Arbitration and Consumer Fraud

January 30, 2012 by Jonathan Rudnick

THE DEFENDANT SHOULD BE ESTOPPED FORM ASSERTING THE ARBITRATION CLAUSE THIS LATE IN THE LITIGATION, ESPECIALLY SINCE THEY 1) FILED A COUNTERCLAIM IN BREACH OF THEIR OWN AGREEMENT; 2) MOVED TO HAVE JUDGMENT ENTERED ON THAT COUNTERCLAIM AGAIN BREACHING THEIR OWN AGREEMENT TO HAVE ALL DISPUTES BETWEEN THE PARTIES


The defendant should be prohibited for enforcing the arbitration agreement because of (1) the extent of the time which they took to enforce the arbitration agreement, and (2) the making of a counterclaim clearly breached the agreement between the parties. The defendants breached the agreement by making a counterclaim rather than demanding arbitration and as such cannot enforce the agreement. Not only have they made a counterclaim but they have moved to enter a judgment on those pleadings.

It is black letter contract law that a material breach by either party to a bilateral contract excuses the other party from rendering any further contractual performance. Magnet Res., Inc. v. Summit MRI, Inc., 318 N.J. Super. 275, 285, 723 A.2d 976, 981 (App.Div. 1998). The court should hold that the defendants have waived their right to assert the matter should be arbitrated. The Supreme Court addressed the issue of waiver in Wein v. Morris, 194 N.J. 364, 376 (2008) and held the following:

Applying fundamental contract principles to the present case, we are in accord with the Appellate Division's conclusion that “the circumstances at hand abundantly militate in favor of the finding of a mutual waiver of the contractual right to arbitrate.” Wein v. Morris, 194 N.J. 364, 376, (2008).

Although the facts in Wein are very different from the facts in this case, the basic concepts are the same. A party cannot use the system and then after having received the full benefit claim they no longer desire such benefits and FORCE the benefits away from the opposing party. The course of the litigation has run and discovery has been completed and NOW they want to enforce an arbitration agreement despite 1) making a counterclaim and asking the court to enter judgment on that counterclaim. Where is the fairness? What about the additional delay to the plaintiffs and what about all the counsel fees in this case? The matter is one of fee shifting and now the defendant wants to do it ALL OVER AGAIN in arbitration? What is the point?