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New Jersey Supreme Court Finds against Arbitration Clause

Monday, October, 13, 2014


In the closely-watched case of Atalese v. U.S. Legal Services Group (ULSG), the New Jersey Supreme Court has found that the arbitration clause included in the contract between Patricia Atalese and ULSG is unenforceable because it did not make it sufficiently clear and obvious that by signing the contract Ms. Atalese was giving up her right to seek redress in the courts.  This goes against recent precedent in the higher courts which have been finding arbitration language of various kinds enforceable.

 

Atalese hired USLG in a debt-resolution capacity in an effort to manage her debt and manage her finances.  When Atalese later sued USLG over a variety of complaints, USLG successfully compelled arbitration based on the arbitration clause in the contract Atalese had signed.  An appeals court later confirmed the finding that the arbitration language was sufficiently clear despite Atalese’s claims that she did not understand the rights she was waiving.

 

The New Jersey Supreme Court did not offer any guidelines as to how its decision should be interpreted, leaving companies in the State to scramble for adequate language revisions in their own arbitration clauses.  The court’s decision could be the gateway to a new flood of litigation as arbitration clauses are invalidated due to insufficiently worded clause language.  Even if the Federal government or the Supreme Court eventually clarifies and strikes down the New Jersey Court’s decision, it could be several years where the supremacy of the arbitration clause is in doubt in the state, which could have far-reaching ramifications.