
Joel N. Kreizman
Partner
732-568-8363 jkreizman@sh-law.comFirm Insights
Author: Joel N. Kreizman
Date: April 15, 2020
Partner
732-568-8363 jkreizman@sh-law.comNew Jersey Gov. Phil Murphy recently signed legislation that establishes new consumer protections in arbitration. The new law, Assembly Bill 4972 (AB 4972), aims to reduce conflicts of interest and fee-shifting.
As set forth in the statement accompanying AB 4972, New Jersey has rules governing arbitrators and arbitration generally, but there are no rules pertaining to the regulation of arbitration organizations. The sponsors of the bill maintain that such regulations are necessary, particularly with respect to arbitration involving consumers. In support, they note that because arbitration is generally confidential and conducted outside of the public eye, it is difficult for the state to monitor whether it is being conducted fairly.
Under the bill, “consumer arbitration” is defined as “arbitration pursuant to a standardized contract, written by one party, with a provision requiring that disputes arising after the contract’s signing shall be submitted to binding arbitration, and the party not writing the contract is a consumer.” AB 4972 expressly does not apply to arbitrations conducted or administered by a self-regulatory organization, as defined by the federal Securities Exchange Act of 1934, the Commodity Exchange Act, or regulations adopted under those acts. Accordingly, arbitrations conducted by the Financial Industry Regulatory Authority (FINRA) would not be subject to the new rules.
Below are the key provisions of AB 4972:
The new law is scheduled to take effect on the first day of the fourth month following enactment, which is May 1, 2020. It will apply to consumer arbitration commenced on or after the effective date and will operate only prospectively so as not to prohibit the administration of consumer arbitrations on the basis of financial interests held prior to the effective date.
If you have any questions or if you would like to discuss the matter further, please contact me, Joel Kreizman, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.
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