SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION DOCKET NO. A-3346- 22 A- 3372

- 22 MARIA AGUIRRE, ANDREA PALACIOS, and LORENA VARAS, Plaintiffs-Respondents,

v. CDL LAST MILE SOLUTIONS, LLC, ANTHONY CURCIO, and KATTY PONCE, Defendants-Appellants, and
SUBCONTRACTING CONCEPTS, LLC, d/b/a SCI, Defendant.

_____ _________________________ MARIA AGUIRRE, ANDREA PALACIOS, and LORENA VARAS, Plaintiffs-Respondents, NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court. " Although it is posted on the internet, this opinion is binding only on the parti es in the case and its use in other cases is limite d. R. 1:36- 3.2 A- 3346

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v. CDL LAST MILE SOLUTIONS, LLC, ANTHONY CURCIO, and KATTY PONCE, Defendants, and
SUBCONTRACTING CONCEPTS, LLC, d/b/a SCI, Defendant-Appellant.

_____ _________________________

Argued January 9, 2024

– Decided February 26, 2024 Before Judges Natali and Puglisi. On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L- 1172

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. Theodore M. Eder argued the cause for appellants CDL Last Mile Solutions, LLC, Anthony Curcio and Katty Ponce, in A- 3346 -22 (Weber Gallagher Simpson Stapleton Fires & Newby LLP, attorneys; Theodore M. Eder, of counsel and on the briefs). Peter Paul Perla, Jr., argued the cause for appella nt Subcontracting Concepts, LLC d/b/a SCI, in A- 3372

- 22 (PRB Attorneys at Law, LLC, attorneys ; Peter Paul Perla, Jr., of counsel and on the briefs). Scott Simpson (Men ken Simpson & Rozger LLP) of the New York bar, admitted pro hac vice, argued the cau se for respondents (Newman, Simpson & Cohen, LLP, attorneys; Scott Simpson, Raya F. Saksouk (Menken3 A- 3346

- 22 Simpson & Rozger LLP) of the New York bar, admitted pro hac vice, Jason J. Rozger, Daniel J ay Cohen, and Daniel C. Stark, on the briefs ).
PER CURIAM In this consolidated appeal, defendants CDL Last Mi le Solutions, LLC (CDL), Anthony Curcio , and Katty Ponce (collectively, the CDL defendants ), and defendant Subcontracting Concepts, LLC d/b/a SC I (SCI), challenge two Law Division orders that denied their respective mo tions to compel arbitration and to dismiss the putative class action complaint filed b y plaintiffs Maria Aguirre, Andrea Palacios, and Lorena Varas. We aff irm for the following

reasons. First, we conclude New Jersey law applies, rather t han New York law as identified in the agreements, because (a) New Jerse y has a materially greater interest than New York in the arbitrability of disp utes related to th e agreement s at issue here , (b) New Jersey law would apply absent any choice of law provision, and (c) New York law is contrary to New Jersey's fundamental public polic y of ensuring any waiver of the right to a jury tri al is knowing, intelligent, and voluntary. On that point , we conclude the arbitration agreements here are

un enforceable because they fail to adequately "explai n that the plaintiff[s] [are] giving up [their] right to bring [their] claims in court or have a jury resolve the4 A- 3346

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dispute," as required by Atalese v. U.S. Legal Serv ices Group, L.P., 219 N.J.
430 , 447 (2014). As we further detail below, we do not reach the app licability of the interstate employment contract exemption to the Fed eral Arbitration Act (FAA), 9 U.S.C. §§ 1- 16 , because, even assuming the FAA applies, it permits states to regulate contracts, including those containing arbi tration provisions, using generally applicable state law such as that set for th in Atalese. Finally, in light of our decision finding the arbitration agreement u nenforceable, we conclude the class action waiver, which by its express terms applies only to arbitration proceedings, is inapplicable under these circumstances.
I. We begin by reciting the relevant facts in the moti on record. CDL is a Delaware LLC, specializing in "logistics and last-m ile delivery services." It is headquartered in New York and operates a warehouse in Bergen County. Plaintiffs, residents of New Jersey, work as delive ry drivers for CDL, make deliveries exclusively in New Jersey, and report to the Bergen County warehouse. SCI is a Delaware LLC, headquartered in New York, t hat "provides thirdparty administrative support for courier and logist ics companies." Since 2012,5 A- 3346

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SCI has provided services to CDL, including payroll processing and delivery driver onboarding. Defendant Curcio is the owner, manager, and preside nt of CDL and a New York resident. Defendant Ponce is a CDL dispatcher at the Bergen County warehouse who is alleged to have "authority to hire , fire, and discipline . . . drivers" and "to assign or reassign their delivery routes." On March 2, 2023, plaintiffs filed a putative clas s action complaint seeking damages, injunctive and declaratory relief, and attorneys' fees and costs. The complaint alleges the class includes at least o ne hundred people, identified

as "all delivery drivers who performed work for [d]ef endants in the [s]tate of New Jersey from March 2, 2017, until [d]efendants c ease their unlawful acts ." Plaintiffs claimed, first, defendants misclassified the class members as independent contractors to avoid paying overtime wa ges in violation of the New Jersey Wage and Hour Law, N.J.S.A. 34:11-56a4(b) (W HL), and second, defendants unlawfully deducted from the class membe rs' wages in violation of the New Jersey Wage Payment Law, N.J.S.A. 34:11-4.4 (WPL ). Plaintiffs further alleged drivers hired to work fo r CDL are "required to si gn an independent contractor agreement with SCI," e ntitled "Owner/Operator Agreement" (the Agreements). CDL is not a party to the Agr eements and while6 A- 3346

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not directly named, is referred to in the Agreement s as the "logistics broker" or "customer." The Agreements signed by each plaintif f contain the following arbitration clause:

In the event of any dispute, claim, question, or disagreement arising from or relating to this agree ment or the breach thereof, or service agreement between Owner/Operator and SCI's clients or any permiss[i]b le statutory disputes, the parties hereto shall use the ir best efforts to settle the dispute, claim, question, or disagreement. . . . If resolution of the dispute is not reached within [sixty] days . . . disputes that are within the jurisdictional maximum for small claims will be settled in small claims court where the Owner/Operat or resides. All other disputes, claims, questions, or differenc es beyond the jurisdictional maximum for small claims courts and have not passed the statute of limitatio ns within the locality of the Owner/Operator's residen ce will be finally settled by arbitration under the po licies of the Federal Arbitration Act and New York State's Arbitration provisions

. . . . Neither you nor SCI shall be entitled to join or consolidate claims in arbitration by or against oth er individuals or entities, or arbitrate any claim as a representative member of a class . .

. . [(Emphasis supplied).] The Agreements also state they "shall be governed b y the laws of the State of New York." At the end of each of the Agreements , just above the signature area, an all-caps notice informs: "THIS CONTRACT C ONTAINS A BINDING7 A- 3346

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ARBITRATION PROVISION AND CLASS-ACTION WAIVER WHICH AFFECTS YOUR LEGAL RIGHTS AND MAY BE ENFORCED BY TH E PARTIES." A separate "Independent Contractor Acknowledgement Form " requires acknowledgement of the following:

You understand you may opt out of the Arbitration provisions within the Owner Operator Agreement by notifying SCI in writing, within ten (10) days of t he date below . .

. . The writing should contain the name and contact information of each person opting out, and a clear statement indicating you are opting out of arbitrate [sic]. By not opting out you are subject to the dispute resolution provisions contained in the Owne r Operator Agreement. The CDL defendants and SCI each moved to dismiss un der Rule 4: 6-2 and to compel arbitration. The CDL defendants contende d the court should apply New York law, consistent with the choice of law pro vision, in determining the enforceability of the arbitration clause in the Agr eements, but also argued the clause would be enforceable under either New York o r New Jersey law. SCI argued the court should apply the FAA as provided i n the Agreements, as the exemption for employment contracts involving inters tate commerce set forth in8 A- 3346

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9 U.S.C. § 1 did not apply. 1 In the alternative, it joined the CDL defendants in contending New York law should control. Plaintiffs responded by arguing New Jersey law appl ied, as New York law concerning enforceability of arbitration agreements was contrary to New Jersey public policy regarding what is required to establi sh a waiver of the right to a jury trial. Under New Jersey law, plaintiffs argue d, the Agreements did not include "clear and unambiguous language" explaining the right being waived and therefore were un enforceable.
On June 27, 2023, the court issued two nearly-identic al orders denying the CDL defendants' and SCI's motions to compel arbitra tion and to dismiss the complaint, accompanied by a rider in which it detai led its reasoning. First, the court explain ed "[c]ourts should generally apply state-law contract pr inciples to determine whether the parties agreed to arbitrate. " It then applied New Jersey law to the question of enforceability of the arbitr ation clause

. Under Atalese, 219 N.J. at 447, it noted while "no pres cribed set of words must be included in an arbitration clause to accomp lish a waiver of rights," a valid clause "must explain that the plaintiff is gi ving up her right to bring her

1 9 U.S.C. § 1 provides, in part, "nothing [in the FA A] shall apply to contracts of employment of . . . any other class of workers e ngaged in foreign or interstate commerce."9 A- 3346

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claims in court or have a jury resolve the dispute. " Here, the court found "the arbitration clause is devoid of any language that w ould put the plaintiffs, without extensive knowledge of arbitration, on notice that they were waiving their right to a jury trial or having their disputes settled in court by signing the agreement." It noted the language of the clause "does not 'unmi stakably' establish that arbitration involves waiver to a jury trial." The court reasoned, as stated in Atalese, 219 N.J. at 442, "an average member of the public may not know

— without some explanatory comment

— that arbitration is a substitute for the right to have o ne's claim adjudicated in a court of law." Further, the court found "Atalese establi shes that 'arbitration' is not self-defining, and the provision in this case goes no further in defining the term." It also determined the admonition at the end of the contract "does nothing to broaden the scope of the class-arbitration waiver its elf" as it failed to provide "a clear explanation of what rights the plaintiffs wer e waiving." The court rejected defendants' argument that the Ag reements "did not need to explicitly state that the arbitration provision would waive the plaintiffs' right to a jury trial because plaintiffs were acting as r epresentatives of their business when signing the contract, rather than as individua ls." It found the plaintiffs were individual delivery drivers and use of a separ ate legal entity "does not10 A- 3346

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imply that they possess the business acumen to comp rehend the implications of arbitration." Additionally, the court noted "there is no case law to support the notion that businesses are not entitled to the same clarity in arbitration provisions as individuals." In conclusion, the court found "New Jersey case law requiring an unambiguous waiver of the right to go to court and have a jury decide your dispute had existed for years, yet the arbitration clauses i n the three most recent contracts signed by the plaintiffs are devoid of th ese fundamental requirements." Because an arbitration clause lacking these require ments is unenforceable under Atalese, 219 N.J. at 436, the court determined the plaintiffs could not be compelled to arbitrate and the class-action waivers tied directly to the arbitration clause were moot. The court thereafter submitted a written amplificat ion pursuant to Rule 2:5 -1(d), in which it further explained its decision t o apply New Jersey law. It noted defense counsel cited in their moving papers, and the parties discussed at oral argument, an unpublished federal district cour t case involving "a contract enormously similar to the contracts in the case at hand, " Easterday v. USPack11 A- 3346

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Logistics, LLC , No. 15-07559 (D.N.J. Dec. 4, 2020)

. 2 After reviewing the federal judge's and magistrate's decisions in that case, the court "chose to follow the Third Circuit's precedent in Roadway [Package S ystem, Inc. v. Kayser, 257 F.3d 287, 288- 89 (3d Cir. 2001)] wherein the Third Circuit found ge neral choice of law provisions shed little light on what law wil l govern arbitration provisions." Therefore, it reasoned, "the choice o f law provision in the contracts in this case is not instructive as to the choice of law for the arbitration clauses." The court explained it also found a conflict existed between New York and New Jersey law "with regards to the enforceability of arb itration provisions when the provisions are silent as to waiving the ri ght to a jury trial." After conducting a choice of law analysis using the most significant relationship test, the court "found the contacts overwhelmingly relate to New Jersey." It thus concluded New Jersey law applied. These consolidat ed appeals followed.
II. We review an order compelling or declining to compe l arbitration de novo. Goffe v. Foulke Mgmt. Corp., 238 N.J. 191, 2 07 (2019). As the enforceability of arbitration provisions is a quest ion of law, no deference is owed

2 Easterday is a non-precedential, unpublished opinio n and as such, does not inform our decision. See R. 1:3 6- 3.12 A- 3346

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to the trial court's interpretation. Ibid. In such a review, we remain "mindful of the strong preference to enforce arbitration agreem ents, both at the state and federal level." Hirsch v. Amper Fin. Svcs., LLC, 215 N.J. 174, 186 (2013). Similarly, we review de novo choice- of -law determinations. Cont'l Ins. Co. v. Honeywell Int'l., Inc., 234 N.J. 23, 46 (2018). Before us, both the CDL defendants and SCI contend the court erred in denying their motions to dismiss and compel arbitra tion. In support, they reprise their arguments: (1) the FAA or New York law, as provided in the Agr eements, should control; (2) the Agreements are enforceable under federal, New York, or New Jersey law; and (3) the Agreements' class actio n waiver is also applicable

. As an initial matter, we conclude the court's relia nce on Roadway Package, 257 F.3d at 288- 89 , was misplaced. In that case, the Third Circuit concluded "the presence of a generic choice- of -law clause tells us little (if anything) about whether contracting parties intende d to opt out of the FAA's default standards and incorporate ones borrowed from state law." Id. at 296. In this case, however, the Agreements contain not only a generic choice- of -law clause, but specify New York law applies to arbitra tion as well. Nevertheless, "it is well-settled that appeals are taken from ord ers and judgments and not from opinions, oral decisions, informal written decisions, or reasons g iven for the13 A- 3346

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ultimate conclusion." Hayes v. Delamotte, 231 N.J. 373, 387 (2018) (quoting
Do -Wop Corp. v. City of Rahway, 168 N.J. 191, 199 (20 01)). Our analysis begins with a determination as to whi ch state's law controls. The CDL defendants contend the court must apply New York law, consistent with the Agreements' choice of law provision. In t his regard, they correctly note, under North Bergen Rex Transportation v. Trai ler Leasing Co., 158 N.J. 561, 568 -69 (1999), New Jersey courts uphold a contract's c hoice of law provision unless:

(a) the chosen state has no substantial relationshi p to the parties or the transaction and there is no othe r reasonable basis for the parties' choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which h as a materially greater interest than the chosen state i n the determination of the particular issue and which . .

. would be the state of the applicable law in the abs ence of an effective choice of law by the parties. [Ibid.] Here, the CDL defendants argue a substantial relati onship to New York exists because it is undisputed CDL and SCI are New York companies. Additionally, they contend application of New York law would not be co ntrary to any fundamental policy of New Jersey. In suppor t, they rely upon Grandvue Manor, LLC v. Cornerstone Contracting Corp., 471 N. J. Super. 135 (App. Div.14 A- 3346

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2022) , which they argue demonstrates any difference betwee n New York and New Jersey law is "slight." The CDL defendants als o note "a party may not be compelled to arbitrate a dispute unless there is ev idence which affirmatively establishes that the parties clearly, explicitly, a nd unequivocally agreed to arbitrate the dispute" under In re AT&S Transp., LL C v. Odyssey Logistics & Tech. Corp., 803 N.Y.S.2d 118 (App. Div. 2005), a s tandard they characterize as "exactly the same as New Jersey." Even assuming a difference in the law of the two states, the CDL defendants assert such differe nce "does not rise to the level of being offensive or repugnant to the public policy of New Jersey." SCI joins the CDL defendants, noting "[i]t is well-sett led that a parties' choice of law provision must be honored" under North Bergen Rex T ransportation, 158 N.J. at 568. Plaintiffs respond by arguing the court properly fo und the New York choice- of -law provision "was void as against New Jersey publ ic policy " which aims to protect "'average' individuals in asymmetri c negotiations (particularly when a waiver of rights is involved.)" They conten d New York "does not require courts to conduct a substantive inquiry into whethe r the arbitration agreement contains a fair and effective waiver of rights in t he sense contemplated by Atalese." Further, they maintain New Jersey has a materially greater interest in15 A- 3346

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this matter than New York, as plaintiffs live in Ne w Jersey, report to a New Jersey warehouse, make deliveries exclusively in Ne w Jersey, signed the Agreements in New Jersey, suffered injuries in New Jersey, and their claims involve vindication of their rights as New Jersey w orkers under the New Jersey WHL and WPL. In contrast, they contend the only co nnections to New York
are CDL 's , SCI 's , and Curcio's residences there. We agree. Generally, "when parties to a contract have agreed to be governed by the laws of a particular state, New Jersey courts will uphold the contractual choice if it does not violate New Jersey's public policy." Grandvue, 471 N.J. Super. at 142 (quoting Instructional Sys., Inc. v. Computer Curr iculum Corp., 130 N.J. 324, 341 (1992)). New Jersey follows the approach set forth in section 187 of the Restatement (Second) of Conflict of Laws and wi ll apply the law of the state chosen by the parties unless:

(a) the chosen state has no substantial relationshi p to the parties or the transaction and there is no othe r reasonable basis for the parties' choice, or (b) application of the law of the chosen state woul d be contrary to a fundamental policy of a state which h as a materially greater interest than the chosen state i n the determination of the particular issue and which wou ld be the state of the applicable law in the absence o f an effective choice of law by the parties.16 A- 3346

- 22 [Grandvue, 471 N.J. Super. at 142 (quoting Instructional Sys., 130 N.J. at 341-42).] Here, New York has a substantial relationship to th e parties because CDL, Curcio, and SCI are residents of that state. See I nstructional Sys., 130 N.J. at 342 (finding section 187(a) inapplicable because Ca lifornia had a substantial relationship to the parties as defendant was headquartered there). Thus, section 187(a) is inapplicable and for New Jersey law to ap ply, (1) New Jersey must have "a materially greater interest than [New York] in the determination of" the Agreements' arbitrability, (2) New Jersey law must be appl icable in the absence of an effective choice of law, and (3) the applicat ion of New York law must be "contrary to a fundamental policy" of New Jersey. Grandvue, 471 N.J. Super. at 142 (quoting Instructional Sys., 130 N.J. at 342 ). We are convinced, based on the facts in the motion record, New Jersey has a "materially greater interest" with respect to disputes under the Agreements than New York. Ibid. (quoting Instructional Sys., 130 N.J. at 342). Ind eed, New York has little to no connection to this matter beyond CDL 's , SCI 's , and Curcio's residences there. Meanwhile, plaintiffs l ive and work in New Jersey, CDL operates a warehouse in New Jersey, the Agreeme nts were executed in New Jersey, and plaintiffs' claims implicate the Ne w Jersey WHL and WPL and involve alleged wage injuries suffered in New Jerse y. These same facts ,17 A- 3346

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combined with plaintiffs' choice of New Jersey as f orum, strongly support the application of New Jersey law absent the choice of law provision. Further, we are also satisfied the application of Ne w York law here would be "contrary to a fundamental policy" of New Jersey . Ibid. (quoting Instructional Sys., 130 N.J. at 342). It is undisp uted both New Jersey and New York favor arbitration as a means of dispute resolu tion. See Flanzman v. Jenny Craig, Inc., 244 N.J. 119, 133 (2020) (noting "the affirmative policy of [New Jersey], both legislative and judicial, favors arbi tration as a mechanism of resolving disputes" (quoting Martindale v. Sandvik, Inc., 173 N.J. 76, 92 (2002))); Ferrarella v. Godt , 15 N.Y.S.3d 180, 183 (App. Div. 2015) (holding "[t]he announced policy of [New York] favors and en courages arbitration as a means of conserving the time and resources of the c ourts and the contracting parties" (quoting In re Nationwide Gen. Ins. Co. v. Inv 'r s. Ins. Co. of Am., 332 N.E.2d 333, 335 (N.Y. 1975)) ). New Jersey has a long standing policy of protecting the right to access its courts. Article I, paragraph 9 of the New Jersey C onstitution provides "[t]he right of trial by jury shall remain inviolate." "A lthough rights may be waived, courts 'indulge every reasonable presumption agains t waiver of fundamental constitutional rights.'" Mazdabrook Commons Homeow ners' Ass'n v. Khan, 21018 A- 3346

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N.J. 482, 505 (2012) (quoting Johnson v. Zerbst , 304 U.S. 458, 464 (1938)). "To be valid, waivers must be knowing, intelligent, and voluntary." Ibid. In that vein, our Supreme Court in Atalese intended "to assure that the parties know that in electing arbitration as the ex clusive remedy, they are waiving their time-honored right to sue." 219 N.J. at 444 (quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 1 68 N.J. 124, 132 (2001)). Accordingly, as we detail further below in section III, the Court held an enforceable arbitration clause "at least in some ge neral and sufficiently broad way, must explain that the plaintiff is giving up h er right to bring her claims in court or have a jury resolve the dispute." Id. at 447. In contrast, to determine whether the parties agree d to arbitrate, New York courts "perform the initial screening process desig ned to determine in general terms whether the parties have agreed that the subj ect matter under dispute should be submitted to arbitration." Grandvue, 471 N.J. S uper. at 144 (quoting Nationwide, 332 N.E.2d at 335). The court's inquir y ends "[o]nce it appears that there is, or is not a reasonable relationship betwe en the subject matter of the di spute and the general subject matter of the underly ing contract." Ibid. (quoting Nationwide, 332 N.E.2d at 335) ; see also Ferrarella, 15 N.Y.S.3d at 183 (holding "[o]nce it is determined that the part ies have agreed to arbitrate the19 A- 3346

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subject matter in dispute, the court's role has end ed"). Further, "New York courts interfere 'as little as possible with the fr eedom of consenting parties' to submit disputes to arbitration." Ibid. (quoting In re 166 Mamaroneck Ave. Corp. v. 151 E. Post Rd. Corp. , 575 N.E.2d 104, 107 (N.Y. 1991)). Protecting individuals' rights to sue and to a jury trial, and ensuring any waiver of those rights is knowing, intelligent, and voluntary are unquestionabl y fundamental policies of New Jersey. Contrary to Ne w Jersey law in this respect, New York law does not specifically require an arbit ration clause explain that agreement thereto involves waiving the right to a jury trial, and defendants have cited no precedent to the contrary. Therefore, we are satisfied application of New York law in this circumstance would be contrary to a fundamental policy of New Jersey and accordingly apply New Jersey law. We are convinced Grandvue does not compel a differe nt result. First, contrary to the CDL defendants' contention, in that case we affirmed the trial court's application of New Jersey law, not New York law. Grandvue, 471 N.J. Super. at 142, 146. Next, while we acknowledge cer tain superficial similarities between the facts of Grandvue and those before us, a t bottom we conclude the se circumstances are distinguishable. Grandvue involv ed a contract for construction of a $10 million home in New York, id. at 139- 40 , while the20 A- 3346

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Agreements here concern the terms of delivery servi ces provided by plaintiffs in New Jersey. As we detail below in section III, plaintiffs here are not the "sophisticated" parties involved in Grandvue

. Id. at 146.
III. Next, the CDL defendants and SCI maintain the arbi tration provision of the Agreements is enforceable even under New Jersey law and controls the disputes at issue. In support, they note the court must examine "whether the agreement to arbitrate all, or any portion of a dis pute is 'the product of mutual assent, as determined under customary principles of contract law,'" under Arafa v. Health Express Corp., 243 N.J. 147, 171 (2020). Further, defendants assert th e court must "preserve the parties' intent to arbit rate" under Arafa and the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -36 (N JAA). They argue the arbitration clause in the Agreements "clearly and u nambiguously describe[s] the entire dispute resolution process," and plaintiffs were given the opportunity to opt -out of arbitration. Further, the CDL defendants assert plaintiffs are sophisticated negotiators who operate their own businesses, and t here was no evidence plaintiffs did not understand what they we re waiving. Plaintiffs respond the arbitration clause in the A greements fails to meet the requirements of Atalese as it "do[es] not distinguis h between arbitration and21 A- 3346

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litigation," "explain what arbitration is," "indica te how arbitration is different from a proceeding in a court of law," or mention th e words jury or waiver, except in the context of the class action waiver. Relying upon Moon v. Breathless Inc. , 868 F.3d 209, 214 (3d Cir. 2017), they argue an enf orceable arbitration agreement must (1) "identify the substantive areas it purports to cover," (2) "reference the types of claims waived," and (3) "ex plain the difference between arbitration and litigation using clear and unambigu ous language to inform the parties of their legal rights and their intent to s urrender those rights." Plaintiffs argue the arbitration clause in the Agreements here fails all three prongs, as it does not explain which areas and claims are covered , nor does it clearly explain the rights to be waived. Plaintiffs also dispute the CDL defendants' claim of their sophistication, contending they are delivery drivers performing man ual labor with "extremely limited control over [their] work." Even though so me plaintiffs may work through their own business entity, they contend thi s does not change the nature of the work they perform or their relationships to CDL and SCI. Additionally, they note their agreement to "two intrinsically unc onscionable contract terms," requiring them to waive "their statutory rights to attorney's fees and punitive22 A- 3346

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damages," demonstrates their lack of sophistication and the disparity in bargaining power between plaintiffs and SCI. We agree with plaintiffs. The NJAA "is nearly identical to the FAA and enunc iates the same policies favoring arbitration." Arafa, 243 N.J. at 167. "[T]he NJAA will apply unless preempted even without being explicitly refe renced in an arbitration agreement." Id. at 169. However, "[a]rbitration's favored status does not mean that every arbitration clause, however phrased, wil l be enforceable." Atalese, 219 N.J. at 441. "An agreement to arbitrate, like any other contract , 'must be the product of mutual assent, as determined under customary pri nciples of contract law.'" Id. at 442 (quoting NAACP of Camden Cnty. E. v. Fou lke Mgmt. Corp., 421 N.J. Super. 404, 424 (App. Div. 2011)). Accordingl y, to be enforceable, an arbitration agreement must clearly state that the p arties are agreeing to arbitrate and are giving up the right to pursue a claim in co urt. In that regard, our Supreme Court has explained:

Mutual assent requires that the parties have an understanding of the terms to which they have agree d. "An effective waiver requires a party to have full knowledge of his [or her] legal rights and intent t o surrender those rights." Knorr v. Smeal, 178 N.J. 169, 177 (2003). "By its very nature, an agreement to arbitrate involves a waiver of a party's right to h ave [his23 A- 3346

- 22 or] her claims and defenses litigated in court." NAACP of Camden Cnty. E., 421 N.J. Super. at 425. [Ibid. (citations reformatted).] Like other waivers of statutory or constitutional r ights, the Court noted "because arbitration involves a waiver of the right to pursue a case in a judicial forum, 'courts take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of t he ramifications of that assent.'" Id. at 442-43 (quoting NAACP of Camden Cnt y. E., 421 N.J. Super. at 425). "Although an arbitration clause need not ide ntify 'the specific constitutional or statutory right guaranteeing a ci tizen access to the courts' that are being waived, it must 'at least in some general and sufficiently broad way' convey that parties are giving up their right to br ing their claims in court or have a jury resolve their dispute." Barr v. Bishop Rose n & Co., Inc., 442 N.J. Super. 599, 606 (App. Div. 2015) (quoting Atalese, 219 N.J . at 447) ; see also Moon , 868 F.3d at 214 ( distilling New Jersey jurisprudence and concluding valid arbitration agreement must "identify the substantiv e area that the arbitration clause covers," "reference the types of claims waiv ed," and "explain the difference between arbitration and litigation"). "A n arbitration agreement that fails to 'clearly and unambiguously signal' to part ies that they are surrendering their right to pursue a judicial remedy renders suc h an agreement24 A- 3346

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unenforceable." Barr, 442 N.J. Super. at 606 (quoting Atalese, 219 N.J. at 444, 448). As we explained in County of Passaic v. Horizon Hea lthcare Services, Inc., 474 N.J. Super. 498, 503- 04 (App. Div. 2023), the concern described in Atalese regarding those who might not be "aware of the fact that an agreement to arbitrate may preclude the right to sue in a cou rt or invoke the inestimable right of trial by jury . . . vanishes when consider ing individua lly -negotiated contracts between sophisticated parties

— often represented by counsel at the formation stage

— possessing relatively similar bargaining power." I n other words, "an express waiver of the right to seek reli ef in a court of law to the degree required by Atalese is unnecessary when part ies to a commercial contract are sophisticated and possess comparatively equal b argaining power." Id. at 504. We are satisfied, applying Atalese and its progeny, the arbitration clause in the Agreements is un enforceable. Although the clause implies some claims will be resolved in "small claims court" while othe rs will go to arbitration, it falls short of the "clear and unambiguous" explanat ion of rights waived required by Atalese, 219 N.J. at 445. The Agreements do not explain what the "jurisdictional maximum for small claims" is, what arbitration is, or that by25 A- 3346

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agreeing to it, plaintiffs gave up their right to l itigate their claims in court. As our Supreme Court recognized, "[t]he meaning of arb itration is not self-evident to the average consumer, who will not know, 'withou t some explanatory comment[,] that arbitration is a substitute for the right to have one's claim adjudicated in a court of law.'" Morgan v. Sanford Brown Inst., 225 N.J. 289, 308 (2016) (second alteration in original) (quoting Atalese, 219 N.J. at 442). While the Agreements describe the procedure arbitra tion will follow , such

as the number of arbitrators on the panel and where i t will occur, they do not define arbitration and lack the crucial disclosure that it will replace litigation or a jury trial. An average consumer or delivery driver is not likel y to understand , absent further explanation, what arbitration is, ho w it differs from litigation in

court or that it involves no judge or jury, nor are they likely abl e to distinguish which claims fall within the "jurisdictional maximu m for small claims" to be litigated in court. The ability to opt-out of arbitration does nothing to further clarify its meaning. We find defendants' reliance on Arafa misplaced as each of the two arbitration agreements involved in that case clearl y complied with Atalese. Arafa, 243 N.J. at 171 -72. Specifically, one agreement stated "[t]he parties voluntarily agree to waive any right to a trial by jury in any suit filed hereunder26 A- 3346

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and agree to adjudicate any dispute pursuant to" fu rther detailed arbitration clauses, and the other provided "BY AGREEING TO ARB ITRATE ALL SUCH DISPUTES, THE PARTIES TO THIS AGREEMENT AGREE THAT ALL SUCH DISPUTES WILL BE RESOLVED THROUGH BINDING ARBITRATION BEFORE AN ARBITRATOR AND NOT BY WAY OF A COURT OR JURY TRIAL." Id. at 155, 158 (emphasis su pplied, caps in original). Here, the Agreements fail to explain th at agreeing to arbitration means waiving the right to a jury trial, or even to menti on the words "jury trial" at all. Finally, the record reflects the Agreements were no t the product of a sophisticated negotiation, contrary to defendants' contentions. It ap pears none of the plaintiffs were represented by counsel, nor did the terms of the Agreements substantially differ among the plaintiff s, suggesting the Agreements were similar to "take- it

- or -leave-it" contracts of adhesion. See Muhammad v. Cnty. Bank of Rehoboth Beach, 189 N.J. 1, 15 (2006) (noting "the essential nature of a contract of adhesion is that it is pres ented on a take- it

- or -leave- it basis, commonly in a standardized printed form, wit hout opportunity for the 'adhering' party to negotiate except perhaps on a f ew particulars" (quoting Rudbart v. N. Jersey Dist. Water Supply Com m'n ., 127 N.J. 344, 353 (1992))). This also indicates unequal bargaining power betwee n the parties. Accordingly,27 A- 3346

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the Agreements are closer to consumer contracts, as in Atale se , than commercial contracts, as in County of Passaic or Grandvue. The parties i n County of Passaic were a municipality and a health insurance company with a seventeen-year relationshi p involving multiple contracts. 474 N.J. Super. at 501, 504. Both were represented by counsel, and the record in that case reflected negotiation of se veral contracts. Id. at 504-05. Thus , we concluded the parties were sophisticated and p ossessed relatively equal bargaining power. Id. at 501, 504. Similarl y, in Grandvue , we deemed the contractor corporation and couple who, through an LLC, contracted for construction of a $10 million home were sophisticat ed. 471 N.J. Super. at 139

- 40 , 146. Further, unlike the Agreements before us, the arbit ration clause we upheld in that case clearly delineated that the parties had a choice between arbitration or "[l]itigation in a court of competent jurisdiction ." Id. at 140. Plaintiffs are clearly not the type of parties we h ad in mind in County of Passaic, 474 N.J. Super. at 503-04. The record is devoid of evidence demonstrating any of them were represented by couns el or engaged in individual negotiation of the Agreements. The record demonstr ates plaintiffs are individual delivery drivers who perform manual labor for CDL under CDL's rules. That one of the plaintiffs worked through a n LLC does not change the28 A- 3346

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nature of the work she perform ed or the disparity in bargaining power between plaintiffs and SCI. Because the Agreements were not the product of a so phisticated negotiation and the arbitration clause therein do es not clearly and unambiguously explain the parties are waiving their rights to bring their claims in court or to have a trial by jury, the court corr ectly found the arbitration agreement is unenforceable.
IV. SCI contends the court erred by failing to analyze the Agreements' arbitration clauses under the FAA. It notes the FA A exemption in 9 U.S.C. § 1 does not apply here because the Agreements are not contracts of employment or interstate commerce as "[p]laintiffs did not provide their delivery servi ces to SCI." Plaintiffs assert they are transportation wo rkers engaged in interstate commerce and thus clearly fall within the section 1 exemption

. They also contend the term "contracts of employment" as used in the section 1 exem ption includes independent contractors under New Prime In c. v. Oliveira , 586 U.S. __, 139 S. Ct. 532 (2019). Under Shetiwy v. Midland Credit Management, 959 F. Supp. 2d 469, 473 (S.D.N.Y. 2013), SCI argues a court determining arb itrability under the FAA29 A- 3346

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must consider "(1) whether the parties have entered into a valid agreement to arbitrate, and, if so, (2) whether the dispute at i ssue comes within the scope of the arbitration agreement." SCI concludes if both parts of the test are answered in the affirmative, as here, the court has no discr etion and must order arbitration. We are not persuaded. Although the FAA "contains no express pre -emptive provision, nor does it reflect a congressional intent to occupy the ent ire field of arbitration," it generally "preempts state laws that treat arbitration agre ements differently from other contracts." Grandvue, 471 N.J. Super. at 145 (quoting Arafa, 243 N.J. at 164 -65). Accordingly, an arbitration clause "cannot b e invalidated by state-law 'defenses that apply only to arbitration or that de rive their meaning from the fact that an agreement to arbitrate is at issue.'" Atal ese, 219 N.J. at 441 (quoting AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 339 (2011)). However, the FAA "specifically permits states to re gulate contracts, including contracts containing arbitration agreemen ts[,] under general contract principles." Grandvue, 471 N.J. Super. at 145 (alt eration in original) (quoting Arafa, 243 N.J. at 165). In other words, "New Jersey may ' regulate agreements, including those that relate to arbitration, by appl ying its contract-law principles that are relevant in a given case.'" Skuse v. Pfiz er, Inc., 244 N.J. 30, 47 (2020)30 A- 3346

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(quoting Leodori v. Cigna Corp., 175 N.J. 293, 302 (2003)). "[S]tate contractlaw principles generally govern a determination whe ther a valid agreement to arbitrate exists." Waskevich v. Herold Law, P.A., 431 N.J. Super. 293, 298 (App. Div. 2013) (quoting Hojnowski v. Vans Skate P ark, 187 N.J. 323, 342 (2006)). The Supreme Court's opinion in Atalese do es not in any way conflict with the FAA as it "do es not disfavor or discriminate against arbitration a greements," but rather "reaffirm ed principles long embedded in [New Jersey] jurisprud ence." Kernahan v. Home Warranty Adm'r of Fla., Inc., 236 N.J. 301, 330 (2019) (Albin, J., concurring). 3 As Justice Albin explained, the United States Supre me Court's FAA jurisprudence "do[es] not bar an undema nding state-law requirement that allows consumers a minimal underst anding that in choosing arbitration they will not have access to a judicial forum." Id. at 334. Thus, in light of our conclusion the Agreements do not compl y with the general contract principles set forth in Atalese , we need not, and do not, decide whether the FAA applies to the Agreements.

3 In Kernahan, 236 N.J. at 328, Justice Albin specifi cally considered and rejected the argument that Atalese conflicted with the United States Supreme Court's holding in Kindred Nursing Centers L.P. v. Clark , 581 U.S. 246 , 248 (2017), a position not advanced by defendants here in their briefs or at oral argument.31 A- 3346

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We are satisfied Arafa does not compel a different result. In that case, the plaintiffs argued (1) there had been no "meeting of the minds" with respect to arbitration because the terms of the agreement prov ided it would be governed by solely the FAA, but the agreement was exempt from t he FAA under 9 U.S.C. §1 , and (2) the court could not apply the NJAA in pla ce of the FAA absen t express intent of the parties to do so. Arafa , 243 N.J. at 160 -61. The Court was therefore required to examine the FAA exemption to resolve the issues before it. Id. at 166. Further, we note each of the arbitration agreements at issue in Arafa expressly informed the parties their assent t hereto constituted a waiver of their right to a trial by jury, as required under A talese. Id. at 172.
V. Finally, the CDL defendants assert "the FAA preempt s states from invalidating class action waiver clauses contained within arbitration agreements on public policy or unconscionability grounds." Pl aintiffs respond the class action waiver was limited to arbitration and is thu s unenforceable. We agree with plaintiffs. The Agreements state "[n]either you nor SCI shall b e entitled to join or consolidate claims in arbitration by or against oth er individuals or entities, or arbitrate any claim as a representative member of a cl ass or in a private attorney32 A- 3346

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general capacity." (Emphasis added). Nothing in this language is ambiguous

— it clearly states the limitation applies to arbitra tion, with no reference to litigation in court. In light of our decision find ing the arbitration agreement unenforceable, we conclude the class action waiver is inapplicable under these circumstances. To the extent we have not addressed any of the part ies' arguments, it is because we conclude they lack sufficient merit to w arrant extended discussion in a written opinion. R. 2:11 -3(e)(1)(E). Affirmed.