Arbitration Provision Bounced Again, Even After Kindred Nursing Decision.

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration (pd)As readers of this blog know, arbitration provisions in consumer contracts are difficult to enforce in New Jersey. (Click here or here for a refresher.) There was some belief that the U.S. Supreme Court's recent decision in Kindred Nursing Centers Ltd. P'ship v. Clark might change this, but it does not appear, at least not yet, that it has. In a recent case, Defina v. Go Ahead and Jump 1, LLC d/b/a Sky Zone Indoor Trampoline Park, the Appellate Division was asked to revisit, in light of Kindred Nursing, its prior decision refusing to enforce an arbitration provision in a contract between a trampoline park and one of its customers. The Appellate Division did so, but affirmed its prior decision, holding that Kindred Nursing did not require New Jersey courts to change the manner in which they approach arbitration provisions.

I wrote about Defina in its first go-around with the Appellate Division — Bounce Around The (Court)Room: Trampoline Park's Arbitration Provision Deemed Unenforceable. The underlying facts of the case are unfortunate. A child fractured his ankle while playing "Ultimate Dodgeball" at a trampoline park. Before entering the facility, the child's father signed a document entitled, "Participation Agreement, Release and Assumption of Risk." The document contained an arbitration provision, which provided: 

If there are any disputes regarding this agreement, I on behalf of myself and/or my child(ren) hereby waive any right I and/or my child(ren) may have to a trial and agree that such dispute shall be brought within one year of the date of this Agreement and will be determined by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. I further agree that the arbitration will take place solely in the state of Texas and that the substantive law of Texas shall apply.

Notwithstanding this provision, the child's parents sued the trampoline park in state court, alleging tort claims for simple negligence and gross negligence, and statutory claims for alleged violations of the Consumer Fraud Act and the Truth in Consumer Contract, Warranty and Notice Act. 

Continue reading “Arbitration Provision Bounced Again, Even After Kindred Nursing Decision.”

Unenforceable Clause In Arbitration Agreement Does Not Void Agreement

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration (pd)One of my children's preschool teachers was fond of saying, "you get what you get and you don't get upset." (Not to my little angel, of course, but to other children.) In Curran v. Curran, the Appellate Division basically applied this admonition to the parties to an arbitration agreement, holding that they got what they intended out of the agreement, therefore they could not argue, after the fact, that an unenforceable provision in the agreement voided the entire agreement.

In Curran, plaintiff filed for divorce from defendant. With the advice of counsel, the parties entered into a consent order to refer all issues incident to their divorce to arbitration under the New Jersey Arbitration Act. In the consent order, the parties acknowledged that any arbitration award that was entered could only be set aside or modified by a court under the limited grounds set forth in the Arbitration Act — e.g., the award was procured by fraud, corruption, or undue means, the court found evidence of "evident partiality" by the arbitrator, the arbitrator exceeded his or her powers, etc.  But the parties also included a handwritten provision, which provided: "The parties reserve their rights to appeal the arbitrator's award to the appellate division as if the matter was determined by the trial court." This is the provision that would cause all of the problems.

After the arbitrator entered a preliminary award, plaintiff requested reconsideration. The arbitrator then issued a comprehensive award setting forth his findings of fact and conclusions of law. Plaintiff filed a motion in the Law Division for an order modifying the award, citing eight alleged "mistakes of law" made by the arbitrator. Plaintiff also argued that the intent of the handwritten provision was not to allow for direct appeal to the Appellate Division, but was instead was evidence that the parties intended a more searching review of the award that what would normally be allowed under the Arbitration Act. The trial court agreed, holding that the paragraph itself was unenforceable because it purported to "create subject matter jurisdiction by agreement." The trial court noted that "[t]he authority of a court to hear and determine certain classes of cases rests solely with the Constitution and the Legislature." But the trial court agreed with plaintiff that the handwritten provision demonstrated the parties' intent to provide for "a little more review" than what would normally be allowed under the Arbitration Act. Therefore, the trial court "in essence act[ed] as the Appellate Division of the arbitrator." It performed a comprehensive review of the arbitrator's decision and affirmed the award. 

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I Thought That Juror Looked Familiar!

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Jury (pd)What happens if you are a party in a lawsuit and you recognize one of the jurors as someone who not only knows you, but probably does not like you and may be looking for revenge? According to the Appellate Division in Rumbas v. Sony Electronics, Inc., at the very least, you bring it up before the jury returns its verdict.

In Rumbas, plaintiff claimed that a television defendant manufactured was defective and caused a fire that damaged plaintiff’s condominium unit and three other units. At the start of jury selection, the judge explained the nature of the case to the potential jurors. He then sat the first eight jurors in the jury box and explained the jury selection process. Specifically, he explained that he would be asking a series of 28 questions, each of which was “designed to elicit a negative response.” As jurors in the box were excused, they would be replaced by jurors from the panel, but the judge would not repeat the 28 questions. Instead, he would simply ask the replacement juror if his or her answer to any of them would be anything other than “no.”  Therefore, the judge stressed that it was important for all jurors, not just those in the jury box at the time, to pay attention to the questions.

Early on in the selection process, while the original eight jurors were seated in the jury box, the judge asked the attorneys to introduce their clients. Plaintiff was not in the courtroom at the time. Apparently, he had to go to the pharmacy, but his attorney indicated that he would be returning soon. The judge then read a list of potential witnesses and asked if any of the jurors knew any of them. None did. During this questioning, plaintiff returned to court, at which time he was introduced to the jurors. The judge asked if any of them knew plaintiff, but none did.

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NJ Supreme Court: If Borrower Abides By Terms Of Settlement Agreement, Lender Must Modify Mortgage

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Mortgage (pd)Lawsuits arising out of foreclosures and mortgage modifications are common. (Even more common than lawsuits about gyms or health clubs if you can believe that.) Nearly every day there is a decision from the Appellate Division arising out of a residential foreclosure. Most of these fall into the same category — borrower defaults and loses home through foreclosure then challenges lender's standing to foreclose after the fact — but some are more interesting. That was the case with GMAC Mortgage, LLC v. Willoughby, a decision released yesterday by the New Jersey Supreme Court involving a mortgage modification agreement entered into to settle a foreclosure lawsuit.

Almost two years ago, I wrote a post about Arias v. Elite Mortgage, a lawsuit over the alleged breach of a mortgage modification agreements. In that case, borrowers entered into a mortgage modification agreement with their lenders that included a Trial Period Plan ("TPP"). As the name suggests, a TPP requires borrowers to make reduced monthly payments in a timely manner for a trial period, after which, if they make the payments, the lender agrees to modify their mortgage. In Arias, the Appellate Division held, as a matter of first impression, that if a borrower makes the trial payments under the TPP, the lender must modify the mortgage, and if it doesn't, the borrower can sue for breach. However, the holding was purely academic because the borrower in that case failed to make one of the trial payments in a timely manner so it could not sue. 

In GMAC Mortgage, the New Jersey Supreme Court faced a similar situation with a much less academic result. 

Continue reading “NJ Supreme Court: If Borrower Abides By Terms Of Settlement Agreement, Lender Must Modify Mortgage”

Clear Arbitration Provision, Negotiated By Sophisticated Party While Represented By Counsel Deemed Enforceable

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration def (pd)The headline of this post is a little like "Dog bites man." But, given the recent trend in New Jersey of "man bites dog" type cases where courts have invalidated arbitration provisions that once seemed unambiguous (look here, here, and here for examples), the headline should make more sense.

In Columbus Circle NJ LLC v. Island Construction Co., LLC, the Appellate Division enforced an arbitration provision contained in a construction contract. Plaintiff was a single-member LLC that retained defendant to build a $1.9 million home on the bay in Avalon, New Jersey. Plaintiff's representative circulated an initial draft contract for the project that used the standard American Institute of Architects (AIA) forms. These forms contain a provision entitled "BINDING DISPUTE RESOLUTION," which, as the name suggests, requires the parties to choose "the method of binding dispute resolution" for any claims between them that are not resolved by mediation. In the draft it circulated, plaintiff's representative checked off "Arbitration pursuant to Section 15.4 of AIA Document A201-2007," rather than "Litigation in a court of competent jurisdiction." Before it was signed, the attorney for the LLC's sole member reviewed the draft and proposed changes, as did defendant, but none of these changes appear to have altered the dispute resolution provision.

During construction, disagreements arose between the parties regarding the cost of the project, leading both parties to terminate the contract. When mediation apparently failed, defendant filed a demand for arbitration. Three months later, plaintiff sued in state court. Defendant successfully moved to dismiss plaintiff's complaint and compel arbitration, and Plaintiff appealed.

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Not An Open-Ended Issue: Judge’s Failure To Ask Open-Ended Questions During Voir Dire Is Reversible Error.

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

 Jury (pd)
In 2006 and 2007, the Administrative Office of the Courts issued directives addressing jury voir dires. The directives require, among other things, that trial judges ask jurors at least three open-ended questions that are designed to elicit a narrative response to which "appropriate follow up questions [can] be asked." These questions must be "posed verbally to each juror to  elicit a verbal response." The purpose of this requirement is to "ensure that jurors verbalize their answers so the court, attorneys and litigants can better assess the jurors' attitudes and ascertain any bias or prejudice, not evident from a yes or no response, that might interfere with the ability of that juror to be impartial." The importance of the Administrative Office's directives was highlighted in two recent decision from the Appellate Division, both of which overturned verdicts rendered by jurors who were not asked at least three open-ended questions during voir dire.

In Heredia v. Piccininni, plaintiff sued after being injured in an automobile accident. Before trial, defendant stipulated liability, thus the only issue for the jury was damages. In advance of jury selection, Plaintiff submitted the following open-ended questions to be asked during voir dire:

  1. What are your feelings regarding the proposition that accidents resulting in serious damage to a vehicle may result in no bodily injuries and accidents resulting in little damage to a vehicle may result in serious bodily injuries?
  1. Describe by way of an example an experience in your life that illustrates your ability to be fair and open-minded in this case.
  1. Who are the two people that you least admire and why?
  1. What would you do about the homeless situation?
  1. What would you do about those without medical insurance?

The court did not include any of plaintiff's proposed questions in the list of questions used during voir dire. Instead, the trial judge asked each juror "multiple biographical questions required by the [Administrative Office]," including how they received their news, what their favorite television shows were, what bumper stickers they had on their cars, and how they spent their time. None of these were open-ended questions. Plaintiff's counsel used two of her six peremptory challenges during jury selection and, at the end of the process, advised the court that the jury was satisfactory.

After trial, the jury returned a verdict of no cause on plaintiff's non-economic losses (e.g., pain and suffering damages) but awarded plaintiff her economic damages, representing the full value of her outstanding medical bills. Plaintiff appealed, arguing, among other things, that the trial judge failed to ask any open-ended questions during voir dire.

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Arbitration Award Stands Even Though One Of The Arbitrators Was Later Convicted Of Crime

  by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Divorce decree (pd)Arbitration awards are, by design, difficult to vacate. But what happens when one of the arbitrators who entered the award is later convicted of a crime related, at least to some extent, to an issue in the arbitration. In Litton v. Litton, the Appellate Division addressed this interesting but (hopefully) uncommon occurrence.

In Litton, plaintiff and defendant were married in 1982 and had one child. In 2008, the Family Part entered a judgment of divorce and ordered them to share joint custody of their son. They were also directed to proceed to arbitration before a rabbinical panel, or Beth Din, which they did. The panel, which was comprised of three rabbis, entered an award requiring the husband to pay the wife $5,000 per month until he gave her a Get. (As the Appellate Division explained, a Get is a "written document a husband must obtain and deliver to his wife when entering into a divorce. Without a Get, a wife cannot remarry under Jewish law.") Once the wife received the Get, the husband's monthly support obligation would be reduced to $3,500. The husband was also ordered to pay $20,0250 in arrears, $100,000 in the wife's legal fees, and a fine of $250,000 for "his refusal to disclose information about the couple's joint funds."

Several months later, the wife moved to enforce the award and, apparently, have the husband jailed for not complying with it. The Family Part denied the request and found that the husband was not capable of complying with the support order.

Four years later, the Family Part reduced the husband's support obligation from $5,000 per month to $23 per week. Around the same time, in a "wholly unrelated matter," one of the arbitrators on the panel was charged with, and apparently later convicted  of, "criminal conspiracy to threaten and coerce Jewish husbands to give Gets to their wives."  The husband moved to vacate the arbitration award, arguing that, in light of these charges against one of the rabbis on the panel, "the award was the product of corruption." The trial court denied the motion, holding that there was no causal connection between the arbitration in 2008 and the charges against the rabbi five years later, and that there were two other rabbis on the panel who were not charged as part of the conspiracy. The husband appealed.

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