May 9, 2008
JOHN AND CAROL KUHN, PLAINTIFFS-RESPONDENTS,
TERMINIX INTERNATIONAL CO., L.P., DEFENDANT-APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-2834-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued: April 16, 2008
Before Judges Axelrad and Sapp-Peterson.
This litigation arises out of a claim of termite damage sustained by plaintiffs, John and Carol Kuhn, to their home during their termite service plan with defendant, Terminix International Co., L.P. Plaintiffs sued, alleging breach of contract in failing to properly inspect their home, specifically asserting violations of the New Jersey Consumer Fraud Act (CFA); the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act; common law fraud; misrepresentation; negligence; and breach of duty of good faith and fair dealing.
Terminix filed a motion to dismiss plaintiffs' complaint and to compel arbitration pursuant to the parties' contract. The arbitration provision on the reverse side of the one-page contract states:
10. ARBITRATION. The Purchaser and Terminix agree that any controversy or claim between them arising out of or relating to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration. Such arbitration shall be conducted in accordance with the Commercial Arbitration Rules then in force of the American Arbitration Association before three arbitrators appointed by the American Arbitration Association. The arbitration award shall be final and binding on both parties. Judgment upon such arbitration award may be entered in any court having jurisdiction.
Judge Fratto denied Terminix's motion, finding the arbitration clause was not valid and did not conform with established case law as it failed to inform plaintiffs they were waiving their right to pursue their statutory claims in the court system. We granted leave to appeal.
On appeal, Terminix argues the arbitration clause is valid and should be enforced because it is sufficiently clear, unambiguously worded, and the broad language "any controversy or claim" encompasses all possible claims that might arise from the contract. Terminix urges that the subject clause noticeably alerts the purchasers of the termite protection plan that any claims which arise out of its performance will be subject to arbitration and specifically lays out the procedures of arbitration. It notes the language on the front page of the contract referencing the "general conditions on the reverse side"; the bold, capitalized large font warning the page contains "GENERAL CONDITIONS"; the bold, capitalized font "ARBITRATION"; and the ensuing paragraph enunciating the specific conditions for arbitration. Terminix thus contends the arbitration clause satisfies the conditions of enforceability in a consumer setting as we set forth in Gras v. Assocs. First Capital Corp., 346 N.J. Super. 42, 54-56 (2001), certif. denied, 171 N.J. 445 (2002) and Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577, 583-85 (App. Div.), certif. denied, 181 N.J. 545 (2004), i.e., that it is clear, unambiguous, and specific with regard to the actual terms of the arbitration, as well as noticeable on the contract, such as in bold font or large print. Terminix seeks to distinguish Rockel, in which we held unenforceable the arbitration provisions of a motor vehicle contract, containing a clause with almost identical language to the contract here, on the basis that Rockel involved two potentially conflicting arbitration clauses.
Terminix further emphasizes the policy of the New Jersey courts favoring enforcement of arbitration agreements. See Fastenberg v. Prudential Insur. Co. of Amer., 309 N.J. Super. 415, 419-20 (App. Div. l998). Terminix points out that the United States Supreme Court has held enforceable arbitration clauses such as those in the present case, although it concedes Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed. 2d 753 (1995) involved a pre-emption issue and did not deal with the precise language of the clause or address the public policy issue of waiver of statutory claims.
We are not persuaded by Terminix's arguments. Discussing the waiver of statutory rights under the Law Against Discrimination (LAD), our Supreme Court expressly stated that "in the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be." Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001). "A party's waiver of statutory rights 'must be clearly and unmistakably established, and contractual language alleged to constitute a waiver will not be read expansively.'" Ibid. (quoting Red Bank Reg'l Educ. Ass'n v. Red Bank Reg'l High Sch. Bd. of Educ., 78 N.J. 122, 140 (1978)).
In Gras we addressed at length the issue of the enforceability of arbitration clauses under the CFA, expressly referencing the specificity of waiver requirement of Garfinkel. Although we recognized that waivers need not specifically refer to every imaginable statute, we held that to be enforceable, such arbitration provisions must provide that by signing, the consumer agrees to arbitrate "all statutory claims arising out of the relationship," "any claim or dispute based on a federal or state statute," or contain similar language reflecting a general understanding of the type of claims included in the waiver. Gras, supra, 346 N.J. Super. at 46, 56-57.
The language at issue here, "any controversy or claim between them arising out of or relating to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration," is similar to that found to be wanting in Rockel and does not comport with the language found to be acceptable in Gras. Although the clause may be reasonably construed as effecting a waiver of trial of contractual claims, it does not contain an explicit agreement to arbitrate nor waiver of trial of statutory claims such as those asserted by plaintiffs in this litigation. Moreover, contrary to Terminix's assertion, the subject contract does not provide the consumer with reasonable notice of the arbitration provision. The arbitration clause is obscured in appearance and location in the contract; it is one of twelve general conditions undistinguishable from all the other boiler-plate provisions. Moreover, its content does not inform the consumers they have waived their statutory rights or their right to a jury trial. Accordingly, Judge Fratto properly concluded the subject arbitration clause is deficient under the case law and should not be enforced.
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