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Don’t Pick on the Little Guy: The Appellate Division’s Disapproval of Adhesive Arbitration Clauses

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In Midland Funding, LLC v. Bordeaux, 447 N.J. Super. 330 (2016), the Appellate Division addressed the question of whether an arbitration clause that was part of a consumer credit card application was enforceable. The appeal arose out of a small claims case filed in the Law Division, Special Civil Part, to collect $1,018.04 from defendant, a consumer who had made purchases on a credit card. After defendant counterclaimed alleging violations of the Fair Debt Collection Practices Act, plaintiff filed a motion to compel arbitration. The trial judge, after one minute of oral argument, granted the motion and found that it was clear that the defendant was trying to avoid paying for her purchases made on credit and she should be forced to go to arbitration. The court further found that there would be little prejudice to defendant if the matter went to arbitration.

The Appellate Division focused on whether defendant had agreed to the arbitration provision, which was contained in a provision written in “a font smaller than the size required to be used in all appellate briefs…” While defendant had made purchases from Dell, there was no evidence that she had agreed to be bound specifically to the arbitration agreement. The Court stated that it is settled law in New Jersey that “an agreement to arbitrate . . . must be the product of mutual assent. . .” and that plaintiff had the burden to prove this assent from defendant, found that plaintiff had not satisfied this burden. The documents provided to prove the arbitration provision did not contain defendant’s signature nor any other evidence that defendant had agreed to be bound and, therefore, the Appellate Division reversed the order of the trial court and sent the case back with a not-so-subtle admonition to the trial judge about his original lack of patience with defendant.

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