279 A.3d 1168
N.J. Super. Ct. App. Div.2022Background
- Plaintiff bought a used car and signed a Motor Vehicle Retail Order (MVRO) that included an arbitration clause in large bold print expressly waiving the right to pursue class actions in court or arbitration.
- Plaintiff filed an AAA arbitration demand alleging overcharges; AAA notified defendant Salerno Duane that the MVRO required the dealer to pay AAA administration fees.
- Salerno Duane failed to pay the AAA fees; AAA declined to administer the arbitration and closed the file, advising the parties they could sue in court.
- Plaintiff then filed a putative class action in Superior Court; defendants moved to compel arbitration and later argued the class-waiver in the MVRO precluded class certification.
- The trial court denied class certification, holding the MVRO’s class-waiver was clear and that Roach (material breach by not paying AAA fees) did not invalidate the class-waiver as to court litigation; the Appellate Division affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does defendants' material breach (failure to pay AAA fees) render the entire arbitration agreement — including the class-action waiver — unenforceable? | Roach requires treating defendants' failure to pay as a material breach that voids the arbitration agreement and related waivers. | Roach bars only compelling arbitration; it does not nullify a separately bargained waiver of the right to bring a class action in court. | Material breach prevents compelling arbitration but does not erase the MVRO's clear court-class-action waiver; waiver remains enforceable in court. |
| Can plaintiff serve as class representative despite the MVRO waiver and the breach? | Plaintiff asserts the breach permits her to represent a class in court. | Defendants say plaintiff waived class-representative status in the MVRO. | Plaintiff knowingly waived the right to act as class representative; court correctly denied certification. |
| Are putative class members barred from joining the class by the MVRO waivers? | Plaintiff argues some putative members lack enforceable waivers (relying on RISC differences). | Defendants point to MVROs signed by putative members that include the class-waiver applicable in court. | Putative class members executed MVROs with the waiver; they are barred from participating in a court class action. |
| Does the RISC arbitration clause supersede the MVRO waiver and permit class litigation? | Plaintiff contends the RISC clause controls and is inconsistent with the MVRO waiver. | Defendants note the RISC was not signed by plaintiff or putative members, so it is not enforceable. | RISC was unsigned by relevant parties, so MVRO governs; no superseding conflict. |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (FAA preempts state rules that nullify class-waiver provisions in arbitration agreements)
- Roach v. BM Motoring, LLC, 228 N.J. 163 (2017) (defendant's knowing refusal to pay arbitration fees can constitute material breach barring compelled arbitration)
- Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430 (2014) (mutual assent requirement for arbitration clauses; clarity in contract formation)
- NAACP of Camden Cnty. E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404 (App. Div. 2011) (FAA preemption bars courts from nullifying class-waiver provisions on certain state-law grounds)
- Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88 (2007) (class actions are a favored procedural device; Rule 4:32-1 construed liberally)
- Cole v. Jersey City Med. Ctr., 215 N.J. 265 (2013) (standard for waiver of affirmative defenses; timely assertion required)