A New Jersey appeals court has ruled that a recent pro-arbitration decision from the U.S. Supreme Court was not enough for a trampoline park to overcome faults in its mandatory arbitration clause.
On Tuesday the Appellate Division upheld a decision to invalidate an arbitration clause at issue in Defina v. Go Ahead and Jump 1, marking the second time a state appeals court has refused to enforce an arbitration agreement in the case.
The defendants, operators of a trampoline park in Pine Brook, argued that the U.S. Supreme Court’s 2017 opinion in Kindred Nursing Centers Ltd. P’ship v. Clark effectively invalidated the state Supreme Court’s 2014 ruling Atalese v. U.S. Legal Services Grp. as a basis to refuse to enforce an arbitration agreement.
But Judges Joseph Yannotti and Harry Carroll in an unpublished decision ruled that Kindred Nursing, which precludes a state from disfavoring arbitration agreements, does not abrogate Atalese. Rather, in Atalese, the Supreme Court, while holding that arbitration clauses must be clear about surrendering the right to sue, also specified that the Federal Arbitration Act explicitly required courts to place arbitration agreements on an equal footing with other contracts, the appeals panel said.
Yannotti and Carroll noted that the Atalese court stipulated that arbitration clauses “are not singled out for more burdensome treatment than other waiver-of-rights clauses under state law.”
The ruling came in a suit by Alexander Defina, a minor who allegedly broke his ankle while playing trampoline dodgeball at the Sky Zone Indoor Trampoline Park. Before Alexander used the facility, his father, Michael Defina, was required to sign a release form holding the park operators harmless for claims stemming from acts of ordinary negligence. The agreement also barred claims for bodily injury except in the event of gross negligence or willful misconduct by the defendants, according to the decision.
The agreement signed by the elder Defina also waived the right to trial, and dictated that any disputes would be subject to binding arbitration to be administered by JAMS in the state of Texas and under that state’s laws.
The plaintiffs filed suit against the trampoline park operator in June 2015, claiming that simple negligence and gross negligence contributed to Alexander’s injury. The suit also asserted that the waiver of liability was an unconscionable consumer practice in violation of the Consumer Fraud Act and the New Jersey Truth in Consumer Contract, Warranty and Notice Act. They sought compensatory and punitive damages, interest, attorney fees and costs of suit.
In October 2015, a Bergen County Superior Court judge granted a motion by Go Ahead and Jump to compel arbitration and stay the court proceedings. The Definas appealed, maintaining that the trial court erred by enforcing the arbitration clause. In July 2016, the Appellate Division agreed and reversed the orders compelling arbitration and staying the proceedings.
The Appellate Division panel issuing that ruling said the arbitration clause at issue did not clearly and unambiguously inform the plaintiffs that they were giving up the right to bring claims in court arising out of activities at Sky Zone. Although the agreement said the person signing it would give up the right to a trial, there was no “clear and unambiguous statement that the person signing the agreement is waiving his right to sue or go to court to secure relief,” the Appellate Division ruled in July 2016.
Then, in May 2017, the U.S. Supreme Court issued its decision in Kindred Nursing, holding that arbitration agreements governed by the Federal Arbitration Act must be placed “on equal footing with all other contracts.”
In September 2017, the franchisor defendants in the Sky Zone case filed a new motion to compel arbitration and stay the suit, arguing that the previous Appellate Division ruling was no longer valid because, after Kindred Nursing, New Jersey courts could no longer rely on Atalese as the basis to refuse enforcement of an arbitration agreement.
The motion was denied in the Law Division in November 2017, and on Tuesday Yannotti and Carroll affirmed. Since it found that Atalese is not abrogated by Kindred Nursing, the appeals court said it had no basis to revisit or depart from its July 12, 2016, decision invalidating the Sky Zone arbitration clause.
David Chazen of Chazen & Chazen in Englewood, who represents the plaintiffs, said in a statement that the appeal was “indicative of a larger problem that … businesses are desperate to conceal bad or dangerous business practices by ending the consumer’s right to go to court. Arbitration clauses are included in consumer contracts of adhesion in order to keep the proceedings and outcomes confidential.”
Chazen’s statement went on to say, “In this case, the Court found the arbitration provision was poorly written and unenforceable. Sky Zone has rewritten its arbitration clauses.”
Kelly Waters of Wood, Smith, Henning & Berman in Berkeley Heights, who represented the defendants, did not return a call seeking comment on the decision.