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Spaeth v. Srinivasan

403 N.J. Super. 508, 959 A.2d 290 (App. Div. 2008)

ARBITRATION — Where an agreement has an arbitration provision, but the parties have instead preceded to court, either party may assert arbitration as the sole remedy unless there has been a waiver which, if enforceable, must have been made clearly, unequivocally, and decisively such that the presumption against waiver can be overcome by clear and convincing evidence.

A seller contracted to sell a client list. The price included an initial, non-refundable payment of $20,000 with the balance to be in two annual installments, with interest. The contract had an arbitration clause and specified New Jersey law to govern the contract’s interpretation. Disputes arose immediately. The buyer alleged that the seller did not refer all of the clients to it and had misrepresented the fees she had been charging those clients. For this reason, the buyer refused to make any payments after the initial installment and sued the seller for damages. During the course of litigation, the parties attempted to settle their disputes. Eventually, the seller argued that the arbitration clause deprived the lower court of jurisdiction to hear the matter. The lower court denied the seller relief.

The Appellate Division ultimately heard the matter on appeal, but limited the issue to whether the seller had waived her right to arbitration. It held that the seller had not. According to the Court, for there to be a waiver of arbitration rights, a party must know of the right and affirmatively reveal its intent to waive that right. It held that a party waiving a right to arbitrate must do so clearly, unequivocally, and decisively, and that the presumption against waiver may only be overcome by clear and convincing evidence. Here, the Court held that the seller never waived her contractual right to arbitrate her claims and had asserted the right only six months after the buyer filed his complaint. This was well before any meaningful exchange of discovery and there was no showing that the delay caused demonstrable prejudice to the buyer.

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