New Jersey Appellate Division Clarifies Rights to Disclosure of School Records Under Public Records Law

In a lengthy, published opinion, the New Jersey Appellate Division recently ruled on four appeals from different trial courts (that had reached conflicting results) about the ability of a nonprofit advocacy organization for disabled students and one of the parent’s efforts to obtain copies of settlement agreements from public school districts relating to the provision of special services to other qualified students.

The issue was how to strike a balance between privacy rights in educational records reflected in the New Jersey Pupil Records Act, and the Federal Family Educational Rights and Privacy Act of 1974, on the one hand, and the broad right to obtain public records under New Jersey’s Open Public Records Act or OPRA, on the other hand.  (See Litigation Law Blog’s Post on a Series of Recent OPRA Decisions by the New Jersey courts.)

The Appellate Division Panel held that the non-profit entity plaintiffs in three of the cases were entitled to copies of the requested records with personal identifying information redacted, if they establish that they are “bona fide researchers” under the New Jersey Public Records Act or if they obtain in advance an order from the trial court granting them access. The school districts were directed to not turn over the redacted records until first providing reasonable advance notice to the parents or guardians of the affected students.

The Court distinguished one of the cases on appeal in which the requestor sought a report that exclusively mentioned her own child, affirming parents’ right to obtain unredacted records relating to their children.

For more information on OPRA, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at at jborek@genovaburns.com.

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New Jersey Supreme Court Holds that Consumers Cannot Pursue Class Action Claims Against TGI Fridays for Inflated Drink Prices, But May Do So Against Carrabba’s Italian Grill

The New Jersey Supreme Court issued a decision on two consumer class actions under the New Jersey Consumer Fraud Act (“CFA”) and the Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”).  In two separate cases, consumers sought damages against TGI Fridays and the operator of several Carrabba’s Italian Grill, respectively, alleging unlawful practices with respect to the disclosure of prices for alcoholic and non-alcoholic beverages to customers.

With respect to TGI Fridays, the Court held that the named plaintiffs failed to show that common questions of law and fact predominate over individual issues.  The plaintiff had advanced a “price inflation” theory – that the fraudulent marketing drove up the cost of the drinks – but the Court rejected it noting that its prior decisions had found this theory did not support a claim under the CFA.

With respect to Carrabba’s, on the other hand, the plaintiff’s allegations focused on specific pricing practices, which plaintiff claimed are supported by receipts showing that each customer making this claim was charged different prices for the same brand, type, and volume of beverage in the course of a single visit. Because the proposed class had been redefined to only include customers who make that specific CFA claim, they met the predominance requirement for class certification.

In both cases, the Court found that the plaintiffs had failed to meet the standards for a class action as to their TCCWNA claims. Under TCCWNA, a claimant must prove that they received a written sign (here, a menu), which contained information in violation of a consumer law.  Because each individual claimant would have to prove that they received a menu, the Court held, the cases were not suitable for resolution as a class action.

For more information on class actions, the CFA or TCCWNA, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

 

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N.J. Supreme Court Finds Material Breach by Company That Knowingly Refused to Cooperate with Arbitration Demands Filed in Compliance with the Arbitration Agreement

The New Jersey Supreme Court has ruled that a company’s refusal to cooperate with plaintiffs’ arbitration demands was a material breach of their arbitration agreement, which barred the company from later compelling arbitration. Tahisha Roach v. BM Motoring, LLC 

The plaintiffs had purchased cars from BM Motoring, LLC and Federal Auto Brokers, Inc. d/b/a BM Motor Cars (BM).  As part of the transaction, each plaintiff signed an arbitration agreement requiring resolution of disputes through arbitration in accordance with the rules of the American Arbitration Association (AAA).  The plaintiffs had filed demands for arbitration against BM with AAA.  In one case, despite repeated requests by AAA, BM refused to advance the filing fees that the arbitration agreement obligated BM to pay, resulting in dismissal of the arbitration for nonpayment of fees. In another case, a plaintiff’s claims were dismissed based on BM’s failure to comply with AAA’s rules and procedures.  The plaintiffs then jointly filed the present action against BM, who moved to dismiss the complaint in favor of arbitration.

Ruling in the plaintiffs’ favor, the Court noted that arbitration agreements are governed by general principles of contract law.  BM’s arbitration agreement required arbitration in accordance with AAA’s rules and therefore permitted arbitration before the AAA.  The Court held that BM’s failure to pay the AAA fees or to respond to plaintiffs’ arbitration demands violated BM’s duty of good faith and fair dealing that New Jersey law implies in all contracts.  Specifically, BM’s actions destroyed the benefit plaintiffs expected in signing the arbitration agreement, namely, the ability to arbitrate claims.  Accordingly, BM was barred from later compelling arbitration.

The New Jersey Supreme Court refused to enact a bright-line rule on the issue, emphasizing the fact-sensitive nature of its determination.  Nonetheless, businesses that include standard arbitration clauses in their agreements, should be aware that a failure to cooperate in bringing the case before an arbitrator may result in a waiver of the arbitration agreement.

For more information, please contact Kathleen Barnett Einhorn, Esq., Chair of the Firm’s Complex Commercial Litigation Group, at keinhorn@genovaburns.com or Jennifer Borek, Esq., Partner in the Complex Commercial Litigation Group, at jborek@genovaburns.com.

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U.S. Supreme Court Reaffirms that Only “Humans and Corporations,” Not Unincorporated Entities Like a Trust, May Assert Their Own Citizenship for Purposes of Federal Diversity Jurisdiction

In a unanimous March 7, 2016 opinion authored by Justice Sotomayor, Americold Realty Trust v. Congra Foods, Inc., et al., , the U.S. Supreme Court affirmed an oft-confused holding relating to diversity jurisdiction: the citizenship of any non-incorporated artificial entity is determined by considering all of the entity’s “members,” not of the state where the entity is formed.

Americold removed its lawsuit to the federal district court in Kansas, which resolved the lawsuit on its merits.  On appeal, however, after supplemental briefing ordered sua sponte by the Court, the Tenth Circuit found that Americold, as an unincorporated real estate investment trust, or REIT, was a citizen of the states of its members.   The Supreme Court granted certiorari to resolve a circuit split regarding the citizenship of unincorporated entities.

Affirming the Tenth Circuit, Supreme Court reiterated its “oft-repeated rule” that diversity jurisdiction in a suit by or against an entity depends on the citizenship of all of its members.  Individuals are citizens of the states in which they reside.  The Supreme Court created an early exception in the 19th century—one which was later codified by Congress:  based on the tradition of treating corporations as separate juridical “persons,” corporations are considered to be citizens of their state of incorporation, and, Congress later added, also of the state where it has its principal place of business. 28 U.S.C. § 1332(c).

This exception was never expanded to unincorporated entities, whose citizenship, the Court reaffirmed, is determined based on the citizenship of its “members.”   The Court previously identified the members of a joint-stock company (as its shareholders), the members of a partnership (as its partners), and the members of a union (as the workers affiliated with it).  With respect to a REIT, the Court found that because Americold is not a corporation, it possesses its members’ citizenship.  Looking at the law of the REIT’s state of organization, Maryland, the court held that, “for purposes of diversity jurisdiction, Americold’s members include its shareholders.”  The Court also found that the entity’s membership cannot be restricted to its trustees simply because the entity “happens to call itself a trust.”

Absent action by Congress, one must consider to look at the citizenship of the members of various unincorporated entities such as LLCs and Trusts, to determine the existence of federal diversity jurisdiction.

For more information regarding federal diversity jurisdiction or the Court’s decision in Americold, please contact Kathleen Barnett Einhorn, Esq., Director of the firm’s Complex Commercial Litigation Group at keinhorn@genovaburns.com, or Jennifer Borek, Esq., a Partner in the Complex Commercial Litigation Group at jborek@genovaburns.com.

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Public Records Produced Pursuant to OPRA May Not be Redacted for Irrelevancy

The New Jersey Appellate Division has recently confirmed the public’s unfettered right to access government records, regardless of whether certain information produced falls outside a specific request.

New Jersey’s Open Public Records Act (N.J.S.A. 47:1A-1 et seq.) (“OPRA”) permits members of the public to access public records maintained by government agencies, in order to ensure not only an informed citizenry but to minimize the evils inherent in a secluded governmental process.  Under OPRA, a member of the public may file a request with a public agency for a “government record”, defined as any record that has been made, received, or kept on file in the course of official business or that has been received in the course of official business.  There are 24 specific categories of documents that are exempt from production, including, deliberative materials, records within the attorney-client privilege, trade secrets or proprietary commercial or financial information, and criminal investigatory records.

Although public entities are exempt from producing confidential information, the New Jersey Appellative Division has recently ruled that custodians may not redact information they deem to be irrelevant in documents produced pursuant to an OPRA request.  In American Civil Liberties Union of N.J. v. N.J. Div. of Crim. Justice, the court addressed the issue of whether a government agency has the authority to redact admittedly responsive documents in order to withhold information the agency deems to be outside the scope of the OPRA request, and found that it could not.  The court held that if the redactions were not made pursuant to the statutorily recognized exemptions to disclose, or on a claim of confidentiality under the common law, information could not be redacted for irrelevancy.

The court noted that by redacting information deemed irrelevant, the custodian confers upon himself quasi-judicial powers which are based only on the custodian’s own notion of relevancy.  The court concluded that no legal support backs this policy. The decision, therefore, confirms that the general public has a right to access governmental records regardless of whether responsive documents to an OPRA request contain some seemingly irrelevant information.  Public agencies may not choose to withhold specific information when producing documents responsive to an OPRA request, because it deems that information irrelevant.  This, according to the Appellate Division, would push back on the very purpose of OPRA.

For more information on OPRA, please contact Kathleen Barnett Einhorn, Director of the Complex Commercial Litigation Practice Group, at KEinhorn@genovaburns.com.

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New AAA Rules Create Greater Flexibility in Appealing Arbitration Awards

In a groundbreaking step, the American Arbitration Association (“AAA”) and the International Centre for Dispute Resolution have newly enacted the Optional Appellate Arbitration Rules (“Appellate Rules”) which allows for a specific and streamlined procedure for parties to obtain further review of arbitral awards. Effective November 1, 2013, these rules put a serious dent in the rigidity that once was the finality of arbitration awards.

Arbitration has traditionally been the gold star standard in the conservation of judicial resources, representing a process intended to be both efficient and final, in that an arbitration award would only be set aside under extreme circumstances. Both the Federal Arbitration Act and the New Jersey Arbitration Act provide that an arbitration award will only be vacated upon a showing of corruption, fraud, partiality or misconduct, or by showing that an arbitrator exceeded his powers. See, 9 U.S.C. § 10, N.J.S.A. 2A:23B-23.

By allowing for a much broader review of arbitration awards by a AAA appellate panel, the Appellate Rules offer a refreshing alternative to the narrow grounds dictated by both the federal and state statutes, but also complicate the overall goal of efficiency and finality. The Appellate Rules are optional, only invoked upon agreement by the parties. Unlike the strict grounds dictated by the state and federal statutes, appellate arbitrators are authorized to review both questions of law and issues of fact, as a party may appeal on the grounds that the arbitral award is based upon an error of law that is material and prejudicial or determinations of fact that are clearly erroneous. See, Appellate Rules, A-10. These new bases for appeal give litigants additional options to consider when entering into a AAA agreement.

The AAA appellate process is truncated, and can be completed in about three months’ time. Oral argument is permitted only if the Appeal Tribunal deems it necessary, and generally appeals will be determined upon the written documents submitted. Id. at A-15. The parties are mandated to cooperate in compiling the record on appeal and may submit as part of the record the relevant excerpts of the transcript of the hearing, any evidence relevant to the appeal that was previously presented at the arbitration hearing and pre- and post-hearing briefs. The Appeal Tribunal’s written decision is due within thirty days of the last appeal brief. The Tribunal has the authority to adopt the underlying award as its own or substitute its own judgment for the underlying award, but is precluded from ordering a new arbitration hearing or remanding the case back to the original arbitrator(s) for corrections or further review. Id. at A-19(a).

It is AAA’s intention that parties engaged in large, complex cases will make use of the Appellate Rules, as evidenced by the type of record required to be maintained for any appeal, and the costs associated with invoking the Appellate Rules. Pursuant to the Administrative Fee Schedule, there is a non-refundable $6,000.00 fee to be paid by the party seeking appellate arbitration and an additional $6,000.00 administrative fee to be borne by any party filing a cross-appeal. These fees do not include the fees and costs associated with the Appeal Tribunal. Such a requirement has the intended outcome of limiting the adoption of the Appellate Rules to large, complex matters, as well as dissuading frivolous appeals.

The ultimate take-away from the introduction of the Appellate Rules is that review of arbitral awards is now much more flexible, as parties may opt into the Appellate Rules and seek an appeal on the grounds that the underlying award is based upon an error of law or fact. Yet these benefits do not come without costs, and the Appellate Rules are obviously tailored for larger, complex cases. With time, we will be sure to see how these newly enacted Appellate Rules will play out and what their effect will be on the arbitration process.

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