Appellate Division Strikes Unconscionable Arbitration Provisions

Estate of Ruszala v. Brookdale Living Comm., Inc., No. A-4403-10 (N.J. App. Div., August 10, 2010) – In this personal injury case, the Appellate Division analyzed the enforceability of a contractual arbitration provision, which required that all claims between the parties (a resident and a nursing home) be resolved through binding arbitration. The provision contained significant restrictions on discovery, limits on compensatory damages and an outright prohibition on punitive damages. The court voided these provisions, finding that they were substantively unconscionable. Although this was not an employment case, employers preparing arbitration agreements must be mindful that any similar restrictions on employees’ rights such as limitations on discovery and recoverable damages may result in the provisions being stricken.