New Jersey Gov. Phil Murphy speaking at his inauguration as governor of New Jersey. Photo by Carmen Natale

In 2019, New Jersey was at the forefront of a legal and public policy battle over mandatory arbitration of employment and consumer contracts. And 2020 promises more conflict as pro-arbitration interests and those opposing mandatory arbitration do battle in state and federal courts.

The U.S. Supreme Court set the tone in 2019 with three major decisions concerning arbitration—Lamps Plus v. Varela and Schein v. Archer and White Sales, which were seen as favorable to employers, and New Prime v. Oliveira, which was more friendly to workers. But the U.S. Court of Appeals for the Third Circuit issued an important arbitration decision when it declared Uber's arbitration clause unenforceable and reinstated a New Jersey class action claiming the ride-hailing company's drivers are misclassified as independent contractors.

A federal judge in the District of New jersey ruled that an electronics company selling its products through nonparty Amazon could not compel arbitration of a customer's complaint through the online retailer's own arbitration channels.

Perhaps the most widely watched state-court ruling on arbitration was the Appellate Division's finding that Pfizer's use of an online employee training program to announce a new, mandatory arbitration policy and obtain their consent was inadequate. The court said Pfizer's reference to the arbitration agreement as a "training module" did not properly capture the essence of the endeavor and was capable of being misunderstood. The company has appealed the ruling to the Supreme Court.

Some New Jersey law firms were directly impacted by the controversy over arbitration in 2019. Sills Cummis & Gross of Newark was in court over a retainer agreement with a firm client that called for arbitration of attorney-client disputes. The Appellate Division ruled that the arbitration agreement was unenforceable because it referenced 33 pages of JAMS arbitration rules but the firm never provided the client with a copy of those rules. The Supreme Court has agreed to hear an appeal in that case.

And another Newark firm, Gibbons, won a ruling from a federal judge in Philadelphia sending a former associate's gender bias suit to arbitration. The judge rejected the plaintiff's claims that the arbitration agreement she signed was unconscionable.

A key battleground in the conflict over arbitration in 2020 will be a suit brought by the U.S. Chamber of Commerce and the New Jersey Civil Justice Institute that seeks to overturn a newly enacted New Jersey law against nondisclosure agreements in employment contracts and settlement agreements. While the bill doesn't explicitly address arbitration, it is seen as effectively banning arbitration agreements in employment-related contracts, and the suit says the new legislation is preempted by the Federal Arbitration Act.

What follows is a series of key developments in the conflict over arbitration in 2019, as reported by the Law Journal, week by week:

Dec. 11: New Jersey's Legislature is named to American Tort Reform Association's annual list of "Judicial Hellholes," which cites its enactment of limits on mandatory arbitration.

Dec. 9: The state Supreme Court agrees to hear the case of a Sills Cummis retainer agreement calling for arbitration of attorney-client disputes. The court granted a petition for certification in Delaney v. Dickey, which concerns a 2015 retainer executed by Sills Cummis and a firm client. The arbitration provision was upheld at the trial court level, but the Appellate Division held the provision unenforceable and reversed.

Dec. 3: The National Association for Law Placement will include data in its 2020 Directory of Legal Employers about whether an employer requires summer associates or associates to sign mandatory arbitration agreements.

NALP's decision is a win for the People's Parity Project, a national organization of law students that began at Harvard Law School who seek to end the use of mandatory arbitration in the legal field and elsewhere. Nearly 1,000 people signed a petition earlier this year asking NALP to help students identify which firms use mandatory arbitration so they can make informed decisions during the on-campus interview process.

Nov. 21: The New Jersey Supreme Court hears arguments in Flanzman v. Jenny Craig. There, the justices are considering whether to uphold a 2018 Appellate Division ruling invalidating the arbitration agreement between the weight loss company and a longtime employee because the agreement failed to designate an arbitration forum or process.

Nov. 15: A bill that would regulate arbitration organizations clears the Senate Commerce Committee by a 3-2 vote. The bill would prohibit a neutral arbitrator or arbitration organization from administering any consumer arbitration that requires a nonprevailing consumer who is a party to the arbitration to pay the opposing party's costs or fees. The bill would also prevent arbitration organizations from administering cases in which the organization has, or has had, a financial interest.

Oct. 22: In Stevens v. Cappadora, the Appellate Division rules that a contract clause requiring arbitration of disputes relating to a joint business venture is waived when the defendant fails to mention it until just before trial. A trial judge had ruled the defendant's untimely effort to compel arbitration was an innocent oversight by counsel. But the appeals court said it would be unfair to switch forums because of the plaintiffs' investment of time engaging in discovery and preparing for trial more than a year after the lawsuit was filed.

Oct. 17: The state Supreme Court agrees to hear two conflicting rulings on whether the New Jersey Arbitration Act applies to employees who are exempt from the Federal Arbitration Act. The justices agreed to take up the two decisions, which are issued one day apart, after different panels of the Appellate Division issued opposing rulings despite similar fact patterns.

Sept. 11: The U.S. Court of Appeals for the Third Circuit finds a mandatory arbitration clause unenforceable and reinstates a class action suit claiming Uber drivers are wrongly classified as independent contractors.

Sept. 3: New Jersey's new law restricting arbitration agreements in employment contracts is preempted by the Federal Arbitration Act, according to a suit filed in federal court by the U.S. Chamber of Commerce and the New Jersey Civil Justice Institute. The complaint refers to the measure as "a complete ban on pre-dispute employment arbitration agreements."

Aug. 23: The Appellate Division rules that the arbitration clause in Sills Cummis' retainer agreement was invalid because it made reference to 33 pages of JAMS arbitration rules but did not provide a copy of the rules.

June 27: A gender bias suit brought by former Gibbons lawyer Jennifer Seme against the firm is headed to arbitration. U.S. District Judge John Padova of the Eastern District of Pennsylvania rejected Seme's claims that the agreement she signed was unconscionable.

June 12: The state Supreme Court rules that bait-and-switch claims against two Cherry Hill car dealerships must go to arbitration. In Goffe v. Foulke Management, the justices overturned an Appellate Division ruling holding that allegations of fraud concerning contracts for used car transactions could vitiate the arbitration clauses in the contracts. The Supreme Court held that whether the underlying contract had been rescinded, or was not enforceable because the seller failed to provide the buyer a copy as required by the Consumer Fraud Act, were not for the court to decide, and had to be resolved in the arbitration.

May 13: Gibbons seeks to have a gender discrimination suit by a former associate in the firm's Philadelphia office moved to arbitration. Jennifer Seme sued the Newark-based firm in February, alleging she was wrongly fired because she is a woman. Gibbons has argued that because Seme signed an arbitration agreement, the dispute cannot be litigated in federal court.