A recent case involving a major national retailer represented by Goldberg Segalla may provide a framework for companies interested in litigating matters in binding arbitration instead of open court. John M. McConnell, co-chair of the firm’s Business and Commercial practice group, utilized impeccable timing and the unyielding language within an arbitration provision of a contract to convince the U.S. District Court for the District of New Jersey to compel arbitration, much to the delight of our client.

In early 2022, the plaintiff in the case allegedly suffered personal injuries after falling in a parking lot adjacent to our client’s store. At the time of the incident, the plaintiff, who worked as an independent contractor for a company that provides retail pickup services, was in the process of completing an order.

The plaintiff filed a complaint and amended complaints against her employer and our client, seeking financial compensation for her injuries. However, earlier that year, the plaintiff signed an independent contracting agreement with her employer that contained an arbitration provision, indicating that all disputes and claims between the plaintiff and her employer shall be resolved by binding arbitration.

Importantly, by signing the agreement, the plaintiff expressly waived her constitutional right to have any claim against her employer decided by a judge or jury in court. After her employer responded to the lawsuit by raising this arbitration provision, the plaintiff dismissed her employer from the suit.

However, the arbitration provision written by the plaintiff’s employer also had a massive impact on our client because it included language whereby the plaintiff agreed that our client was a third-party beneficiary of the arbitration provision and that all claims or disputes against our client arising from related services performed under the agreement shall be resolved by an arbitrator.

At the outset of the case, our client removed the complaint to federal court based on diversity jurisdiction. The plaintiff then filed an amended complaint, naming additional defendants, including the plaintiff’s employer. Our client subsequently moved to compel arbitration based on the provision in the plaintiff’s agreement with her employer, for which we argued that our client was a third-party beneficiary.

In the motion to compel arbitration, we argued that the Federal Arbitration Act favors the enforcement of arbitration agreements so long as the agreement satisfies two key requirements: that a valid agreement to arbitrate exists and the dispute falls within the scope of the agreement. Indeed, the judge agreed that the “arbitration provision’s terms are clear and unambiguous,” including blatant instructions on how to opt out of the agreement. Additionally, the court said it “easily finds” the negligence claim against our client represents a covered claim under the arbitration provision. The court found the details of this case satisfied both requirements, declaring the arbitration provision to be enforceable and granting our motion to compel arbitration.

This case, and the Court’s holding, is one that any company, retailer, or business may want to look to, especially if they have strong interest in attempting to resolve matters in arbitration as opposed to court. If this is their strategy, they should develop arbitration language in their contracts with partners or potential claimants that will resolutely urge courts to compel arbitration.

“There are certainly some benefits to going to a binding arbitration instead of litigating a case for a significant period of time then proceeding to a jury trial,” John said. “If a company prefers a binding arbitration over a jury trial, this is a decision that may provide some insight for any company looking to compel binding arbitration.”

MORE ABOUT JOHN M. MCCONNELL

John is co-chair of Goldberg Segalla’s Business and Commercial group and is a trusted counselor to Fortune 500 companies and other publicly traded corporations. He is renowned for his record of success in high-stakes litigation and acumen in motion practice and trial advocacy. John is based in Goldberg Segalla’s Princeton, New Jersey, office, and he is licensed in New Jersey and Pennsylvania.