New Jersey Appellate Court Holds That Failing To Identify The Proper Arbitration Forum In An Arbitration Agreement Does Not Put Employers In A JAM(S) As To Its Enforcement

By Ryan Carlson, Esq., April 15, 2021

Most arbitration agreements identify the specific arbitration forum where an employee must bring a dispute. The Judicial Mediation and Arbitration Services (JAMS) and the American Arbitration Association (AAA) are household names when it comes to arbitration and the two most common forums employers identify to hear disputes arising under their agreements. Employers often identify these forums in their agreements even though they may not be available to hear a dispute in the state the employer operates in or where it seeks to enforce their agreement. However, on April 8, 2021, the Appellate Division confirmed that doing so will not necessarily render an arbitration agreement unenforceable.

In Richardson v. Sky Zone, LLC, et al, a personal injury plaintiff was initially successful in challenging Sky Zone’s arbitration agreement because it identified JAMS as the arbitration forum to hear the plaintiff’s dispute despite that JAMS was not available in New Jersey where Sky Zone operated. The trial court in Burlington County determined that JAMS was an integral part of the parties’ arbitration agreement and it could not enforce the agreement if JAMS was not available.

The Appellate Division reversed. Relying on the New Jersey Supreme Court’s recent decision in Flanzman v. Jenny Craig, Inc., 244 N.J. 119 (2020), which held that an agreement can be enforced without designating an arbitrator or process to select an arbitrator, the court declared that the unavailability of JAMS did not render the agreement unenforceable. The court did not find the lack of an available arbitration forum fatal because the agreement specifically referenced that it would be interpreted under New Jersey law and governed by the Federal Arbitration Act, both of which contain provisions allowing a court to appoint an arbitrator when an arbitrator cannot act pursuant to the terms of an arbitration agreement. Additionally, the agreement did not state the parties intended not to arbitrate their disputes if JAMS is unavailable.

This decision comes on the heels of several pro-arbitration decisions by state and federal courts in New Jersey. While it appears that this trend will continue for the foreseeable future, we recommend that employers continually review and update their arbitration agreements to ensure they are enforceable and consistent with law.

 

 

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