Readers may have questioned the Appellate Division’s opinion in Goffe v. Foulke Management Corp., 454 N.J. Super. 260 (App. Div. 2018), holding that allegations of fraud concerning contracts for used car transactions could vitiate the arbitration clauses in the contracts and remanding for discovery regarding the formation issues raised by Plaintiffs. After all, the United States Supreme Court had held, in Prima Paint Corp. v. Flood and Conklin Mfg. Co., 388 U.S. 395 (1967), that arbitration clauses were “severable” from the contracts in which they were incorporated; thus, unless allegations of fraud went specifically to the arbitration clause, the arbitrator should decide fraud issues relating to the entire contract. It seemed somewhat unusual that the Appellate Division did not mention severability or cite Prima Paint or any more recent cases discussing the severability doctrine.
Reversing the Appellate Division on June 6, __ N.J. __, 2019 N.J. LEXIS 791, the New Jersey Supreme Court followed Prima Paint and the more recent discussion of the issue in Buckeye Check Cashing, Inc. v. Cardengna, 546 U.S. 440 (2006). We welcome the course correction.
