October 2018 Newsletter

General Litigation

Court Holds Arbitration Agreement Invalid for Failure to Designate Forum

In Flanzman v. Jenny Craig, Inc. ___A.3d ___, 2018 WL 5019942, (A.D. Oct. 17, 2018), Plaintiff, Marilyn Flanzman was terminated from her position as a weight loss counselor for Defendant JC USA, Inc. (“Jenny Craig”) at the age of eighty-two. Plaintiff had worked for Jenny Craig for twenty six years. Defendant gradually reduced plaintiff’s full-time hours to only three hours per week. The substantial reduction in hours led to her termination.

Plaintiff filed her complaint alleging (1) age discrimination and harassment in violation of the New Jersey Law Against Discrimination (NJLAD), N.J.S.A. 10:5-1 to -49; (2) discriminatory discharge and/or constructive termination in violation of the NJLAD; and (3) aider and abettor liability under the NJLAD. Defendant then filed its motion to compel arbitration relying on the parties’ arbitration agreement.

Plaintiff has no recollection of signing the document that contained the arbitration agreement, which the parties did not execute when defendant hired her. Rather, in 2011, twenty years after she was hired, defendant presented plaintiff with the document, which she signed to maintain her employment. In pertinent part, the agreement provides:

Arbitration Agreement

Any and all claims or controversies arising out of or relating to [plaintiff’s] employment, the termination thereof, or otherwise arising between [plaintiff] and [defendant] shall, in lieu of a jury or other civil trial, be settled by final and binding arbitration. This agreement to arbitrate includes all claims whether arising in tort or contract and whether arising under statute or common law including, but not limited to, any claim of breach of contract, discrimination or harassment of any kind. . . . [Plaintiff] will pay the then-current Superior Court of California filing fee towards the costs of the arbitration (i.e., filing fees, administration fees, and arbitrator fees) . . .

If enforceable, plaintiff gave up her right to a jury trial by executing the agreement. The agreement, however, said nothing about what forum generally replaced that right (although it confusingly referred to California court filing fees). The trial judge recognized this omission when he suggested that “the choice of which arbitral body would conduct the arbitration would be turned over to the [p]laintiff.” In other words, the judge – not the parties – decided who would pick the forum.

On appeal, plaintiff argued that the arbitration agreement lacked mutual assent and was therefore invalid as a matter of contract law. She arued that the parties did not reach a “meeting of the minds” as to the rights that replaced her right to a jury trial.

The Court agreed with plaintiff and invalidated the arbitration agreement between the plaintiff and the company, ruling that the failure to designate an arbitration forum or process meant that their supposed contract lacked a “meeting of the minds.”

The Court provided, “We hold that the parties lacked a ‘meeting of the minds’ because they did not understand the rights under the arbitration agreement that ostensibly foreclosed plaintiff’s right to a jury trial.” The Court added: “We do not mean to imply that there must be ‘magic words’ in the agreement as to the rights that replace the right to judicial adjudication. Imposing such a requirement would upset the ‘equal footing’ that arbitration contracts enjoy with all other contracts.”

Insurance Law

Court Finds “Ongoing Business Operations” Exclusion Does Not Bar Coverage for Damages from Fire at Vehicle Dismantling Facility

In Tuscarora Wayne Ins. Co. V. Hebron, ___A.3d ___, 2018 WL 4763182 (Pa.Super. Oct. 3, 2018), the Pennsylvania Superior Court reviewed a declaratory judgment action brought by Tuscarora Wayne Inc. Co. (“TWIC”) regarding an incident at Hebron’s vehicle dismantling facility. The incident involved a fire that started when one of Hebron’s truck drivers was attempting to pump gas into a flatbed truck in the loading dock area outside that facility. The fire caused damage to Hebron’s facility as well as to neighboring businesses and vehicles parked in the area.

At the time of the fire, Hebron was the named insured under a commercial liability policy issued by TWIC. The policy included an endorsement that excluded “designated ongoing operations.” Endorsement CG 21 53 01 96 at 1. The endorsement’s Schedule described the designated ongoing operations as “vehicle dismantling” and provided that “[t]his insurance does not apply to … property damage arising out of [vehicle dismantling], regardless of whether such operations are conducted by you or on your behalf or whether the operations are conducted for yourself or for others.” The phrase “vehicle dismantling” is not defined in the policy.

TWIC filed a declaratory judgment action, seeking a declaration that it was not obligated to defend or indemnify Hebron for any property damage claims arising from the fire in light of the designated ongoing procedures exclusion (“the Exclusion”). Following discovery, TWIC and Hebron filed motions for summary judgment.

The trial court granted TWIC’s motion and denied Hebron’s motion, on the basis that the fueling was “incidental to the vehicle dismantling business.” Therefore, the trial court decided, claims arising from refueling the truck were subject to the exclusion in the TWIC policy for “ongoing business operations, namely ‘vehicle dismantling.’”

On appeal, Hebron argued that “vehicle dismantling” was limited to the process of stripping vehicles of its parts, and that the fueling of the truck was unrelated to this process. The Superior Court agreed. The Court noted that the fire occurred after the vehicle dismantling operations ceased for the day. The Court also noted that the only “connection” the fueling process had with vehicle dismantling operations arose from the fact the fuel used by Hebron trucks was drained from vehicles that were dismantled. However, the fuel was not immediately transferred from the vehicles to the trucks, but kept in a holding tank until pumped into another holding tank or used to fuel Hebron vehicles.

Based upon these facts, the Court concluded that the fire did not occur in the course of vehicle dismantling so as to be subject to the Exclusion. Accordingly, the Court held that TWIC is required to defend and indemnify Hebron under the terms of TWIC’s policy and Hebron is entitled to summary judgment in its favor.