Caren Frederick v. Law Office of Fox Kohler & Ass

• Court: Court of Appeals for the Third Circuit
• Decided: March 24, 2021
• Docket: 20-2539
• Status: Unpublished

Opinion

NOT PRECEDENTIAL UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT _____________

No. 20-2539 _____________

CAREN FREDERICK, on behalf of herself and all other class members similarly situated

v.

LAW OFFICE OF FOX KOHLER & ASSOCIATES PLLC LLC, FKA National Legal Center PLLC; ARTHUR M. KOHLER; ROSEANNA FOX; COMERICA BANK; GLOBAL CLIENT SOLUTIONS LLC; JOHN DOE(S) 1-100 Said name of John Doe(s) being fictitious

LAW OFFICE OF FOX KOHLER & ASSOCIATES PLLC LLC, FKA National Legal Center PLLC; ARTHUR M. KOHLER; ROSEANNA FOX, Appellants _____________

On Appeal from the United States District Court for the District of New Jersey (D.C. No. 1-19-cv-15887) District Judge: Honorable Noel L. Hillman _______________

Argued January 28, 2021

Before: JORDAN, MATEY, Circuit Judges and BOLTON,* District Judge.

(Filed March 24, 2021) _______________

* Honorable Susan R. Bolton, United States District Court Judge for the District of Arizona, sitting by designation. Vincent E. Gentile [ARGUED] 214 Carnegie Center, Suite 100 Princeton, NJ 08540 Counsel for Appellants

Joseph M. Pinto [ARGUED] POLINO AND PINTO, P.C. 720 East Main Street, Suite 1C Moorestown, NJ 08057 Counsel for Appellee _______________

OPINION _______________

JORDAN, Circuit Judge.

The Law Office of Fox Kohler & Associates, P.L.L.C., Arthur M. Kohler, and

Rosanna Fox (collectively, the “Law Firm”) appeal the District Court’s order denying a

motion to compel arbitration. Because we conclude that the arbitration agreement at

issue is valid and applies to statutory claims, we will vacate the order and remand with

instructions to compel arbitration.

I. BACKGROUND1

In 2013, Caren Frederick entered into a Professional Legal Services Agreement

(the “Agreement”) with the Law Firm to help negotiate her accounts with creditors, “[t]he

 This disposition is not an opinion of the full court and, pursuant to I.O.P. 5.7, does not constitute binding precedent. 1 Resolving the questions on appeal requires only our consideration of the Agreement’s arbitration provision and choice of law provision. We accordingly limit the scope of the background to the information that is pertinent to our decision.

2 goal [being] to resolve each account, one by one, based on what the creditor agrees to

settle for and [her] available reserves.” (App. at 132a; App. At 107a, ¶ 14.) Six years

later, she filed suit against the Law Firm for allegedly engaging in racketeering,

consumer fraud, and unlawful debt adjustment practices, in violation of various New

Jersey laws. Frederick brought the suit on behalf of herself and “a class composed of all

citizens or residents of the State of New Jersey who executed agreements with or

received services from, or on whose behalf was established trust or escrow accounts

maintained or utilized by the [Law Firm] in a bank or other financial institution into

which monies of the class members were transferred or deposited for the purpose of or

relating to services provided by the [Law Firm] in connection with debt adjustment or

credit counseling services.” (App. at 73a-74a, ¶ 63.)

The Law Firm moved to compel arbitration pursuant to the following provision in

the parties’ Agreement:

Each party agrees to enter into good faith discussions and if needed, allow up to 180 days to seek resolution prior to either party filing a formal complaint. Any dispute that cannot be resolved between the parties after 180 days must be resolved by binding arbitration that replaces the right to go to court before a judge or a jury which may limit each party’s right to discovery and appeal. This agreement shall be submitted for binding arbitration in accordance with the rules of the American Arbitration Association [(“AAA”)]. Neither party may bring a class action suit or other representative action in court, nor bring any claim in arbitration as a class action or other representative action. The laws of the State of DE shall govern this agreement[.]

(App. at 109a, ¶ 32.) The District Court denied the Law Firm’s motion.

Notwithstanding the Agreement’s Delaware choice of law provision, the Court

3 applied the law of the forum state, New Jersey, and held the Agreement’s

arbitration provision to be unenforceable. The Law Firm has timely appealed.

II. DISCUSSION2

The Law Firm argues that the District Court erred in concluding that the

Agreement’s arbitration provision is invalid. First, it contends that the arbitration

provision would have been found valid had the Court applied Delaware law in

accordance with the terms of the Agreement. Next, it argues that the Court’s construction

of New Jersey law on arbitrability was erroneous. Lastly, it challenges the enforceability

of New Jersey law on arbitrability, contending that the Federal Arbitration Act (“FAA”)

preempts it.

A. Choice of Law3

We “apply the choice of law rules of the forum state to determine what substantive

law will govern.” Huber v. Taylor, 469 F.3d 67, 73 (3d Cir. 2006) (citation omitted). So,

here, we apply New Jersey’s choice of law rules. However, “[b]efore a choice of law

question arises, there must first be a true conflict between the potentially applicable

bodies of law.” Id. at 74 (citation omitted). A true conflict exists “when the application

2 We have jurisdiction under 9 U.S.C. § 16(a)(1) to review an order denying a motion to compel arbitration. Zimmer v. CooperNeff Advisors, Inc., 523 F.3d 224, 228 (3d Cir. 2008) (citations omitted). The District Court had jurisdiction pursuant 28 U.S.C. § 1332(a). 3 “Since choice of law analysis involves a purely legal question, we exercise plenary review.” NL Indus., Inc. v. Comm. Union Ins. Co., 65 F.3d 314, 319 (3d Cir. 1995) (citation omitted).

4 of one or another state’s law may alter the outcome of the case[.]” In re Accutane Litig.,

194 A.3d 503, 517 (N.J. 2018) (citation omitted).

The Law Firm contends that there is a true conflict between New Jersey and

Delaware law concerning arbitration, with Delaware applying a more deferential standard

for enforcing arbitration provisions. Delaware courts hold that a contract’s general

provision “for arbitration of all disputes” and its incorporation of “rules that empower

arbitrators to decide arbitrability[,]” such as the AAA rules incorporated here, “evidences

a clear and unmistakable intent to submit [all issues, including] arbitrability issues[,] to

an arbitrator.” James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d 76, 80 (Del. 2006).

But New Jersey courts might well render that same contract language unenforceable

because it “does not explain what arbitration is, nor does it indicate how arbitration is

different from a proceeding in a court of law. Nor is it [necessarily] written in plain

language that would be clear and understandable to the average consumer that she is

waiving statutory rights.” Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306, 315 (N.J.

2014); see also id. at 313 (“[A]n average member of the public may not know—without

some explanatory comment—that arbitration is a substitute for the right to have one’s

claim adjudicated in a court of law.”). It therefore appears that there is a true conflict

between Delaware and New Jersey law on this point. Despite that, however, we need not

decide which state’s law applies because, even under the more stringent rule for

enforcing arbitration agreements, the Law Firm prevails. We will therefore assume for

purposes of analysis that New Jersey law applies.

5 B. Arbitrability4

“Because the underlying principle of all arbitration decisions is that arbitration is

strictly a matter of consent, the FAA requires courts to enforce arbitration agreements

according to their terms.” In re Remicade Antitrust Litig., 938 F.3d 515, 519 (3d Cir.

2019) (internal quotation marks and citations omitted). In doing so, we “must consider

two gateway questions: (1) whether the parties have a valid arbitration agreement at all

(i.e., its enforceability), and (2) whether a concededly binding arbitration [agreement]

applies to a certain type of controversy (i.e., its scope).” Id. (quoting Lamps Plus, Inc. v.

Varela, 139 S. Ct. 1407, 1416-17 (2019)) (internal quotation marks and other citations

omitted). State law governs both gateway questions, but “due regard must be given to the

federal policy favoring arbitration.” Jaludi v. Citigroup, 933 F.3d 246, 255 (3d Cir.

2019) (citation omitted). Accordingly, we employ a presumption of arbitrability at the

second gateway question. Id.

1. The arbitration provision is valid

When “an average member of the public may not know—without some

explanatory comment—that arbitration is a substitute for the right to have one’s claim

adjudicated in a court of law[,]” New Jersey “courts take particular care in assuring the

knowing assent of both parties to arbitrate, and a clear mutual understanding of the

ramifications of that assent.” Atalese, 99 A.3d at 313. While “[n]o particular form of

4 “We exercise plenary review over questions of law concerning the applicability and scope of arbitration agreements.” Zimmer, 523 F.3d at 228 (citation omitted).

6 words is necessary to accomplish a clear and unambiguous waiver of rights[,]” an

arbitration provision will pass muster if it, “at least in some general and sufficiently broad

way, … explain[s] that the plaintiff is giving up her right to bring her claims in court or

have a jury resolve the dispute.” Id. at 314-16.

That standard is met here. The Agreement’s arbitration provision explains that

arbitration “replaces the right to go to court before a judge or jury” and further states that

arbitration “may limit each party’s right to discovery and appeal.” (App. at 109a, ¶ 32.)

Additionally, it states that “[a]ny dispute that cannot be resolved between the parties after

180 days must be resolved by binding arbitration” and that the Agreement “shall be

submitted for binding arbitration in accordance with the rules of the American Arbitration

Association[,]” thereby both clarifying that arbitration is the singular way for the parties

to resolve their disputes and establishing the rules that will govern the arbitration. (App.

at 109a, ¶ 32 (emphases added).) The Agreement’s arbitration provision makes “clear

and understandable to the average consumer” that she is waiving her right to bring suit in

a judicial forum. Atalese, 99 A.3d at 315. We, therefore, conclude that the arbitration

provision is enforceable.

2. The arbitration provision includes statutory claims

The arbitration provision is also “sufficiently broad to encompass reasonably

[Frederick’s] statutory causes of action.” Martindale v. Sandvik, Inc., 800 A.2d 872, 883

(N.J. 2002). It expressly includes “[a]ny dispute that cannot be resolved between the

parties after 180 days[.]” (App. at 109a, ¶ 32.) That provision is “‘clear and

unambiguous’ in [its] intent and purpose to inform the reader that all disputes must be

7 presented in an arbitral forum, not a court.” Curtis v. Cellco P’ship, 992 A.2d 795, 802

(N.J. Super. Ct. App. Div. 2010) (citations omitted). Moreover, New Jersey courts have

consistently held that such broad language will encompass statutory claims, particularly

in the absence of “a limiting reference to a contract.” See Moon v. Breathless Inc., 868

F.3d 209, 216 (3d Cir. 2017) (applying New Jersey law and noting that “the court found

that the contract was sufficiently broad because … it did not make a limiting reference to

a contract”); compare Martindale, 800 A.2d at 884 (“[T]he arbitration provision here

does not contain any limiting references[.]”), with Curtis, 992 A.2d at 802.

Hence, the Agreement’s arbitration provision is enforceable as to both contractual

and statutory claims, and Frederick must resolve her claims in arbitration with the Law

firm, according to the terms of the Agreement.5

III. CONCLUSION

For the foregoing reasons, we will vacate the District Court’s order denying the

Law Firm’s motion to compel arbitration and remand with instructions to grant the

motion.

Consequently, we do not address the Law Firm’s remaining argument regarding 5

preemption.