Key Takeaways from the Recent N.J. Arbitration Decision

By Kelly M. Purcaro, Partner and Litigation Chair, A.Y. Strauss, LLC

I. Factual Background

In V.S. v. T-Mobile, USA, Inc., No. A-0973-21, 2022 WL 2204353 (N.J. Super. Ct. App. Div. June 21, 2022), the N.J. Appellate Court bolstered the enforceability of arbitration clauses in consumer adhesion contracts. In that case, Plaintiff went to a T-Mobile store to transfer her cellular data to a new cell phone. Given the time to complete this task, Plaintiff left her old phone in the store while the transfer took place. Upon returning, Plaintiff noticed something strange. Her phone had an outgoing message, with her personal information and intimate pictures attached, sent to an unknown number. Plaintiff immediately called the unknown number and discovered it belonged to one of the employees in the store. Plaintiff brought claims against T-Mobile (“Defendant”) for the behavior of the store’s employee. Defendant moved to dismiss and compel arbitration pursuant to Terms and Conditions (“T&Cs”), even though Plaintiff never signed any such agreement. Ultimately, the N.J. Appellate Court granted Defendant’s motion, sending the case to arbitration.

II. Overview of the Court’s Decision and Analysis

“When reviewing a motion to compel arbitration, courts apply a two-pronged inquiry: (A) whether there is a valid and enforceable agreement to arbitrate disputes; and (B) whether the dispute falls within the scope of the agreement.” Id. at *4 (citing Martindale v. Sandvik, Inc., 173 N.J. 76, 83, 92, 800 A.2d 872 (2002)).

The Court held that Plaintiff indeed accepted the T&Cs, despite never signing the document. The Court pointed to the language of the agreement, which stated, “You accept these T&Cs by doing any of the following things: [1] giving us a written or electronic signature or confirmation, or [2] telling us orally that you accept; activating, using or paying for the Service or a Device; or opening the Device box. If you don’t want to accept these T&Cs, don’t do any of these things.” Id. at *2. The T&Cs permitted Plaintiff to opt out of the arbitration provision within thirty days of acceptance. Id. The Court continued, “These are explicitly and unmistakably defined methods of acceptance conspicuously found on the first page of the T&Cs.” Id. at *7.  Furthermore, “because the parties’ agreement is a consumer contract under N.J.S.A. 56:12-1—T-Mobile provides wireless services to plaintiff—[the arbitration provision] must ‘be written in a simple, clear, understandable and easily readable way.’” Id. at *6 (quoting N.J.S.A. 56:12-2). The Court determined T-Mobile’s arbitration provision was enforceable since “there was mutual assent [] because the arbitration provision reflects that Plaintiff ‘clearly and unambiguously’ agreed to waive her right to a jury trial and submit to binding arbitration.” Id. at *7 (quoting Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 443, 99 A.3d 306 (2014)).

Next, the Court concluded that Plaintiff’s claims fell within the scope of the arbitration provision. The Court opined, “the language of the arbitration provision here is sufficiently broad to require all claims to be arbitrated. Indeed, all of the pleaded claims are related to the T&Cs, or T-Mobile’s service, devices, or privacy policy. The cause of events all stem from the service T-Mobile provided plaintiff at the retail store.” Id. at *8 (citation omitted).

III. Key Takeaways

Several takeaways can be gleaned from the Court’s reasoning to increase the effectiveness of arbitration provisions for New Jersey companies.

First, like in T-Mobile’s T&Cs, arbitration provisions “should [implement] plain language . . . and utilize[] bold lettering and conspicuous placement.” Id. at *7. This type of statement is necessary to meet the clear and unambiguous agreement to arbitrate requirement.

Second, if the consumer is accepting the agreement by means other than physical signature, the agreement should “explicitly and unmistakably defined [alternative] methods of acceptance.” Id. For example, T-Mobile’s T&Cs state on its first page various acceptance methods, including paying for the company’s services or opening a device box. Id. at *2.

Third, a company should ensure its consumer agreements include “a simply stated, conspicuous opt-out clause.” Id. at *7. In other words, the agreement should include a provision that allows consumers to opt out of the arbitration clause within a particular timeframe.

Lastly, the arbitration provision should contain broad language concerning the types of disputes that are subject to arbitration.

Having these arbitration provisions in every consumer contract will increase a company’s likelihood of successfully enforcing arbitration in the event of a dispute. However, when deciding whether or not arbitration is the best practice for your company, the practical and legal implications upon your particular business should be considered. Companies should consult with an attorney before making decisions on whether arbitration of claims is right for their respective businesses.