Mike Wallace – Vice President, Government Affairs
On behalf of our member companies that provide more than 1 million jobs in the state and make the New Jersey Business & Industry Association (NJBIA) the largest statewide business association in the country, we are submitting testimony in opposition to A-584.
The bill prohibits a State agency from entering into a contract or agreement with a business entity that requires any person or public entity, as a condition of doing business with that business entity, to give up any right or remedy provided by the laws of this State.
While the bill appears to address a legitimate public policy concern, in effect, it unfairly penalizes businesses that use standard form contracts that provide for binding arbitration in lieu of a jury trial and bars them from State contracts because they include arbitration clauses in their consumer contracts. Because the bill impliedly limits the use of arbitration, it violates the Federal Arbitration Act (FAA).
According to the United States Supreme Court, the FAA “establishes an equal-treatment principle, and preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements.” Kindred Nursing Centers, L.P. v. Clark et al., (May 15, 2017). The Court relied on its prior reasoning in AT&T Mobility LLC v. Concepcion, which held that an arbitration agreement could not be invalidated “on legal rules that ‘apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.”
The bill does not withstand the legal analysis required by the Kindred Nursing and Conception decisions because it fails to put arbitration agreements on equal footing with other contracts, and is therefore preempted by the FAA.
Traditionally, arbitration has been viewed as a meaningful and effective forum for resolving disputes. Contracts between business vendors and State government routinely include binding arbitration provisions since arbitration is often more efficient, faster and less costly for the contracting parties. These attributes of a streamlined dispute resolution process are factored into the costs of consumer products produced and sold by business.
While some may argue that the bill is a necessary consumer protection measure, this is not the case. The New Jersey Supreme Court has already established specific requirements that must be included in contracts where consumers are asked to agree to arbitration terms. In Atalese v. U.S. Legal Services Group (2014), the Court determined that agreements to waive statutory or constitutional rights must be stated in clear and unambiguous terms so that the waiver is knowing and voluntary.
In accordance with Atalese, an arbitration clause in a consumer contract should make clear to the signing parties that they are giving up the right to go to court and have a judge or jury resolve disputes. These provisions should also be presented in a conspicuous manner with bold print, large font, or both.
Finally, the bill appears to conflict with the New Jersey International Arbitration, Mediation, and Conciliation Act. This law, New Jersey recognizes the need for the establishment of international dispute resolution centers at nonprofit organizations in the State. Arbitration has become the preferred mechanism for solving international disputes because it is generally less expensive than litigation and easier to enforce than a judgement obtained in a foreign court or jurisdiction. Under New Jersey’s International Arbitration, Mediation, and Conciliation Act, arbitration centers across the state will facilitate the resolution of international business, trade, commercial, and other disputes between persons by means of arbitration, conciliation, mediation, or other means of alternatives to litigation.
For these reasons, we respectfully ask that you vote no on A-584.
