March 1, 2023
In a precedential opinion, New Jersey’s Appellate Division held that an arbitration clause may be enforced, even where it lacks an acknowledgment of the parties’ explicit waiver of access to the courts, as required in Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), where the contract is between sophisticated parties. In County of Passaic v. Horizon Healthcare Services, Inc. d/b/a Horizon Blue Cross Blue Shield of New Jersey, A-0952-21, the Appellate Division was confronted with a dispute arising out of the parties’ contract, whereby the defendant Horizon had been retained, over the course of a seventeen-year relationship, to administer the County’s self-funded employee health benefit plan. After the contract ended, a lawsuit was filed in 2021 in which the County alleged that the defendant had breached the contract and had not implemented certain modified reimbursement rates.
Horizon promptly moved to enforce the arbitration clause contained in the parties’ contract. That clause unambiguously obligated the parties to proceed to binding arbitration in the event of any dispute arising out of the parties’ contract. The clause did not, however, contain any express language indicating the parties’ assent to the waiver of their right to a trial by jury. In Atalese, New Jersey’s Supreme Court had held that “[t]he absence of any language in the arbitration provision that plaintiff was waiving her statutory right to seek relief in a court of law renders the provision unenforceable.” Id. at 436. The Appellate Division acknowledged this holding, but reasoned that the factual context and the legal rationale behind the Atalese decision did not apply to contracts between sophisticated parties, but instead applied to employees or consumers “lacking sufficient bargaining power to resist the extraction of an agreement to arbitrate.”
The parties to the contract before the court were represented by counsel at all relevant stages of their negotiations, and during the formation of the contract at issue. The parties had a seventeen-year relationship and “understood the difference between the right to seek relief in a court of law and being relegated to arbitration under AAA’s commercial rules.” Thus, notwithstanding the absence of the language contemplated in Atalese, the trial court and later the Appellate Division found that the arbitration clause was enforceable.
This decision marks a clarification in New Jersey law on this topic, and demonstrates a move away from the bright line rule in Atalese, to a more fact-sensitive, case-by-case analysis which looks to the relative bargaining power of the parties and other basic considerations applicable to all contractual actions.
For more information on this topic, or on the decision reached by the Appellate Division, please feel free to contact the author, Tom Emala, at temala@mkcilaw.us.com.