Lawyers who assume that the arbitration provisions within their carefully drafted agreements will be enforced may have to re-examine these assumptions. Within the space of less than one month, the Justices waded into three civil matters that dealt with the constant re-arrangement of the deck chairs and fine tuning of the parties’ rights and obligations relating to the application of the Federal Arbitration Act leaving those who practice with less than crystal clear guidance about how to proceed.

On May 23, 2022, in Morgan v. Sundance, Inc., SCOTUS, in a unanimous decision, ruled, contrary to the current positions of 9 of the 11 Circuits, that the requirement by the 8^th Circuit that a showing that the other side has been prejudiced by a delay is not required for a party that has proceeded with litigation to be deemed to have waived its contractual right to arbitrate.  Although the Opinion was only nine (9) pages, the beginning, middle and end focused on one seeming objective of lesser ultimate important; that Courts may not establish law relating to the enforcement of arbitration agreements solely in order to protect the sanctity of arbitration agreements under the FAA.  To quote:  “… federal courts may not create arbitration-specific variants of federal procedural rules, like those concerning waiver, based on the FAA’s ‘policy favoring arbitration.’ If an ordinary procedural rule – whether of waiver or forfeiture or what-have you – would counsel against enforcement of an arbitration contract, then so be it.  The federal policy is about treating arbitration contracts like others, not about fostering arbitration.”

The Supreme Court of New Jersey recently issued its ruling and opinion in the closely watched case of Delaney v. Trent S. Dickey and Sills Cummins & Gross, P.C. (Dec. 21, 2020)(“Sills”), relating to enforcement of a mandatory arbitration agreement in the Sills engagement letter. The Court refused to compel arbitration in that case because Sills had not adequately communicated with its client about the risks and benefits of agreeing to mandatory arbitration in order to make an informed decision. The Court did not go so far as to declare all mandatory arbitration provisions in engagement letters unenforceable, as some feared it might, but it requested additional guidance from the New Jersey Advisory Committee on Professional Ethics on the scope of an attorney’s disclosure requirements in this context.

On January 18, 2022, the Advisory Committee did that and more. The Committee expanded the scope of its mandate by asking the Court to reconsider its decision in Delaney and pronounce that New Jersey lawyers are prohibited from including mandatory arbitration provisions in their engagement agreements, even with appropriate disclosures and counseling. The Committee further proposed uniform guidelines for a separate rider addressing arbitration provisions and stressed the need for oral discussion with a client and recommendation to seek review by independent counsel.