Flanzman v. Jenny Craig, Inc., 456 N.J. Super. 613 (App. Div. 2018). This opinion by Judge Fasciale today is yet another case arising out of an arbitration clause. Plaintiff, having been terminated from her employment by defendant, filed an age discrimination complaint under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. Defendant filed a motion to compel arbitration. The Law Division granted that motion. Plaintiff appealed, and the Appellate Division, applying de novo review since the enforceability of the arbitration clause was a legal issue, reversed in today’s opinion.
The basis for reversal was simple and clear: since the arbitration clause did not specify a forum, such as the American Arbitration Association (“AAA”) or JAMS, there was no mutual assent or “meeting of the minds,” and therefore no valid agreement to arbitrate. Quoting prior caselaw, Judge Fasciale observed that a party who signs an agreement containing an arbitration clause “must be able to understand– from clear and unambiguous language– both the rights that have been waived and the rights that have taken their place.” That did not happen here.
“Selecting an arbitral institution informs the parties, at a minimum, about that institution’s rules and procedures. Without knowing this basic information, parties to an arbitration agreement will be unfamiliar with the rights that replaced judical adjudication. That is, the parties will not reach a ‘meeting of the minds.'” Judge Fasciale cited some of the rules of AAA, and noted that JAMS and other arbitral fora have comparable rules, which “generally establish the substantive and procedural setting for the entire arbitration process.” Without knowledge of what those rules are, a party lacks the required understanding of what rights replace the right to judicial adjudication, rendering the arbitration clause unenforceable.
Judge Fasciale was careful to emphasize that the panel was not imposing a requirement of any particular “magic words” in an arbitration agreement. Citing a federal district court opinion from Mississippi, he offered some pointers about how to deal with this issue near the end of his opinion. Anyone involved in drafting agreements would benefit from reviewing this opinion.