Jury Waiver and Fee Award to Defendant in CEPA Case Are Overturned

Noren v. Heartland Payment Systems, Inc., 448 N.J. Super. 486 (App. Div. 2017).  In Abbamont v. Piscataway Tp. Bd. of Educ., 238 N.J. Super. 603 (App. Div. 1990), aff’d, 138 N.J. 405 (1994), the Appellate Division ruled that there was no right to a jury trial under the Conscientious Employee Protection Act, N.J.S.A. 34:19-1 to -14 (“CEPA”).  Thereafter, the Legislature amended CEPA to provide expressly that “a jury trial shall be directed” upon a party’s request.

Today’s decision by Judge Espinosa addressed whether plaintiff had lost that statutory protection when he signed an employment agreement that purported to “waive any right to trial by jury in any suit, action or proceeding under, in connection with or to enforce [that a]greement.”  The panel found no waiver of the jury trial right and reversed a Law Division that had ruled for defendant on the waiver issue.  A multi-million dollar counsel fee awarded to the successful defendant after a 22-day bench trial on plaintiff’s CEPA and breach of contract claims, which became necessary when plaintiff defeated defendant’s motion for summary judgment, was also reversed.

In addressing the jury trial issue, Judge Espinosa began with Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430 (2014), which was discussed here.  Addressing a waiver of the right to proceed in court and instead being bound to arbitrate disputes, Atalese held that a waiver must be “clearly and unmistakably established,” and that a waiver of rights is not effective unless the party purportedly waiving has “full knowledge of his legal rights and intent to surrender those rights.”

Judge Espinosa then discussed other waiver of arbitration cases, including Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J.  124 (2001).  That case found that an arbitration clause that remitted to arbitration any controversy or claim that arose from an employment agreement or its breach was too ambiguous to extend to claims under the New Jersey Law Against Discrimination.  Since the jury waiver provision here was likewise limited to matters “in connection with or to enforce [the employment a]greement,” with no reference to statutory claims such as CEPA, the panel determined that “the provision limits the category of disputes for which a jury trial is waived.”  The matter was remanded for a jury trial.

Turning to the fee award to defendant, Judge Espinosa observed that the award could be justified only if either CEPA or the parties’ agreement provided for such an award.  CEPA allows “reasonable attorneys’ fees and court costs” for an employer only upon a court finding that “an action brought by an employee under this act was without basis in law or in fact,” a standard that, being in derogation of the common law, was to be strictly construed.  The Law Division determined that plaintiff had “failed to set forth a viable claim against the defendant pursuant to CEPA.”  But Judge Espinosa found a wide gap between a claim that is not “viable” and one that is “without basis in law or fact,” analogizing to the frivolous litigation rule, Rule 1:4-8, under which sanctions can be imposed if “no rational argument can be advanced” to support a claim, “or it is not supported by any credible evidence, or it is completely untenable.”  The fact that plaintiff defeated defendant’s summary judgment motion showed that the CEPA claim was not “without basis in law or fact.”

Nor did the parties’ agreement justify the fee award.  Like the jury trial waiver, a fee-shifting provision in the applicable agreement (which also had to be strictly construed) was limited to suits arising out of the agreement.  Moreover, the clause purported to award expert fees, which neither CEPA nor other statutes or court rules authorized.  Because plaintiff had also brought, and lost, the breach of contract claim, fees might be awardable to defendant as to that claim.  But the Law Division had not distinguished between the breach of contract and the CEPA claims.  The panel remanded for the Law Division to perform that exercise.

Finally, defendant had cross-appealed from the denial of its summary judgment motion.  But defendant did not include in the appellate appendix all the items submitted to the Law Division on the summary judgment motion, in violation of Rule 2:6-1(a)(1).  Defendant did not submit any of the exhibits offered by plaintiff as attachments to his certification that opposed the motion.  Defendant’s selective inclusion of only parts of the summary judgment record made it impossible for the panel to perform its review function.  Accordingly, the cross-appeal was dismissed.

That aspect of today’s ruling is a lesson for practitioners.  The requirement of Rule 2:6-1(a)(1), though it can be somewhat tedious, has teeth.  Failure to abide by it can cost a party its appeal.