McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446 (N.J. Super. Ct. App. Div. Sept. 20, 2024)
On March 31, 2022, a lawyer and her husband sustained personal injuries after their rideshare driver ran a red light and collided with another vehicle.[1] The lawyer underwent numerous surgeries and other procedures after sustaining cervical and lumbar spine fractures, rib fractures, a protruding hernia, traumatic injuries to her abdominal wall and pelvic floor, and other physical injuries.[2] She was unable to work for over 12 months after the accident, until April 23, 2023.[3] Her husband sustained a fractured sternum and fractures to his left arm and wrist, for which he underwent an operation and received a bone graft.[4]
Approximately a year later, on February 23, 2023, the married couple filed a lawsuit against their rideshare driver, the driver and owner of the other vehicle involved, and the multinational rideshare company along with its subsidiary seeking damages for the couple’s injuries.[5] In response, the rideshare company filed a motion to compel arbitration pursuant to the Arbitration Agreement contained in its Terms of Use.[6] The New Jersey appeals court ruled the married couple’s remedy against the rideshare company was subject to arbitration, finding that the lawyer or her 12-year-old daughter had accepted the Terms of Use when using the company’s food delivery platform.[7] The case was remanded for entry of an order compelling arbitration for the married couple’s claims against the rideshare company and its subsidiary.[8]
The lawyer had created an account with the rideshare company in June 2015.[9] Before requesting the company’s services, such as a rideshare, the user must agree to the company’s Terms of Use.[10] The lawyer agreed to the rideshare company’s Terms of Use, including its Arbitration Agreement, multiple times since creating her account. The Terms of Use were amended on January 18, 2021 (“January Terms”) and on December 16, 2021 (“December Terms”).[11] The rideshare company contended that by accepting the Terms of Use on at least two separate occasions, the lawyer agreed to arbitrate any disputes with the company arising out of her use of the company’s services.
On April 1, 2021, the lawyer accepted the January Terms, which included an agreement to arbitrate personal injury claims.[12] The rideshare company’s records showed that the lawyer agreed to the January Terms by checking the box next to the statement “I have reviewed and agree to the Terms of Use” and clicking the “Confirm” button.[13] The arbitration provision contained in the January Terms includes exceptions to arbitration, the governing rules and procedures for arbitration, how to initiate an arbitration, a delegation clause, and a third-party beneficiary clause. Specifically, the January Terms stated, “You acknowledge and agree that you and [the rideshare company] are each waiving the right to a trial by jury.”[14] The lawyer did not dispute that she agreed to the January Terms.[15]
On January 8, 2022, the lawyer was notified of the December Terms through a pop-up blocking screen in the rideshare company’s app, which she had to accept before continuing to access the company’s services.[16] The pop-up notification stated “We’ve updated our terms” with two clickable hyperlinks to the rideshare company’s Terms of Use and Privacy Notice.[17] The terms required the user to attest that they were at least 18 years old. Again, the rideshare company’s records showed that the lawyer checked the box indicating that she had reviewed and agreed to the Terms of Use.[18]
The married couple argued that their minor daughter, with the lawyer’s permission, used the lawyer’s phone and confirmed her agreement to the December Terms before ordering food for delivery through the company’s food delivery platform.[19] Thus, the couple never saw or confirmed the updated Terms of Use pop-up themselves. The arbitration provision contained in Section 2 of the December Terms provides that disputes which may arise between the lawyer and the rideshare company, including disputes related to auto accidents or personal injuries, will be resolved through binding arbitration and “not in a court of law.”[20] Additionally, the delegation clause indicates that any disputes over arbitrability would be delegated to the arbitrator.[21] The arbitration provision also stated that it is governed by the Federal Arbitration Act (the “FAA”) codified at 9 U.S.C. §§ 1-16.[22]
The lower court denied the rideshare company’s motion to compel arbitration, finding that the Arbitration Agreement in the December Terms was unenforceable. Specifically, the lower court found that the Arbitration Agreement “faile[d] to clearly and unambiguously inform [the lawyer] of her waiver of the right to pursue her claims in a judicial forum,” and that the agreement lacks specificity on what a resolution, or what an alternative resolution, might be, as the January Terms contained an express jury waiver provision, while the December Terms did not.[23]
The Arbitration Agreement in the January Terms explicitly mentioned the app user was waiving their right to a jury trial. In contrast, the updated language in the December Terms states:
You and [the rideshare company] agree that any dispute, claim or controversy in any way arising out of or relating to … (ii) your access to or use of the Services at any time, [or]
(iii) incidents or accidents resulting in personal injury that you allege occurred in connection with your use of the Services … will be settled by binding arbitration between you and [the rideshare company], and not in a court of law.[24]
The couple argued that because the December Terms did not expressly state that they were waiving their right to a jury trial, the arbitration clause does not constitute an enforceable waiver of that right.[25] However, the New Jersey Supreme Court has held that it is not always necessary to expressly waive a jury trial in arbitration provisions.[26] This notion is further supported by the New Jersey Arbitration Act, which is consistent with the FAA, and favors arbitration by placing “arbitration agreements on an equal footing with other contracts[,] and enforce[s] [the agreements] according to their terms.”[27]
A court employs a two-prong inquiry when reviewing a motion to compel arbitration: (1) whether there is a valid and enforceable agreement to arbitrate disputes; and (2) whether the dispute falls within the scope of the agreement.[28] Clickwrap agreements are “routinely enforced by the courts” because they require “a physical manifestation of assent,” putting the user “on inquiry notice of the terms assented to.”[29] The appeals court recognized the “strong preference to enforce arbitration agreements, both at the state and federal level.”[30] In effect, arbitration agreements “should be read liberally in favor of arbitration.”[31] For a waiver to be valid, it “must be knowing, intelligent, and voluntary.”[32]
In Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306 (N.J. Sept. 23, 2014), the New Jersey Supreme Court held that an enforceable arbitration clause “at least in some general and sufficiently broad way, must explain that the plaintiff is giving up [his or] her right to bring [his or] her claims in court or have a jury resolve the dispute.”[33] An arbitration provision is not enforceable unless the consumer has reasonable notice of its existence.[34] However, a party cannot claim lack of notice of the terms of an arbitration provision for failure to read it.[35]
The appellate court in McGinty found that the lower court erred in denying the rideshare company’s motion to compel arbitration.[36] The court acknowledged that although “jury” is no longer explicitly stated in the updated December Terms, “magic words are not required for enforceability and the clause clearly intimates that disputes are resolved through arbitration.”[37] There was no ambiguity when the lawyer agreed to resolve disputes related to the rideshare company’s services by binding arbitration “and not in a court of law.”[38] Furthermore, the lawyer expressly agreed to binding arbitration in the January Terms and confirmed that she waived her right to a jury trial.[39] Under Atalese, specific jury trial language is not required to constitute a valid waiver of rights.[40]
In short, the McGinty case serves as a reminder that when considering whether to compel arbitration pursuant to an arbitration agreement contained within a company’s Terms of Use, two things should be evaluated: (1) does the consumer have reasonable notice of the arbitration provision; and (2) does the contract clearly state that disputes are to be resolved through arbitration, not in a court of law. To reduce ambiguity, companies should ensure that any arbitration provisions related to Arbitration Agreements in their contracts expressly state that users are waiving their right to a jury trial.
[1] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *3 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[2] Id.
[3] Id.
[4] Id. at *4.
[5] Id.
[6] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *4 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[7] Id. at *1.
[8] Id.
[9] Id.
[10] Id.
[11] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *1 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[12] Id.
[13] Id.
[14] Id.
[15] Id.
[16] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *1 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[17] Id.
[18] Id. at *2.
[19] Id.
[20] Id.
[21] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *2 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[22] Id. at *3.
[23] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *4 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[24] Id. at *7.
[25] Id.
[26] Id. (citing Arafa v. Health Express Corp., 233 A.3d 495, 509 (N.J. July 14, 2020)).
[27] Id.
[28] Id. at *6. (citing Martindale v. Sandvik, Inc., 800 A.2d 872 (N.J. July 17, 2002)).
[29] Id. (quoting Santana v. SmileDirectClub, LLC, 292 A.3d 529 (N.J. Super. Ct. App. Div. April 3, 2023)).
[30] Id. at *5.
[31] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *5 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[32] Id. at *6.
[33] Id. (citing Atalese v. U.S. Legal Servs. Grp., L.P., 99 A.3d 306, 447 (N.J. Sept. 23, 2014)).
[34] Id.
[35] Id.
[36] McGinty v. Zheng, No. A-1368-23, 2024 WL 4248446, at *7 (N.J. Super. Ct. App. Div. Sept. 20, 2024).
[37] Id. at *8.
[38] Id.
[39] Id.
[40] Id.