N.J. group opposes consumer contracts legislation

John O'Brien Dec. 20, 2011, 10:27am

TRENTON, N.J. (Legal Newsline) - A New Jersey tort reform group says legislation recently passed by the state's General Assembly may be in conflict with a recent U.S. Supreme Court decision.

A-3434 requires a review of consumer contracts for unconscionability and was approved by a 44-27 vote on Thursday. The New Jersey Lawsuit Reform Alliance opposes the bill and says the U.S. Supreme Court's April decision in AT&T v. Concepcion may preempt its measures.

In that case, a couple attempted to sue AT&T over a 2002 cell phone purchase that was advertised as free. However, AT&T charged customers for tax on the phone's normal price, drawing a class action lawsuit from the couple.

The contract said all disputes had to go to an arbitrator. The court ruled in a 5-4 vote that "When state law prohibits outright arbitration of a particular type of claim, the (Federal Arbitration Act) displaces the conflicting rule."

The act, originally passed by Congress in 1925, says states must apply the same rules to arbitration as they do to normal court cases.

The "overarching purpose" of the FAA, the Court said, is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate "efficient," "streamlined" proceedings tailored to the type of dispute.

"It can be specified, for example, that the decision-maker be a specialist in the relevant field, or that proceedings be kept confidential to protect trade secrets. And the informality of arbitral proceedings is itself desirable, reducing the cost and increasing the speed of dispute resolution," it wrote.

The Court added, "Requiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA."

A-3434 would allow a court to declare a mandatory arbitration agreement as unconscionable if the contract is standardized and not negotiated by the parties, the NJLRA says.

"This would encompass a large number of existing consumer contract agreement forms currently used and ultimately increase the cost to consumers of goods and services," NJLRA executive director Marcus Rayner said.

"Arbitration offers as meaningful and effective a forum for resolving disputes without lawsuits, and arbitration is often less costly and faster for both parties."

The bill is sponsored by the following members of the General Assembly: Paul Moriarty, Patrick Diegnan, Peter Barnes and Bonnie Watson Coleman.

All four are Democrats. The party holds a 47-33 advantage in the General Assembly and a 24-16 majority in the state Senate. Should it pass the Senate, it would have to be signed into law by Republican Gov. Chris Christie.

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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