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Dunnington Wins Motion to Dismiss & Motion to Quash Offer of Judgment in NJ Discrimination Case

By March 5, 2021No Comments

On January 11, 2021, the Superior Court of New Jersey granted Dunnington client LA Fitness’ motion to dismiss in favor of arbitration for claims brought against it by a former employee under New Jersey’s Law Against Discrimination (“LAD”) statute.

Although the Plaintiff executed two arbitration agreements as part of her employment, the former employee brought LAD claims against LA Fitness in 2018—two years after the end of her employment. In 2018, LA Fitness moved to dismiss those claims based on the arbitration agreement signed by Plaintiff. The Judge on the matter at that time denied the motion, but since the Judge’s order was not accompanied by a written or oral Opinion or Statement Reasons, the Appellate Division reversed and remanded, with instruction to consider if an evidentiary hearing was warranted. The new Superior Court Judge determined that he would permit discovery and hold a trial on the issue of the circumstances under which Plaintiff executed the arbitration agreement.

Before the evidentiary hearing, on July 6, 2020, Dunnington won in its opposition to Plaintiff’s motion to quash LA Fitness’ offer of judgment. An offer of judgment is a tool that is aimed at encouraging settlement by discouraging a party from rejecting a reasonable settlement offer, wherein a party offers to pay the other party a certain amount within a set time period. If an offer of judgment is rejected and the court’s final decision is less favorable than the offer made in the offer of judgment, the rejecting party may be penalized. Particularly, for defendants in civil rights cases, offers of judgment can help limit situations in which a court awards a small amount against them, but because of fee-shifting provisions, the defendant is required to pay the plaintiff’s attorneys’ fees that could be multiple times the amount of the award.

In this case, New Jersey’s LAD statute can significantly limit the attorneys’ fees to a plaintiff that obtains a judgment that is less than 80% of an offer of judgment amount. Because this case has been ongoing for two years on procedural points, LA Fitness filed an offer of judgment for more than twice Plaintiff’s annual pay. Plaintiff moved to quash this offer, arguing that offers of judgment cannot apply in LAD cases because of the statute’s fee-shifting provision. After briefing and a virtual oral argument, the Court agreed with Dunnington’s arguments and denied Plaintiff’s motion, ruling that, consistent with other New Jersey cases, an offer of judgment can be filed in an LAD case, and can be used to determine a calculation of fees if there is an award in the plaintiff’s favor at the end of the case. Importantly, there has been no previous New Jersey case stating this as clearly as this ruling concerning LAD cases.

Later in July 2020, the Court held a two-day virtual evidentiary hearing. Plaintiff argued that the arbitration agreement she signed in connection with her employment application was not a binding contract, citing to Morgan v. Raymours Furniture Co., Inc., 443 N.J. Super 338 (App. Div. 2016). Plaintiff further argued that she was prevented from examining the second arbitration agreement she signed.

The Court rejected Plaintiff’s arguments, and on January 11, 2021, issued an order granting LA Fitness’ motion to dismiss in full, finding that Plaintiff freely assented to the arbitration agreement when she was presented with and signed the same in connection with her employment application. In its decision, the Court ruled that, contrary to Plaintiff’s argument, “there is no bar under New Jersey law to a prospective employer requiring an applicant, in the context of submitting an employment application, to sign and thereby become bound to, an arbitration agreement,” as the Supreme Court determined in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). The Court cited Martindale, when holding that LA Fitness provided adequate consideration for Plaintiff to be bound to her agreement to arbitrate that was contained in her employment application. The Court stated that La Fitness’ consideration included LA Fitness’ agreement to consider Plaintiff for employment, Plaintiff’s express recitals that she was signing the agreement as a condition of employment, LA Fitness’ consideration of her application, LA Fitness’ providing Plaintiff an offer for employment, and the continuation of her employment.

The Court agreed with Dunnington’s arguments and rejected Plaintiff’s attempted application of Morgan. The Court distinguished this case from Morgan, noting that in Morgan, the agreement to arbitrate was inserted into an employee handbook which stated that it was not an enforceable contract, and the employee’s signature was only used to show that the employee received a copy of the handbook. The Court held that in this case, Plaintiff’s signature in the arbitration agreement contained in her employment application served to confirm the intention to create a binding and enforceable contract to arbitrate. Here, unlike in Morgan, there was clear and unambiguous language presented immediately above Plaintiff’s electronic signature block that explicitly stated that Plaintiff was agreeing to be bound by its terms, and provided Plaintiff an opportunity to renounce the arbitration agreement within seven days of her signing. Thus, Morgan was inapplicable, and Plaintiff’s arbitration agreement contained in her employment application was fully enforceable.

Dunnington’s William F. Dahill represents LA Fitness. The case is Nikki Cordero vs. Fitness International, LLC, Docket No. ESX-L-000641-18 in the Superior Court of New Jersey, Essex County.


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