Emails Between Counsel Create Agreement To Arbitrate, Even Where Contractual Arbitration Provision Would Have Been Unenforceable

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

Generally, when you end an email to your adversary with "we'll be awaiting your motion," something has gone wrong. This was certainly true in So v. Everbeauty, Inc.

In So, plaintiff sued defendant, his former employer, alleging that defendant had violated his rights under the New Jersey Law Against Discrimination and the Workers' Compensation Law. Shortly after the lawsuit was filed, defendant's counsel suggested to plaintiff's counsel that the matter should be arbitrated under the arbitration provision in plaintiff's employment contract. Plaintiff's counsel initially responded that his client was "leaning towards . . . going to arb," but that counsel still needed to speak with plaintiff, who was away on vacation. Later, plaintiff's counsel emailed defendant's counsel as follows: "I was able to speak to my client and we will proceed to arbitration. I can draft stip of dismissal." Two weeks later, however, plaintiff apparently had a change of heart. His counsel wrote to defendant's counsel stating that plaintiff had "instructed him to make efforts to avoid arbitration." Seeing the writing on the wall, plaintiff's counsel ended the email, "we'll be awaiting your motion."

As expected, defendant moved to compel arbitration, but did so in a somewhat unusual way. Defendant's counsel acknowledged that the arbitration provision in plaintiff's employment contract was unenforceable because it was not "sufficiently specific." But defendant argued that the back-and-forth between counsel created a separate, binding agreement to arbitrate. The trial court denied the motion, holding that (1) the emails between counsel did not "evidence a bargained for exchange but only a statement by plaintiff's counsel as to what his intentions were going forward in response to inquiries from defense counsel," and (2) there was no consideration to support the alleged agreement to arbitrate. Defendant appealed.

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“Here’s the mail it never fails . . . :” Judge Posner Criticizes “Rhetorical Envelopes” In Which Judicial Opinions Are “Delivered To The Reader”

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

[Apologies for the Blue's Clues reference in the title to this post.]

In his concurring opinion in a recent Seventh Circuit decision — United States v. Dessart — Judge Posner agreed with the majority's conclusions, but wrote separately to express his "reservations about some of the verbal formulas in the majority opinion." He did not "criticize the majority for reciting them" because, as he noted, they are "common, orthodox, even canonical." But he did criticize the "verbal formulas" themselves as being "inessential and in some respects erroneous" and thus, he urged, "ripe for rexamination."

What were the "verbal formulas" that Judge Posner was so keen to criticize? Just some of the legal standards that we see recited in opinions every day. For example, the commonly-used "abuse of discretion" standard, of which Judge Posner appears not to be a big fan. In his concurring opinion, Judge Posner noted that the majority defined this standard as including "among other missteps, 'material errors of law.'" This apparently did not jibe with Judge Posner's understanding of discretion and its abuse, as he explained:

Of course, material errors of law are potentially very serious, but what has that to do with discretion or its abuse? Common as the term "abuse of discretion" is in opinions dealing with appeals from district court decisions, I find it opaque. If the appellate court is persuaded that the trial court erred in a way that makes the trial court's decision unacceptable, it reverses. What has discretion to do with it? And "abuse" seems altogether too strong a term to describe what may be no more than a disagreement between equally competent judges – the trial judge and the appellate judges – that the appellate judges happen to be empowered to resolve as they see fit.

Similarly, he challenged the majority's similarly well-settled statement that an appellate court, when reviewing a trial court's decision to issue a search warrant, must afford that decision "great deference." (Among the issues in the Dessart case was whether a search warrant was supported by probable cause.) Judge Posner acknowledged that the standard comes from a Supreme Court decisions holding that "[a] magistrate's determination of probable cause should be paid great deference by reviewing courts," but questioned it nonetheless. First, he questioned why "great" deference should be afforded to such decisions since "warrants [are] usually issued by the most junior judicial officers – and often police or prosecutors can shop among magistrates for one who is certain or almost certain to respond affirmatively to a request to issue a warrant." Second, Judge Posner noted that "[n]othing in the [Fourth] amendment requires warrants – ever," therefore it was not fair, in Judge Posner's opinion, to conclude, as is often concluded, that the Constitution expresses a preference for searches conducted pursuant to warrants or to afford great deference to a trial court's decision to issue one.

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Jury Instructions Deemed Ambiguous “and/or” Erroneous “and/or” a “Mongrel Expression”

When I used to teach Legal Research and Writing, one of the phrases I encouraged my students to avoid was "and/or." Like a lot of legalese, I think lawyers believe that using "and/or" leads to greater clarity in their writing when in fact the opposite is true. I suspect that, like much of what I taught them, my students avoided "and/or" in the writing they submitted to me and then quickly went back to using it as soon as they got out of my class. They may have thought that my opposition to "and/or" — like my opposition to "any and all," "heretofore," and any number of other phrases — was personal preference not generally accepted advice. If they did, however, they would have been wrong, and the Appellate Division has now confirmed as much.

In State v. Gonzalez, the Appellate Division reversed defendant's conviction and ordered a new trial because the trial court's repeated use of "and/or" in its jury charges rendered the instructions "hopelessly ambiguous and erroneous in important respects." In that case, defendant was convicted of, among other things, robbery and aggravated assault. (The emphasis on "and" will become clear later.) He was accused of conspiring with two other individuals to rob and then assault another individual. As might be expected, the prosecution and defense presented different versions of the underlying events to the jury. The problem for the Appellate Division was not the evidence that each side presented, but rather the repeated use of "and/or" by the trial judge when he instructed the jury on how to evaluate that evidence.

The Appellate Division began by observing that "[t]he imprecision of the phrase 'and/or' and criticism for its use [in New Jersey] and in other jurisdictions has been well documented." New Jersey's highest court previously described it as an expression that "has never been accredited in this state as good pleading or proper to form part of a judgment record." Courts in other states were less kind, calling it: a "verbal monstrosity, neither word nor phrase;" "an inexcusable barbarism" that was "sired by indolence;" a "mongrel expression" that was "an equivocal connective, being neither positively conjunctive nor positively disjunctive;" and an "abominable invention." The Appellate Division further observed that "[w]henever found in the decisions of [New Jersey] courts, 'and/or' has been recognized as creating ambiguity."

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Another Reminder That Even When You Win You Still Lose Under The New Jersey Consumer Fraud Act

by: Peter J. Gallagher

The Appellate Division issued an unpublished decision today that again emphasizes the power (some might say, inequity) of the New Jersey Consumer Fraud Act. In Logatto v. Lipsky, plaintiffs hired defendant to build an addition on their home and perform other renovations. Although defendant prepared a written proposal with cost estimates, he never prepared a written contract. After the project was 90% complete, and plaintiffs had paid him $247,500, defendant notified plaintiffs that actual expenses exceeded the proposed costs, and therefore he required an additional $78,469.37 to complete the project. Plaintiffs refused and, when the parties could not come to a resolution on the issue, defendant left the job. Plaintiffs then sued defendant under the Consumer Fraud Act for the costs of completion of the project, and defendant counterclaimed for $50,000 in unpaid costs. Both parties moved for summary judgment, but both motions were denied.

The case was tried to a jury. After plaintiffs put on their evidence, they moved for judgment on liability in connection with their Consumer Fraud Act Claims. The trial court granted the motion, finding that there were technical violations of the Act (failure to have a signed contract and change orders). However, the trial court left the question of whether plaintiffs had suffered an "ascertainable loss," a requirement under the Consumer Fraud Act, to the jury. The jury ultimately returned a verdict in favor of defendant, finding that plaintiffs did not suffer any ascertainable loss. After the verdict, however, plaintiffs moved for, among other things, fees and costs under the Consumer Fraud Act. The trial court denied the motion, but the Appellate Division reversed the trial court and remanded the issue back to the trial court for disposition of the fee motion.

You may be asking yourself – how is this possible? How can a defendant prevail at trial but still be responsible for the plaintiffs' legal fees? What happened to the "American Rule"? The answer to all of these questions is, the New Jersey Consumer Fraud Act. Under the Act, as it has been interpreted by the New Jersey Supreme Court — in cases like Cox v. Sears Roebuck & Co. and Weinberg v. Sprint Corp. — plaintiffs can recover costs and fees if they prove that a defendant committed an unlawful practice, even if the victim cannot show any ascertainable loss. While a plaintiff cannot recover treble damages under the Act without an ascertainable loss, it can still recover its costs and fees. What this means is that if a plaintiff survives summary judgment and presents a prima facie case of ascertainable loss, it will be able to recover its costs and fees even if, as in the Logatto case, it ultimately loses on the merits at trial.

This case, like seemingly every other decision handed down in connection with the Consumer Fraud Act, should be a cautionary tale for any business or entities that sell products or provide services that are covered by the Act.