Appendix — County Bank of Rehoboth Beach, Delaware v. Muhammad, 127 S. Ct. 2032 (2007) (No. 907)

Bl

Muhammad v. County Bank of Rehoboth

BeachN.J.Super.A.D.,2005.

Superior Court of New Jersey,Appellate Division.

Jaliyah MUHAMMAD, on her own and on behalf of all

others similarly situated, Plaintiff-Appellant,

v.

COUNTY BANK OF REHOBOTH BEACH, Delaware;

Easy Cash; Telecash; and Main Street Corporation,

Defendants-Respondents.

FN1. Respondent County Bank certified that “Easy

Cash” and “Telecash” were trade names that were

used by County Bank in connection with the

advertising and making of its short term loans. Main

Street used the trade name “Easy Cash” but did not

use the name “Telecash”. They were not

independent entities.

Argued March 15, 2005.

Decided July 14, 2005.

Background: Borrower brought class action against lender

and servicer of payday loan, alleging that all defendants

violated the New Jersey Consumer Fraud Act, the servicer

violated usury law and the New Jersey Racketeer Influenced

and Corrupt Organizations Act (RICO), and the lender

conspired to violate RICO. Defendants moved to compel

arbitration. The Superior Court, Law Division, Union

County, granted motion. Borrower appealed.

Holdings: The Superior Court, Appellate Division, Falcone,

J.A.D., held that:

(1) unequal bargaining power was not sufficient to render

arbitration agreement unconscionable;

B2

(2) borrower's economic duress was not sufficient to render

agreement unconscionable;

(3) arbitration rule limiting discovery did not render

agreement unconscionable; and

(4) agreement provision that precluded class actions did not

render agreement unconscionable.

Affirmed.

Kestin, P.J.A.D., concurred and filed an opinion.

West Headnotes

[1] Appeal and Error 30 <"1078(1)

30 Appeal and Error

30XVI Review

30XVI1(K) Error Waived in Appellate Court

30k1078 Failure to Urge Objections

30k1078(1) k. In General. Most Cited Cases

Borrower waived on appeal her argument that Delaware law

applied to her action against lender, where she failed to brief

the issue in the trial court.

{2] T "113

25T Alternative Dispute Resolution

25TII Arbitration

25TII(A) Nature and Form of Proceeding

25Tk113 k. Arbitration Favored; Public Policy.

Most Cited Cases

(Formerly 33k1.2 Arbitration)

B3

T 138

25T Alternative Dispute Resolution

25TU Arbitration

25TII(B) Agreements to Arbitrate

25Tk136 Construction

25Tk138 k. Liberal or Strict Construction. Most

Cited Cases

(Formerly 33k7.1 Arbitration)

T C139

25T Alternative Dispute Resolution

25TU Arbitration

25TII(B) Agreements to Arbitrate

25Tk136 Construction

25Tk139 k. Construction in Favor of

Arbitration. Most Cited Cases

(Formerly 33k7.1 Arbitration)

A strong public policy exists favoring arbitration as a means

of dispute resolution and requiring liberal construction of

contracts in favor of arbitration.

[3] T 139

25T Alternative Dispute Resolution

25TU Arbitration

25TI(B) Agreements to Arbitrate

25Tk136 Construction

25Tk139 k. Construction in Favor of

Arbitration. Most Cited Cases

(Formerly 33k7.1 Arbitration)

T 210

25T Alternative Dispute Resolution

25TII Arbitration

B4

25TII(D) Performance, Breach, Enforcement, and

Contest

25Tk204 Remedies and Proceedings for

Enforcement in General

25Tk210 k. Evidence. Most Cited Cases

(Formerly 33k23.10 Arbitration)

The Federal Arbitration Act (FAA) establishes that, as a

matter of federal law, any doubts concerning the scope of

arbitrable issues should be resolved in favor of arbitration,

whether the problem at hand is the construction of the

contract language itself or an allegation of waiver, delay, or a

like defense to arbitrability. 9 U.S.C.A. § 2.

[4] T 116

25T Alternative Dispute Resolution

25TII Arbitration

25TII(A) Nature and Form of Proceeding

25Tk116 k. What Law Governs. Most Cited Cases

(Formerly 33k2.2 Arbitration)

The Federal Arbitration Act (FAA) applies in state as well as

federal courts. 9 U.S.C.A. § 2.

[5] T 137

25T Alternative Dispute Resolution

25TU Arbitration

25TH(B) Agreements to Arbitrate

251k136 Construction

25Tk137 k. In General. Most Cited Cases

(Formerly 33k7 Arbitration)

When deciding whether the parties agreed to arbitrate a

certain matter including arbitrability, courts generally should

apply ordinary state-law principles that govern the formation

of contracts.

[6] Contracts 95 1

95 Contracts

9SI Requisites and Validity

95I(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

When the issue of unconscionability is addressed, courts

lock at two factors, namely, unfairness in the formation of

the contract, which is procedural unconscionability, and

excessively disproportionate terms, which is substantive

unconscionability.

_ [7] Contracts 95 1

95 Contracts

95] Requisites and Validity

9SI(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

Procedural unconscionability can include a variety of

inadequacies, such as age, literacy, lack of sophistication,

hidden or unduly complex contract terms, bargaining tactics,

and the particular setting existing during the contract

formation process.

[8] Contracts 95 <1

95 Contracts

951 Requisites and Validity

95I(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

Substantive unconscionability suggests the exchange of

obligations so one-sided as to shock the court's conscience.

[9] Contracts 95 <1

95 Contracts

95I Requisites and Validity

95I(A) Nature and Essentials in General

95ki k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

A claim of unconscionability can succeed when one form of

it, e.g., procedural unconscionability, is greatly exceeded,

while the other form of it, e.g. substantive

unconscionability, is only marginally exceeded.

[10] Contracts 95 1

95 Contracts

951 Requisites and Validity

9SI(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

The issue of unconscionability is one of law for resolution by

the court, and the burden of proving unconscionability is on

the party asserting it.

[11] Contracts 95 <1

95 Contracts

951 Requisites and Validity

95I(A) Nature and Essentials in General

9Sk1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

A “contract of adhesion” is presented on a take-it-or-leave-it

basis, commonly in a standardized printed form, without

opportunity for the adhering party to negotiate except

perhaps on a few particulars.

B7

[12] Contracts 95 1

95 Contracts

951 Requisites and Validity

95I(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases

The mere fact that a contract is adhesive does not render it

unenforceable.

[13] Contracts 95 <1

95 Contracts

951 Requisites and Validity

9SI(A) Nature and Essentials in General

95k1 k. Nature and Grounds of Contractual

Obligation. Most Cited Cases |

In determining whether to enforce the terms of a contract of

adhesion, the appropriate analysis requires a consideration of

the subject matter of the contract, the relative bargaining

powers of each party, the degree of economic compulsion

motivating the adhering party, and the public interests

AER y the conn

[14] T <134(6)

25T Alternative Dispute Resolution

25TH Arbitration

25TII(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

25Tk134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

Borrower's contention that the arbitration forum would not

issue a binding, public opinion, and consequently would hide

payday lender's alleged scheme to evade usury laws was

B8

speculative and went against the strong policy favoring

arbitration, and thus, it was insufficient to render arbitration

clause in loan documents unconscionable.

[15] T <= 134(6)

25T Alternative Dispute Resolution

25TH Arbitration

25TI(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

25Tk134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

Although borrower had unequal bargaining power in

entering into payday loan with lender, such inequality was

insufficient to render arbitration agreement in loan

documents unconscionable, where there was no indication

that borrower ever sought to alter the terms of the agreement

and was precluded from doing so, or that lender's liability

was limited.

[16] T <"134(6)

25T Alternative Dispute Resolution

25TU Arbitration

25TIL(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

251k134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

Borrower was not under sufficient economic duress so as to

render arbitration clause in payday loan documents

unconscionable, even though at the time she obtained the

loan she was experiencing financial stress, where no

employee of lender solicited borrower or exerted pressure on

B9

her to make any loan, and, in fact, borrower had approached

lender for loan.

[17] T <= 134(6)

25T Alternative Dispute Resolution

25TH Arbitration

25TII(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

25Tk134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

National Arbitration Forum rule that limited the cost of

discovery in arbitration to the amount of the claim if the

parties could not mutually agree on the discovery to be

exchanged did not place borrower in any worse position than

she would have been in if she were able to pursue her claim

against lender in state court, and thus, rule did not render

arbitration agreement unconscionable, where the rule did not

place any more restrictive limits on the parties than the Rules

of Court regarding actions in Small Claims Court and

actually permitted more discovery than permitted by the

court rules. R. 6:4-3(e).

[18] T <= 134(6)

25T Alternative Dispute Resolution

25TII Arbitration

25TiI(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

25Tk134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

B10

T C361

25T Alternative Dispute Resolution

25TU Arbitration

25TU(H) Review, Conclusiveness, and Enforcement

of Award

25Tk360 Impeachment or Vacation

25Tk361 k. In General. Most Cited Cases

(Formerly 33k6.2 Arbitration)

Assuming arbitration forum was biased in favor of lenders,

borrower's interests were protected, and thus arbitration

clause was not unconscionable, even though an arbitrator

could not be removed before the award, given that the court

was authorized to vacate an arbitration award if there was

evidence of impartiality or corruption. 9 USCA. §

10(a)(2); N.J.S.A. 2A:24-8.

[19] T <= 134(6)

25T Alternative Dispute Resolution

25TH Arbitration

25TU(B) Agreements to Arbitrate

25Tk131 Requisites and Validity

25Tk134 Validity

251k134(6) k. Unconscionability. Most Cited

Cases

(Formerly 33k6.2 Arbitration)

Arbitration agreement between borrower and lender, which

precluded borrower from bringing class action against

lender, was not unconscionable, where the agreement

contained clear, consistent, and unambiguous language

relating to the agreement to arbitrate all disputes and

borrower's agreement not to bring, join, or participate in a

class action.

Bll

(20) T 121

25T Alternative Dispute Resolution

25TII Arbitration

25TII(A) Nature and Form of Proceeding

25Tk118 Matters Which May Be Subject to

Arbitration Under Law

25Tk121 k. Statutory Rights and Obligations.

Most Cited Cases

(Formerly 33k3.3 Arbitration)

New Jersey Racketeer Influenced and Corrupt Organizations

Act (RICO) claims are subject to arbitration.

[21] T 205

25T Alternative Dispute Resolution

25TII Arbitration

25TI(D) Performance, Breach, Enforcement, and

Contest

25Tk204 Remedies and Proceedings for

Enforcement in General

25Tk205 k. In General. Most Cited Cases

(Formerly 33k23.7 Arbitration)

Borrower was not entitled to conduct discovery prior to the

determination of the validity of the arbitration clause in loan

documents.

**342 *227 Donna Siegel Moffa, Philadelphia, PA, argued

the cause for appellant (Williams, Cuker and Berezofsky and

Trujillo Rodriguez & Richards, attorneys; Mark R. Cuker

and Ms. Moffa, on the brief).

Marc J. Zucker, Philadelphia, argued the cause for the

respondent County Bank (Weir & Partners attorneys; Susan

Verbonitz and Mr. Zucker, on the brief).

Claudia T. Callaway (Paul, Hastings, Janofsky & Walker)of

the District of Columbia Bar, admitted pro hac vice, argued

B12

the cause for respondent Main Street Service Corp.

(Sweeney & Sheehan, and Ms. Callaway, attorneys; Ms.

Callaway of counsel; J. Michael Kunsch, on the brief).

Pinilis Halpern, attorneys for amicus curiae AARP

Foundation and Counsel for National Association of

Consumer Advocates (William J. Pinilis, of counsel and on

the brief).

Before Judges KESTIN, LEFELT and FALCONE.

The opinion of the court was delivered by

**343 FALCONE, J.A.D.

The principal question presented in this interlocutory appeal,

and one that appears to be of first impression in this State, is

whether a mandatory arbitration provision in a payday loan

contract is enforceable. A “payday loan” is a short term,

single payment, unsecured consumer loan, so-called because

payment is typically due on the borrower's next payday.

Plaintiff, Jaliyah Muhammad, contends that, because the

arbitration clause is both procedurally and substantively

unconscionable, the trial court erred in its determination that

the clause was enforceable. She further contends that the

trial court should have permitted discovery prior to making

its determination that the arbitration clause is enforceable.

We disagree and affirm.

*228 1.

Here are the pertinent facts and relevant procedural history.

According to the certification of David E. Gillan, a Vice

President of defendant, County Bank of Rehoboth Beach,

Delaware (County Bank), County Bank is a federally insured

depository institution, chartered under Delaware law, whose

main office is located in Rehoboth Beach, Delaware. Since

1997, one of the products offered by County Bank is a

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payday loan. An applicant may be approved for a loan of up

to $500. County Bank uses independent servicers, including

defendant Main Street Service Corporation (Main Street) to

market its consumer loans nationally.

County Bank has entered into standardized written contracts

with its servicers. Under the terms of these contracts, the

servicers market the loans, assist in processing loan

applications, and service and collect the loans, which are

made and funded exclusively by County Bank and not the

servicers. In 2003, Market Street operated a telephone

service center located in Pennsylvania from which it

marketed, processed, serviced and collected County Bank's

loans in accordance with policies and procedures established

by County Bank.

According to plaintiff, she was enrolled in 2003 as a part-

time student at Berkley College in Paramus. Although her

tuition was financed by student loans, she had other

educational expenses, such as books, which were not

covered by the loans. In April 2003, based on a need for

cash to purchase books for her “‘next college terms”, plaintiff

responded to a Main Street advertisement. A loan

application was faxed to her. On page two of the

application, just above plaintiff's signature, were clauses

entitled, “AGREEMENT TO ARBITRATE ALL

DISPUTES” and “AGREEMENT NOT TO BRING, JOIN

OR’ PARTICIPATE IN CLASS ACTIONS.” The

application further advised plaintiff that County Bank had

“retained Main Street ... to assist in processing [her]

Application and to service [her] loan.” Plaintiff completed

and returned the loan application by facsimile, seeking a

$100 loan.

*229 Plaintiff also completed and returned by fax the one-

page Loan Note and Disclosure form that included above her

signature a number of clauses, including the following,

B14

which are the subject of the dispute presented to us:

AGREEMENT TO ARBITRATE ALL DISPUTES: You and

we agree that any and all claims, disputes or controversies

between you and us and/or the Company, any claim by either

of us against the other or the Company (or the employees,

officers, directors, agents or assigns of the other or the

Company) and any claim arising from or relating to your

application for this loan or any other **344 loan you

previously, now or may later obtain from us, this Loan Note,

this agreement to arbitrate all disputes, your agreement not to

bring, join or participate in class actions, regarding collection

' of the loan, alleging fraud or misrepresentation, whether

under the common law or pursuant to federal, state or local

statute, regulation or ordinance, including disputes as to the

matters subject to arbitration, or otherwise, shall be resolved

by binding individual (and not joint) arbitration by and under

the Code of Procedure of the National Arbitration Forum

(“NAF”) in effect at the time the claim is filed. This

agreement to arbitrate all disputes shall apply no matter by

whom or against whom the claim is filed. Rules and forms

of the NAF may be obtained and all claims shall be filed at

any NAF office, on the World Wide Web at www.arb-

forum.com, by telephone at 800-474-2371, of at “National

Arbitration Forum, P.O. Box 50191, Minneapolis, Minnesota

55405.” Your arbitration fees may be waived by the NAF in

the event you cannot afford to pay them. The cost o. any

participatory, documentary or telephone hearing, if one is

held at your or our request, will be paid for solely by us as

provided in the NAF Rules and, if a participatory hearing is

requested, it will take place at a location near your residence.

This arbitration agreement is made pursuant to a transaction

involving interstate commerce. It shall be governed by the

Federal Arbitration Act, 9 U.S.C. Sections 1-16. Judgment

upon the award may be entered by any party in any court

having jurisdiction.

NOTICE: YOU AND WE WOULD HAVE A RIGHT OR

OPPORTUNITY TO LITIGATE DISPUTES THROUGH A

B15

COURT AND HAVE A JUDGE OR JURY DECIDE THE

DISPUTES BUT HAVE AGREED INSTEAD TO

RESOLVE DISPUTES THROUGH BINDING

ARBITRATION.

AGREEMENT NOT TO BRING, JOIN OR PARTICIPATE

IN CLASS ACTIONS: To the extent permitted by law, you

agree that you will not bring, join or participate in any class

action as to any claim, dispute or controversy you may have

against us,-our employees, officers, directors, servicers and

assigns. You agree to the entry of injunctive relief to stop

such a lawsuit or to remove you as a participant in the suit.

You agree to pay the attorney's fees and court costs we incur

in seeking such relief. This Agreement does not constitute a

waiver of any of your rights and remedies to pursue a claim

individually and not as a class action in binding arbitration as

provided above.

After this language, and just above the signature line, the

following language appears: *230 BY SIGNING BELOW,

YOU AGREE TO ALL OF THE TERMS OF THIS NOTE,

INCLUDING THE AGREEMENT TO ARBITRATE ALL

DISPUTES AND THE AGREEMENT NOT TO BRING,

JOIN OR PARTICIPATE IN CLASS ACTIONS. YOU

ALSO ACKNOWLEDGE RECEIPT OF A _ FULLY

COMPLETED COPY OF THIS NOTE.

The Loan Note and Disclosure form executed by plaintiff

disclosed that the amount of the loan was $100, the finance

charge was $30, the annual percentage rate (APR) was

644.1%, and payment of $130 from plaintiff was due on May

16, 2003.

On or about May 23, 2003, plaintiff applied for and received

a payday loan of $200. The identical forms were executed

by plaintiff. The Loan Note and Disclosure **345 form for

this loan disclosed that the amount of the loan was $200, the

finance charge was $60, the APR was 608.33%, and

B16

payment of $260 from plaintiff was due on June 13, 2003."™

FN2. In her brief, plaintiff states that she “extended”

this loan twice, each time paying an interest charge of

$60 (for a total finance charge of $180 on a $200

loan). In the record presented, there is no

documentation to support this claim. The record

does support, however, that plaintiff made three

payday loans.

On or about June 6, 2003, plaintiff applied for and received

another payday loan of $200. Again, the paperwork was

identical to the forms previously executed by plaintiff. The

Loan Note and Disclosure form disclosed the amount of the

loan, the finance chargé of $60, the APR of 782.14%, and a

repayment date of June 27, 2003.

As to all three loans, the exchange of paperwork between

plaintiff and Main Street took place by facsimile and, once a

loan application was approved, funds were transmitted from

a County Bank account directly to plaintiff's checking

account.

II.

On or about February 2, 2004, plaintiff filed a class action

complaint alleging that: (1) all four defendants violated the

New Jersey Consumer Fraud Act, N.J.S.A. 56:8-1 to -20; (2)

Main Street, Easy Cash and Telecash violated the civil usury

law, *231 N.J.S.A- 31:1-1 to -9, and engaged in a pattern of

racketeering in violation of N.J.S.A. 2C:41-1 to -6.2, the New

Jersey Racketeering and Corrupt Organizations Act (RICO

statute); and (3) County Bank conspired with the other

defendants to violate the RICO statute, V.J.S.A. 2C:5-2, and

aided and abetted the other defendants in conduct that

=

B17

violated the civil and criminal usury laws of this State.

Thereafter, on or about February 23, 2004, plaintiff made a

demand upon defendants for the production of documents

and propounded thirty-eight interrogatories.

On or about March 11, 2004, defendants removed the case to

federal court on the ground that plaintiff's claims were

preempted by federal law, 12 USCA. § 1831d, because

they amounted to usury claims against a state-chartered

bank. Five days later, defendants filed a motion to stay the

action pending arbitration and to compel arbitration or, in the

alternative, to dismiss the case. On or about April 1, 2004,

while defendants’ motion was pending, plaintiff filed a

motion to remand the action to state court.

On or about May 18, 2004, U.S. Magistrate Judge Hedges

issued a report wherein he recommended that plaintiff's

remand motion should be granted. By written decision

dated June 10, 2004, Federal District Court Judge Martini

ordered remand of the matter to state court.

On or about July 7, 2004, defendants filed a notice of motion

in state court to stay the action pending arbitration and to

compel arbitration on the ground that “the parties entered

into a written arbitration agreement which is governed by the

Federal Arbitration Act, 9 US.C. § § 1-16, and provides for

arbitration of claims such as those asserted [in the

complaint].” Defendants also filed a notice of motion for a

protective order on the grounds that discovery as to plaintiff's

claims was “unwarranted and inappropriate” because the

claims “[were] referable to arbitration pursuant to the parties

written arbitration agreement....” Several weeks later,

plaintiff filed a notice of cross-motion for an order striking

defendants’ objections to discovery and compelling

responses to *232 the interrogatories and production of

documents requested in the discovery served on February 23,

2004.

B18

**346 Prior to the return date of the motion and cross-

motion, counsel for defendants wrote to plaintiff's counsel

and expressed a willingness to participate in an American

Arbitration Association (AAA) arbitration of plaintiff's

individual claim, since plaintiffs brief in opposition to

defendants' motion had suggested to defendants that

plaintiff's rights “would be better protected in an arbitration

conducted before the AAA as opposed to the NAF identified

in the parties’ arbitration agreement.” In a response dated

August 2, 2004, counsel for plaintiff emphatically declined

this offer, characterizing it as “nothing more than a ploy to

preserve advantages of an arbitration clause” and “an effort

to prevent the court from scrutinizing a practice which

[defendants] will repeat against other consumers who are not

represented by counsel and who are not able to effectively

challenge the cost issue.”

LIT.

Defendants’ motion for a stay of the action, to compel

arbitration, and for a protective order, as well as plaintiffs

cross-motion for an order striking defendants’ objections to

discovery, were argued before Judge Lyons on August 6,

2004. After reviewing New Jersey case law and declining

to address the underlying dispute that plaintiff had with

defendants as to the legality of payday loans, the motion

judge identified the agreement between plaintiff and

defendants as a contract of adhesion and noted that the issues

presented were whether “the provisions in [the] contract are

such that they are to be enforced on the procedura! issue of

arbitration ...” and whether the arbitration piun as

“substantively put forth is such as to be unconscionable.”

Judge Lyons decided these issues in favor of defendants.

Immediately after Judge Lyons rendered his oral decision, a

colloquy ensued between the court and counsel as to the

B19

form of order. Counsel for plaintiff requested an

opportunity to submit a form of order, which would dismiss

the case without prejudice “so that [plaintiff] can take it up

as a matter of right ... to the *233 Appellate Division.”

Over the objection of defendants’ counsel, Judge Lyons

permitted both sides to submit a letter brief as to the form of

order.

By letter brief dated August 9, 2004, counsel for plaintiff

asked Judge Lyons “to dismiss [the] case without prejudice

rather than to stay [the] case indefinitely pending the

outcome of arbitration proceedings.” A proposed form of

order was submitted with the letter brief. Counsel for

defendants forwarded a proposed form of order with a letter

brief, dated August 11, 2004, in which plaintiff's request was

opposed.

By order dated August 18, 2004, Judge Lyons stayed

plaintiff's action pending arbitration pursuant to § 3 of the

FAA, compelled arbitration of plaintiff's claims pursuant to §

4 of the FAA, and denied plaintiff's request “to modify [the]

order to provide for the dismissal of [the] case.” That same

day, Judge Lyons signed a protective order under R. 4:10-3a,

which provides, in pertinent part, “[u]pon motion ... by the

person from whom discovery is sought, and for good cause

shown, the court may make [an] order which justice requires

. to protect a party or person from annoyance ... or undue

burden or expense, ... (a) [t]hat the discovery not be had.”

Plaintiff filed a timely motion for leave to appeal from these

two orders, which we granted on October 4, 2004.

Thereafter, by order dated January 5, 2005, we granted the

application of AARP, Consumers League of New Jersey and

National Association of Consumer Advocates to appear as

amici curiae. R. 1:13-9.

B20

**347 IV.

[1] On appeal, plaintiff contends that the trial court erred:

(1) by ordering plaintiff to proceed to arbitration because the

arbitration agreement is unenforceable under New Jersey

law; and (2) by not permitting discovery prior to making the

arbitration decision.’ In support of her claim that the

arbitration clause is | *234 unconscionable and, thus,

unenforceable, plaintiff argues that the “arbitration provision

at issue is a one-sided contract, unilaterally imposed upon

financially distressed [and unsophisticated] consumers in a

market devoid of choices.” She argues further that the

arbitration clause “requires that small claims be heard on an

individual basis only, in a forum [NAF] lacking impartiality

that operates under a cloak of confidentiality and so severely

limits discovery that it denies consumers the ability [to] fully

and fairly litigate their claims.”

FN3. In a footnote in their appellate brief, defendants

contend that because the agreement between the

parties contained a choice of law provision, i.e.,

“{t]his note is governed by Delaware law”, that the

law of that state should apply. We note that this

choice-of-law question was not briefed in the trial

court or discussed by the trial judge in his ruling. It

is “wholly improper” to raise the issue now in a

footnote. See Almog v. Israel Travel Advisory Serv..

Inc., 298 NJ Super. 145, 155, 689 A2d_ 158

(App.Div.), certif, granted, 151 N.J. 463, 700 A.2d

876 (1997), appeal dismissed, 152 N.J_361, 704 A.2d

1297, cert. denied, 525 U.S. 817. 119 S.Ct. 55, 142

L.Ed.2d 42 (1998).

In support of plaintiff, amici contend that, since the usury

laws of New Jersey protect consumers, the arbitration clause

should be invalidated because it is a way to “hide ...

B21

exploitative business practices from public scrutiny and

prevent vulnerable borrowers from obtaining redress and

changing industry practices.” In their joint brief, amici set

forth the history and-nature of payday loans and describe

how lenders use exploitative practices that are costly to

borrowers and exacerbate borrowers’ problems with debt.

They also discuss how lenders’ relationships with out-of-state

banks effectively evade state usury loans. | While these

claims are arguably compelling and raise important issues,

they do not specifically address the issues before us, namely,

the enforceability of the arbitration clause and the discovery

question. We note, before addressing the issues presented,

that if the practice of offering payday loans in this State is to

be abolished, it will take legislative action to do so. See

Bankwest,_ Inc. __v. _ Baker. 324 F.Supp.2d 1333

(N.D.Ga.2004)(the Georgia law, O.C.G.A. § § 16-17-1 to

16-17-10, that declared payday loans illegal in that state was

upheld as constitutional).

*235 [2] We have considered and analyzed the written and

oral arguments of the parties and the brief submitted by

amici and, applying prevailing legal principles and

procedural standards, including the principle that “this State

has a strong public policy ‘favoring arbitration as a means of

dispute resolution and requiring liberal construction of

contracts in favor of arbitration’ ”, Caruso vy. Ravenswood

Developers, Inc., 337 N.J.Super. 499. 504, 767 A.2d 979

(App.Div.2001)(quoting Alamo Rent A Car, Inc. v. Galarza,

306 N.J.Super. 384, 389, 703 A.2d 961 (App.Div.1997)), we

reject plaintiff's claims and affirm.

V.

{3] Congress enacted the FAA, 9 USCA. § § 1-16, to

“reverse longstanding judicial hostility’ to arbitration

agreements and to “place arbitration agreements upon the

B22

same footing as other contracts.” Gilmer __v.

Interstate/Johnson_Lane_Corp., 500 U.S. 20, 24, 111 S.Ct.

1647, 1651, . L.Ed2d 26, 36 (1991). The New Jersey

counterpart to iw FAA is **348N.J.S.4. 2A:24-1to-11. In-

pertinent part, § 2 of the FAA provides:

A written provision in any ... contract evidencing a

transaction involving commerce to settle by arbitration a

controversy thereafter arising out of such contract or

transaction or the refusal to perform the whole or any part

thereof, or an agreement in writing to submit to arbitration an

existing controversy arising out of such a contract,

transaction, or refusal, shall be valid, irrevocable, and

enforceable, save upon such grounds as exist at law or in

equity for the revocation of any contract.

[9 USCA. § 2]

See N.JS.A. 2A:24-1. In Southland Corp. v. Keating, 465

U.S. 1, 10, 104 S.Ct. 852, 854, 79 L.Ed.2d 1, 12 (1984), the

Supreme Court stated that § 2 of the FAA was enacted to

establish a national policy “favoring” arbitration. The

Arbitration Act establishes that, as a matter of federal law,

any doubts concerning the scope of arbitrable issues should

be resolved in favor of arbitration, whether the problem at

hand is the construction of the contract language itself or an

allegation of waiver, delay, or a like defense to arbitrability.

[Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460

U.S__1. 24-25, 103 S.Ct. 927, 941. 74 LEd2d 765, 785

(1983).]

*236 [4][5] While the FAA applies in state as well as

federal courts, Southland Corp., supra, 465 U.S. at 12, 104

S.Ct at 859. 79 L.Ed2d at 13, “[g]enerally, contract

defenses, such as fraud, duress, or unconscionability may be

applied to invalidate arbitration agreements without

contravening § 2.” Doctor's Assocs., Inc. v. Casarotto, 517

U.S. 681, 686-87. 116 S.Ct 1652, 1653. 134 L.Ed 2d 902,

908-09 (1996). See also Gras _v. Associates First Capital

B23

Corp., 346 N.J.Super. 42, 47. 786 A.2d 886 (App.Div.2001),

certif, denied, 171 NJ. 445, 794 A.2d 184 (2002). Thus,

“{w]hen deciding whether the parties agreed to arbitrate a

certain matter (including arbitrability), courts generally ...

should apply ordinary state-law principles that govern the

formation of contracts.” First Options of Chicago, Inc._y.

Kaplan. 514 U.S. 938. 944, 115 S.Ct 1920. 1924, 13]

L.Ed.2d 985, 993 (1995).

[6][7][8][9] In this state, we recognize unconscionability as a

basis for invalidating a contract. See Saxon Constr. and

Management Corp. v. Masterclean of North Carolina, 273

N.J.Super. 231, 236, 641 A.2d 1056 (App.Div.)(“It is equally

well recognized that our courts may refuse to enforce

contracts that are unconscionable or violate public policy”),

certif denied, 137 NJ. 314, 645 A.2d 142 (1994). But,

“{t]here is no hard and fast definition of unconscionability.”

Lucier v. Williams, 366 N.J.Super. 485, 492. 841 A.2d 907

(App.Div.2004). In Howard v. Diolosa, 241 N.J.Super. 222,

230, 574 A.2d 995 (App.Div.), certif denied, 122 NJ. 414,

585 _A.2d 409 (1990), we described unconscionability as

“overreaching or imposition resulting from a_ bargaining

disparity between the parties, or such patent unfairness in the

contract that no reasonable person not acting under

compulsion or out of necessity would accept its terms.”

When the issue of unconscionability is addressed, we look at

two factors, namely, unfairness in the formation of the

contract (procedural unconscionability) and excessively

-disproportionate terms (substantive unconscionability).

Sitogum Holdings, Inc. v. Ropes, 352 N.J.Super. 555, 564,

800 A.2d 915 (Ch.Div.2002). Procedural unconscionability

“can include a variety of inadequacies, such as age, literacy,

lack of sophistication, hidden or unduly *237 complex

contract terms, bargaining tactics, and the particular setting

existing during the contract formation process.”**349 [bid

Substantive unconscionability “suggests the exchange of

obligations so one-sided as to shock the court's conscience.”

B24

Id_ at 565, 800 A.2d 915. Applying a “sliding scale” of

unconscionability, a claim of unconscionability can succeed

when one form of it, e.g. procedural unconscionability, is

greatly exceeded, while the other form of it, e.g., substantive

unconscionability, is only marginally exceeded. /d at 565-

67, 800 A.2d 915.

[10] The issue of unconscionability is one of law for

resolution by the court, Gladden vy. Cadillac Motor Car Div.,

General Motors Corp., 83 NJ. 320, 337, 416 A.2d 394

(1980), and the burden of proving unconscionability is on the

party asserting it, Howard, supra, 241 N.J.Super. at 230, 574

A.2d 995.

[11][12][13] Here, plaintiff contends that the agreement was

a contract of adhesion and thus procedurally unconscionable.

While it appears that the agreement between plaintiff and

defendants is a contract of adhesion-“it is presented on a

take-it-or-leave-it basis, commonly in a standardized printed

form, without opportunity for the ‘adhering’ party to

negotiate except perhaps on a few particulars”, Rudbart v.

North Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 353.

605 A.2d 681, cert. denied sub nom., First Fid Bank v.

Rudbart, 506 U.S. 871, 113 S.Ct 203, 121 LEd2d 145

(1992)-“the mere fact that a contract is adhesive does not

render it unenforceable.” Gras, supra, 346 N.J.Super. at 48,

786 A.2d 886. In fact, a finding that a contract is one of

adhesion is the “beginning, not the end, of the inquiry.”

Rudbart,_ supra, 127 N.J. at 354, 605 A.2d 681. In

determining whether to enforce the terms of a contract of

adhesion, the appropriate analysis requires a consideration of

the subject matter of the contract, the relative bargaining

powers of each party, the degree of economic compulsion

motivating the adhering party, and the public interests

affected by the contract. /d_at 356, 605 A.2d 681.

B25

*238 VI.

[14] We now analyze plaintiff's claim of unenforceability in

light of the four Rudbart factors. The parties appear to

agree that the subject matter of the agreement is arbitration.

Plaintiff contends that the arbitration forum will not issue a

binding, public opinion, and consequently will hide

defendants' “scheme” to evade the usury laws of this State.

Besides being somewhat speculative, this contention must be

balanced against this State's strong policy favoring

arbitration.

[15] Plaintiff argues on the second Rudbart factor that the

relative bargaining position of the parties and “the very terms

of the loan constitute evidence that payday borrowers have a

high degree of economic compulsion and are desperate

enough to accept almost any contract provision, no matter

how unfavorable.” In this regard, plaintiff characterizes

herself as “untrained and unsophisticated” and claims she

had “no real choice but to agree to arbitration” because all

payday lenders include an arbitration clause. As to

defendants, plaintiff contends that County Bank was a

“repeat player” in the payday loan market with an

understanding of how clauses imposing arbitration and

banning class actions insulated it from liability.

To bolster her claim that disparities in knowledge can

support a finding of unconscionability, plaintiff cites the

Lucier case, 366 N.J.Super. at 485, 841 A.2d 907. In Lucier,

the question presented to us was the enforceability of a

limitation-of-liability provision in a home _ inspection

contract, the effect of which was to limit the home buyer's

potential recovery to one-half of the fee paid for the home

inspection service.**350 The plaintiffs claimed damages

_of $10,000, but the limitation-of-liability provision in the

form contract limited defendant's liability to $192.50. The

contract also contained an enforceable arbitration clause.

B26

We held the provision was unconscionable and therefore

unenforceable. Our determination was based on a number

of factors: (1) the document was a contract of adhesion that

defendant refused to alter despite plaintiffs’ protests; (2) the

parties were in a grossly disproportionate*239 bargaining

position; (3) the potential damage level was so nominal as to

avoid almost all responsibility for the professional's

negligence; and (4) the provision was “contrary to the state's

public policy of effectuating the purpose of a home

inspection contract to render reliable evaluation of a home's

fitness for purchase and holding professionals to certain

industry standards.” Lucier, supra, 366 N.J.Super. at 493,

841 4.2d 907.

We are satisfied that plaintiffs reliance on Lucier is

misplaced because the facts are distinguishable. While the

disparity in bargaining position was~a factor in our decision

in Lucier, equally compelling was the finding that the

provision was against public policy because it severely

limited defendant's responsibility. Here, while there was

certainly unequal bargaining power between the parties,

disparity will not always render a contract unconscionable.

See Gilmer, supra, 500 U.S. at 33, 111 S.Ct at 1655. 114

L.Ed.2d at 41 (“Mere inequality in bargaining power ... is not

sufficient reason to hold that arbitration agreements are

never enforceable in the employment context”). See also

Martindale v. Sandvik, Inc., 173 N.J.76, 90, 800 A.2d 872

(2002)(“Virtually every court that has considered the

adhesive effect of arbitration provisions in employment

applications or employment agreements has upheld the

arbitration provision contained therein despite potentially

unequal bargaining power between the employer and

employee’).

In addition, there is nothing in the record presented to us to

establish that plaintiff ever sought to alter the terms of the

agreement and was precluded from doing so, or that

B27

defendants’ liability was limited. It seems clear that plaintiff

had the opportunity and ability to read the plain language of

the agreement and was fairly apprised that she was not

giving up, as she claims, her ability to vindicate her rights.

Rather, plaintiff was agreeing to have the opportunity to

vindicate those rights in an arbitration and not a court. See

Van Syoc_v. Walter, 259 NJ Super. 337, 339, 613 A.2d

490(App.Div.1992) “when ... parties agree to arbitrate, they

are opting for a nonjudicial manner of resolving their

disputes”, *240 and “[iJ}t is not whether the contract can be

attacked, but the forum in which the attack is to take place)”,

certif. denied, 133 N.J_ 430, 627 A.2d 1136 (1993).

[16] Regarding the third Rudbart factor, plaintiff contends

that economic duress forced her to make the agreement in

order “to cover immediate expenses for which she had no

cash.” “Economic duress occurs when the party alleging it is

‘the victim of a wrongful or unlawful act or threat’, which

‘deprives the victim of his [or her] unfettered will.’ ”

Quigley v. KPMG Peat Marwick, LLP, 330 N.J.Super. 252,

263. 749 A2d 405 (App.Div.)(quoting 13 Williston on

Contracts, § 1617 (Jaeger ed.1970)), certif, denied, 165 N.J.

527, 760 A.2d 781 (2000). In Continental Bank v. Barclay

Riding Academy, Inc., 93 N.J_ 153, 177, 459 A.2d 1163, cert.

denied, 464 U.S. 994, 104 S.Ct. 488, 78 L.Ed.2d 684 (1983),

we noted “that the ‘decisive factor’ is the wrongfulness of

the pressure exerted [,|” and that “[t]he term ‘wrongful’ ...

encompasses more than criminal or tortuous acts, for conduct

**351 may be iegal but still oppressive.” Further, wrongful

acts can include acts that are wrong in a moral or equitable

sense. /bid.

In Quigley, supra._330 N.J.Super. at 252, 749 A.2d 405,

plaintiff claimed that the trial court erred in enforcing an

arbitration agreement that she had signed after having been

advised by her supervisor that she would be terminated if she

declined to sign. In reversing the trial court, we stated that

B28

“courts that have considered this issue [of whether the threat

of termination of employment for refusing to agree to

arbitration is oppressive] have consistently determined that

the economic coercion of obtaining or keeping a job, without

more, is insufficient to overcome an agreement to arbitrate

statutory claims.” /d_ at 264. 749 A.2d 405. We made a

finding that plaintiff had not demonstrated more than

ordinary economic pressure faced by every employee who

needed a job and concluded thu: there was no economic

duress to render the arbitration agreement unconscionable.

Id. at 266, 749 A.2d 405.

*241 We are satisfied here that plaintiff's circumstances are

less compelling than an employee who is forced to sign an

arbitration agreement as a condition of continued

employment. Plaintiff was not the victim of a wrongful or

unlawful act or threat. She was simply a person who needed

money to purchase school books and decided to meet this

expense by making a number of payday loans. No

employee of the defendants solicited plaintiff or exerted

pressure on her to make any of the loans. Indeed, plaintiff

approached the defendants. And, while plaintiff may have

been experiencing financial stress, she was not, under these

facts, the victim of sufficient economic duress to render the

arbitration clause she signed unconscionable.

As to the final Rudbart factor, i.e., whether a contract of

adhesion is unconscionable because the public interest is

affected by the agreement, plaintiff contends that: (A) the

procedural limitations on the chosen forum, NAF, especially

NAF rules 37 and 29, preclude her from a full and fair

opportunity to litigate her claim; (B) that NAF is biased;

and (C) the arbitration clause is exculpatory in that it denies

the borrower the right to participate in a class action suit.

B29

A.

In regard to NAF procedures, plaintiff argues that they are

defective because they are confidential and do not permit

stare decisis or collateral estoppel. She specifically objects

to NAF Rule 37G (Awards), which provides that an award

shall not include any reasons, findings of fact or conclusions

of law unless requested and an additional fee of $100 is paid,

and NAF Rule 29 (Discovery), which limits discovery to “an

amount commensurate with the claim-even if the claim

involves complex legal and factual issues.” These claims

are without merit. Because plaintiff is unable to establish

precedents through her arbitration, this claimed “defect”

does not render the forum violative of public policy,

especially considering our strong policy favoring arbitration.

*242 As to NAF Rule 37G, plaintiff has not explained why

its terms preclude her from a full and fair opportunity for her

claims to be heard. Plaintiff's conclusionary statement and

lack of supporting legal argument as to this rule make it

impossible for us to consider this issue. See Miller v. Reis,

189 = NJSuper. _437, 441, 460 A2d 210

(App.Div.1983)(appellants’ request for a declaration of third-

party defendant's liability on a minor issue was not

considered on appeal because the issue was raised in a

conclusionary statement by the brief writer, but was not

briefed). See also **352State v. Hild, 148 N..J.Super. 294,

296, 372 A.2d 642 (App.Div.1977).

[17] As noted, plaintiff argues that NAF Rule 29 precludes

her from effectively litigating her small value claim. She

maintains that defendants acted in concert through a complex

legal arrangement to evade New Jersey's usury laws by

means of a “rent-a-charter” scheme, whereby County Bank

lent its Delaware charter to Main Street to enable Main

Street to do business in this State without being subject to

our usury laws. In order to prove the scheme, plaintiff

B30

contends she will need extensive discovery. This issue is

likewise without merit.

NAF Rule 29A provides, in pertinent part, “[p]arties shall

cooperate in the exchange of documents and information(,]”

and any party “requesting discovery shall contact other

[p]arties and discuss discovery [r]equests and any objections

and arrange for the exchange of documents and

information.” In pertinent part, NAF Rule 29B provides:

If the parties are unable to resolve discovery matters under

Rule 29A, a Party may request the disclosure of documents,

swom answers to not more than twenty-five (25) written

questions, or one or more depositions before a Hearing

where:

1. The information sought is relevant to a Claim or

Response, reliable, and informative to the Arbitrator;

2. The cost is commensurate with the amount of the Claim;

and

3. The Request is reasonable and not unduly burdensome

and expensive.

Pursuant to NAF Rule 29C, a party may request other

discovery, including requests for admissions and requests for

physical or mental examinations under the same three

conditions listed under Rule 29B. And, under NAF Rule

29G, the arbitrator “may draw *243 an unfavorable, adverse

inference or presumption from the failure of a party to

provide discovery” and may assess “costs, expenses, and

fees, including reasonable attorney fees related to seeking or

resisting discovery under [the rule] ... against the non-

prevailing party.”

The plain language of NAF Rule 29 makes it clear that the

cost of discovery cannot exceed the amount of the claim, but

this limitation is imposed only if the parties cannot mutually

agree on the discovery to be exchanged. Despite this

B31

apparent limitation on discovery, we are satisfied that Rule

29 does not place any more restrictive limits on the parties

than do our Rules of Court regarding actions filed in Small

Claims Court and, indeed, may permit more discovery than

permitted by the court rules. Under NAF Rule 29, discovery

is limited to the amount in controversy only if the parties are

unable to resolve discovery issues between themselves. In

these circumstances, the arbitrator may order answers to

twenty-five interrogatories, “one or more depositions”, and

impose costs and sanctions if the non-producing party acted

in bad faith. Under R. 6:4-3(e), “each party may serve

interrogatories consisting of no more than five questions

without parts.” There are, however, no provisions for

depositions or counsel fees. In these circumstances, since

the limited discovery provided by NAF Rule 29 does not

place plaintiff in any worse position than she would be in if

she were able to pursue her claim in state court, her claim

that the arbitration provision is unconscionable must fail.

B.

[18] Plaintiff claims that the arbitration clause is

unconscionable because the chosen forum, NAF, is biased

against consumers who bring suit against lenders. In

response to this claim, defendants point to **353 a number

of reported decisions where the issue of NAF's bias was

raised and rejected. See Marsh v. First USA Bank, N.A., 103

F.Supp.2d 909 (N.D.Tex.2000); Bank One, N.A. v. Coates,

125 F-Supp.2d 819 (S.D.Miss.2001), aff'd, 2002 WL 663804

(Sth Cir:2002); Hutcherson v. Sears, Roebuck & Co., 342

*244 Ill App.3d 109, 276 Jil Dec. 127, 793 NE2d 886,

appeal denied, 205 Ill.2d 582, 281 Jil. Dec. 78, 803 N.E.2d

482 (2003).

In Marsh, the plaintiffs alleged that the NAF could not

provide fair, impartial and effective relief because the NAF

B32

was prejudiced against consumers and engaged in a collusive

effort with lenders to defeat consumer claims. The plaintiffs

pointed to statistics which indicated that the bank had

prevailed against holders of its credit cards in the

overwhelming majority of disputes resolved through NAF.

In further support of their claim of bias, plaintiffs pointed to

NAF's reluctance to disclose information to its arbitrators,

NAF's exorbitant or indeterminate fees, and NAF's ability to

change its code of procedure at the whim of its director.

In finding the plaintiffs’ allegations unfounded, the court in

Marsh was “satisfied that NAF will provide a reasonable,

fair, and impartial forum” for the plaintiffs to seek redress of

their grievances. The court noted that NAF's Code of

Procedure and Code of Conduct had provisions addressing

conflicts of interest, disqualification of potential! arbitrators,

and peremptory challenges. Further, the court noted that an

arbitration was subject to review by the court under 9

US.C.A. § 10.

Here, we are satisfied that plaintiff's interests are protected,

since, under 9 USCA. § 10(a)(2) and N.JS.A. 2A:24-8,

even though an arbitrator may not be removed before the

award, a court may vacate an arbitration award if there is

evidence of impartiality or corruption.

..

[19] Plaintiff contends that the arbitration clause is

unconscionable and contrary to public policy because it

denies the borrower the right to participate in a class action

suit, “effectively leaving payday borrowers without a

realistic remedy.” While plaintiff “does not contend that all

contractual arbitration provisions that preclude aggregation

of claims are unconscionable”, she does allege “that in these

circumstances, the preclusion [of class *245 action suits]

B33

supports a finding of unconscionability based on the totality

of the circumstances.”

In support of her contention, plaintiff cites to numerous out-

of-state cases, including several cases submitted since oral

argument under R. 2:6-11, to support her claim that

preclusion of class action suits can invalidate an arbitration

case. Since we discern no basis to depart from Gras, supra,

346 N.J Super. at 45, 786 A.2d 886, which directly addresses

the issue, we see no need to discuss these cases, except for

two New Jersey cases, Rockel v. Cherry Hill Dodge, 368

N.J.Super. 577, 847 A.2d 621 (App.Div.), certif denied, 181

N.J_ 545, 859 A.2d 689 (2004) and Discover Bank v. Shea,

362 N.J.Super. 200, 827 A.2d 358 (Law Div.2001), cited by

plaintiff to support her claim that Judge Lyons overstated the

holding of Gras.

In Gras, the plaintiffs filed suit against finance companies

claiming that the credit life insurance provisions in their loan

agreements violated the New Jersey Consumer Fraud Act

(CFA), N.JS.A. 56:8-1 to -20. The defendants filed a

demand for arbitration pursuant to the arbitration agreement

contained in the loan documents signed by plaintiffs. The

plaintiffs moved to stay the arbitration and the defendants

cross-moved for a stay pending **354 arbitration. The

motion judge granted the defendants’ motion and dismissed

the plaintiffs' complaint. The plaintiffs appealed, claiming

that the arbitration agreement was void because it

contravened public policy by precluding class actions.

On appeal, after reviewing a number of federal cases that

held the preclusion of class actions did not preclude

arbitration and a number of cases cited by the plaintiffs for

the contrary position and, finding the plaintiffs’ authority

“not persuasive”, we rejected their claim. We noted, in

affirming the motion judge, that “two significant public

policies must be harmonized”, namely, the CFA's policy to

B34

“root out consumer fraud” and the “competing and

compelling public policy favoring arbitration as a means of

dispute resolution and requiring liberal construction of

contracts in favor *246 of arbitration.” Jd at 53-54, 786

A.2d 886. In resolving the conflict, we stated:

On balance, even if we consider the policies in equipoise, we

must consider that here the parties have agreed to permit the

issues to be resolved in the arbitration forum. We recognize

that the parties were in distinctly different bargaining

positions. We are less certain of the economic compulsion

that caused plaintiffs to recast each loan with a new loan

over a short period of time. Nevertheless, even assuming

that these factors ultimately favor plaintiffs’ position, the

absence of a legislative mandate or overriding public policy

in favor of class actions leads us to conclude that the

arbitration provision here is enforceable.

[Id. at 54, 786 A.2d 886. ]

We are satisfied that plaintiff's reliance on Rockel, supra,

368 N.J.Super. at 577, 847 A.2d 621, is misplaced. There,

we noted that the “arbitration agreement [was] highly

ambiguous because the parties executed two documents

which contain separate and somewhat disparate arbitration

clauses”, and concluded “that the uncertain content of the

parties’ agreement to arbitrate, the contracts’ conflicting

descriptions of the manner and procedure which would

govern the arbitration proceedings, the absence of a

definitive waiver of plaintiffs’ statutory claims, and the

obscure appearance and location of the arbitration

provisions, militate against the entry of an order requiring

arbitration over plaintiffs' objection.” Jd_at 580-81, 847

A.2d 621. In reversing the trial court's dismissal of the

plaintiffs’ complaint, we noted the distinctions between the

provisions in question and those considered in Gras and held

that the ambiguity in the arbitration agreement was “fatal to

the compelling of the arbitration of plaintiffs' CFA claims.”

B35

Id_ at 581, 847 A.2d 621. Finally, we note the following,

which clearly distinguishes Rockel from Gras and supports

defendants’ position in this case:

The delicate balance between the policies of the CFA and the

policy in favor of arbitration requires that the consumer be

given reasonable notice of such provisions, that the

provisions contain a clear waiver of statutory rights, and that

the arbitration agreement be phrased in unambiguous terms.

As explained, the arbitration agreement in question fails to

meet these critical requirements. | While we continue to

adhere to Gras's holdings that arbitration may be compelled

in a consumer transaction even when imposed by a party

possessing superior bargaining power, and that a party

claiming a contract to be the product of unconscionable

conduct prohibited by the CFA may be compelled to

arbitrate because of the presence of an arbitration clause

contained in the very contract under attack, we *247

conclude that any attempt to impose arbitration **355

through an arbitration agreement less clear and less

noticeable than that considered in Gras is not likely to pass

muster. Here, the presence of two conflicting arbitration

provisions, the expression of a waiver of the right to trial by

jury in small print, and the absence of any other clear

warning or caution of the waiver of statutory rights, requires

a rejection of these claims.

[/d. at 587, 847 A.2d 621.]

Here, the factors noted in Rockel, which militate against

mandatory arbitration, are not present. The loan application

and the loan note and disclosure form faxed to plaintiff

contain clear, consistent, and unambiguous language relating

to the parties’ agreement to arbitrate all disputes and

plaintiff's agreement not to bring, join or participate in class

actions. Both forms set forth in capital letters, above

plaintiff's signature, a notice that the parties agreed to resolve

all disputes through binding arbitration. And, the loan note

B36

and disclosure set forth in capital letters an acknowledgment

by plaintiff that by signing the form she was agreeing to

arbitrate all disputes and agreeing not to bring, join or

participate in class actions.

We are also satisfied that plaintiffs reliance on Discover

Bank, supra, 362 N.J.Super. at 200, 827 A.2d 358, is equally

unavailing. There, the plaintiff brought an action in New

Jersey to compel arbitration against a defendant who had

filed a class action against the plaintiff in California on

behalf of the bank's credit card customers who had allegedly

-been charged improper overlimit fees. The plaintiff's

demand to compel arbitration was denied and its complaint

was dismissed. It appears that the original agreement

between the credit cardholder and the bank did not contain

an arbitration clause, but the bank amended its credit card

agreement by way of a “bill stuffer” notice to provide for

arbitration and to force its cardholders to give up their right

to file a class action. Any cardholder who did not accept the

new terms would have their account closed by the bank. In

these circumstances, including a finding that the bank was

able to “completely avoid accountability whenever the harm

to each class member is small enough”, the trial court

concluded that the arbitration %*248 agreement was

unenforceable and the agreement precluding class actions

was unconscionable and unenforceable.

Discover Bank is clearly distinguishable from the case

presented to us. ‘First, unlike Discover Bank where the

consumer received “notice” via a “bill stuffer”, plaintiff in

this case was clearly notified that she waived her right to file

a class action. Second, we note that Discover Bank, which

is a Law Division opinion, was decided two months prior to

our decision in Gras and, to the extent it is in conflict with

our holding in Gras, it is the latter that controls.

B37

[20] Before addressing plaintiff's final argument that

discovery was necessary, we note that plaintiff's contention

that the agreement is unenforceable because her RICO claim

cannot be vindicated in arbitration is clearly without merit.

RICO claims are subject to arbitration. Caruso, supra, 337

N.JSuper._at_ 505, 767 A.2d 979; Gras, supra, 346

N.J.Super. at 52, 786 A.2d 886. See also Republic of the

Philippines v. Westinghouse Elec. Corp. 714 F.Supp. 1362.

1373 (D.N.J.1989).

VII.

[21] Plaintiff contends that Judge Lyons erred in ruling that

the matter should proceed to arbitration without first

permitting discovery. In support of her claim that discovery

should have been permitted prior to the determination as to

the validity of the arbitration clause, plaintiff **356 cites

Blair _v. Scott Specialty Gases, 283 F.3d 595 (3d Cir.2002)

and Hayes v. County Bank, 185 Misc.2d 414, 713 N.Y.S.2d

267 (2000). While the court permitted some limited

discovery in each of these cases, we decline to adopt that

approach as a requirement in this case. “Arbitration can

attain its goal of providing final, speedy and inexpensive

settlement of disputes only if judicial interference is

minimized.” Barcon Associates _v. Tri-County_Asphalt

Corp., 86 NJ. 179, 187, 430 A.2d 214 (1981). Here,

plaintiff has not convinced us that discovery was needed

before Judge Lyons made his decision that the matter should

proceed to arbitration.

*249 VIII.

In summary, we are satisfied that plaintiff has failed to meet

her burden that the contract was unconscionable and

therefore unenforceable. We are equally satisfied that

B38

plaintiff can vindicate her claims in arbitration.

Accordingly, the orders of August 18, 2004 are affirmed.

KESTIN, P.J.A.D., concurring.

While concurring with the result, I respectfully depart from

the majority's approach in this case. Because of plaintiff's

rejection of defendants’ offer to arbitrate the matter under the

aegis of the American Arbitration Association and pursuant

to its established rules and procedures, I would not consider

any of plaintiffs arguments addressed to the validity of

NAF's arbitration procedures. Having forgone the

opportunity. to avoid the asserted bias and procedural

unconscionability inflicted by NAF arbitration standards,

plaintiff should not now be heard to attack those very

processes, which she, for a second time, elected to be bound

by.

On a more basic level, I share the majority's views in

resolving the conflict between two public policies: on the

one hand, the rules permitting class actions and the standards

governing them; and, on the other hand, our system's

commitment to arbitration as an alternative remedial choice

to litigation. I see no enforceable bar to plaintiff's right to

raise, in arbitration, the important public policies she

advances stemming from this State's usury laws or any other

pertinent question of law she may choose to argue.

N.J.Super.A.D.,2005.

Muhammad v. County Bank of Rehoboth Beach

379 N.J.Super. 222, 877 A.2d 340

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