Appellate Division Compels Arbitration of Consumer Fraud and TCCWNA Claims and Dismisses Class Claims

Adrienne C. Rogove

In Griffoul v. NRG Residential Solar Solutions, LLC and NRG Energy, Inc., the Appellate Division recently addressed the validity of an arbitration clause in a lease between the plaintiffs, residents of Elmwood Park and class representatives (“Plaintiffs”), and NRG Residential Solar Solutions (“NRG RSS”) doing business as NRG Home Solar (“NRG Residential”) and NRG Energy, Inc. (“NRG Energy”) (collectively, “Defendants”). A-5535-16T1 (App. Div. May 4, 2018). Plaintiffs filed a class action complaint against Defendants alleging violations of the New Jersey Consumer Fraud Act (“CFA”) and the Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) based on particular provisions in the lease. The lease required NRG Residential to install solar systems on Plaintiffs’ properties, which would provide electricity to their homes, and which would be connected to the utility’s electrical transmission grid.

Defendants filed a motion to compel arbitration pursuant to an arbitration clause in the lease. In pertinent part, the lease provided:

“[A]ny dispute, disagreement or claim between you and NRG RSS arising out of or in connection with this Lease, or the Solar System…shall be submitted to final and binding arbitration…YOU AND NRG RSS AGREE THAT BY ENTERING INTO THIS LEASE, YOU AND WE ARE WAIVING THE RIGHT TO A JURY TRIAL. IN ADDITION, EACH PARTY MAY BRING CLAMS AGAINST THE OTHER PARTY ONLY IN ITS INDIVIDUAL CAPACITY AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS OR REPRESENTATIVE PROCEEDING.”

Defendant NRG Energy also moved to dismiss the CFA claim for failure to plead it with particularity as required by Rule 4:5-8(a), and to dismiss the TCCWNA claim on the basis that NRG Energy was not a party to the lease agreement.

The trial court denied Defendants’ motions. The trial court held that the arbitration clause failed to state that Plaintiffs’ statutory claims were subject to arbitration, that the class action waiver was unclear, and that the waiver contradicted the arbitration clause. The trial court also denied Defendant NRG Energy’s motion to dismiss.

On appeal, the Appellate Division reversed, holding that the arbitration clause was governed by the Federal Arbitration Act because the lease involved interstate commerce, that the arbitration provision was clear and unambiguous, and that the arbitration provision “clearly and unambiguously signaled plaintiffs could not pursue their claims in court.” The provision was likened to the clause at issue in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002), where the language requiring arbitration was clear and unambiguous, and sufficiently broad to encompass plaintiffs’ statutory causes of action. Relying on Martindale, the Appellate Division in Griffoul held that the arbitration clause unambiguously waived Plaintiffs’ rights to a jury trial and required arbitration of all disputes between the parties. Moreover, the arbitration clause in the lease defined the capacity in which claims could be brought in arbitration and, with respect to class action complaints, the arbitration clause clearly limited those claims to individual claims, thereby barring a class action in arbitration. The Appellate Division declined to address the trial court’s denial of NRG Energy’s motion to dismiss, finding that the issue raised in the motion to dismiss should be raised in arbitration.

While the decision in Griffoul is unpublished, it provides useful guidance to companies that contract with consumers. In particular, consumer-focused companies should include clear and unambiguous arbitration clauses in their contracts that limit claims to individual ones, and which bar the right to bring class action claims. Such clear and unambiguous language will assist companies if they are faced with defending against consumer fraud and TCCWNA claims by limiting suits to claims by individuals only and eliminating the right to bring such claims as class actions, where there is exposure to a substantial attorneys’ fees award.

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