McKeon, Diegnan & Moriarty Bills to Reform Consumer Arbitration Process Clear Assembly Panel

Legislation Assembly Democrats John F. McKeon, Patrick Diegnan and Paul Moriarty sponsored to make the consumer arbitration process more accessible and more transparent was advanced by an Assembly committee on Thursday.

The first bill (A-1515), sponsored by McKeon, would prohibit terms and conditions in a consumer contract from requiring any dispute that arises to be resolved outside of the state of New Jersey. Holding litigation or arbitration outside of New Jersey can make dispute resolution costly and burdensome for consumers, McKeon noted.

“Oftentimes these contracts are offered on a take-it-or-leave-it basis, putting a consumer who needs a product or service at a major disadvantage,” said McKeon (D-Essex/Morris). “Forcing someone to travel to another state to resolve a dispute makes the process inaccessible, in effect, and ultimately increases the likelihood that a consumer who’s been wronged will forgo the pursuit of restitution altogether.”

A recent New York Times series highlighting the proliferation of arbitration agreements in consumer contracts over the past decade revealed that businesses often insert provisions limiting the adjudication of medical malpractice, sexual harassment, fraud, wrongful death and other matters to private arbitration forums, which often are out-of-state and tend to favor businesses. Such provisions have made bringing class action claims more difficult, McKeon said.

The second bill (A-2150), sponsored by Diegnan and Moriarty, would implement new regulations regarding binding arbitration arising from consumer contracts. Although arbitration organizations typically dictate the rules governing disputes and how an arbitrator is chosen, current law does not include rules pertaining to the regulation of these organizations. Unlike courts, for example, arbitration organizations are not required to make public any documents related to disputes.

“Arbitration organizations play an important role in giving consumers a platform for bringing forth grievances, and in the interest of making the arbitration process more fair and transparent, New Jersey must introduce some regulations,” said Diegnan (D-Middlesex). “The provisions outlined in this bill will help the state make arbitration more accessible for more individuals.”

“A consumer who believes that he or she has been a victim of wrongdoing should be able to have confidence in the arbitration process,” said Moriarty (D-Camden/Gloucester). “This legislation is aimed at leveling the playing field in arbitration cases.”

Increasingly, contractual agreements between consumers and businesses require an arbitration organization to administer the arbitration. The bill would prohibit an arbitration organization from requiring indigent and non-prevailing consumers to pay the opposing party’s costs or fees. The legislation also would require the organization to notify the consumer of his or her right to obtain a fee waiver.

In addition, the bill would prohibit an arbitration organization from administering consumer arbitration if the organization has a financial interest in any party involved in arbitration.

Lastly, the legislation would require any arbitration organization that is involved in more than 50 consumer arbitrations annually to collect, publish and make available to the public the following:

  • The name of any corporation or other business entity that is party to the arbitration;
  • The type of dispute involved, including, but not limited to, goods, banking, insurance, health care or employment;
  • Whether the consumer was the prevailing party;
  • The number of occasions, if any, a business entity which is a party to an arbitration has previously been a party in an arbitration or mediation administered by the arbitration organization;
  • Whether the consumer was represented by an attorney;
  • The date the arbitration organization received the demand for arbitration, the date the arbitrator was appointed and the date of disposition by the arbitrator or arbitration organization;
  • The type of disposition of the dispute, if known, including withdrawal, abandonment, settlement, award after hearing, award without hearing, default or dismissal without hearing;
  • The amount of the claim, the amount of the award and any other relief granted, if any;
  • The name of the arbitrator, his or her total fee for the case and the percentage of the arbitrator’s fee allocated to each party.

The measures were advanced by the Assembly Consumer Affairs Committee, of which Moriarty is chair.