Specific Language Not Required in New Jersey Arbitration Agreements Between Sophisticated Parties
In County of Passaic v. Horizon Healthcare Services,1 the New Jersey Appellate Division (the Appellate Division) clarified that arbitration provisions between sophisticated entities need not explicitly explain the implications of arbitration to be enforceable.
In Horizon Healthcare, Horizon Blue Cross Blue Shield of New Jersey (Horizon) managed Passaic County’s (the County) health benefits plan under an agreement that included a binding arbitration provision.2 After the County brought a breach-of-contract action in state court, the trial judge enforced the arbitration provision and granted Horizon’s motion to compel arbitration.3 The County appealed, relying on the New Jersey Supreme Court’s decision in Atalese v. U.S. Legal Services Group.4 Atalese requires consumer arbitration provisions to clearly and unambiguously warn plaintiffs that they are giving up their right to pursue their claims in court. Atalese found that consumer arbitration provisions are only enforceable “when phrased in plain language that is understandable to the reasonable consumer.”5 Because the arbitration provision in the agreement between Horizon and the County lacked the explicit waiver Atalese requires, the County argued that the arbitration provision was unenforceable.6
The Appellate Division held that Atalese does not apply to arbitration provisions in contracts between sophisticated parties. Atalese focused on the protection of consumers from an “unequal relationship between [] contracting parties,”7 and the court in Horizon Healthcare explained that any concern for protecting unwary consumers “vanishes when considering individually-negotiated contracts between sophisticated parties – often represented by counsel at the formation stage – possessing relatively similar bargaining power.”8 In the first published decision by the Appellate Division to address this issue head on, the court ruled “that an express waiver of the right to seek relief in a court of law to the degree required by Atalese is unnecessary[.]”9
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer. Any views expressed herein are those of the author(s) and not necessarily those of the law firm's clients.
