Once again, the New Jersey Appellate Division has just given a strong boost of support to the Bais Din system.
Prior to entering into a business deal, a rental lease, or a divorce proceeding, many members of our community enter into agreements which set forth the terms of their transactions and contain arbitration clauses that in case of a dispute a Bais Din will decide the dispute.
Such arbitration provisions are now commonplace in consumer contracts at large, but especially in the frum community.
While there is no set, express language required to uphold an arbitration agreement, in order for these provisions to be enforceable in court, established case law requires the agreement to expressly waive their right to sue in court.
A case ruling released just today reinforces that it is imperative for parties to commercial contracts to closely review precise terms of arbitration clauses with experienced Toanim and Lawyers to ensure; a) that there are no confusions as to what is being agreed to; and b) that the agreement will be enforceable in court if necessary.
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Daniel Delgado leased a 2021 BMW sedan from Park Ave BMW.
The total cost of the lease, including amounts due at signing or delivery, total monthly payments, amounts charged at the end of the lease, and the residual value, amounted to $96,553.25.
The lease contained an arbitration provision agreement. The agreement
stated in bold, red, all-capitalized letters:
"PLEASE REVIEW—IMPORTANT— AFFECTS MY LEGAL RIGHTS" under a bold, all-capitalized letter section title reading "ARBITRATION CLAUSE."
The clauses in the agreement stated in all-capitalized letters and bolded.
NOTICE:
Either Park Ave or Mr. Delgado may choose to have any dispute between us decided by arbitration and not in a court or by jury trial. If a dispute is arbitrated, Mr. Delgado will give up [his] right to participate as a class representative or class member on any class claim [he] may have against Park Ave including any right to class arbitration or any consolidation of individual arbitrations. Discovery and rights to appeal in arbitration are generally more limited than in a lawsuit, and other rights Park Ave and Mr. Delgado would have in court may not be available in arbitration. Any claim or dispute, whether in contract, tort, statute or otherwise (including the interpretation and scope of this clause, and the arbitrability of the claim or dispute), between Mr. Delgado and Park Ave or Park Ave's employees, agents, successors or assigns, which arise out of or relate to my credit application, lease, purchase or condition of this vehicle, this lease or any resulting transaction or relationship (including any such relationship with third parties who do not sign this lease) shall, at Park Ave's or Mr. Delgado's election, be resolved by neutral, binding arbitration and not by a court action. Any claim or dispute is to be arbitrated by a single arbitrator on an individual basis and not as a class action or other mass action. Mr. Delgado expressly waives any right [he] may have to arbitrate a class action. Mr. Delgado may choose the following arbitration organization and its applicable rules: the National Arbitration Forum . . . or any organization that Mr. Delgado may choose subject to Park Ave's approval. Mr. Delgado may get a copy of the rules of these organizations by contacting the arbitration organization or visiting its website....
The arbitrator's award shall be final and binding on all
parties....
The agreement included addresses for Park Ave and BMW as assignee.
Just above Mr. Delgado's signature, the lease provided in bold letters:
By signing below, Mr. Delgado acknowledges that: This
lease is completely filled out; Mr. Delgado has no ownership rights in the vehicle unless and until he exercises his option to purchase the vehicle; Mr. Delgado has read all pages of this lease carefully
and agrees to all of its terms; and he has received
a completely filled in copy of this lease.
Both plaintiff and a Park Ave representative signed the agreement.
After leasing the car, Mr. Delgado modified the vehicle with special rims and
tires, alleging he spent approximately $17,000 for the alterations.
The vehicle was stolen in December 2021. BMW advised Mr. Delgado the payoff figure was $75,504.08.
Instead of completing the required
documents to purchase the car, Mr. Delgado made a claim to Allstate, his insurance company, for the loss of the car. Allstate retained a
market valuation report that determined the value of the vehicle was $93,152.
BMW agreed to accept the valuation and Allstate tendered payment to satisfy
the claim.
Asserting that he is entitled to the monies he invested in the car, Mr. Delgado filed a complaint in New Jersey Superior Court in Bergen County, asserting claims for breach of contract, conversion, breach of the covenant of good faith and fair dealing, violations of the Consumer Fraud Act, unjust enrichment, and breach of fiduciary duty.
BMW filed a motion to dismiss the complaint and compel arbitration.
BMW sought to arbitrate the claims regarding the actual value of the vehicle at
the time it was stolen and the amount Allstate was required to pay BMW. BMW
asserted those claims fell within the scope of the arbitration provision of the lease agreement.
Mr. Delgado opposed the motion, contending the agreement was unclear, and because BMW was not a party to the original lease, the agreement was not enforceable.
On November 4, 2022, the trial court judge granted the motion to compel arbitration, finding that Mr. Delgado's claims fell "expressly within the scope of the arbitration clause." The court found the agreement was valid and enforceable "and it expressly provided that the parties intended that . . . any existing or future controversy . . . be submitted to arbitration."
The judge stated, there is no dispute that . . . plaintiff executed the
agreement as part of the lease of the vehicle and . . .
plaintiff's claims unequivocally . . . fall within the scope
of the existing arbitration clause in this case.
There is absolutely no doubt before the court
that this arbitration clause exists and that the plaintiff's
claims arise out of and relate to the vehicle and the
lease.
The court also found the lease clearly defined any assignee would be subject to
the lease terms, including the agreement.
Mr. Delgado appealed the ruling, contending that the trial court erred in dismissing the complaint and compelling arbitration because the agreement was ambiguous as to his waiver of rights, the party enforcing the agreement was not an original party to it, and enforcement of the agreement detrimentally affects the public interest because it is unconscionable.
In an unpublished ruling released today, Judges Currier and Enright were completely unpersuaded.
The judges reviewed the 2014 ruling in Atalese v. U.S. Legal Servs. Grp., L.P., which established:
An arbitration agreement is a waiver of the right to have claims and
defenses heard in court. Therefore, a party must have knowledge of the right to
use the court system and also the intent to surrender that right...
Because the average member of the public may not know—without some explanatory comment—that arbitration is a substitute for the right to have one's claim adjudicated in a court of law, courts must take particular care in assuring the knowing assent of both parties to arbitrate. A court should therefore determine whether an arbitration clause, in some general and sufficiently broad way, . . . explains that the plaintiff is giving up their right to bring their claims in court or have a jury resolve the dispute....
The waiver provision must state its purpose clearly and unambiguously. In choosing arbitration, consumers must have a basic understanding that they are giving up their right to seek relief in a judicial forum....
There is no set, express language required to uphold an arbitration agreement. Instead, our courts have upheld arbitration clauses phrased in various ways when those clauses have explained that arbitration is a waiver of the right to bring suit in a judicial forum...
We are satisfied the agreement here was clear and unambiguous, plainly
informing plaintiff of the waiver of his right to institute suit in court but instead
to bring his claims in an arbitration proceeding. The agreement appears in its
own dedicated, enumerated section and is not hidden or burdensome to read. It is preceded by bold, all-capitalized text labeling it as an "arbitration clause," and
advises plaintiff on the next line in bold, all-capitalized, and red letters, to
"please review" the "important" terms that "affect his legal rights."
The agreement expressly states either party may elect to have any dispute "whether in contract, tort, statute or otherwise (including the interpretation and scope of this clause, and the arbitrability of the claim or dispute)" be addressed in "arbitration and not in a court or by jury trial."
Plaintiff was informed that arbitration could be invoked by either party for a broad, but defined, list of claims and this would entail a distinct process from a court or jury trial. The agreement further explained that "discovery and rights to appeal in arbitration are generally more limited than in a lawsuit and other rights [plaintiff] and [Park Ave or BMW] would have in court may not be available in arbitration."
We therefore discern no merit to plaintiff's argument that the agreement was confusing, vague, or difficult to read.
Plaintiff further asserts that because BMW was not a signatory to the lease
or the agreement, it cannot compel plaintiff to arbitrate his claims. We again
disagree.
In section one of the lease, Park Ave and plaintiff were listed as the parties
to the lease. Immediately below it, in section two, the lease identified BMW as an assignee and expressly stated that BMW would administer the lease on its
own behalf or on behalf of any other assignee.
As long as the assignment of a contract is valid, the assignee can compel
arbitration. See Zirpoli v. Midland Funding, LLC.
Plaintiff cannot assert he was unaware of the existence of an assignee that
was identified on the first page of the lease. There is no ambiguity in the
document. It is clear Park Ave had the intent to assign the lease to BMW. This is a valid assignment and the court
did not err in compelling arbitration.
"We discern no merit in plaintiff's argument that the court erred in dismissing the complaint because BMW acted unconscionably. As stated, the agreement is a clear and unambiguous waiver of plaintiff's right to bring his claims in court. There is no bad faith or otherwise unconscionable conduct on BMW's part that would warrant invalidating the arbitration agreement. The trial court conducted the appropriate two-pronged inquiry and found there was a valid and enforceable agreement to arbitrate disputes and plaintiff's claims fell within the scope of the agreement. We see no reason to disturb that conclusion," the Appellate panel concluded.
As previously reported here on FAA News, just last week as well the Appellate Division released a decision affirming an arbitration provision.
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