industry Association, Commerce and Industry Association of New Jersey and New Jersey Chamber of Commerce (McCarter & English, attorneys; David R. Kott, Newark, Edward J. Fanning, Jr., Newark, and Zane C. Riester, Newark, of counsel and on the briefs, and Steven H. Del Mauro, Newark, on the briefs).
James A. Barry, Cherry Hill, argued the cause for amicus curiae New Jersey Association for Justice (Locks Law Firm and Law Offices of Charles N. Riley, attorneys; James A. Barry, Michael Galpern, Cherry Hill, Andrew P. Bell and Charles N. Riley, Cherry Hill, on the brief).
George W. Conk, South Orange, argued the cause for amicus curiae New Jersey State Bar Association (New Jersey State Bar Association, attorneys; Robert B. Hille, President, Morristown, of counsel and on the brief, and George W. Conk and Timothy E. Dinan, Sparta, on the brief).
In this appeal, we address whether parties to a consumer contract intended to create an agreement to arbitrate through the insertion of language within an alternative dispute resolution provision. See Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 435, 99 A.3d 306 (2014) ( ).
Both the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1 to 16, and the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32, value the benefits from arbitration of disputes and encourage enforcement of arbitration agreements. See Roach v. BM Motoring, LLC, 228 N.J. 163, 173-74, 155 A.3d 985 (2017). In determining whether to give effect to the disputed alternative dispute resolution provision here, we are mindful that federal law requires that arbitration agreements be placed "on equal footing with all other contracts." Kindred Nursing Ctrs. L.P. v. Clark, 581 U.S. ––––, 137 S.Ct. 1421, 197 L.Ed.2d 806 (2017) (quoting DIRECTV, Inc. v. Imburgia, 577 U.S. ––––, 136 S.Ct. 463, 465, 193 L.Ed.2d 365 (2015) ). Our case law recognizes that obligation as well. See Atalese, 219 N.J. at 440-41, 99 A.3d 306 (collecting cases).
In dispensing even treatment to arbitration agreements, basic contract formation and interpretation principles still govern, for there must be a validly formed agreement to enforce. See Volt Info. Scis., Inc. v. Bd. of Trs., 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488 (1989) ; Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132, 773 A.2d 665 (2001). We apply state law principles of contract formation in that analysis. See First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) ().
In this matter, plaintiff Amanda Kernahan entered into an agreement with defendants for a home maintenance warranty. When she became dissatisfied, she filed a complaint in Superior Court seeking statutory and common law relief. Defendants sought dismissal of the action, arguing that the contract's alternative dispute resolution provision, labeled "MEDIATION," contained language that required plaintiff to proceed with her claims exclusively through arbitration.
The trial court refused to dismiss plaintiff's complaint, finding in the language of the provision no mutuality of assent to have formed an agreement to arbitrate. The Appellate Division affirmed. We granted certification to review defendants' argument that an overly demanding review resulted in a prohibited hostility to arbitration. Defendants also contended that our recent decision in Atalese, which examined a contract for mutuality of assent to arbitrate, thereby waiving one's right to pursue claims in court, violated recent United States Supreme Court pronouncements in Kindred Nursing about FAA requirements. Because defendants have retreated from their argument that our decision in Atalese transgresses the FAA under Kindred Nursing, we do not address that contention. We will not address an argument that, at this time, is advanced only by amici.
In our de novo review of the pivotal provision at issue in the disputed contract, we conclude that the so-called "arbitration agreement" within this consumer contract fails to support a finding of mutuality of assent to form an agreement to arbitrate. The provision's language is debatable, confusing, and contradictory -- and, in part, misleading. The "arbitration agreement" touted by defendants is also obscure when this consumer contract is viewed as a whole. The provision does not fairly convey to an ordinary person that arbitration would be the required method of dispute resolution.
Accordingly, for the reasons expressed herein, we concur in the judgment that declined to enforce this provision as an understandable mutual agreement to arbitrate disputes, which, thereby, allowed plaintiff to proceed with her claims in the action she filed in court.
A.
Because this appeal arises from a denial of a motion to dismiss, we recite the facts as alleged in plaintiff's November 30, 2015 putative class action complaint. In the spring of 2015, plaintiff purchased a "home service agreement" from defendants Home Warranty Administrator of Florida, Inc., and Choice Home Warranty (collectively, defendants). The agreement was essentially a consumer contract whereby defendants would pay for and arrange for a certified contractor to repair or replace certain home appliances at plaintiff's property in Orlando, Florida, in exchange for the contract term price of $1050.
Becoming dissatisfied, plaintiff cancelled the contract in June 2015 and received a refund of the purchase price.1 In November 2015, she filed the instant complaint alleging that defendants violated the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20; the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18; and the implied covenant of good faith and fair dealing. She claimed that the agreement misrepresented its length of coverage and that the deceptively labelled "MEDIATION" section of the agreement failed to inform her that she was waiving her right to a jury trial and would be deterred from seeking the additional remedies of treble damages, punitive damages, and attorney's fees and costs.2 Defendants filed a motion to dismiss the complaint with prejudice in favor of arbitration, citing the agreement's alternative dispute resolution provision.
The alternative-dispute-resolution section of the agreement that is the focus of this appeal appears on the fifth and last page of the contract, and it reads in full as follows:
Before the trial court, defendants argued that the contract's "arbitration provision" is valid and enforceable, containing several clauses that put plaintiff on notice that she is waiving her right to a jury trial, even though the provision does not explicitly reference a jury trial. Defendants maintained that the provision satisfied this Court's prior case...
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