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Kuhn v. Terminix International Co., L.P.

A-1518-07T3 (N.J. Super. App. Div. 2008) (Unpublished)

CONSUMER FRAUD ACT; ARBITRATION — An arbitration provision requiring any controversy or claim between the parties arising out of or relating to the interpretation, performance or breach of any provision of their agreement to be settled by arbitration is not explicit enough to cover statutory claims, especially where that provision is obscured in appearance and location in the contract.

A pest control contract included a notice on the front telling the customer about general conditions on the reverse side of the contract. The general conditions provided that “any controversy or claim between [the parties] arising out of or relating to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration.” When the customer sued the pest control company, the company asserted that the arbitration clause was valid and should be enforced “because it [was] sufficiently clear, unambiguously worded, and the broad language ‘any controversy or claim’ encompassed all possible claims that might arise from the contract.” The lower court and the Appellate Division were not persuaded by the pest control company’s arguments.

The Appellate Division pointed to a New Jersey Supreme Court case, under the Law Against Discrimination, that expressly stated that “in the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be.” Other case law provides that “[a] party’s waiver of statutory rights ‘must be clearly and unmistakably established, and contractual language alleged to constitute a waiver will bot be read expansively.” Further, the Appellate Division case “addressed at length the issue of the enforceability of arbitration clauses under the [Consumer Fraud Act], expressly referencing the specificity of waiver requirement[s]” under prior case law. In that earlier Appellate Division decision, the court “held that to be enforceable, such arbitration provisions must provide that by signing, the consumer agrees to arbitrate ‘all statutory claims arising out of the relationship,’ ‘any claim or dispute based on a federal or state statute,’ or contain similar language reflecting a general understanding of the type of claim included in the waiver.” In this case, the Court believed that the provision requiring “any controversy or claim between them arising out of or relating to the interpretation, performance or breach of any provision of this agreement shall be settled exclusively by arbitration,” was similar to the language found to be wanting in earlier cases. It believed that “[a]lthough the clause may be reasonably construed as effecting a waiver of trial of contractual claims, it [did] not contain an explicit agreement to arbitrate nor [a] waiver of [a] trial of statutory claims such as those asserted by [the customers] in this litigation.” The Court also believed that the arbitration clause was “obscured in appearance and location in the contract” because it was “one of twelve general conditions undistinguishable from all the other boiler-plate provisions.” Consequently, the Court would not enforce the arbitration provision in this case.


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