Aguirre v. CDL Last Mile Sols.

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MARIA AGUIRRE, ANDREA PALACIOS, and LORENA VARAS, Plaintiffs-Respondents, v. CDL LAST MILE SOLUTIONS, LLC, ANTHONY CURCIO, and KATTY PONCE, Defendants-Appellants, and SUBCONTRACTING CONCEPTS, LLC, d/b/a SCI, Defendant. MARIA AGUIRRE, ANDREA PALACIOS, and LORENA VARAS, Plaintiffs-Respondents, v. CDL LAST MILE SOLUTIONS, LLC, ANTHONY CURCIO, and KATTY PONCE, Defendants, and SUBCONTRACTING CONCEPTS, LLC, d/b/a SCI, Defendant-Appellant.

Nos. A-3346-22, A-3372-22

Superior Court of New Jersey, Appellate Division

February 26, 2024

This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

Argued January 9, 2024

On appeal from the Superior Court of New Jersey, Law Division Bergen County, Docket No. L-1172-23.

Theodore M. Eder argued the cause for appellants CDL Last Mile Solutions, LLC, Anthony Curcio and Katty Ponce, in A-3346-22 (Weber Gallagher Simpson Stapleton Fires &Newby LLP, attorneys; Theodore M. Eder, of counsel and on the briefs).

Peter Paul Perla, Jr., argued the cause for appellant Subcontracting Concepts, LLC d/b/a SCI, in A-3372-22 (PRB Attorneys at Law, LLC, attorneys; Peter Paul Perla, Jr., of counsel and on the briefs).

Scott Simpson (Menken Simpson &Rozger LLP) of the New York bar admitted pro hac vice, argued the cause for respondents (Newman, Simpson &Cohen, LLP, attorneys; Scott Simpson, Raya F. Saksouk (Menken Simpson &Rozger LLP) of the New York bar, admitted pro hac vice, Jason J. Rozger, Daniel Jay Cohen, and Daniel C. Stark, on the briefs).

Before Judges Natali and Puglisi.

PER CURIAM.

In this consolidated appeal, defendants CDL Last Mile Solutions, LLC (CDL), Anthony Curcio, and Katty Ponce (collectively, the CDL defendants), and defendant Subcontracting Concepts, LLC d/b/a SCI (SCI), challenge two Law Division orders that denied their respective motions to compel arbitration and to dismiss the putative class action complaint filed by plaintiffs Maria Aguirre, Andrea Palacios, and Lorena Varas. We affirm for the following reasons.

First we conclude New Jersey law applies, rather than New York law as identified in the agreements, because (a) New Jersey has a materially greater interest than New York in the arbitrability of disputes related to the agreements at issue here, (b) New Jersey law would apply absent any choice of law provision, and (c) New York law is contrary to New Jersey's fundamental public policy of ensuring any waiver of the right to a jury trial is knowing, intelligent, and voluntary. On that point, we conclude the arbitration agreements here are unenforceable because they fail to adequately "explain that the plaintiff[s] [are] giving up [their] right to bring [their] claims in court or have a jury resolve the dispute," as required by Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430, 447 (2014).

As we further detail below, we do not reach the applicability of the interstate employment contract exemption to the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-16, because, even assuming the FAA applies, it permits states to regulate contracts, including those containing arbitration provisions, using generally applicable state law such as that set forth in Atalese. Finally, in light of our decision finding the arbitration agreement unenforceable, we conclude the class action waiver, which by its express terms applies only to arbitration proceedings, is inapplicable under these circumstances.

I.

We begin by reciting the relevant facts in the motion record. CDL is a Delaware LLC, specializing in "logistics and last-mile delivery services." It is headquartered in New York and operates a warehouse in Bergen County. Plaintiffs, residents of New Jersey, work as delivery drivers for CDL, make deliveries exclusively in New Jersey, and report to the Bergen County warehouse.

SCI is a Delaware LLC, headquartered in New York, that "provides third-party administrative support for courier and logistics companies." Since 2012, SCI has provided services to CDL, including payroll processing and delivery driver onboarding.

Defendant Curcio is the owner, manager, and president of CDL and a New York resident. Defendant Ponce is a CDL dispatcher at the Bergen County warehouse who is alleged to have "authority to hire, fire, and discipline . . . drivers "and "to assign or reassign their delivery routes."

On March 2, 2023, plaintiffs filed a putative class action complaint seeking damages, injunctive and declaratory relief, and attorneys' fees and costs. The complaint alleges the class includes at least one hundred people, identified as "all delivery drivers who performed work for [d]efendants in the [s]tate of New Jersey from March 2, 2017, until [d]efendants cease their unlawful acts." Plaintiffs claimed, first, defendants misclassified the class members as independent contractors to avoid paying overtime wages in violation of the New Jersey Wage and Hour Law, N.J.S.A. 34:11-56a4(b) (WHL), and second, defendants unlawfully deducted from the class members' wages in violation of the New Jersey Wage Payment Law, N.J.S.A. 34:11-4.4 (WPL).

Plaintiffs further alleged drivers hired to work for CDL are "required to sign an independent contractor agreement with SCI," entitled "Owner/Operator Agreement" (the Agreements). CDL is not a party to the Agreements and while not directly named, is referred to in the Agreements as the "logistics broker" or "customer." The Agreements signed by each plaintiff contain the following arbitration clause:

In the event of any dispute, claim, question, or disagreement arising from or relating to this agreement or the breach thereof, or service agreement between Owner/Operator and SCI's clients or any permiss[i]ble statutory disputes, the parties hereto shall use their best efforts to settle the dispute, claim, question, or disagreement. ... If resolution of the dispute is not reached within [sixty] days . . . disputes that are within the jurisdictional maximum for small claims will be settled in small claims court where the Owner/Operator resides.

All other disputes, claims, questions, or differences beyond the jurisdictional maximum for small claims courts and have not passed the statute of limitations within the locality of the Owner/Operator's residence will be finally settled by arbitration under the policies of the Federal Arbitration Act and New York State's Arbitration provisions. . . .

Neither you nor SCI shall be entitled to join or consolidate claims in arbitration by or against other individuals or entities, or arbitrate any claim as a representative member of a class . . . .

[(Emphasis supplied).]

The Agreements also state they "shall be governed by the laws of the State of New York." At the end of each of the Agreements, just above the signature area, an all-caps notice informs: "THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION AND CLASS-ACTION WAIVER WHICH AFFECTS YOUR LEGAL RIGHTS AND MAY BE ENFORCED BY THE PARTIES." A separate "Independent Contractor Acknowledgement Form "requires acknowledgement of the following:

You understand you may opt out of the Arbitration provisions within the Owner Operator Agreement by notifying SCI in writing, within ten (10) days of the date below .... The writing should contain the name and contact information of each person opting out, and a clear statement indicating you are opting out of arbitrate [sic]. By not opting out you are subject to the dispute resolution provisions contained in the Owner Operator Agreement.

The CDL defendants and SCI each moved to dismiss under Rule 4:6-2 and to compel arbitration. The CDL defendants contended the court should apply New York law, consistent with the choice of law provision, in determining the enforceability of the arbitration clause in the Agreements, but also argued the clause would be enforceable under either New York or New Jersey law. SCI argued the court should apply the FAA as provided in the Agreements, as the exemption for employment contracts involving interstate commerce set forth in 9 U.S.C. § 1 did not apply.^[1] In the alternative, it joined the CDL defendants in contending New York law should control.

Plaintiffs responded by arguing New Jersey law applied, as New York law concerning enforceability of arbitration agreements was contrary to New Jersey public policy regarding what is required to establish a waiver of the right to a jury trial. Under New Jersey law, plaintiffs argued, the Agreements did not include "clear and unambiguous language" explaining the right being waived and therefore were unenforceable.

On June 27, 2023, the court issued two nearly-identical orders denying the CDL defendants' and SCI's motions to compel arbitration and to dismiss the complaint, accompanied by a rider in which it detailed its reasoning. First, the court explained "[c]ourts should generally apply state-law contract principles to determine whether the parties agreed to arbitrate." It then applied New Jersey law to the question of enforceability of the arbitration clause.

Under Atalese, 219 N.J. at 447, it noted while "no prescribed set of words must be included in an arbitration clause to accomplish a waiver of rights," a valid clause "must explain that the plaintiff is giving up her right to bring her claims in court or have a jury resolve the dispute." Here, the court found "the arbitration clause is devoid of any language that would put the plaintiffs, without extensive knowledge of arbitration, on notice that they were waiving their right to a jury trial or having their disputes settled in court by signing the agreement." It noted the language of the clause "does not 'unm...