Court Opinion

ID: 4580470
Source: CourtListenerOpinion
Date Created: 2020-10-26 14:08:12.925319+00
Date Added: 2024-06-11T08:47:55.920023
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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 parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0156-19T2

BRENDAN CLARE and
CAROLYN CLARE,

          Plaintiff-Respondent,

v.

ACT, INC.,

          Defendant-Appellant.

                   Argued September 21, 2020 – Decided October 26, 2020

                   Before Judges Currier, Gooden Brown and DeAlmeida.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Somerset County, Docket No. L-1067-18.

                   Caroline Mew (Perkins Coie LLP) of the Washington,
                   D.C. bar, admitted pro hac vice, argued the cause for
                   appellant (Methfessel & Werbel, and Caroline Mew,
                   attorneys; Shaji M. Eapen, on the briefs).

                   Patrick J. Clare argued the cause for respondent (Clare
                   & Scott, LLC, attorneys; Patrick J. Clare, of counsel
                   and on the brief).

PER CURIAM
      In this matter, we consider whether plaintiffs are required to submit their

claims to arbitration under the provisions contained in the contract executed with

defendant. The trial judge found the arbitration provisions were procedurally

and substantively unconscionable and denied defendant's motion to compel

arbitration. After a de novo review, we conclude the arbitration clauses are valid

and enforceable and plaintiffs' claims are subject to arbitration. Therefore, we

reverse the trial court's order.

                                        I.

      As a high school student proceeding through the college application

process, plaintiff Brendan Clare 1 took the ACT college admissions test

administered by defendant three times.       The ACT measures an examinee's

abilities in English, mathematics, reading, and science. Examinees are given a

score for each subject along with a composite score.

      In late April 2018, defendant advised Brendan of its concerns regarding

the validity of his scores on the second and third tests. Defendant explained that

its review of test data reflected that Brendan's second and third exams had an

unusually high number of identical correct and incorrect responses as another

1
  Plaintiff Carolyn Clare is Brendan's mother. She claims defendant's grossly
negligent conduct caused her to incur $1260 in tutoring lessons to prepare
Brendan for the fourth examination.
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                                        2
examinee. In addition, Brendan's scores increased significantly on the second

and third examinations from the score achieved on the first test. Defendant

informed Brendan it was performing an official score review. At the time,

Brendan was a senior, and after receiving acceptances from several colleges and

universities, he matriculated into the university he currently attends.

      Defendant advised Brendan of three options to respond to the score

review: (1) he could cancel the second and third test scores; (2) he could take a

private retest at defendant's expense to confirm the questioned scores; or (3) he

could provide documentation to help establish the validity of his scores, which

would be reviewed by defendant's review panel.

      The letter further informed Brendan that defendant would continue to treat

his scores as valid during the review process. Defendant also advised Brendan

of his options if the review panel decided to cancel the test scores.

      Brendan chose the third proffered option and provided documentation to

help establish the validity of his scores.    After reviewing the information,

defendant notified Brendan in June 2018 there was substantial evidence to

conclude the scores were invalid and to cancel the test scores from the second

and third examinations.     Defendant provided a detailed explanation of its

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                                        3
analysis, concluding in the review panel's determination to invalidate the scores

based on the totality of the evidence.

      Defendant again offered Brendan three options prior to a cancellation of

the scores: he could (1) voluntarily cancel his test scores; (2) take a private retest

at defendant's expense to confirm the prior scores; or (3) challenge the review

panel's cancellation decision in binding arbitration through written submissions

to the American Arbitration Association (AAA).

      Brendan chose to take a private retest. His composite score on the retest

was within the range required by defendant to satisfy its inquiry, and Brendan

was advised in early August 2018 that the score review was closed, and his test

scores had not been cancelled. The ACT scores were treated as valid during the

entire score review process. No schools were notified of defendant's inquiry.

                                         II.

      ACT examinees who register online must agree to a set of terms and

conditions to complete their registration. Brendan agreed to these provisions

when he registered for each test.

      On the day of the examination, examinees must also agree to the terms

and conditions by signing their name below the following provision: "By

submitting this answer sheet, I agree to comply with and be bound by the Terms

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and Conditions: Testing Rules and Policies for the ACT® Test provided in the

ACT registration materials for this test, including those concerning test security,

score cancellation, examinee remedies, arbitration. . . ." In a space provided,

examinees must write the following certification: "I agree to the Statement

above and certify that I am the person whose name and address appear on this

answer sheet."

      Brendan completed the certification on the day of the examinations. In

addition to certifying and agreeing to the terms and conditions on the answer

sheet, an examinee also completes a similar procedure on the cover of their test

booklet.

      The terms and conditions include two arbitration clauses.          The first

provision in dispute is the Individual Score Review (ISR) which states:

            If ACT discovers reason to believe your score may be
            invalid – such as evidence of unusual similarities in the
            answers of you and another examinee, evidence that
            you may have falsified your identity or impersonated
            someone else, evidence of possible advance access to
            test questions or answers, or other indicators the test
            scores may not accurately reflect your level of
            educational achievement – ACT may conduct an
            Individual Score Review. ACT reserves the right to
            cancel test scores when there is reason to believe the
            scores are invalid. Proof of misconduct is not
            required to cancel scores.

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           ACT will take steps to notify you if ACT decides to
           conduct an Individual Score Review. The notice
           includes information about why ACT has started the
           Individual Score Review and options available for
           resolving it. If the scores that are the subject of the
           Individual Score Review have not yet been reported by
           ACT, ACT reserves the right to hold those scores
           pending the outcome of the review process, including
           any appeal. More information regarding the review
           process will be provided to you if ACT opens an
           Individual Score Review regarding your score.

           For Individual Score Reviews, the final and
           exclusive remedy available for you to appeal or
           otherwise challenge a decision by ACT to cancel
           your test score is binding arbitration. The arbitration
           will be conducted through written submissions to the
           American Arbitration Association ("AAA"), unless
           both you and ACT agree to submit the matter to an
           alternative forum. By agreeing to arbitration in
           accordance with these Terms and Conditions, you are
           waiving your right to have your dispute heard by a
           judge or jury. 2 If you choose to appeal a decision by
           ACT to cancel your test scores by exercising your right
           to seek arbitration of that decision, you must pay a
           nonrefundable filing fee of $200 to the AAA (or
           alternate forum) as your share of the filing fee, and
           ACT will pay the remainder of the filing fee. Your
           share of the filing fee is payable in full when a request
           for arbitration is filed with the AAA, but will be
           reimbursed by ACT if you prevail in arbitration and
           your scores are not cancelled. The only issue for
           arbitration will be whether ACT acted reasonably and

2
  In the terms and conditions applicable to the third exam taken by Brendan,
ACT bolded the following sentence: "By agreeing to arbitration in
accordance with these Terms and Conditions, you are waiving your right to
have your dispute heard by a judge or jury."
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                                      6
            in good faith in deciding to cancel the scores. No
            damages may be awarded by the arbitrator and each
            party is responsible for its own fees and expenses,
            including attorneys' fees, except as otherwise expressly
            provided in these Terms and Conditions. No arbitration
            involving the outcome of an Individual Score Review
            may be maintained as a class action, and the arbitrator
            shall not have the authority to combine or aggregate the
            disputes of more than one individual, conduct any class
            proceeding, make any class award, or make an award to
            any person or entity not a party to the arbitration.

      In addition to the ISR, the terms and conditions include a general

arbitration clause in a provision entitled "Arbitration of Disputes with ACT"

(general arbitration clause) which states:

            All disputes – other than disputes involving "Individual
            Score Reviews" (described above) or infringement of
            ACT's intellectual property rights – that relate in any
            way to registering for or taking the ACT test, requesting
            or receiving accommodations [or supports] on the ACT
            test, the reporting of ACT test scores or the use or
            disclosure of personal information by ACT, shall be
            resolved by a single arbitrator through binding
            arbitration administered by the American Arbitration
            Association ("AAA"), under the AAA Consumer Rules
            ("AAA Rules") in effect at the time a request for
            arbitration is filed with the AAA. Copies of the AAA
            Rules can be located at www.adr.org. No arbitration
            may be maintained as a class action, and the arbitrator
            shall not have the authority to combine or aggregate the
            disputes of more than one individual, conduct any class
            proceeding, make any class award, or make an award to
            any person or entity not a party to the arbitration. By
            agreeing to arbitration in accordance with these Terms

                                                                        A-0156-19T2
                                        7
            and Conditions, you are waiving your right to have your
            dispute heard by a judge or jury. 3

            Each party will be responsible for its own fees and
            expenses incurred in connection with the arbitration,
            regardless of the outcome of the arbitration, except as
            otherwise expressly provided in these Terms and
            Conditions. In no event shall ACT be liable to an
            examinee for any special, indirect, consequential,
            exemplary, or punitive damages.

            NOTE: Separate procedures apply to arbitration
            proceedings involving Individual Score Reviews.
            These procedures are discussed above, under the
            heading "Individual Score Reviews."

                                      III.

      After defendant advised its score inquiry was closed, Brendan and his

mother instituted suit against defendant, alleging tortious claims of gross

negligence in defendant's handling and timing of the score review and violations

of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -226.4

3
   In the terms and conditions accompanying the third exam, ACT bolded the
following sentence: "By agreeing to arbitration in accordance with these
Terms and Conditions, you are waiving your right to have your dispute
heard by a judge or jury."
4
   Brendan added the CFA claims in a Second Amended Complaint. After the
trial court denied defendant's motion to compel arbitration, plaintiff requested
and was granted leave to again amend his complaint. Because the Third
Amended Complaint was filed after the trial court considered the validity of the

                                                                        A-0156-19T2
                                       8
Defendant filed a motion to compel arbitration. Brendan opposed the motion

and filed a cross-motion to invalidate the arbitration clauses.

      In a January 14, 2019 order and written statement of reasons, the trial

court found the arbitration clauses were procedurally and substantively

unconscionable as applied to Brendan and void against public policy.         We

disagree.

      Preliminarily, the court noted Brendan did not contend he did not

understand the rights he waived when he registered for and took the ACT.

Furthermore, the court observed Brendan did not assert his age as a defense –

he was seventeen when he took the second test and eighteen at the time of the

third examination.

      The court found defendant's contract was a contract of adhesion. The

court determined the font size – "extremely small" and "7 point type" – was a

violation of the Plain Language Act (PLA), N.J.S.A. 56:12-1 to -13.5           In

arbitration clauses, we only consider the allegations presented in the Second
Amended Complaint.
5
  Brendan has not raised the issue of font size before this court. As stated, an
examinee registers for the ACT and acknowledges its terms and conditions
online, allowing the registrant to expand the size of the print in his or her
browser. Brendan also has not raised any violation of the PLA as an issue before
this court.

                                                                        A-0156-19T2
                                        9
considering whether the provisions were unconscionable, the court stated minors

could not waive their rights to a jury trial. 6 The court also determined that both

arbitration provisions excluded an award of damages so there was no remedy

available to Brendan in an arbitration proceeding.

       In conclusion, the court found "ACT's binding arbitration clauses and

damages waivers are procedurally and substantively unconscionable as applied

to plaintiff, and void as against public policy, and will not be enforced." In a

footnote, the court added: "The court has serious concerns about the

enforceability of the arbitration provisions on additional grounds such as

adequate notice, mutual assent, as well as confusion and ambiguity in the

competing provisions of the contract and the AAA rules."

                                       IV.

       We "apply a de novo standard of review when determining the

enforceability of contracts, including arbitration agreements." Goffe v. Foulke

Mgmt. Corp., 238 N.J. 191, 207 (2019). "The enforceability of arbitration

provisions is a question of law; therefore, it is one to which we need not give

deference to the analysis by the trial court." Ibid.

6
    Brendan has not asserted this argument on appeal.
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      On appeal, defendant asserts: (1) the trial court failed to apply the Federal

Arbitration Act (FAA) 9 U.S.C. §§ 1 to 16; (2) Brendan is contractually bound

to arbitrate his claims; (3) the trial court erred in finding the arbitration

provisions procedurally and substantively unconscionable; (4) the court erred in

finding the arbitration agreement void as to public policy; and (5) the court erred

in invalidating the arbitration provisions in their entirety rather than severing

the parts unenforceable under New Jersey law.

      The Federal and New Jersey Arbitration Acts, see 9 U.S.C. §§ 1 to 16 and

N.J.S.A. 2A:23B-1 to -36, express a general policy favoring arbitration. Atalese

v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 440 (2014) (citing AT&T Mobility

LLC v. Concepcion, 563 U.S. 333, 339 (2011)). "The public policy of this State

favors arbitration as a means of settling disputes that otherwise would be

litigated in a court." Badiali v. N.J. Mfrs. Ins. Grp., 220 N.J. 544, 556 (2015)

(citing Cnty. Coll. of Morris Staff Ass'n v. Cnty. Coll. of Morris, 100 N.J. 383,

390 (1985)).

      Mindful of that tenet, in considering Brendan's arguments, we begin with

the basic premise that when a party to an arbitration agreement argues that the

agreement is unconscionable and unenforceable, we look to the same state law

principles that apply to contracts generally. Delta Funding Corp. v. Harris, 189

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                                       11
N.J. 28, 39 (2006). An arbitration clause can be invalidated and declared

unenforceable by generally applicable contract defenses such as fraud, duress or

unconscionability. Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87

(1996).

      We agree with the trial court's determination that the contract between

Brendan and defendant is a contract of adhesion – "[a] contract where one party

. . . must accept or reject the contract." Rudbart v. N. Jersey Dist. Water Supply

Comm'n, 127 N.J. 344, 353 (1992) (internal citation omitted). Its "essential

nature . . . is that it is presented on a take-it-or-leave-it basis, . . . without

opportunity for the 'adhering' party to negotiate . . . ." Ibid. (internal citation

omitted).

      Here, an examinee who registers to take the ACT must agree to the terms

and conditions set forth in the contract to complete the registration. On the test

day, the examinee must certify and acknowledge their acceptance of defendant's

terms and conditions on the top of their answer sheet and on their test booklet.

An examinee cannot bargain or negotiate specific terms or alter the arbitration

agreement in any way.

      However, the nature of an adhesion contract alone does not make it

unenforceable. Id. at 354. Where there are allegations of unconscionability,

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                                       12
courts must conduct a fact-sensitive analysis. Muhammad v. Cnty. Bank of

Rehoboth Beach, 189 N.J. 1, 15-16 (2006).

      In determining whether to enforce the terms of a contract of adhesion,

courts look not only to the take-it-or-leave it nature or the standardized form of

the document, but also to: (1) the subject matter of the contract; (2) the parties '

relative bargaining positions; (3) the degree of economic compulsion motivating

the "adhering" party; and (4) the public interests affected by the contract.

Rudbart, 127 N.J. at 356. Those factors focus on procedural and substantive

aspects of the contract "to determine whether the contract is so oppressive, or

inconsistent with the vindication of public policy, that it would be

unconscionable to permit its enforcement." Delta, 189 N.J. at 40 (internal

citations omitted).

      Here, the trial court found the arbitration provisions were unconscionable

because Brendan was a minor at the time of executing the contract and the

provisions precluded any award of damages. Although we note Brendan did not

assert his age as a defense before the trial court or this court, we recognize age

can be a factor of unfairness between the contracting parties.

      As our Court has stated, a contract of adhesion necessarily involves

indicia of procedural unconscionability. Id. at 39. But Brendan's age is not

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                                        13
sufficient to establish the "overwhelming procedural unconscionability"

necessary to render the contract unenforceable. Muhammad, 189 N.J. at 16 n.3.

In addition, we disagree that, under these circumstances, a minor cannot be

bound to an arbitration agreement.

      As described, Brendan was informed of defendant's contractual terms and

conditions at the time of registration for the exam, and twice on testing day.

There was no time pressure to complete the registration process; a registrant had

all the time he or she needed to review the terms and conditions and inquire of

a parent or other adult the meaning of its provisions. Brendan's age alone is

insufficient to void the arbitration agreement.

      We turn then to the court's conclusions of substantive unconscionability

and whether the contract is "so one-sided as to shock the court's conscience."

Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super. 555, 565 (Ch. Div. 2002). The

trial court found the provisions were substantively unconscionable because

Brendan was precluded from obtaining relief under the ISR or general

arbitration clause. That was a misapprehension of the clauses.

      Because Brendan did not choose to challenge the score review decision

under the ISR, that clause was not triggered. But we note an examinee can be

accorded relief under the ISR. If the arbitrator determined the review panel

                                                                         A-0156-19T2
                                       14
acted in bad faith or unreasonably, the arbitrator would order defendant to

restore the cancelled ACT scores.        Therefore, the examinee would receive

equitable relief because the inquiry would be terminated, and the scores

reinstated.

      The allegations in Brendan's Second Amended Complaint regarding

defendant's negligence in the reporting of test scores fall within the parameters

of the general arbitration clause. That provision is triggered to resolve "[a]ll

disputes . . . that relate in any way to registering for or taking the ACT test, . . .

[and] the reporting of ACT test scores." And, under that clause, the arbitrator is

authorized to award damages.         The provision only excludes the award of

"special, indirect, consequential, exemplary, or punitive damages."               The

arbitration agreement does not limit direct damages or statutory damages

allowed under the CFA. See Arafa v. Health Express Corp., _ N.J. _, _ (2020)

(stating that arbitration provisions do not need to expressly reference statutory

rights to create an enforceable agreement to arbitrate statutory claims).

Therefore, the general arbitration provision is not unconscionable, as it does not

prohibit an award of damages.

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                                        15
      Without specific findings, the trial court concluded the arbitration clauses

were "void as against public policy." We turn then to a consideration of the

relevant interests of examinees, test administrators and the public.

      In Scott v. Educ. Testing Serv., 252 N.J. Super. 610 (App. Div. 1991), the

defendant challenged the validity of the test scores achieved by the plaintiff on

the National Teachers Examination. The defendant offered the plaintiff several

options to resolve the issue and the plaintiff chose binding arbitration. Id. at

612. After the arbitrator ruled in favor of the defendant, the plaintiff moved to

vacate the award and for other relief. Ibid. To determine whether the defendant

needed to show actual cheating or other misconduct prior to cancelling the test

scores, we recognized the competing public and private interests. Id. at 618.

We stated:

             [An examinee] has a legitimate interest in assuring that
             [he or] she is not stripped of a valid test score. ETS has
             an interest in assuring the accuracy of the test results it
             reports and the predictions it thereby makes. The other
             test-takers are entitled to assurance that no examinee
             enjoys an unfair advantage in scoring. The school
             officials to whom test results are certified need to be
             assured that all reported test results are reliable.
             Finally, the public at large has an interest in assuring
             that all persons certified as teachers have in fact
             fulfilled the requirements of that certification.

             [Ibid.]

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                                        16
We concluded a testing administrator was not required to show proof of actual

misconduct to justify the cancellation of questioned scores. Id. at 621.

      As in Scott, the private and public interests here all seek the reliability of

the test scores. Defendant must be able to vouch for the integrity of its test

results; the public relies on the validity of the test scores to make decisions

concerning college admissions, course placements and scholarships. A test

examinee, minor or adult, also shares the interest of reliability, knowing he or

she is on equal footing with all other test takers. We are satisfied the arbitration

clauses are not deemed unenforceable on public policy grounds.

      Before the trial court, Brendan argued the arbitration clauses were not

compliant with Atalese, 219 N.J. at 430. Although the motion judge expressed

"concerns" in a footnote regarding waiver and mutual assent in the parties'

contract, he did not address those issues. For completeness, we will do so.

      In determining the enforceability of an arbitration agreement, as with any

other contract, a court must resolve "whether the agreement to arbitrate . . . a

dispute is 'the product of mutual assent, as determined under customary

principles of contract law.'" Kernahan v. Home Warranty Adm'r of Fla., Inc.,

236 N.J. 301, 319 (2019) (quoting Atalese, 219 N.J. at 442). "Mutual assent

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requires that the parties have an understanding of the terms to which they have

agreed." Atalese, 219 N.J. at 442.

      Although no particular form of words is necessary to accomplish a clear

and unambiguous waiver of rights, id. at 444, an arbitration clause must "explain

that the plaintiff is giving up her right to bring her claims in court or have a jury

resolve the dispute." Id. at 447.

      We are satisfied the arbitration clauses at issue here meet the Atalese

standard. As stated, an examinee must agree to the terms and conditions of the

ACT contract when he or she registers for the examination and again on test day.

There is a table of contents for the terms and conditions and "Individual Score

Review" and "Arbitration of Disputes with ACT" are topics within the table of

contents.

      The ISR is located on page three of the four-page terms and conditions.

Its heading, in bold print, states: "For Individual Score Reviews, the final and

exclusive remedy available for you to appeal or otherwise challenge a

decision by ACT to cancel your test score is binding arbitration." The

examinee is informed the arbitration will be conducted through the AAA unless

the parties agree to an alternative arbitration forum. The clause further informs:

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                                        18
"By agreeing to arbitration in accordance with these Terms and Conditions, you

are waiving your right to have your dispute heard by a judge or jury."

      The general arbitration clause is located on the fourth and final page of

the terms and conditions. The examinee is again informed he or she is waiving

the right to have the dispute heard by a judge or jury. It alerts the examinee that

all disputes against ACT will be resolved by a single arbitrator through binding

arbitration administered by the AAA. Both arbitration clauses provide sufficient

information to put an examinee on notice that a score review challenge or any

dispute pertaining to the ACT test will be submitted to binding arbitration and

will not be resolved by a judge or jury.

      For the reasons stated, we are satisfied the arbitration clauses contained

in defendant's contract are not unconscionable. With more than two million

students taking the ACT test in 2017,7 the clauses provide the examinees an

expedient, streamlined and confidential resolution of any disputes regarding the

taking of the test and the reporting of the scores. This is a mutual goal desired

by the examinee and the test administrator. Because we conclude the clauses

are enforceable, we reverse the trial court's order.

7
  Caralee J. Adams, In the College-Testing Game, ACT Outscores SAT—for
Now, 36 Educ. Week 22, 22-23 (2017).
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                                       19
      Reversed and remanded to the trial court for proceedings consistent with

this opinion. We do not retain jurisdiction.

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