New Jersey’s highest court has just reinforced established case law that arbitration provisions are real serious business and need to be reviewed properly before drafting or signing them.
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.
This case ruling just released reinforces that it is imperative for parties to commercial contracts or to divorce proceedings 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.
In June 2021, Nechama Szimonowitz utilized Travelocity.com to purchase eight Turkish Airlines tickets for round trip flights to and from Tel Aviv, Israel. The cost for the tickets totaled $4,761.19.
Before Szimonowitz could complete her transaction on the website, she was required to agree to their written "Terms of Use" which included a "Disputes; Arbitration" section which stated, in part:
You and Travelocity agree that any and all [c]laims will be resolved by binding arbitration, rather than in court... There is no judge or jury in arbitration, and court review of an arbitration award is limited..."
In September 2021, due to changes in international visa requirements resulting from COVID-19, Szimonowitz called Travelocity to cancel her tickets from Turkish Airlines and reschedule her trip.
Instead of providing a refund directly to her for the Turkish Airlines tickets, the representative told her that she "would receive a credit for the purchase price of the tickets to be retroactively applied to her new booking with El Al Israel Airlines."
However, after she gave the representative her credit card information, the representative purchased tickets on El Al for her, but failed to apply her refund credit towards the purchase and refused to issue a refund for the purchase price of the Turkish Airlines tickets.
In response, in March 2022, Szimonowitz filed a lawsuit in New Jersey Superior Court in Ocean County against Travelscape LLC, the parent company of Travelocity.com, seeking damages in the sum of $4,761.19, the price she paid for the Turkish Airlines tickets.
Travelscape participated in the litigation for a number of months including with substantial motion practice, until finally filing a motion seeking dismissal of the complaint, citing the arbitration provision.
On January 23, 2023, Judge James Den Uyl granted the motion to dismiss the complaint and compel the matter to arbitration.
In a written opinion accompanying the orders, the judge initially noted that an arbitration agreement is generally valid and enforceable, and "the enforceability of an internet consumer contract often turns on whether the agreement is characterized as a 'scrollwrap,' 'sign-in wrap,' 'clickwrap,' or 'browsewrap'[—]or a hybrid version of these electronic contract types." After recognizing "an electronic communication may be a clear and effective method of communicating proposed contract terms," the judge stated, "the pertinent inquiry is whether the user was provided with reasonable notice of the applicable terms of the parties' contract, based on the design and layout of the website."
Turning to the facts of this case, the judge found that "as part of the purchase, Szimonowitz was required to click a dialog box agreeing to Travelocity's Terms of Use, including the arbitration provision."
Additionally, the judge concluded that she was required to agree to the 'Terms of Use' before purchasing the airline tickets, and because she "had the option to either click to agree and continue with the purchase or not move forward with the purchase," she received "sufficient notice of the arbitration agreement." Moreover, he found that "considering the scope of the agreement," the parties' "dispute fell within the scope of the terms."
The Appellate Division affirmed the ruling, stating:
We are persuaded the judge correctly found plaintiff entered into an enforceable agreement to arbitrate the parties' dispute, given that she agreed to abide by defendant's Terms of Use before she bought the Turkish Airlines tickets. We also are convinced defendant did not waive its right to compel arbitration of plaintiff's claims.
Szimonowitz petitioned the New Jersey Supreme Court to review the case, arguing in part that the lower courts erred in not determining that Travelscape waived their ability to compel arbitration through affirmative litigation. (I.e. because they only moved to compel arbitration after several months of litigation in court, they should have lost the opportunity to do so later).
The State's highest court just denied the petition, underscoring the importance of reviewing arbitration clauses prior to drafting or signing them.
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