FAVORING LAWSUITS OVER ARBITRATION
Arbitration provides a faster, less expensive, and less adversarial means of resolving disputes than litigation. Congress and the U.S. Supreme Court have long recognized a “liberal federal policy favoring arbitration” and precluded states from erecting barriers to its use. In direct contravention of this, New Jersey courts have recently issued rulings that disfavor arbitration agreements, implying arbitration is inferior to traditional court proceedings. As a result of this trend, New Jersey has become “a more attractive venue for the ling of [consumer] class actions.”
The New Jersey Supreme Court delivered a blow to arbitration in late 2014. In Atalese v. U.S. Legal Services Group, the court found that an arbitration provision in a contract for debt adjustment services was unenforceable. The provision stated that “any claim or dispute . . . shall be submitted to binding arbitration.” That language may seem clear to Judicial Hellholes readers, but the state’s high court found that a special warning is required because an “average member of the public may not know” that arbitration is a substitute for going to court. In June 2015, the U.S. Supreme Court opted not to review the case, leaving New Jersey’s heightened notice requirement in place for the foreseeable future.
Courts across the state are striking down arbitration agreements in light of the Atalese ruling, and this may be just the tip of the iceberg. The New Jersey Supreme Court recently heard another arbitration case, and it was clear from oral argument that members of the court are willing to extend their reasoning in Atalese to cover additional arbitration-related disputes. A ruling in the most recent case is expected in 2016.
LAWSUIT-GENERATING CONSUMER LAWS
New Jersey’s consumer protection law is a magnet for lawsuit abuse. A recent ATRF-commissioned study by Emory University School of Law Professor Joanna Shepherd found that New Jersey Consumer Fraud Act (CFA) decisions increased 447% from 2000 to 2009. is increase is staggering, but Shepherd suggests it, “probably understates the growth of consumer protection litigation” in the state since many such cases are settled well before they are led in court and enter her dataset. Professor Shepherd concludes that “while the New Jersey CFA was initially celebrated as empowering consumers, the expansion in the original legislation has tipped the balance from protecting consumers to encouraging excessive consumer litigation.”
It is no surprise that after an Australian man posted a photo on Facebook showing a Subway “footlong” sandwich falling short of 12 inches, plaintiffs’ lawyers rushed to bring their class actions in New Jersey. That case, which was consolidated with others filed around the country, reached a settlement in October 2015 in which plaintiffs’ lawyers will share $525,000 among themselves and consumers (aside from nine class representatives) will not get a cent. New Jersey law is favored for these types of ridiculous lawsuits due to its automatic tripling of damages and attorneys’ fees, favoring of class action certification, and no requirement that plaintiffs show they relied on the allegedly deceptive ad or practice in making a purchase. Sometimes common sense prevails, however, as it did in August 2015 when a federal judge in New Jersey tossed lawsuits that vaguely alleged that supermarkets Wegmans, Whole Foods, and Acme violated the CFA by posting signs touting “fresh” bread when the bread had been baked off premises.
The CFA is not the only consumer protection law being abused by the Garden State’s gang of greedy trial lawyers. A separate New Jersey law, the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA), is suddenly generating an unprecedented number of claims, as well. The TCCWNA permits plaintiffs’ lawyers to file lawsuits against New Jersey businesses if they sell a product with a poorly drafted warranty, or a less than perfect contract, regardless of whether a consumer experienced an actual loss, even if the seller acted in good faith. The law awards $100 per violation, which perhaps seemed reasonable until New Jersey courts began allowing these cases to be filed as class actions and settlements offered class members pennies on the dollar while their attorneys raked in handsome fees. In some cases, plaintiffs’ lawyers are claiming that violations of technical regulations automatically violate the TCCWNA so that they can collect statutory damages and fees.