In Curiale v. Hyundai Capital America, Inc., No. A-5565-18T3 (N.J. Sup. Ct. App. Div. Apr. 27, 2020), a two-judge panel of the New Jersey Superior Court, Appellate Division, reversed a trial court order denying Defendant Hyundai Capital America, Inc.’s (“Defendant”) application to compel arbitration against Plaintiffs Christopher D. Curiale and Jerome C. Curiale (“Plaintiffs”).  The Appellate Division held that the Defendant, as an assignee of a lease, could enforce an arbitration provision and class-action waiver contained in the motor vehicle retail order that was executed by Plaintiffs and the dealership.  The Appellate Division further held that the arbitration provision and class waiver were not ambiguous.

In 2014, the Plaintiffs executed a lease at a dealership and the lease was assigned to Defendant.  In 2018, the Plaintiffs brought a putative class action against the Defendant under the New Jersey Consumer Fraud Act and Truth-in-Consumer Contract, Warranty, and Notice Act.  Plaintiffs alleged that Defendant engaged in deceptive and unlawful business practices for charging extraneous and duplicative fees that violated the clear terms of the lease, including a fraudulent title fee and repossession fees.  Plaintiffs also lodged an individual claim against Defendant for an allegedly fraudulent excessive wear charge.  The Appellate Division ruled that Plaintiffs must individually arbitrate their claims, and may not bring their claims on a class-wide basis.

The lease did not contain an arbitration provision.  However, in connection with the lease, Plaintiffs executed a series of related documents, including a gap waiver addendum and a motor vehicle retail order (“MVRO”).  The MVRO contained an arbitration provision and waiver of class actions.  In compelling Plaintiffs to arbitrate their claims on an individual basis, the Appellate Division held that although Defendant was not a signatory to the MVRO, it could enforce the arbitration provision because Plaintiffs, by signing the lease and gap waiver addendum, agreed that the dealership assigned “all right, title and interest in the Lease and the Vehicle,” which included the right to arbitrate Plaintiffs’ claims.  The panel held that the MVRO, which explicitly referenced the lease, along with the other documents executed by Plaintiff in connection with the lease “constitute[d] a single, integrated contract.”

The Appellate Division further held that the arbitration provision in the MVRO was not ambiguous.  The specific arbitration provision at issue has previously been reviewed by the Appellate Division, and there have been competing interpretations of the portion of the arbitration provision concerning the waiver of class actions in court.  Since 2011, this case marks the fifth time that the Appellate Division has addressed this specific arbitration clause.  In five unpublished decisions, the Appellate Division has held that the clause was impermissibly ambiguous twice:  Rotondi v. Dibre Auto Grp., LLC, No. A-1051-14T1, 2014 WL 3129804 (N.J. Sup. Ct. App. Div. July 9, 2014), certif. denied, 220 N.J. 41 (2014), and Snap Parking, LLC v. Morris Auto Enterprises, LLC, No. A-4733-15T4, 2017 WL 113168 (N.J. Sup. Ct. App. Div. Mar. 27, 2017).  In the other three (including this morning’s decision), the Appellate Division has held that the arbitration provision is clear and unambiguous.  Massa v. McGuire Buick-Pontiac-GMC, 2011 WL 5041338 (N.J. Sup. Ct. App. Div. Oct. 25, 2011); Haynes v. DCN Automotive Limited Liability Co., No. A-4593-16T4, 2018 WL 1569338 (N.J. Sup. Ct. App. Div. Apr. 2, 2018).  Here, the Appellate Division held that “[t]here is no ambiguity, that under the clause, plaintiffs waived their rights to bring any claims that arose under the agreement, including class actions, in court and waived their rights to pursue a class action in arbitration.”

In holding that the Defendant could enforce the arbitration provision, the Appellate Division did not address an issue raised by the Defendant concerning inconsistencies between New Jersey case law and precedent set down by the Supreme Court of the United States regarding the Federal Arbitration Act (“FAA”).  The Defendant argued that the trial court, in relying on the Supreme Court of New Jersey’s decision in Atalese v. U.S. Legal Services Corp., 219 N.J. 430 (2014), to resolve supposed ambiguity in the arbitration provision against arbitration, applied New Jersey state law in a fashion that is preempted by the FAA.  The Supreme Court of New Jersey, in Kernahan v. Home Warranty Administrator of Florida, Inc., 236 N.J. 301 (2019), has cautioned against an overbroad reading of Atalese.  Indeed, such a reading would be questionable under decisions of the Supreme Court of the United States since Atalese, including Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407 (2019), and Kindred Nursing Ctrs., Ltd. v. Clark, 137 S. Ct. 1421 (2017).  Here, by holding that the arbitration at issue was not ambiguous, the Appellate Division was able to bypass this issue.

Though unpublished, this decision clears a substantial hurdle for leasing companies and automobile financers in New Jersey.  While car dealerships have been relying on arbitration provisions in MVROs, this case marks an important decision where the MVRO has been utilized by a non-signatory assignee.  When facing putative class action claims, leasing companies should assess all of the documents executed by the parties at the time of the transaction, and not just the lease because it may not include the lessee’s agreement to arbitrate his or her claims.