Arbitration agreements in New Jersey

On May 16, 2022, the Appellate Division decided two cases which involved arbitration agreements. On both cases, Judge Gilson, J.A.D. was the opinion’s author.  In the first, the panel held the arbitration agreement was enforceable. However, in the second, which involved a minor plaintiff, the appellate panel held that the minor plaintiff had the right to disaffirm the arbitration agreement. The following is an analysis of both cases, which when viewed together, serve a refresher of the nuances of arbitration agreements in New Jersey.

In Perez v. Sky Zone, L.L.C., A-1861-20, plaintiff Louie Perez (“Plaintiff”) visited an indoor trampoline park, which required him to sign a “Participation Agreement, Release and Assumption of Release (“The Agreement”) in order to use the facility. There were several provisions in the Agreement, including an Arbitration Provision. The Arbitration Provision provided that Plaintiff agreed to arbitrate any claims arising out of his access to or use of the trampoline park, and waived his right to bring a lawsuit against Sky Zone. After reviewing it, Plaintiff checked the box next to the Arbitration Provision.

Thereafter, Plaintiff Perez was injured and brought a personal injury action against the park and its affiliates (the “Sky Zone Defendants”). The Sky Zone Defendants moved to dismiss Plaintiff’s complaint and compel arbitration. Following oral argument, the trial court granted the motion, and entered an order staying the litigation and compelling all of Plaintiff’s claims to arbitration. Plaintiff appealed.

To determine whether a matter should be submitted to arbitration, a court must evaluate (1) whether a valid agreement to arbitrate exists, and (2) whether the dispute falls within the scope of the agreement. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985). Both the New Jersey Arbitration Act and the Federal Arbitration Act allow the scope of what is subject to arbitration to be delegated to the arbitrator.

The terms of an arbitration provision must be “sufficiently clear to place a consumer on notice that he or she is waiving a constitutional or statutory right,” in order to reflect mutual agreement to arbitrate. Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 445-46. If the language of the clause conveys that arbitration is a waiver of a right to bring suit in a judicial forum in “at least some general and sufficiently broad way”, the clause will be enforced. Id. at 447.

In Perez, the Appellate Division found that the Arbitration Provision signed by Plaintiff was clear; and that the broad language was a clear and unambiguous waiver of the Plaintiff’s right to a jury trial and to pursue his claims in a court of law. Therefore, the Arbitration Provision was enforceable.

In the matter of Matullo v. Sky Zone Trampoline Park, A-2813-20, a 15 year-old patron visited a trampoline park and, in order to gain access, lied about his age.  He signed the Participation Agreement, which contained an Arbitration Provision.  He signed himself in as the “signing party” and represented that he was 19 years-old, then listed himself as a minor with a date of birth making him 15 years-old. He used the same name for both entries on the Agreement.  

While using the facility, he suffered injuries and, predictably, filed suit against the Sky Zone Defendants, who filed a motion to dismiss Plaintiff’s complaint and compel arbitration based on the Arbitration Provision. The trial court granted the motion. Plaintiff appealed.

In New Jersey, a person can disaffirm a contract he or she entered before reaching the age of majority and avoid being bound by the terms of the contract. Mechs. Fin. Co. v. Paolino, 29 N.J. Super 449, 453 (App. Div. 1954). This rule, also known as the infancy defense, has its basis in the notion that minors do not have the capacity to bind themselves to contractual obligations. See La Rosa v. Nichols, 92 N.J.L. 375, 379 (1918). There are exceptions to the infancy rule. One exception is when the minor misrepresented that he or she was an adult when entering the contract, also known as estoppel. Id. at 380.

The Appellate Division rejected the Sky Zone Defendants’ argument that since plaintiff had lied about his age, representing that he was nineteen years old, he should be estopped from disavowing the Agreement. In so doing, the court found that if a representative from Sky Zone had simply reviewed the plaintiff’s signed Agreement, they would have seen he had provided the same date of birth, just four years apart, under the same name. The Court based its ruling on New Jersey’s public policy of protecting minors. Even though the Court previously ruled that a parent can bind a minor to an arbitration agreement, the important principle is that an authorized adult must assent to the arbitration agreement on behalf of the minor. Hojnowski v. Vans Skate Park, 187 N.J. 323 (2006). Here, there was no authorized adult who assented to the Arbitration Provision.  Thus, according to the appellate panel, the Sky Zone Defendants could not show that they had reasonably relied on Plaintiff’s assent.

In conclusion, potential parties who sign an agreement with an arbitration provision in New Jersey should be mindful of the terms, as courts will evaluate a challenge to submit a matter to arbitration based on the foregoing conditions. Potential parties should also be aware of possible pitfalls regarding minors in relation to arbitration provisions, as a minor can avoid being bound by the terms of a contract entered into before the minor reaches the age of majority.