Voiding the Enforcement of a Mandatory Arbitration Clause in NJ

By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Arbitration Law Attorney

Is there anything that will persuade a NJ court to void a mandatory arbitration clause?  In a landmark decision, the N.J. Supreme Court case of Atalese v. U.S. Legal Services Group, determined that for a mandatory arbitration provision to be enforceable, it must not only mention arbitration but specifically, must state that the plaintiff is giving up his right to bring his claims in court.  The idea behind this ruling is to prevent certain parties from having an unfair bargaining advantage – sort of in the form of “having your cake and eating it too”.

In this case an executive signed an employment agreement to serve as vice president and chief medical officer for a three-year period. He was to be highly compensated with annual bonuses.  The contract also included a provision stating: “Should any dispute arise out of this agreement, a phased dispute resolution process shall resolve the dispute.”

After termination the executive filed suit claiming he was paid $477,000 out of the $740,000 that was owed to him in salary.  His former employer moved to dismiss the case and remand it to arbitration. This motion was granted in Burlington County Superior Court.  The Appellate Division later reversed and returned the case to the trial court because they interpreted the clause to mean that “instead of suing in court, both parties agreed to try to settle disputes by arbitration.”  There was no specific reference to a waiver of the employee’s rights to settle a dispute in court or by a jury trial.  As a result, the clause did not constitute a waiver of rights to have his employment claims decided in a court of law.

In short, a case like this illustrates the importance of what a few words (included or excluded) can make in the outcome of a case.  With that being said, it would be wise to contact an attorney that is knowledgeable in contract law and arbitration-related disputes.

To discuss your NJ Arbitration and Contract Law matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.