In Pace v. Hamilton Cove, the New Jersey Supreme Court reversed the Appellate Division and held that stand-alone, contractual class action waivers, not tied to arbitration agreements, are not per se unconscionable under New Jersey law. The Court cautioned that class action waivers may still be held unconscionable under certain circumstances if the usual tests are met. However, the Court determined that the specific class action waiver involved in this case was not unconscionable and therefore ruled that the plaintiff’s putative class claims brought under the Consumer Fraud Act must be dismissed.
NJCJI submitted an amicus brief and participated in oral argument. NJCJI demonstrated to the Court that the Appellate Division’s finding of per se unconscionability made New Jersey a national outlier. Courts in neighboring states such as New York and Pennsylvania have enforced stand-alone class action waivers in consumer contracts, as have courts in California. Additionally, NJCJI’s brief explained that the Appellate Division’s decision conflicted with prior decisions from both the United States Supreme Court and New Jersey Supreme Court. The New Jersey Supreme Court's decision reflected NJCJI’s arguments, citing cases relied upon by NJCJI and aligning New Jersey with a growing national consensus that stand-alone class action waivers may be enforced.
The plaintiff sought thousands of dollars of damages for his individual claim, and the lease contract he signed was one of adhesion. Nevertheless, the Supreme Court noted that he could have found other housing if he did not wish to be bound by the class action waiver. The opinion cautioned that a different conclusion about unconscionability might have been reached if barring class actions left a plaintiff without an effective remedy or if a plaintiff lacked meaningful choice. Thus, while stand-alone class action waivers may be an option for some New Jersey businesses to adopt in their contracts, incorporating class action waivers into arbitration agreements remains safer because the United States Supreme Court has repeatedly held that the Federal Arbitration Act makes agreements to arbitrate claims on an individual basis—effectively barring class actions—fully enforceable.
