Tomorrow, February 12, a panel of judges on Part F will hear oral argument in Wang v. COA Hudson 99, LLC. The case involves an arbitration clause in a Subscription and Purchase Agreement for a condominium residence unit. Plaintiffs on this appeal, purchasers of the unit, declined to close because, they asserted, the unit was substantially smaller than had been represented to them. Defendants in this case filed a demand for American Arbitration Association (“AAA”) arbitration, contending that the buyers had breached the contract by failing to close and that defendants were entitled to retain the buyers’ deposit. 

The buyers filed an Answer and Counterclaim in the AAA arbitration. They also filed suit in Superior Court for a declaration that the arbitration clause was invalid under Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), for an injunction of the AAA arbitration, and for damages for violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 et seq., and on other statutory and common law damage theories. 

After some other motion practice, defendants filed a pre-Answer motion for summary judgment, arguing that Atalese did not apply to the contract at issue. The Law Division denied that motion.

On appeal, defendants contend (among other things) that (a) Atalese is preempted by the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”), which expressly governed the subject agreement, (b) Atalese involved a consumer contract, and the contract here was a commercial contract, (c) plaintiffs are sophisticated purchasers and they had advice from counsel before making the purchase, and (d) plaintiffs waived their objection to arbitration by their filing of an Answer and Counterclaim in the AAA arbitration. 

Plaintiffs respond (among other things) that (a) Atalese and subsequent cases from our Supreme Court and the Appellate Division have rejected the argument that the FAA preempts Atalese, (b) this was a consumer contract, not a commercial one, as the condominium was to be their home, (c) there is no “sophisticated consumer” or “advice of counsel” exception to Atalese, and (d) plaintiffs’ AAA Answer and Counterclaim did not waive their objection to arbitration, as it was an opening filing and was followed shortly thereafter by the present lawsuit.

The parties’ extensive briefing, available here, preceded the decision yesterday in Hopkins v. LVNV Funding, in which parties there unsuccessfully contended that the invocation of the FAA in an arbitration clause insulated that provision from challenge under New Jersey caselaw. The parties may be asked about that ruling at oral argument, which can be viewed live here.