New Jersey Supreme Court says arbitration terms must be clear
by Carol Thompson
Yesterday the New Jersey Supreme Court overturned an order compelling arbitration in a case against U.S. Legal Services Group, LP (USLGS) ruling that the arbitration agreement signed by the plaintiff failed to clearly state that she was waiving the right to sue.
Patricia Atalese had contracted with USLGS 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 of the plaintiff waiving her right to seek relief in court.
Atalese brought a lawsuit against the company alleging violation of two consumer protection statues. The trail court granted USLGS’s motion to compel arbitration pursuant to the service contract. The Appellate Division affirmed the lower court’s ruling.
The Supreme Court reversed the decision. “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,” wrote Justice Barry T. Albin (pictured) in the state Supreme Court decision.
Atalese had entered into a service contract with USLGS which promised to provide debt adjustment services. She paid the company approximately $5,000, which included $4083 in legal fees, $940 in supplemental legal fees, and $107 in other fees. Atalese alleged that USLGS 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 one-page answer for collection action in which she represented herself, the decision notes.
Atalese also alleged that USLGS settled only a single debt for her and “knowingly omitted” that it was not a licensed debt adjuster in New Jersey. She further alleged the company violated the state’s usury law.
USLG moved to compel arbitration. When the trial court ruled that the arbitration clause was sufficient. Atalese appealed.
USLGS contended that the term arbitration is universally understood and that no reasonable consumer could have any doubt that arbitration is different than litigation.
The state Supreme Court opined that because arbitration involves a waiver of the right to pursue a case in a judicial forum, “courts take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of the ramifications of that assent.”
The opinion continues, “Arbitration clauses are not singled out for more burdensome treatment than other waiver-of-rights clauses under state law… the waiver must be clearly and unmistakably established.” The court ruled that USLGS’s contract failed to explain that the plaintiff waived her right to seek court relief.
The opinion states that an arbitration clause should contain clear and unambiguous language. “Mutual assent to an agreement requires mutual understanding of its terms.”
Atalese can now bring her complaint against USLGS to the court.