Appellate Division Judge Douglas Fasciale. Photo: Carmen Natale

In a precedent-setting opinion in New Jersey, a state appeals court has invalidated an arbitration agreement between a former Jenny Craig employee and the company, ruling that the failure to designate an arbitration forum or process meant that their supposed contract lacked a “meeting of the minds.”

Wednesday's Appellate Division decision means that Marilyn Flanzman, a former longtime Jenny Craig employee, is allowed to press her age-discrimination and harassment lawsuit against the company in court.

Failing “to identify in the arbitration agreement the general process for selecting an arbitration mechanism or setting … deprived the parties from knowing what rights replaced their right to judicial adjudication,” the court said.

The panel, however, noted that “we do not impose any special language that parties must use in an arbitration agreement,” which “would violate Kindred Nursing [v. Clark], Atalese [v. U.S. Legal Services Group], and the other cases that preclude subjecting arbitration agreements to more burdensome requirements than other contractual agreements.”

Flanzman contends in her suit against Jenny Craig that as she aged, the company gradually—and discriminatorily—reduced her full-time hours at a Paramus location to just three hours per week. Then it allegedly fired her when she was 82, after she'd been employed as a Jenny Craig weight-loss counselor for 26 years, according to the unanimous Appellate Division panel opinion, Flanzman v. Jenny Craig, on Wednesday.

Flanzman and her attorneys had cited multiple grounds, arguing to the panel that Flanzman should not be forced into arbitration with Jenny Craig. The company had brought a motion to compel arbitration in the lawsuit.

The panel agreed with Flanzman's argument that the arbitration agreement the weight-loss counselor had signed in 2011—after some 20 years as a Jenny Craig employee—lacked mutual assent and was therefore invalid as a matter of contract law.

“In general, a forum is the mechanism—or setting—that parties use to arbitrate their dispute,” wrote Appellate Division Judge Douglas Fasciale on behalf of the three-judge panel, adding that the parties “could have designated an arbitral institution (like the American Arbitration Association (AAA) or the Judicial Arbitration and Mediation Services (JAMS)), or they could have communicated a general method for selecting a different arbitration setting.

“The process is important because the rights associated with arbitration forums differ depending on which is chosen, or how the arbitral process is defined,” Fasciale continued. “Here, the agreement ignored the subject altogether.”

He further wrote, “We hold that the parties lacked a 'meeting of the minds' because they did not understand the rights under the arbitration agreement that ostensibly foreclosed plaintiff's right to a jury trial.”

Fasciale added: “We do not mean to imply that there must be 'magic words' in the agreement as to the rights that replace the right to judicial adjudication. Imposing such a requirement would upset the 'equal footing' that arbitration contracts enjoy with all other contracts.”

Flanzman's attorney said in a phone interview Wednesday that he and his client were “very gratified by the decision.”

David Zatuchni of Zatuchni & Associates in Lambertville added that, to his knowledge, the particular arbitration agreement issue before the panel—that leaving out an an arbitration forum and process from an agreement can invalidate it—was one of first impression in New Jersey, and therefore the appeals panel's ruling sets some precedent.

“From our standpoint, the decision makes clear that New Jersey courts are going to review these types of agreements, where employees purportedly waived their statutory right [to a trial], very carefully,” Zatuchni said, “and look to see that there is a true meeting of the minds and waiver.”

An attorney for Jenny Craig, Sharon Margello of Ogletree, Deakins, Nash, Smoak & Stewart in Morristown, could not be reached on Wednesday.