New Jersey Appellate Division Invalidates Jenny Craig Employee Arbitration Provision

This week, in Marilyn Flanzman v. Jenny Craig Inc. et al., No. A-2580-17, a panel of the Appellate Division found that an arbitration provision between weight loss company Jenny Craig and a former employee was unenforceable because the agreement failed to identify where or how the parties would arbitrate their dispute.

The plaintiff’s employment was terminated when she was 86 years’ old and after she had worked for Jenny Craig for 26 years.  The trial court had sent her age discrimination case to an arbitrator based on an arbitration agreement signed in 2011.

Congress passed the Federal Arbitration Act (“FAA”) almost a century ago to address the hostility courts had towards private arbitration and put arbitration agreements “on\equal footing” with other contracts.   Jenny Craig’s arbitration agreement did not identify where and how the parties would arbitrate the dispute (such as, through the American Arbitration Association, or by creating a process for the selection of an arbitrator).  This failure doomed the provision,  the Appellate Division held, because under New Jersey law, the parties must have reached a “meeting of the minds” to successful enter into a contract.  Without knowing what rights would replace their right to judicial resolution of their dispute, the Court concluded, the parties could not have properly agreed to the provision.

Though dealing with a single case, any decision invalidating an arbitration provision is likely to result in a negative reaction from the business community.  Jenny Craig may still seek review by the New Jersey Supreme Court, which has as recently as September 2018 taken up cases to clarify the interplay between New Jersey contract law and the FAA.

For more information on arbitration, the FAA and this decision please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.