'Atalese' Rightly Limited

Although grounded in precedent, the New Jersey Supreme Court’s 2014 opinion in Atalese v. U.S. Legal Services Group, L.P. created something of a sea-change in New Jersey arbitration law. In a consumer fraud case, the Supreme Court held that the parties’ mutual assent to arbitration, thereby waiving the constitutional and/or statutory right to have disputes tried in court by a jury, must be set forth in clear and express language. It has since been held applicable in other types of contracts, including employment; the Atalese ”defense” is a regular staple of motions to compel arbitration. Although state cases have noted the consumer or employment context in cases applying Atalese to deny motions to compel arbitration under New Jersey law, the Third Circuit has held that the express waiver language of Atalese is not required when sophisticated commercial parties are involved, and unpublished state and federal court cases have followed the same logic in an increasing number of cases. Yet a smattering of cases continued to apply Atalese to sophisticated parties such as lawyers and parties represented by lawyers.

On Feb. 8, 2023, the Appellate Division, in a published opinion, clarified the role the parties’ sophistication should play in determining whether or not to enforce an arbitration clause without a clearly written, express waiver. County of Passaic v. Horizon Healthcare Services, Inc. held that an express waiver was not required in a contract with the county because it was a sophisticated party represented by counsel. The concern stated in Atalese to protect parties from unconscionable terms in contracts of adhesion, as set out in Muhammad v. County Bank of Rehoboth Beach, were not impacted in that context and elsewhere where the parties were sophisticated. The decision, while still subject to a motion for petition for certification to the New Jersey Supreme Court, is welcome — not only because it brings our state court jurisprudence in line with our federal courts (and out-of-state jurisdictions), but also because it removes an artifice raised by sophisticated parties seeking an unjustified edge in commercial disputes.