Pub. 13 2014-2015 Issue 4

N E W J E R S E Y C O A L I T I O N O F A U T O M O T I V E R E T A I L E R S 5 new jersey auto retailer W W W . N J C A R . O R G President’s MESSAGE | BY JAMES B. APPLETON Arbitration Agreements Are Under Attack Legislation recently introduced in the NewJersey StateAssembly, if passed, would all but eliminate the use of arbitration clauses in consumer contracts, including Retail Order Forms utilized in every motor vehicle lease or purchase transaction. NJ CAR has serious concerns regarding this legislation (A4097). The bill adds nothing to existing consumer protections that are already in place and govern the day-to-day business of New Jersey’s 515 franchised automotive retailers. The bill would amend subsection 16 of the Truth inConsumerContract,Noticeand Warranty Act (TCCWNA) to provide that no consumer contract may contain a provision which waives a consumer’s rights under the Consumer Fraud Act, or the New or Used Car Lemon Laws. This amendment is unnecessary because it duplicates a provision in subsection 15 that already prohibits “any provision that violates any clearly established legal right of a consumer or responsibility of a seller, lessor, creditor, lender or bailee as established by State or Federal Law.” The truth is, A4097 seeks amendments to TCCWNA and targets abuses that do not exist in the marketplace. It is a solution in search of a problem. No provision in a consumer contract can limit a con- sumer’s ability to report or complain to a law enforcement agency or other government entity, such as theOffice of Consumer Protection. If there were such provisions, they would never be considered en- forceable. The same would be true of a provision which purports to shorten a statute of limitations or waive a cause of action for personal injury for a consumer. The true intent of A4097 seems to be to either limit or prohibit the use of arbitration clauses in consumer contracts. If this is the end- game, it is doomed to failure. The provisions in A4097 prohibiting limitations on the right of discovery, prohibiting class actions, and prohibiting waiver of the right to a jury, would have the effect of prohibiting arbitration. Under Federal law, particularly the Federal Arbitration Act, arbitration is highly favored as an alternative means of dispute resolution to reduce litigation and court congestion. The Federal Arbitration Act preempts any State law which would limit the enforcement of an arbitration agreement. The provisions of A4097 would appear to limit the enforcement of an arbitration clause, and therefore would be pre-empted by Federal law. This position was most recently confirmed by the U.S. Supreme Court in AT&TMobility LLC v. Concepcion , 131 S. Ct. 1740 (2011). Arbitration benefits both consumers AND automotive retailers and any effort to limit its effectiveness and ef- ficiencies is bad public policy. A4097 does not appear to add anything “new” to existing consumer protec- tions. Instead, the legislation seems to only prohibit acts which are already clearly prohibited and adds a $100 fine for what amounts to a purely technical violation. I suspect A4097 is an attempt to regulate arbitration agreements, which the State Legislature cannot do because arbitration agree- ments are governed by federal law and the states are pre-empted from legislating in this area. The only beneficiaries if A4097 were to be enacted would be plantiffs’ attorneys that would be given free rein to bring technical claims, under an extension of TCCWNA’s $100 statutory dam- ages provision. This does absolutely nothing to help consumers because the actions A4097 aims to prohibit are already considered unenforceable under existing law. NJ CARwill continue to voice the industry’s opposition to A4097. The true intent of A4097 seems to be to either limit or prohibit the use of arbitration clauses in consumer contracts. If this is the endgame for the Bill’s supporters, it is doomed to failure.