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Thomas Paschos & Associates, P.C.
Haddonfield, New Jersey

General Litigation

In Patricia Atalese v. U.S. Legal Services Group, L.P., 2014 N.J. LEXIS 906 (N.J. September 23, 2014), Plaintiff, Patricia Atalese, contracted with defendant, U.S. Legal Services Group, L.P. (USLSG), for debt-adjustment services. Plaintiff brought a lawsuit against USLSG in the Special Civil Part alleging violations of two consumer-protection statutes -- the Consumer Fraud Act and the Truth-in-Consumer Contract Warranty and Notice Act. She claimed the firm was not authorized to provide debt relief services in New Jersey and that it made misrepresentations or omissions about that and about the work it was doing for her and the fees it collected.

U.S. Legal Services moved to compel arbitration based on an arbitration clause stating that “any claim or dispute ... shall be submitted to binding arbitration upon the request of either party.” The provision in the agreement discussed selection of the arbitrator and the location and conduct of the arbitration but made no mention of the right to go to court or any other right or to the waiver of any right.

The trial court granted USLSG's motion to compel arbitration pursuant to the service contract. The Appellate Division affirmed, finding that "the lack of express reference to a waiver of the right to sue in court" did not bar enforcement of the arbitration clause. Plaintiff appealed.

Plaintiff argued that the arbitration clause does not comply with New Jersey law, because it does not clearly and unequivocally state its purpose in depriving [plaintiff] of her time-honored right to sue." She asserts that New Jersey courts do not uphold "arbitration provisions that fail to: (1) indicate that the parties waive their right to sue; or (2) indicate that arbitration is the parties' exclusive remedy." Plaintiff did not suggest that any "magic words" are necessary for a waiver of rights but did assert that the language for such a waiver must be clear and unequivocal.

USLSG argued that the term "arbitration" is universally understood and that "[n]o reasonable consumer could have any doubt that arbitration is different than litigation." USLSG emphasizes that the Federal Arbitration Act (FAA) reflects a "liberal federal policy favoring arbitration" and requires courts to "place arbitration agreements on an equal footing with other contracts and enforce them according to their terms." USLSG also argued that the arbitration clause is sufficiently clear and "adequately advised" plaintiff that her lawsuit would be resolved "in an arbitral forum."

The Supreme Court overturned holding that an arbitration provision, like any comparable contractual provision that provides for the surrendering of a constitutional or statutory right, must clearly and unambiguously notify the consumer that he or she is waiving the right to seek relief in a court of law. The Court found that the arbitration agreement in this case was unenforceable because it failed to notify plaintiff that, by entering into the agreement, she was surrendering her right to seek relief in a judicial forum.

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Copies of the full text of any of the cases discussed in this Newsletter may be obtained by calling the firm.  The articles contained in this Newsletter are for informational purposes only and do not constitute legal advice.

The Paschos Law Update Newsletter September 2014