Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 127, (2001) (Consumer Arbitration Agreements)(Employment Arbitration Agreements)

Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 127, (2001)(The Supreme Court has invalidated arbitration agreements)

In Garfinkel, the Court REFUSED to enforce an arbitration based on state law contract principles. In Garfinkel, the Court held that basic contract principles warranted the denial of the defendant’s motion to enforce the arbitration clause. The Court specifically held that an employment agreement’s arbitration clause was insufficient to constitute a waiver of the plaintiff’s remedies under the law against discrimination.

The arbitration agreement at issue stated:

Any controversy or claim arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration in Morristown, New Jersey, in accordance with the rules then obtaining of the American Arbitration Association, and judgment upon any reward rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Id. at 128.

The Supreme Court in Garfinkel specifically held that “as we have stressed in another context, a party’s waiver of statutory rights must be clearly and unmistakably established and contractual language alleged to constitute a waiver will be read expansively. The Court’s interpretation of the agreement was that since the arbitration was not properly worded so as to apprise the signor of the waiver, the clause was unenforceable.

Arbitration Agreements are now commonplace. You find arbitration agreements in consumer contracts. You find arbitration agreements and employee applications. The find arbitration agreements in almost every standardized contract, in person and online. All the major credit card companies have arbitration agreements. Amazon, Microsoft, and Google all of arbitration agreements whether you know it or not. All cell phone carriers have arbitration agreements, Verizon, T-Mobile and/or other providers.

Courts have held at the federal and state level that these arbitration agreements are enforceable. Federal law in state law favor enforce arbitration agreements as it is, in theory, a cheaper, quicker, easier way to dispose of the disputes. The concept behind arbitration agreements is that they are better for consumers. However, this is always not the case. And there is no mention of results. However, all major businesses law firms included have arbitration agreements in their agreements with customers, potential customers, employees, and potential employees.

This case is one of the older cases and there have been significant evolution in interpreting arbitration agreements between then and now. The underlying concepts are the same however there are some differences between interpreting employee arbitration agreements and consumer arbitration agreements. However, generally the underlying concepts are identical. Full and fair disclosure. Clear indication of what claims are contained in the arbitration agreement and what laws and what claims under what laws are going to be included in the arbitration agreement. In addition, the most part, only those who signed an arbitration agreement are subject to the terms and conditions. There are some exceptions called third-party beneficiaries. However, mostly the arbitration agreements are to be enforced against those who have signed the agreement.

There are various arbitration agreements that are included to be signed by consumers or employees. Each one is different. Some arbitration agreements are signed in a digital fashion. Some arbitration agreements are signed by way of acknowledgment. Some arbitrations are done the old school way as a pen to paper. However, the underlying concept is full, knowing consent to participating in the arbitration and waiting the right to go to court.

The New Jersey with the courts looks at arbitration agreements as waivers. The New Jersey law waivers is that the waiver must be clear and express a clear intent to waive a specific right. The right would be the right to a jury trial guaranteed in the New Jersey Constitution.

Usually, the disclosure identifies the organization providing the arbitration services. This will provide a procedure and the concept of selecting an arbitrator.

Expenses in arbitration and due process protocols in JAMS and AAA

Most organizations administrative arbitrations are slanted towards and require due process protocols. In simple terms this is fairness in the payment of fees. These organizations recognize the most people cannot afford to pay the high fees to file in arbitration. These organizations, to their benefit, recognized this fact. Most organizations such as American Arbitration Association and JAMS require a small fee if any from the consumer at the beginning of the arbitration. These organizations then require the business to pay an upfront filing fee and any fees which are incurred down the road.
It is a valid defense to the enforcement of an arbitration clause that it is too expensive. This is called due process. A business cannot force a consumer into a process which cannot be afforded. This is the reason that the American Arbitration Association in JAMS as something called due process protocols. These due process protocols assure fairness and disclosure for consumers. The business does not comply with the due process protocols these organizations will not administer claims filed.

Most automotive dealerships have a provision that the automotive dealership would pay for the cost of arbitration. Most other large organizations have in place a requirement that the business pays most of the arbitration fees. This should be a clue that arbitration is cheaper for large corporations and that they will pay all the fees for a consumer which would be cheaper than litigating the matter in court for years and paying their lawyers. Big businesses like arbitration agreements because they end up being cheaper. Big businesses like arbitration agreements because it limits legal expenses and there are no appeals. Generally, the matters are over quicker, speedier and with results without having to go before a jury can take any risks.

For consumers arbitration is certainly quicker. However, results are not determined by a jury but rather by a retired judge for a practicing attorney. There are serious implications here. The rules of evidence are also different. In arbitration the application of the rules of evidence are discretionary. The elimination of the hearsay rule makes arbitrations far less expensive than proceeding to court.