Arbitration/photo courtesy of shutterstock.com

Brushing back an effort to harness a standard set forth a few years ago by the Third Circuit on arbitration agreement language, a state appeals court has ruled that failure to mention specific statutory rights being waived didn't doom an arbitration clause in a dispute between an investor and her adviser.

In arguing against compelled arbitration, the plaintiff in Lueddeke v. Mazza pointed to Moon v. Breathless, a 2017 precedential decision by the U.S. Court of Appeals for the Third Circuit that set out a three-part test for arbitrability of claims arising out of statute.

The Appellate Division on Wednesday declined to find that that test, coming in an employment law case, voided the arbitration clause in the present suit, which asserted violations of the Truth-in-Consumer Contract, Warranty and Notice Act and other causes of action.

According to the decision, the case included claims that plaintiff Tara Lueddeke's invested funds were misused, through unauthorized investments, by National Securities Corp. and one of its brokers.

National Securities moved to have the matter dismissed and referred to arbitration, based on a provision contained in a series of contracts Lueddeke signed, which provided, among other terms, that all "controversies that may arise between me and my Broker/Dealer concerning any subject matter, issue or circumstance whatsoever" would go to arbitration.

Lueddeke contended that the arbitration provision was invalid because it made no specific reference to statutory or constitutional rights, or to statutory remedies, which her suit sought.

She relied in part on the Moon decision. There, the Third Circuit, applying state law, said valid arbitration clauses must "identify the general substantive area that the arbitration clause covers," and must "reference the types of claims waived," as well as "explain the difference between arbitration and litigation." The Third Circuit panel in that case invalidated a clause executed by, and reinstated the suit lodged by, exotic dancers working as independent contractors at Breathless, a club in Rahway, who claimed violations of the Fair Labor Standards Act and other statutes.

Lueddeke also cited the New Jersey Supreme Court's landmark decision from 2014 in Atalese v. U.S. Legal Services Group, which requires that arbitration agreements make clear that a right to go to court is being waived.

"Contrary to our settled case law, the purported agreement does not make any specific reference to the consumer's statutory and constitutional right to a trial in court, nor to statutory remedies such as the TCCWNA or New Jersey's Uniform Securities Law," Lueddeke's brief to the Law Division stated. "Thus, under Atalese (as followed in Moon), Defendants' arbitration clause fails right out of the box."

In granting dismissal in last July, Hudson County Superior Court Judge Kimberly Espinales-Maloney said National Securities' arbitration clause "broadly encompasses all claims, including the consumer's statutory and constitutional right to a trial in court[.]" She added that Atalese stated that "an arbitration clause does not have to identify a specific statutory right one is subjecting to arbitration[.]"

Appellate Division Judges Jessica Mayer and Catherine Enright affirmed Wednesday in a per curiam decision. Lueddeke had cited a number of cases in the effort against arbitration, court documents show, but the panel in its seven-page ruling focused largely on the applicability of Moon.

"We reject plaintiff's argument that the Arbitration Agreement failed to satisfy the Moon test," the panel wrote.

"By agreeing to the broad language 'all controversies,' plaintiff's statutory causes of action were encompassed within the Arbitration Agreement. The Arbitration Agreement also governed claims 'concerning any subject matter, issue or circumstance whatsoever []including, but not limited to, controversies concerning any account, order or transaction, or the continuation, performance, interpretation or breach of this or any other agreement between me and my Broker/Dealer … .'

"This language unambiguously incorporated all claims asserted by plaintiff, including her statutory claims," the panel said.

The panel said National Securities' arbitration provision also satisfied the other parts of the Moon test.

Daniel Buzzetta of Baker & Hostetler in New York, who represents National Securities along with lawyers from Freeman Mathis & Gary, declined to comment.

Lueddeke's counsel, Bruce Baldinger of Morristown, didn't return a call about the decision.

The decision in the Lueddeke case came the same day that the Appellate Division issued at least two other decisions involving arbitration. In one of those, Maga v. Premier Consulting Group, a different Appellate Division panel voided an arbitration agreement signed by a former employee, finding it "deficient under the Atalese standard."

"Although the clause does reference final binding arbitration and provides a venue and arbitration forum, it lacks any mention of the waiver of any right or that plaintiff is foreclosed from bringing a claim in court," the panel said in the decision, which, like Lueddeke, was unpublished. "The signor of the agreement is not advised that arbitration is a waiver of the right to bring a suit in a judicial forum.

"While the language suggested in Atalese to satisfy a knowing waiver of a basic right may be simple in its words, it is crucial in its significance," the court said.