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Automotive Educational Subliminal, Inc. v. Ferrigan

A-1402-96T2 (N.J. Super. App. Div. 1998) (Unpublished)

CONTRACTS; ARBITRATION—Where, without overreaching, a contract requires arbitration in New Jersey, a New York party is bound by that agreement.

This is a dispute as to whether a New Yorker, as a party to a contract, was compelled to arbitrate a dispute in the State of New Jersey. It involved a licensing agreement between a New Jersey corporation that licensed individuals to use and employ its proprietary and copyrighted methods and materials in the business of soliciting and teaching automobile sales techniques and an individual New York resident. The New Yorker entered into a license agreement with the company to become an “instructor” in the State of New York in response to an advertisement in a New York newspaper. When the individual was unsuccessful in selling the company’s product, he rightfully terminated the agreement. Thereafter, it came to the company’s attention that its former “instructor” was operating a Maine corporation which was in the same business as the company and which used similar materials. As a result, it filed a demand for arbitration in accordance with a provision of the original contract which read that any controversy involving the agreement or the relationship was to be resolved “by binding arbitration, held in Cherry Hill, Camden County, New Jersey… .” The agreement also contained a choice of law provision which recited that the parties intended the agreement to be construed in accordance with the laws of the State of New Jersey in Camden County and went on to say “[t]his is an essential part of this Agreement.” The individual refused to arbitrate and the company commenced an action to compel arbitration. The individual had several New York attorneys attempt to appear in the matter, but none of those attorneys was admitted for the purpose of the litigation. Therefore, the former “instructor” claimed that service was not proper. The court accepted the premise that the service of process on the “instructor” was flawed because service was not made at his home, but rather at his place of business by leaving the papers with his secretary. Nevertheless, he did receive the summons and complaint and attempted to respond to it through counsel. Thus, the purpose of the service rules, (i.e., adequate notice and due process) was satisfied. Jurisdiction was therefore proper.

The “instructor” argued that the arbitration clause and the choice of laws clause were agreements of adhesion and, therefore, unenforceable. In this case, the Court found that the cases cited by the “instructor” involved the abuse potential of the economic power of large corporations, a situation which did not exist in this case. In addition, in the Court’s mind the difference between arbitrating in New York or in New Jersey was not very great. It was persuaded that where the available forums are New York and New Jersey, the choice of one over the over is not unfair or unreasonable in the circumstances of this case. Consequently, the provision requiring arbitration in Camden County, New Jersey was upheld.


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