Alan Schorr’s Employment Case of The Week ending August 16, 2013

Cole v. Jersey City Medical Center, — A.3d —-, 2013 WL 4081057 (August 14, 2013)
Moore ex rel. Moore v. Woman to Woman Obstetrics & Gynecology, L.L.C., 2013 WL 4080947 (App. Div. August 14, 2013) (unpublished)

This past Wednesday, the New Jersey Supreme Court unanimously held that the public policy favoring arbitration has its limits, while, on the same day, an Appellate panel ordered arbitration despite finding that the agreement was cohesive and unconscionable. The Supreme Court case, Cole v. Jersey City Medical Center, involved a defendant that willingly litigated a case in Superior Court for 21 months, without any objection, and then moved to compel arbitration three days before the scheduled trial date.

Karen Cole was a certified nurse anesthetist who had a contract with Liberty Anesthesia Associates, which had a contract with Jersey City Medical Center. The hospital claimed to have discovered discrepancies in Ms. Cole’s accounting of certain medications and revoked her privileges. As a result, Ms. Cole’s employment was terminated with Liberty. Ms Cole sued the hospital, and the hospital then impleaded Liberty as a third-party defendant. The litigation went on thereafter for 21 months. The plaintiff settled with the hospital but not the employer.

The employer filed for summary judgment and succeeded in knocking out two of the four remaining counts. Then, three days before the scheduled trial, the employer filed a motion to compel arbitration. Judge Toskos of Bergen County granted the motion, reasoning that the employer failed to assert its right to arbitrate because the hospital, which had not signed the arbitration agreement was the primary defendant in the action. Cole appealed, and the Appellate Division reversed finding that the employer was equitably estopped from compelling arbitration. The Supreme Court granted Certification and affirmed, but on slightly different grounds.

The Supreme Court chose not to even address the Appellate Division’s analysis regarding estoppel, and chose instead to focus upon whether the defendant had waived its defense by failing to preserve it. In doing so, the Supreme Court announced a seven factor test for courts to determine whether a party has waived its right to enforce an arbitration agreement. The seven factors are (1) delay in making arbitration request; (2) filing of any motions, particularly dispositive motions, and their outcomes; (3) whether delay in seeking arbitration was part of the party’s litigation strategy; (4) extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as affirmative defense, or provided other notification of its intent to seek arbitration; (6) proximity of date on which party sought arbitration to date of trial; and (7) the resulting prejudice suffered by the other party, if any. In addition, the Supreme Court directed that a court will consider an agreement to arbitrate waived, however, if arbitration is simply asserted in the answer and no other measures are taken to preserve the affirmative defense.

While acknowledging the strong public policy in favor of arbitration, in applying this test to the employer’s motion, the Court concluded that Liberty engaged in litigation conduct that was inconsistent with its right to arbitrate the dispute with its former employee and affirmed.

On the same day, released simultaneously with the Cole decision, the Appellate Division, in the unpublished decision, Moore ex rel. Moore v. Woman to Woman Obstetrics & Gynecology, L.L.C., enforced an arbitration agreement in a medical malpractice dispute even though the Court concluded that the agreement was cohesive and unconscionable and that the plaintiff totally lacked bargaining power. Although this is not an employment case, the Court’s treatment is instructive. Once again, the Court cited the public policy favoring arbitration, but here, the Court held that the policy is so strong that it trumps equal bargaining position and fairness in contracting.

Although this was the second written decision by the Appellate Division, neither opinion actually explained why Monica and Kevin Moore sued on behalf of their daughter. Reading between the lines, it appears that Monica, who was 44, was in a high-risk pregnancy, and something happened to the child, Koval Moore, that will require extensive and expensive medical treatment. The Court, in addition to compelling Monica to arbitrate, also held that, by signing the agreement to arbitrate, Monica had also bound her in utero child to arbitrate.

But the news was not all good for the defendant. The Court held that Monica’s agreement to arbitrate did not bind her husband to arbitrate. So the parties will now have two proceedings – an arbitration for the wife and child, and a trial for the father.

This writer remains concerned that, in so zealously pushing parties to arbitrate under the theory that arbitration eases the pressure on the courts, the courts have created much more work and have instead damaged judicial efficiency. If arbitration is so great, why are the courts at every level flooded with lawsuits and appeal after appeal by parties desperate to avoid it? Arbitration between parties who knowingly and voluntarily agree to it can be a very good thing. But forcing arbitration upon parties who never had a fair chance to reject it does not provide fair resolution of disputes and increases, rather than decreases, the number of legal disputes that courts are called upon to resolve.

Cole v. Jersey City Medical Center

Plaintiff’s Counsel: Jonathan I. Nirenberg and Gerald Jay Resnick, Resnick Law Group.

Defendant’s Counsel: Dominick J. Bratti and Annemarie T. Greenan, Wilentz, Goldman & Spitzer.

Amicus Counsel: Jonathan Romberg, Seton Hall Law School Center for Social Justice.

Trial Judge – Menelaos W. Toskos, J.S.C.

Appellate Judges: Fuentes, Ashrafi and Nugent.

Supreme Court Justices and Judges: Chief Justice Rabner and Justices Lavecchia, Hoens and Patterson and Judges Rodr즵ez (t/a) and Cuff (t/a).

Moore ex rel. Moore v. Woman to Woman Obstetrics & Gynecology, L.L.C.:

Plaintiffs’ Counsel: Marc C. Johnson, Weiss & Paarz.

Defendants’ Counsel: Joel I. Fishbein, Spector, Gadon & Rosen, P.C., and Janet L. Poletto, Hardin, Kundla, McKeon & Poletto, P.A.

Appellate Judges: Fuentes, Grall and Hayden.