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Cart before the Horse? How the New Jersey Courts Vacated an Order to Compel Arbitration (NJ)

December 4, 2020

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<p style="text-align: justify;">On December 2, 2020, the Superior Court of New Jersey, Appellate Division vacated the trial court’s order to compel arbitration and remanded the case to trial court in <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/12/Knight-v.-Vivint-Solar-Developer.pdf">Knight v. Vivint Solar Developer</a>. </em>The Appellate Division reasoned it was unclear from the record whether the plaintiff agreed to arbitrate disputes under the agreement and remanded for a plenary hearing to the trial court.</p>
<p style="text-align: justify;">The Plaintiff filed a claim alleging violations of the New Jersey Consumer Fraud Act against the Defendants, and the Defendants moved to compel arbitration. In a January 29, 2020 order, the trial court granted Defendant’s motion to compel arbitration and stay Plaintiff’s law division action. Plaintiff then appealed the Court’s January 29, 2020 order. Plaintiff argued she did not sign the agreement with the Defendant which contains the arbitration provision at issue on appeal.</p>
<p style="text-align: justify;">The trial court relied on the Supreme Court’s then-recent decision in <span><em>Goffe v. Foulke Management Corporation,</em></span><span><em> </em></span><em>238 N.J. 191 (2019).</em> The Superior Court of New Jersey, Appellate Division disagreed with the trial court’s reliance on <em>Goffe. </em>In contrast to <em>Goffe</em>, the Plaintiff here challenges the arbitration provision of her agreement. The Appellate Court held the arbitrator cannot decide the validity of the disputed agreement until the trial court resolves the issue of fact regarding the formation of the arbitration provision. The Court was unpersuaded by the defendant’s argument which stated because the arbitration provision was contained within the agreement, which the Plaintiff challenges, the arbitrator must determine validity. The Court opined this procedure puts the cart before the horse.</p>
<p style="text-align: justify;">This case furthers the importance of gaining mutual assent and the understanding of arbitration terms when entering into an agreement, and the possibility of the court’s intervening in lieu of an arbitrator when an issue of fact arises.</p>
<p style="text-align: justify;">Thanks to Madeline Troutman for her contribution to this post.  Please email <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>

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