Opinion
DOCKET NO. A-1861-17T2
06-13-2019
ALEXANDER DEFINA, a minor by his parents and guardians ad litem, MICHAEL DEFINA and DAHIANA DEFINA, Plaintiffs-Respondents, v. GO AHEAD AND JUMP 1, LLC, d/b/a SKY ZONE INDOOR TRAMPOLINE PARK, SKY ZONE, LLC and SKY ZONE FRANCHISE GROUP, LLC, Defendants-Appellants.
Kelly A. Waters argued the cause for appellants Sky Zone, LLC and Sky Zone Franchise Group, LLC (Wood Smith Henning & Berman LLP, attorneys; Kelly A. Waters, of counsel and on the briefs; Deborah J. Davison and Samuel G. John, on the briefs). Joseph M. Powell argued the cause for appellant Go Ahead and Jump 1, LLC, d/b/a Sky Zone Indoor Trampoline Park (Powell & Román, LLC, attorneys; José D. Román, on the brief). David K. Chazen argued the cause for respondents (Chazen & Chazen, LLC, attorneys; David K. Chazen, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3. Before Judges Yannotti, Rothstadt, and Natali. On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-5751-15. Kelly A. Waters argued the cause for appellants Sky Zone, LLC and Sky Zone Franchise Group, LLC (Wood Smith Henning & Berman LLP, attorneys; Kelly A. Waters, of counsel and on the briefs; Deborah J. Davison and Samuel G. John, on the briefs). Joseph M. Powell argued the cause for appellant Go Ahead and Jump 1, LLC, d/b/a Sky Zone Indoor Trampoline Park (Powell & Román, LLC, attorneys; José D. Román, on the brief). David K. Chazen argued the cause for respondents (Chazen & Chazen, LLC, attorneys; David K. Chazen, on the brief). PER CURIAM
Defendants appeal from an order of the trial court, dated November 17, 2017, which denied a motion by Sky Zone, LLC and Sky Zone Franchise Group, LLC (collectively, the Franchisor Defendants) to compel arbitration and stay further proceedings in this matter.
Previously, we affirmed the trial court's order; however, the Supreme Court granted defendants' petitions for certification and summarily remanded the matter for reconsideration in light of Kernahan v. Home Warranty Administrator of Florida, Inc., 236 N.J. 301 (2019). See Defina by Defina v. Go Ahead and Jump 1, LLC, 236 N.J. 490 (2019). Having reconsidered our judgment in light of Kernahan, we again affirm the trial court's order.
I.
Defendant Go Ahead and Jump 1, LLC (Go Ahead and Jump) owns and operates Sky Zone Indoor Trampoline Park (SZITP) in Pine Brook. On February 8, 2015, plaintiff Alexander Defina, who was then nine years old, suffered a fractured right ankle at SZITP while participating in a game of trampoline dodgeball. Before plaintiff gained access to SZITP, plaintiff's father, Michael Defina, signed electronically a document entitled, "Participant Agreement, Release and Assumption of Risk" (the Agreement).
The Agreement states that "[i]n consideration for gaining access to" the facility:
I for myself and on behalf of my child(ren) and/or legal ward, heirs, administrators, personal representatives, or assigns, do agree to hold harmless, release and discharge SZITP of and from all claims, demands, causes of action, and legal liability, whether the same be known or unknown, anticipated or unanticipated, due to SZITP's ordinary negligence: and I, for myself and on behalf of my child(ren) and/or legal ward, heirs, administrators, personal representatives, or any assigns, further agree that except in the event of SZITP's gross negligence and willful and wanton misconduct, I shall not bring any claims, demands, legal actions and causes of action, against SZITP for any economic and non-economic losses due to bodily injury, death, property damage sustained by me and/or my minor child(ren) that are in any way associated with SZITP trampoline games or activities. Should SZITP or anyone acting on their behalf be required to incur
attorney's fees and costs to enforce this Agreement, I for myself and on behalf of my child(ren), and/or legal ward, heirs, administrators, personal representatives or assigns, agree to indemnify and hold them harmless for all such fees and costs.
The Agreement also contained an arbitration clause, which states:
If there are any disputes regarding this [A]greement, I on behalf of myself and/or my child(ren) hereby waive any right I and/or my child(ren) may have to a trial and agree that such dispute shall be brought within one year of the date of this Agreement and will be determined by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. I further agree that the arbitration will take place solely in the state of Texas and that the substantive law of Texas shall apply. If, despite the representations made in this [A]greement, I or anyone on behalf of myself and/or my child(ren) file or otherwise initiate a lawsuit against SZITP, in addition to my agreement to defend and indemnify SZITP, I agree to pay within 60 days liquidated damages in the amount of $5,000 to SZITP. Should I fail to pay this liquidated damages amount within the 60 day time period provided by this Agreement, I further agree to pay interest on the $5,000 amount calculated at 12% per annum.
In addition, the Agreement included the following provision, which was printed in bold type:
By signing this document, I acknowledge that if anyone is hurt or property is damaged during my participation in this activity, I may be found by a court of law to have waived my right to maintain a lawsuit against SZITP on the basis of any claim from which I have released them
herein. I have had sufficient opportunity to read this entire document. I understand this Agreement and I voluntarily agree to be bound by its terms.
On June 18, 2015, plaintiff filed a complaint in the Law Division against Go Ahead and Jump seeking recovery for the injuries he sustained at SZITP. Thereafter, Go Ahead and Jump filed a motion to compel arbitration and stay further trial court proceedings. The court entered an order on October 23, 2015, granting the motion. Plaintiff appealed. We reversed the trial court's order, and held that the arbitration clause was unenforceable. Defina by Defina v. Go Ahead and Jump 1, LLC (Defina I), No. A-1371-15 (App. Div. July 12, 2016) (slip op. at 12).
In our opinion, we stated that the arbitration clause "did not clearly and unambiguously inform plaintiff that he was giving up his right to bring claims arising out of the participation in activities at SZITP in a court of law and have a jury decide the case." Id. at 12. We explained that
[t]he arbitration clause states that the person signing the [A]greement waives any right to a "trial" and agrees that any dispute shall be determined "by binding arbitration before one arbitrator to be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures.
Although the clause refers to a "trial," there is no "clear and unambiguous statement that the person signing the Agreement is waiving [his] right to sue or
go to court to secure relief." [Atalese v. U.S. Legal Servs. Grp., LP, 219 N.J. 430, 446 (2014)]. Indeed there is no reference in the clause to a court or a jury. The Agreement also does not explain how arbitration differs from a proceeding in a court of law. We conclude that the Agreement did not clearly and unambiguously inform Michael Defina that he was "giving up his right to bring [his] claims in court and have a jury resolve the dispute." Id. at 447 (footnote omitted).
[Defina I, slip op. at 12.]
Plaintiff thereafter amended his complaint and added the Franchisor Defendants as parties to the litigation. The Franchisor Defendants filed an answer in which they asserted, among other things, that the claims are subject to binding arbitration.
In May 2017, the Supreme Court of the United States decided Kindred Nursing Centers Limited Partnership v. Clark, 581 U.S. ___, 137 S. Ct. 1421 (2017). In that case, the Court held that a Kentucky rule, which required that a power of attorney specifically state that the attorney-in-fact is authorized to enter into an arbitration agreement, violated the Federal Arbitration Act's (FAA) requirement that arbitration agreements be placed "on equal footing with all other contracts." Id. at 1426-28 (quoting DIRECTV, Inc. v. Imburgia, 577 U.S. ___, 136 S. Ct. 463, 465 (2015))
In September 2017, the Franchisor Defendants filed a motion to compel arbitration and stay further trial court proceedings. They argued that our July 12, 2016 decision was no longer valid because after Kindred Nursing, New Jersey courts could not rely on Atalese as a basis for refusing to enforce an arbitration agreement. The trial court rejected that argument and denied the motion. Defendants appealed. We affirmed the trial court's order. Defina by Defina v. Go Ahead and Jump 1, LLC (Defina II), No. A-1861-17 (App. Div. June 5, 2018) (slip op. at 11-12).
We rejected defendant's contention that Kindred Nursing abrogated Atalese and reaffirmed our decision in Defina I. Id. at 10-12. Defendants filed petitions for certification with the Supreme Court. As noted previously, the Supreme Court granted defendants' petitions for certification and remanded the matter for reconsideration in light of Kernahan. Defina, 236 N.J. at 490.
II.
Defendants argue that reconsideration of our prior decision is warranted because the arbitration clause at issue in this matter is enforceable under Atalese and Kernahan. We disagree.
In Atalese, the Court considered whether an arbitration clause in a debt-adjustment-services contract was enforceable. Atalese, 219 N.J. at 435. The clause stated in part that, "[T]he claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute." Atalese, 219 N.J. at 437.
In addressing the issue of enforceability, the Court noted that an arbitration agreement "must be the product of mutual assent, as determined under customary principles of contract law." Id. at 442 (quoting NAACP of Camden Cty. E. v. Foulke Mgmt., 421 N.J. Super. 404, 424 (App. Div.), certif. granted, 209 N.J. 96 (2011), and appeal dismissed, 213 N.J. 47 (2013)). The Court stated, "Mutual assent requires that the parties have an understanding of the terms to which they have agreed." Ibid.
The Court observed that "An effective waiver requires a party to have full knowledge of his legal rights and intent to surrender those rights." Ibid. (quoting Knorr v. Smeal, 178 N.J. 169, 177 (2003)). The Court stated that "under New Jersey law, any contractual 'waiver-of-rights provision must reflect that [the party] has agreed clearly and unambiguously' to its terms." Id. at 443 (alteration in original) (quoting Leodori v. CIGNA Corp., 175 N.J. 293, 302 (2003)).
In Atalese, the Court expressed the concern that "an average member of the public may not know—without some explanatory comment—that arbitration is a substitute for the right to have one's claim adjudicated in a court of law." Id. at 442. The Court held that an arbitration clause, "in some general and sufficiently broad way, must explain that the plaintiff is giving up her right to bring her claims in court or have a jury resolve the dispute." Id. at 447. The Court noted, however, that "[n]o particular form of words is necessary to accomplish a clear and unambiguous waiver of rights." Id. at 444.
The Atalese Court found the arbitration agreement at issue was unenforceable because there was no "explanation that plaintiff [was] waiving her right to seek relief in court for a breach of her statutory rights." Id. at 446. The Court noted that the clause stated the parties would submit their disputes to arbitration, but "[t]he provision d[id] not explain what arbitration [was], nor d[id] it indicate how arbitration is different from a proceeding in a court of law." Ibid. The Court added that the clause was not written in plain language. Ibid.
The Court again addressed the enforceability of an arbitration clause in Kernahan. The clause at issue in that case was set forth in a section of the agreement entitled "MEDIATION." Kernahan, 236 N.J. at 310. The clause stated, in part, that "[t]he parties agree to mediate in good faith before resorting to mandatory arbitration in the State of New Jersey." Ibid. The clause also stated:
Any and all disputes, claims and causes of action arising out of or connected with this Agreement . . . shall be resolved exclusively by the American Arbitration Association in the state of New Jersey under its Commercial Mediation Rules. Controversies or claims shall be submitted to arbitration regardless of the theory under which they arise . . . .
[Ibid.]
In Kernahan, the Court reaffirmed the standard enunciated in Atalese, noting that to be enforceable, an arbitration agreement must be "the product of mutual assent, as determined under customary principles of contract law." Id. at 319 (quoting Atalese, 219 N.J. at 442). The Court stated that in Atalese it "w[as] guided essentially by twin concerns[:]" (1) consumers may not understand "law-imbued terminology about procedures tucked into form contracts" and (2) New Jersey law has required "plain language explanations of consequences" in contract cases where a person might not understand she was agreeing to waive her constitutional or statutory rights. Id. at 319-20.
The Court also stated that Atalese was
rooted in the notion that mutual assent had not been achieved because the provision did not, in some fashion, explain that it was intended to be a waiver of the right to sue in court. Because the provision could not be deemed a knowing waiver of the right to sue in court, a meeting of the minds did not occur. The consumer context of the contract mattered. That said, the decision imposes no talismanic recitations,
acknowledging that a meeting of the minds can be accomplished by any explanatory comment that achieves the goal of apprising the consumer of her rights.
[Id. at 320 (citations omitted).]
In Kernahan, the Court also noted that in Atalese, the Court "w[as] unwilling to attribute knowledge of [the] definition [of arbitration] to consumers in part because 'an average member of the public may not know - without some explanatory comment - that arbitration is a substitute for the right to have one's claim adjudicated in a court of law.'" Id. at 321 (quoting Atalese, 219 N.J. at 442). The Court stated that the issue was whether "the use of the word 'arbitration' in the context of the contract . . . is apparent, and whether it can therefore supply the mutual assent required for the provision to constitute a meeting of the minds." Ibid.
The Kernahan Court held that the meaning of the arbitration clause at issue was not apparent from the agreement. Ibid. The Court noted that the arbitration provision appeared in a section entitled "MEDIATION." Id. at 322. In addition, the terms were printed in a small font and were contradictory. Id. at 322-23. The clause also referred to the American Arbitration Associations' Commercial Mediation Rules, which are different from the rules that apply to arbitration. Id. at 323. The Court could not conclude there was mutuality of assent between the parties to have the disputes arising under the agreement submitted to arbitration. Id. at 327.
Thus, Kernahan reaffirms the essential principles that govern the enforceability of arbitration agreements as set forth in Atalese. Under Atalese, there must be mutual assent by the parties to submit their dispute to arbitration. Atalese, 219 N.J. at 442. Since arbitration involves the waiver of the right to pursue the claims in court, the arbitration clause must show that the party waiving the right did so clearly and unambiguously. Id. at 443.
Furthermore, "[n]o particular form of words is necessary to accomplish a clear and unambiguous waiver of rights." Id. at 444. However, "[T]he clause, at least in some general and sufficiently broad way, must explain that the plaintiff is giving up her right to bring her claims in court or have a jury resolve the dispute." Id. at 447.
In Kernahan, the Court emphasized that Atalese "imposes no talismanic recitations, acknowledging that a meeting of the minds can be accomplished by any explanatory comment that achieves the goal of apprising the consumer of [his or] her rights. Kernahan, 236 N.J. at 320 (citing Atalese, 219 N.J. at 445). Nevertheless, the Court did not alter the basic principles enunciated in Atalese that in order to have mutual asset to submit a dispute to arbitration, the contract "must explain that the plaintiff is giving up her right to bring her claims in court or have a jury resolve the dispute." See Atalese, 219 N.J. at 447.
Here, the arbitration clause refers to a waiver of any right to "a trial" but does not explain that the person signing the Agreement is giving up his right to bring his claims in court or have a jury resolve the dispute. See ibid. The clause also states that "any dispute . . . will be determined by binding arbitration." However, the arbitration clause does not explain what arbitration is or how it differs from a proceeding in court. See ibid. Therefore, the arbitration provision "cannot be deemed a knowing waiver of the right to sue in court." See Kernahan, 236 N.J. at 320.
Defendants argue, however, that the arbitration clause should be enforced because it is not substantially different from the arbitration clause the Court approved in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). The plaintiff in Martindale signed an employment application, which stated that as a condition of employment, the plaintiff agreed to "waive" her "right to a jury trial" in any action or proceeding relating to her employment. Id. at 81-82. The application also provided that the plaintiff agreed that all disputes related to her employment or termination shall be decided by an arbitrator, through the American Arbitration Association. Ibid.
The arbitration clause at issue in Martindale is, however, distinctly different from the clause at issue in this case because the clause in Martindale expressly stated that the plaintiff is waiving her "right to a jury trial." See ibid. By referring to a jury trial, the clause informed the plaintiff, in a "general and sufficiently broad way," that she was "giving up her right to bring her claims in court or have a jury resolve the dispute." See Atalese, 219 N.J. at 447. Therefore, Martindale does not support defendants' contention that the arbitration clause at issue in this case established mutual assent by the parties to have any claims arising under the Agreement submitted to arbitration.
III.
Defendants further argue that if we conclude the subject arbitration clause does not satisfy the Atalese standard, we should reconsider our earlier determination that Kindred Nursing did not abrogate Atalese.
We note that in Kernahan, the defendants initially argued that Atalese ran afoul of Kindred Nursing, but the defendants abandoned that argument in the Supreme Court. Kernahan, 236 N.J. at 313. The Court determined that there was no need to discuss "any perceived conflict between [Atalese and Kindred Nursing] because the threshold issue of whether the [subject] provision's language contains sufficient clarity to form any agreement about arbitration is easily answered." Ibid. Therefore, Kernahan does not require reconsideration of our earlier opinion in this case that Kindred Nursing did not abrogate Atalese.
Defendants contend, however, that the discussion in Kernahan of the Atalese standard shows that Atalese violates the "equal-footing" principle in the FAA, as interpreted in Kindred Nursing. Defendants contend that Atalese establishes a subjective standard for mutual assent, which is not applied to other contracts. We disagree.
In Kindred Nursing, the Court noted that "[t]he FAA . . . preempts any state rule discriminating on its face against arbitration . . . [and] displaces any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements." Kindred Nursing, 137 S. Ct. at 1426. The Court stated that the FAA's "equal-footing" principle applies equally to contract formation and contract enforcement. Id. at 1428.
The Court held that "[a] rule selectively finding arbitration contracts invalid because improperly formed fares no better under the [FAA] than a rule selectively refusing to enforce those agreements once properly made." Ibid. The Court held the Kentucky rule, with its stated purpose of protecting an individual's constitutional right of access to the courts and a jury trial, violated the FAA because it was "too tailor-made to arbitration agreements." Id. at 1427.
As noted, in our earlier opinion, we held Kindred Nursing did not abrogate Atalese. Defina II, slip op. at 10-11. Relying on Atalese, we stated that waiver-of-rights provisions, whether in the arbitration context or otherwise, must clearly and unambiguously inform the individual he or she is waiving her rights. Id. at 11 (quoting Atalese, 219 N.J. at 444). We held that Atalese did not "single[] out [arbitration clauses] for more burdensome treatment than other waiver-of-rights clauses under state law." Ibid. (quoting Atalese, 219 N.J. at 444).
Atalese does not, as defendants contend, establish a subjective test for mutual assent for arbitration agreements. In Atalese, the Court stated that, "Mutual assent requires that the parties have an understanding of the terms to which they have agreed." Atalese, 219 N.J. at 442. Moreover, "An effective waiver requires a party to have full knowledge of his legal rights and intent to surrender those rights." Id. at 442 (quoting Knorr, 178 N.J. at 177).
Contrary to defendant's arguments, Atalese does not require courts to determine whether an individual subjectively understood that he or she was waiving the right to a trial in court and agreeing to arbitrate. Instead, Atalese requires courts to examine the relevant contractual language, and based on that language, determine whether mutual assent has been achieved.
Therefore, Atalese does not establish a standard for mutual assent that applies only to arbitration agreements. As the Atalese Court noted, "The requirement that a contractual provision be sufficiently clear to place a consumer on notice that he or she is waiving a constitutional or statutory right is not specific to arbitration provisions." Id. at 443. Atalese does "not single[] out [arbitration clauses] for more burdensome treatment than other waiver-of-rights clauses under state law." Id. at 444. We again conclude that the Atalese standard for mutual assent to arbitration does not run afoul of the FAA's "equal-footing" principle, as interpreted in Kindred Nursing.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION