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Under New Jersey law, contractual waivers of the right to bring a class action are valid and enforceable if the remedy available to successful claimants would be sufficient to attract representation by competent counsel, according to a federal district court in New Jersey.
In Jones v. The Chubb Institute, Civ. A. No. 06-4937 (KSH), 2007 WL 2892683 (D. N.J. Sept. 28, 2007), Jones and other students at trade school Chubb executed an enrollment agreement containing a provision requiring arbitration of any and all claims and statutory claims against Chubb. Later, Jones and other students filed a class action suit against Chubb for violating a New Jersey consumer fraud statute.
Chubb moved to compel arbitration of the claims individually, maintaining that the arbitration provision was valid and enforceable, the class action waiver within was valid and enforceable, and that the statutory claims fell within the scope of the provision. Jones alleged the provision and its class action waiver were unconscionable and that the claims were outside the scope of the agreement.
The Court granted Chubb’s motion to compel arbitration, ordering that each plaintiff’s claims be arbitrated individually.
The Court first found the arbitration provision to be valid, holding that Jones had failed to show it was either procedurally or substantively unconscionable. While the terms of the arbitration provision were in slightly smaller type than the rest of the agreement, the Court observed that the provision consisted of a full page, was in bold type, and that it was understandable to high school graduates like Jones, all factors that cut against a finding of procedural unconscionability. The Court also declined to find substantive unconscionability, noting that Jones was specifically allowed in the provision to seek full vindication of his statutory claims in arbitration.
Next, the Court found the class action waiver in the arbitration provision valid. The Court acknowledged that precedent supported declaring such waivers unenforceable when such waivers would preclude a claimant from securing competent counsel in the case of small claims; however, Jones and others had substantial claims for damages in an amount that would not preclude finding counsel, especially since the provision allowed for treble damages and fee-shifting for successful claimants.
Finally, the Court found Jones’s statutory claims fell squarely within the scope of the arbitration provision. The Court rejected Jones’s characterization of the claims as “collection of tuition,” a type excluded in the arbitration provision. Instead, the Court found the statutory consumer fraud claims to be specifically included in the provision.
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