NAACP of Camden County East v. Foulke Management Corp., 421 N.J. Super. 404 (App. Div. 2011). This consumer class action was the occasion for another typically scholarly opinion by Judge Sabatino. Geraldine Thomas, an African-American, bought a new automobile from defendant. She was given numerous documents to sign as part of that transaction. Three of those documents contained arbitration clauses, including waivers of the right to litigate or arbitrate on a class basis. Ms. Thomas signed them. Later, she sought to contest some of the charges as not having been in accord with the terms of the sale. She did so by filing a class action, alleging (among other things) that defendant targeted unfair business practices, such as those allegedly used in her transaction, against African-Americans. The NAACP of Camden County was also a plaintiff, on behalf of its members.
The Law Division held that the NAACP had no standing to be a plaintiff. That court also granted a defense motion to dismiss the case and send it to arbitration. Plaintiffs appealed, and the Appellate Division reversed on both of those issues.
The bulk of Judge Sabatino’s opinion addressed the arbitration clauses. He painstakingly analyzed the various documents that Ms. Thomas had been required to sign and identified numerous conflicting provisions of the respective arbitration clauses. The panel concluded that “the disparate arbitration provisions in this case were too confusing, too vague, and too inconsistent to be enforced.” Accordingly, the Appellate Division reversed the decision sending the case to arbitration.
Before reaching that bottom-line conclusion on the arbitration issue, the panel upheld the Law Division’s ruling that the class action waiver provisions in the documents would not be invalidated on public policy grounds. Judge Sabatino found that ruling to be in keeping with AT&T Mobility LLC v. Concepcion, 563 U.S. ___, 131 S.Ct. 1740 (2011).
Concepcion had rejected a California rule that invalidated, on unconscionability or public policy grounds, class action waivers in arbitration clauses inserted into consumer contracts. But Judge Sabatino noted that “state courts remain free to decline to enforce an arbitration provision by invoking traditional legal doctrines governing the formation of a contract and its interpretation.” Those doctrines included the principle of mutual assent.
The Law Division had found that the three arbitration clauses were sufficiently clear and able to be harmonized to give rise to mutual assent. Judge Sabatino observed, however, that this was a legal conclusion that the Appellate Division would review de novo. Applying that standard of review, the panel differed with the court below. Although “an especially prudent purchaser” who took the time to study all the documents, “which are laden with fine print, would likely obtain a generalized sense that a post-sale dispute would be handled through some kind of arbitration,” defendant’s form documents did not “plainly convey– with precision and consistency– what the exact terms of that arbitration process would be.” As a result, the arbitration clauses would not be enforced.
This was the correct decision on these facts, especially in light of Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577 (App. Div. 2004), on which the panel relied heavily. But the ruling that Concepcion foreclosed a public policy or unconscionability challenge under New Jersey law still leaves room for a contrary decision in another case.
Judge Sabatino listed four arguments that plaintiffs made in an effort to distinguish Concepcion. None of those arguments succeeded. But plaintiffs did not argue that Concepcion was limited to California’s “Discover Bank rule,” to which Concepcion referred expressly, specifically and repeatedly.
New Jersey’s own unconscionablity doctrine differs from that of California. Indeed, though Concepcion found that the California rule almost inevitably voided arbitration clauses and class action waivers, the two leading Supreme Court of New Jersey cases on this subject, Muhammad v. County Bank of Rehoboth Beach, 189 N.J. 1 (2006), and Delta Funding Corp. v. Harris, 189 N.J. 28 (2006), went in opposite directions on that issue. Thus, New Jersey’s unconscionability law is not hostile to arbitration as the California rule was found to be.
Plaintiffs therefore may still argue that Concepcion does not affect Muhammad. Judge Sabatino wisely stated that the panel did “not address the continuing precedential force of Muhammad, supra, in the wake of AT&T Mobility, and [would] leave that assessment to the New Jersey Supreme Court.”
The panel’s reversal on the issue of the NAACP’s standing applied a settled body of law. New Jersey views standing more liberally than do the federal courts, due to the absence of a “case or controversy” provision in the New Jersey Constitution. An organization that has interests in the subject matter of a case has often been found to have standing to bring that case.
Here, as Judge Sabatino stated, “[i]f, as plaintiffs have alleged, defendant targeted its supposedly unfair business practices at African-Americans, this case surely would implicate the NAACP’s organizational interests in combating racial discrimination.” As a result, and under the de novo standard of review that applies to decisions on standing, the panel reversed the denial of standing to the NAACP as premature. This too was the correct ruling.