NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0657-15T3

BERNETICH, HATZELL & PASCU, LLC,

on behalf of itself and all

others similarly situated,

Plaintiff-Respondent,

v.

MEDICAL RECORDS ONLINE, INC.

(d/b/a "MRO"),

Defendant-Appellant.

___________________________________

Argued April 6, 2016 – Decided 

Before Judges Ostrer, Haas and Manahan.

On appeal from the Superior Court of New 

Jersey, Law Division, Camden County, Docket 

No. L-1271-15.

Lisa J. Rodriguez argued the cause for 

appellant (Schnader Harrison Segal & Lewis 

LLP, attorneys; Ms. Rodriguez, of counsel; 

David Smith, Carl A. Solano and Bradly A. 

Nankerville, on the briefs).

Joseph A. Osefchen argued the cause for 

respondent (DeNittis Osefchen, P.C., 

attorneys; Stephen P. DeNittis and Mr. 

Osefchen, on the brief).

The opinion of the court was delivered by

OSTRER, J.A.D.

April 22, 2016

APPROVED FOR PUBLICATION

April 22, 2016

APPELLATE DIVISION
2 A-0657-15T3

In this appeal, we conclude that a hospital's medical 

records processor may not enforce a mandatory arbitration clause 

that it included in its invoice to a patient's attorney in 

response to a request for records. The hospital, and the 

processor acting as its agent, had a pre-existing legal duty 

under State law to provide the patient's records. Consequently, 

the records requester's alleged bargain to arbitrate any dispute 

related to the invoice was unsupported by consideration, and 

thus unenforceable. We therefore affirm the trial court's order 

denying the records processor's motion to compel arbitration of 

a dispute over its invoice.

I.

Defendant Medical Records Online, Inc. (MRO) is a thirdparty processor of requests for medical records submitted to 

hospitals and physicians, including Kennedy Memorial Hospitals 

(Kennedy Hospitals) in Washington Township. Plaintiff 

Bernetich, Hatzell & Pascu, LLC (BH&P) is a personal injury law 

firm. A prospective client, J.H., authorized BH&P to obtain his 

medical records from Kennedy Hospitals on his behalf. BH&P sent 

the hospital a medical records request on February 23, 2015.

In response to the request, MRO sent BH&P an invoice for 

$204.19. MRO stated prepayment was required before it would 

release the records; payment would constitute approval of the 
3 A-0657-15T3

charges and the invoice; and if BH&P disputed the invoice, it 

had to arbitrate first. The invoice provided: 

By paying this invoice, you are representing 

that you have reviewed and approved the 

charges and have agreed to pay them. Any 

dispute relating to this invoice must be 

presented before paying this invoice. Any 

dispute not so presented is waived. All 

disputes must be resolved by arbitration 

under the Federal Arbitration Act through 

one or more neutral arbitrators before the 

American Arbitration Association. Class 

arbitrations are not permitted. Disputes 

must be brought only in the claimant's 

individual capacity and not as a 

representative of a member or class. An 

arbitrator may not consolidate more than one 

person's claims nor preside over any form of 

class proceeding.

[1]

The bottom of the invoice stated, "Please contact MRO . . . for 

any questions regarding this invoice." 

MRO retrieved 271 pages, for which it charged $204.19.

This charge consisted of a $10 search and retrieval fee, $1.19 

for postage, and $193 in per-page fees. The fees were

calculated at the rate of $1.00 a page for pages one through 100 

for each hospital visit, and twenty-five cents a page for 

additional pages for each visit. The invoice stated that 

records over seventy-five pages "may be sent on CD-ROM." BH&P 

 

1 We will hereinafter refer to this paragraph as the arbitration 

provision.
4 A-0657-15T3

paid the invoice and received a CD-ROM containing the 271 pages 

of medical records.

Thereafter, BH&P filed a complaint on behalf of itself and 

a putative class, alleging that MRO overcharged BH&P and other 

records requesters. BH&P contended that patients and their 

authorized agents are legally entitled to obtain their medical 

records, and that health care providers may only charge a costbased fee. BH&P alleged that MRO's per page fee was unrelated 

to, and far exceeded, its actual costs in retrieving 

electronically stored medical records and transferring them onto 

digital media. BH&P asserted that MRO's billing practices 

violated the New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to 

-20 (CFA), among other claims. MRO responded by filing a motion 

to compel arbitration, or, alternatively, to dismiss for failure 

to state a claim. R. 4:6-2(e). 

The trial court denied MRO's motion to compel arbitration.

2

Citing Atalese v. U.S. Legal Services Group, 219 N.J. 430 

(2014), cert. denied, ___ U.S. ___, 135 S. Ct. 2804, 192 L. Ed.

2d 847 (2015), the court held that the invoice was a consumer 

contract that did not put BH&P on notice, with sufficient 

clarity and prominence, that by paying the invoice it was 

 

2 The court decided the arbitration motion first, and thereafter 

stayed action on the dismissal motion pending this appeal.
5 A-0657-15T3

waiving its right to litigate. Further, the invitation at the 

bottom of the invoice to call MRO with questions was not a clear 

mechanism for opting out of arbitration. The judge concluded 

that the invoice held a consumer's records "hostage" until a 

consumer paid the invoice and, thereby, purportedly agreed to 

the terms of the arbitration provision. The court denied MRO's 

motion to compel arbitration. This appeal as of right followed. 

See R. 2:2-3(a)(3). 

On appeal, MRO argues that the arbitration provision is 

enforceable. MRO contends that BH&P accepted the arbitration 

provision, and waived any objection to its terms, by paying the 

invoice without first raising its dispute. MRO also contends 

that the invoice is neither a consumer contract nor subject to 

the stringent standards established in Atalese; and it clearly 

informed BH&P that disputes over the invoice must be arbitrated. 

MRO asks us to enforce federal and state laws that favor 

arbitration, and to reverse the trial court's order.

BH&P responds that the arbitration provision is a consumer 

contract; Atalese applies; and the arbitration provision did not 

provide clear and unambiguous notice to consumers that, by 

paying the invoice, they were waiving their right to sue. BH&P 

argues its payment did not constitute assent to the arbitration 

provision. BH&P also argues that the arbitration provision is 
6 A-0657-15T3

unenforceable because MRO imposed it unilaterally. As MRO had a 

legal duty to provide the requested records, BH&P argues it was 

unlawful and unconscionable to condition performance of that 

duty upon consent to the arbitration provision.

II.

A.

We exercise plenary review regarding whether an arbitration 

agreement is valid and enforceable. Hirsch v. Amper Fin. 

Servs., LLC, 215 N.J. 174, 186 (2013). 

Though both the Federal Arbitration Act, 9 U.S.C.A. §§ 1 to 

16, and New Jersey's version of the Uniform Arbitration Act, 

N.J.S.A. 2A:23B-1 to -32, reflect a preference for arbitration, 

arbitration remains "a matter of contract." AT&T Mobility LLC 

v. Conception, 363 U.S. 333, 339, 131 S. Ct. 1740, 1745, 179 L. 

Ed. 2d 742, 751 (2011) (citation omitted); Fawzy v. Fawzy, 199 

N.J. 456, 469 (2009) (stating arbitration is "a creature of 

contract.") (citation omitted). "Arbitration is a matter of 

contract and a party cannot be required to submit to arbitration 

any dispute which he has not agreed so to submit." AT&T Techs., 

Inc. v. Commc'n Workers of Am., 475 U.S. 643, 648, 106 S. Ct.

1415, 1418, 89 L. Ed. 2d 648, 655 (1986); Atalese, supra, 219 

N.J. at 430 ("Parties are not required to arbitrate when they 

have not agreed to do so.") (quoting Volt Info. Scis. v. Bd. of 
7 A-0657-15T3

Trs. of Leland Stanford Jr. Univ., 489 U.S. 468, 478, 109 S. Ct.

1248, 1255, 103 L. Ed. 2d 488, 499 (1989)). 

We apply state contract law to determine whether a valid 

agreement to arbitration exists. Id. at 441. "When deciding 

whether the parties agreed to arbitrate a certain matter . . .

courts generally . . . should apply ordinary state-law 

principles that govern the formation of contracts." First 

Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. 

Ct. 1920, 1924, 131 L. Ed. 2d 985, 993 (1995). However, we may 

not "subject an arbitration agreement to more burdensome 

requirements than those governing the formation of other 

contracts." Leodori v. CIGNA Corp., 175 N.J. 293, 302, cert. 

denied, 540 U.S. 938, 124 S. Ct. 74, 157 L. Ed. 2d 250 (2003).

We view the principal issue in this case to be whether 

MRO's fulfillment of a pre-existing legal duty — to provide 

medical records for a cost-based fee — furnishes consideration 

to create an enforceable contract to arbitrate. We will first 

outline the nature of the duty, and then review the applicable 

contract principles.

Under state and federal law, a patient has a qualified 

right to inspect or obtain copies of his or her medical records. 

Federal regulations adopted pursuant to 42 U.S.C.A. §§ 1320d to 

1320d-9, provisions of the Health Insurance Portability and 
8 A-0657-15T3

Accountability Act of 1996 (HIPAA), grant "an individual . . . a 

right of access to inspect and obtain a copy of protected health 

information about the individual in a designated record," 45 

C.F.R. § 164.524(a), upon payment of a "reasonable, cost-based 

fee. . . ." 45 C.F.R. § 164.524(c)(4). However, certain kinds 

of records are excluded, and various circumstances may justify 

denial of access to otherwise disclosable records. 45 C.F.R. § 

164.524(a)(2), (a)(3). The federal right to access medical 

records for a cost-based fee extends to an individual's personal 

legal representative, which has been construed to include a 

guardian, but not such other agents as attorneys. Webb v. Smart 

Document Solutions, LLC, 499 F.3d 1078, 1085-86 (9th Cir. 2007).

The New Jersey patient's right to access records is not so 

limited, and extends to the patient's attorneys. The Hospital 

Patients Bill of Rights includes the right "to access" "all 

records pertaining to the patient's treatment . . . including 

receipt of a copy thereof at reasonable cost, upon request, 

unless the patient's physician states in writing that access by 

the patient is not medically advisable . . . ." N.J.S.A. 26:2H12.8(g). This right is implemented by State regulation,

N.J.A.C. 8:43G-4.1(a)(25), which enumerates a hospital patient's 

rights, and establishes the right "[t]o obtain a copy of the 

patient's medical record, at a reasonable fee, within 30 days of 
9 A-0657-15T3

a written request to the hospital" unless access is "medically 

contraindicated . . . ." The thirty-day deadline is also found 

in N.J.A.C. 8:43G-15.3(d).3

The "reasonable fee" must be a "fee based on actual costs," 

yet it may not exceed established ceilings, which vary depending 

on who requests the documents. N.J.A.C. 8:43G-15.3(d), (e). 

One standard applies to the "patient or the patient's legally 

authorized representative," N.J.A.C. 8:43G-15.3(d), which 

includes, among others, an attorney, as well as a spouse, 

guardian, or insurer. N.J.A.C. 8:43G-15.3(d)(5). Another 

standard applies to requests made by anyone else whom the 

patient has authorized, as well as health care providers 

themselves and their attorneys. N.J.A.C. 8:43G-15.3(e). 

The regulation states: 

(d) If a patient or the patient's legally 

authorized representative requests, in 

writing, a copy of his or her medical 

record, a legible, written copy of the 

record shall be furnished at a fee based on 

actual costs. One copy of the medical 

record from an individual admission shall be 

provided to the patient or the patient's 

legally authorized representative within 30 

 

3 The Board of Medical Examiners has promulgated separate 

regulations governing the right to, and charges for, patient 

records held by its licensees. See N.J.A.C. 13:35-6.5(c)(4); 

Boldt v. Correspondence Mgmt., 320 N.J. Super. 74, 78-81 (App. 

Div. 1999) (distinguishing between N.J.A.C. 8:43G-15.3 and 

N.J.A.C. 13:35-6.5).
10 A-0657-15T3

days of the request, in accordance with the 

following:

1. The fee for copying records shall not 

exceed $ 1.00 per page or $ 100.00 per 

record for the first 100 pages. For records 

which contain more than 100 pages, a copying 

fee of no more than $ 0.25 per page may be 

charged for pages in excess of the first 100 

pages, up to a maximum of $ 200.00 for the 

entire record;

2. In addition to per page costs, the 

following charges are permitted:

i. A search fee of no more than $ 10.00 per 

patient per request. (Although the patient 

may have had more than one admission, and 

thus more than one record is provided, only 

one search fee shall be permitted for that 

request. The search fee is permitted even 

though no medical record is found as a 

result of the search.); and

ii. A postage charge of actual costs for 

mailing. No charges shall be assessed other 

than those permitted in (d)1 and 2 above;

. . . .

(e) The fee for copying medical records 

shall be based on actual costs, which in no 

case shall exceed $ 1.00 per page and $ 

10.00 per search, in the case of the 

following:

1. Where the patient has authorized 

release of his or her medical record to a 

person or entity other than those identified 

in (d) above, including but not limited to 

physicians or other practitioners who 

provided care to the patient, or attorneys 

representing such providers; or

2. The patient subsequently requests 

additional copies of a medical record which 
11 A-0657-15T3

has been furnished in accordance with (d) 

above.

[N.J.A.C. 8:43G-15.3(d)-(e).]

As the fee must be based on "actual cost," the per-page 

amounts serve only to establish the maximum a patient may be 

charged. See Smith v. Hudson Register, 411 N.J. Super. 538, 571 

(App. Div. 2010);4 see also Boldt, supra, 320 N.J. Super. at 82.

5 

The regulation provides that "[a]ccess to the medical 

record shall be limited only to the extent necessary to protect 

the patient." N.J.A.C. 8:43G-15.3(f). Hospitals shall review 

their medical record department's policies and procedures, 

including its fees, at least every three years. N.J.A.C. 8:43G15.2(a). 

Nothing in N.J.A.C. 8:43G-15.3 expressly permits a hospital 

to exact any consideration other than a cost-based fee in return 

for supplying records. Doing so would burden the patient's 

 

4 Smith was superseded on other grounds by N.J.S.A. 47:1A-5(b), 

as recognized in Smith v. Hudson County Register, 422 N.J. 

Super. 387, 391 (App. Div. 2011).

5 In a petition for rulemaking, the Association of Health 

Information Outsourcing Services argued that its members should 

not be required to justify the charge of each medical record 

request based on its cost because it would be impractical to do 

so. It proposed that the Department of Health and Senior 

Services amend its regulation to permit the association's 

members to charge the amounts specified in the regulation. 29 

N.J.R. 5335(a) (Dec. 15, 1997). The Department referred the 

matter for study. 30 N.J.R. 3338(a) (Sept. 8, 1998). The 

proposal was never adopted.
12 A-0657-15T3

right, guaranteed by statute, to his or her records. Indeed, in 

some respects, a hospital may be constrained to accept less than 

a cost-based fee, as the regulation sets a $200 maximum for an 

entire record requested by a patient or the patient's legally 

authorized representative. N.J.A.C. 8:43G-15.3(d). Hospitals 

must also "establish a policy assuring access to copies of 

medical records for patients who do not have the ability to 

pay. . . ." N.J.A.C. 8:43G-15.3(d)(3). On the other hand, a 

hospital's fee policy shall include incentives to encourage 

patients to accept summaries or abstracts of their medical 

records. N.J.A.C. 8:43G-15.3(d)(4).

Returning to the question of whether the arbitration 

provision is enforceable, we apply the fundamental principle 

that "[n]o contract is enforceable . . . without the flow of 

consideration — both sides must 'get something' out of the 

exchange." Continental Bank of Pa. v. Barclay Riding Acad., 

Inc., 93 N.J. 153, 170 (citation omitted), cert. denied, 464 

U.S. 994, 104 S. Ct. 488, 78 L. Ed. 2d 684 (1983). "Basic 

contract principles render a promise enforceable against the 

promisor if the promisee gave some consideration for the 

promise." Martindale v. Sandvik, 173 N.J. 76, 87 (2002). 

Consideration "is a bargained-for exchange of promises or 

performance that may consist of an act, a forebearance, or the 
13 A-0657-15T3

creation, modification, or destruction of a legal relation." 

Ibid. (citation omitted); see also Sipko v. Koger, Inc., 214 

N.J. 364, 381 (2013) (invalidating stock transfers based on lack 

of required consideration). Therefore, consideration is 

essential to form an agreement to arbitrate. Martindale, supra,

173 N.J. at 88-89 (finding consideration for arbitration 

agreement). 

However, consideration generally may not be furnished by 

fulfilling a pre-existing legal duty. "Performance of a legal 

duty owed to a promisee which is neither doubtful nor the 

subject of honest dispute is not consideration. . . ." 

Restatement (Second) of Contracts, § 73 (1981);

6 Segal v. Lynch, 

211 N.J. 230, 253 (2012) (stating that "consideration cannot be 

a promise to perform a pre-existing legal duty") (citing 

Williston on Contracts § 7:37 (4th ed. 2008)). 

Consistent with this principle, a party may not impose an 

arbitration clause after the parties have already exchanged 

consideration and created an enforceable contract. We held that 

a party was not obliged to arbitrate a warranty claim where the 

arbitration clause was sent to the party after they entered the 

original contract. Paul v. Timco, Inc., 356 N.J. Super. 180, 

 

6 We recognize that the "pre-existing duty rule" is not without 

exceptions. See Restatement (Second) of Contracts, § 89 (1981). 

However, none apply here.
14 A-0657-15T3

185-86 (App. Div. 2002). "One party to a contract may not 

unilaterally impose an obligation to arbitrate upon another 

party to the contract." Id. at 185. 

In this case, MRO's pre-existing duty arises from statute 

and regulation, as opposed to contract. As the records 

processor for Kennedy Hospitals, MRO was obliged to provide 

medical records upon the request of "a patient or the patient's 

legally authorized representative" or anyone else whom the 

patient has authorized.7 N.J.A.C. 8:43G-15.3(d), (e). MRO 

contended in oral argument that the medical records constituted 

consideration for BH&P's alleged promise to arbitrate. We 

disagree. As BH&P had a pre-existing right to the records for a 

cost-based fee, it does not "get something" out of the alleged 

agreement to arbitrate that it did not already have. Further,

in exchange for assent to the arbitration provision, MRO did not 

promise BH&P anything it was not already obliged to provide. 

 

7 MRO questioned whether BH&P was the patient's attorney, because 

BH&P referred to the patient as a "potential client," and 

asserted that it sought the records for itself, noting that 

doing so established its standing to dispute MRO's invoice. 

Whether BH&P is a "legally authorized representative" as the 

patient's attorney under N.J.A.C. 8:43G-15.3(d), or another 

entity authorized by the patient under N.J.A.C. 8:43G-15.3(e), 

is of no moment in our contract analysis. Kennedy Hospitals and 

MRO owe a legal duty to produce the records to either one.
15 A-0657-15T3

In sum, the alleged agreement to arbitrate lacks 

consideration. BH&P may not be held to the terms of the 

arbitration provision in the invoice.

B.

MRO argues that even if it had no contractual right to 

compel arbitration, BH&P surrendered any right to object simply 

by paying the invoiced amount, rather than presenting its 

dispute prior to payment. We disagree. In characterizing 

payment as a waiver, MRO relies on the terms of the invoice, 

which provide that payment constitutes a complete waiver of any 

objection or dispute. But this begs the question. The term 

providing for waiver of disputes upon payment suffers from the 

same shortcoming as the term requiring arbitration. It lacks 

consideration. 

Furthermore, a waiver is a "voluntary and intentional 

relinquishment of a known right." Knorr v. Smeal, 178 N.J. 169, 

177 (2003) (emphasis added). Even assuming that BH&P, unlike an 

unsophisticated patient, fully understood that MRO intended to 

secure its non-objection by payment, there was nothing 

"voluntary" about the choice MRO presented. MRO demanded 

prepayment before releasing the records. MRO thus presented a 

patient with a dilemma: pay the invoice and surrender the right 

to raise any dispute relating to it; or raise a dispute, and 
16 A-0657-15T3

incur an inevitable delay in receiving the records as the matter 

proceeds to arbitration, in derogation of the right to receive 

records in no more than thirty days.8 N.J.A.C. 8:43G-4.1(a)(25); 

N.J.A.C. 8:43G-15.3(d).

We reject the notion that MRO's invitation to call "for any 

questions regarding this invoice," included at the bottom of the 

invoice, offered BH&P a meaningful opportunity to contest the 

terms of the invoice. MRO did not invite calls to register an 

objection. Nor would it be reasonable for the reader to 

conclude that the invitation to pose questions indicated a 

willingness to deviate from the emphatic statement, "prepayment 

required," placed at the very top of the invoice, or any other 

of its terms.

The purported waiver was the product of a threat to 

withhold the requested medical records for an indeterminate 

period of time while the dispute was referred to arbitration. 

See Restatement (Second) of Contracts, cmt. b to § 73 (noting 

the "danger of express or implied threats to withhold 

performance" of a legal duty, and that "[a] bargain induced by 

an improper threat may be voidable for duress"); Id. § 175 ("If 

 

8 In oral argument, MRO contended that "a dispute relating to 

this invoice" included a dispute regarding the accuracy or 

completeness of the records provided, notwithstanding the 

impossibility of discovering the basis for such a dispute prior 

to payment and receipt of the records. 
17 A-0657-15T3

a party's manifestation of assent is induced by an improper 

threat by the other party that leaves the victim no reasonable 

alternative, the contract is voidable by the victim."). Thus, 

BH&P's payment of the fee does not constitute an enforceable 

waiver of the right to object to the arbitration provision that 

MRO unilaterally imposed.

Given our conclusion that the arbitration provision is 

unenforceable for a lack of consideration, we need not address 

whether the invoice is a consumer contract under Atalese, or, 

had there been an exchange of consideration, whether the terms 

of the provision were sufficiently clear and unambiguous to be 

enforceable. 

Affirmed.