Recent cases out of New Jersey state courts and the Third Circuit provide guidance on arbitration issues that warrant the attention of arbitrators, practitioners, and clients.
Cornelius v. CVS Pharm. Inc. (3d Cir. 2025)
In Cornelius v CVS Pharm Inc., 133 F.4th 240 (3d Cir. 2025) the Third Circuit considered whether a claim was subject to the Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act (EFAA), and when and what evidence the court should review in determining the validity of an arbitration agreement between parties under New Jersey law.
The plaintiff alleged that beginning in 2018, her supervisor at CVS intentionally targeted her “with severe and pervasive negative treatment,” because she was a woman. Despite raising numerous complaints to CVS, she was ultimately terminated.
In April 2023, the plaintiff filed suit, and CVS moved to compel arbitration in May 2023. The plaintiff countered that the arbitration agreement was unenforceable under the EFAA. The District Court stated that because the plaintiff’s claims did not constitute a “sexual harassment dispute” within the meaning of the EFAA, the EFAA did not apply. The District Court “further held that the parties voluntarily entered into a valid and enforceable agreement to arbitrate,” and rejected the plaintiff’s claim that the agreement was unconscionable.
On appeal, the Third Circuit affirmed, on different grounds, that the EFAA did not apply to the plaintiff’s claim, finding that her claim arose after the effective date of the statute. The text of the EFAA instructs that it applies to any dispute or claim arising or accruing on or after the EFAA’s enactment on March 3, 2022. Although the plaintiff conceded that her claim accrued prior to her termination from CVS in November 2021 and before the EFAA’s effective date, the plaintiff maintained that her dispute with CVS arose when she filed an external complaint with the EEOC in August 2022. The Third Circuit, however, agreed with CVS, finding that the plaintiff’s “dispute arose prior to March 3, 2022[,]” because prior to her separation from CVS in 2021, she had submitted internal written complaints that CVS allegedly dismissed, siding with her supervisor and disagreeing with Cornelius’s position and characterization of the alleged conduct, and CVS failed to take any steps to remedy the alleged hostile work environment. Thus, the Third Circuit held that the EFAA was not applicable, finding that the dispute arose long before the March 3, 2022 effective date of the EFAA.
Notwithstanding this holding affirming the lower court in part, the Third Circuit remanded the case to the district court on a separate issue unrelated to the EFAA.
Takeaways
This case has some practical implications with respect to the application of the EFAA in the Third Circuit. Here, the Third Circuit determined that a “dispute” arises, and the EFFA applies when an employee communicates dissatisfaction and the employer expressly or implicitly rejects or opposes the employee’s allegations. Even without litigation or a formal investigation, because CVS rejected Cornelius’s internal complaints before March 3, 2022, the court found this dispute arose prior to the EFAA’s effective date. Because the court concluded that the dispute arose before the EFAA was enacted, the statute did not serve to bar arbitration.
Other Circuits
However, the same issue regarding the applicability of the EFAA has been reviewed by other circuit courts, with some different results and reasoning.
Contrary to the Third Circuit, in 2024, the Eighth Circuit determined in Famuyide v. Chipotle Mexican Grill, Inc., 111 F.4th 895 (8th Cir. 2024) that under the language of the EFAA, the dispute arose when the employee formally filed suit in July 2022 – after the EFAA’s enactment in March 2022.
In Memmer v. United Wholesale Mortgage, LLC, 135 F.4th 398 (6th Cir. 2025) the Sixth Circuit reviewed the EFAA’s language and distinguished a “claim” from a “dispute,” recognizing that even if a claim accrued before the EFAA’s enactment, the relevant “dispute” might arise later, such as when an employee files an EEOC charge or takes some other formal step after March 3, 2022. The court stated that “[a] dispute may arise between the parties about the harassment, but if the harassment continues, a continuing violation, such as a hostile work environment claim, might subsequently accrue due to the later events.” Ultimately, determining when a dispute arises is a “fact-dependent inquiry” that considers the context of the case.
Further, in Olivieri v. Stifel, 112 F.4th 74 (2d Cir. 2024) the Second Circuit applied the continuing violation doctrine to hostile work environment claims, holding that while some conduct predated the EFAA, ongoing retaliatory or harassing conduct after March 2022 caused the claim to re-accrue and “essentially [be] reborn.” Thus, the Second Circuit found the EFAA applied and barred arbitration.
Fazio v. Altice USA (NJ 2025)
In Fazio v Altice USA, 261 N.J. 90 (2025) the New Jersey Supreme Court addressed the waiver of arbitration agreements and whether, when, and how an arbitration clause could be deemed enforceable by relying on habit or routine business practice as evidence. In 2019, the plaintiff, Fazio, who was unable to wear a mask due to medical reasons, purchased cellular services from an Altice retail store. A salesperson provided the plaintiff with a receipt that did not mention an arbitration agreement but stated that a copy of all documents and agreements will be sent electronically to the email address provided during account creation, which allegedly included a customer service agreement with arbitration provisions. A week later, the plaintiff bought a cell phone at an Altice retail store and signed a retail installment contract that did not include any mention of the plaintiff waiving his right to a jury trial or to sue in court.
In June 2021, during COVID, the plaintiff visited an Altice retail store for an issue with his cell phone and was denied entry for failing to wear a face mask; the store employees called the police. The plaintiff alleged discrimination and harassment based on his disability, and in October 2022, filed suit under the New Jersey Law Against Discrimination (NJ LAD).
Altice filed a motion to compel arbitration and dismiss the complaint. The defendant provided an affidavit from the Senior Director of Business Process Management for Altice retail stores who certified that he was familiar with Altice’s and Optimum Mobile’s business practices, and generally certified that after procuring business cellular service, an individual would receive a copy of the customer service agreement by email. Altice further relied on the retail installment contract which incorporated the terms of the customer service agreement. The plaintiff claimed that he did not need to establish that he never received the customer service agreement, stating that after searching his email account, he found no email concerning the arbitration clause.
The trial judge dismissed the complaint and compelled arbitration. The appellate division affirmed the order, finding that the plaintiff’s utilization of uninterrupted cellular service for two years constituted evidence of a binding agreement.
On appeal, the New Jersey Supreme Court reversed. The Court noted that while a party may present “evidence of a specific, repeated, and regular business habit or practice,” to establish that a business acted in conformity with that practice and as evidence of a business’s routine practices (e.g., routinely sending arbitration agreements by email) to create a rebuttable presumption that the same practice was followed in a specific instance, here, Altice had failed to establish this practice with enough specificity. In particular, Altice failed to show with enough specificity that customer service representatives routinely discussed the arbitration agreement with customers and did not list how, when, or from whom the emails containing the customer service agreements were routinely sent. The affidavit “did not set forth what either Altice’s or Optimum Mobile’s specific business practices were regarding how customers were provided with service agreements.” Thus, Altice could not rely on this allegedly routine business practice as evidence that Fazio actually received the arbitration agreement. Moreover, Altice could provide no direct proof that Fazio had ever received the agreement.
In order to establish assent to arbitration, an organization must establish that an individual actually received the arbitration agreement and consented to its terms. This may be established by concrete evidence of receipt and consent or by routine business practice under New Jersey Rule of Evidence 406. While evidence of a routine business practice may be admissible to establish that arbitration agreements were provided to consumers and/or employees, the practice must be established with sufficient detail describing the who, what, when, and how of the routine behavior. Vague claims lacking specificity, as was the case in Fazio, will not suffice to establish that a consumer or employee actually received the agreement in question.
Takeaways
The Fazio case highlights the well-established precedent that organizations must meet a high standard of clarity to establish that an individual assented to arbitration and waived their right to a jury. For instance, in 2014 in Atalese v. U.S. Legal Servs, Grp., L.P., 219 N.J. 430 (2014) the New Jersey Supreme Court held that arbitration clauses must include an explicit waiver of the parties’ rights to seek relief in a court of law as a prerequisite to enforceability. In Atalese, the New Jersey Supreme Court determined that an arbitration clause in a consumer contract was unenforceable because it did not clearly inform the consumer that she was waiving her right to sue in court. The court maintained that arbitration agreements must include clear and unambiguous language explaining the waiver of the right to a judicial forum. Thus, in Atalese, the court invalidated the arbitration clause based on lack of clarity and informed consent.
Chen v. New York Jets, LLC (Bergen County Sup. Ct. 2025)
In Chen v. New York Jets, No. BER-L-6630-25 (Bergen County Sup. Ct. Nov. 14, 2025) the court considered the enforceability of an arbitration clause in a nondisclosure agreement (NDA) between the Jets and their former VP of Finance, Chen, by carefully evaluating the language contained therein. Chen had been terminated for allegedly participating in a conspiracy to anonymously accuse the team president of sexual harassment. Chen later sued the Jets for marital status discrimination, retaliation, and associational retaliation under the NJ LAD, along with related common-law claims. The Jets moved to compel arbitration based on an NDA provision stating that “any and all disputes…concerning [Chen’s] employment or relationship with [the Jets] …will be subject to arbitration,” including discrimination claims.
Chen argued that the agreement did not clearly and unambiguously waive her right to pursue statutory claims in court, did not cover her NJ LAD retaliation or post-employment claims, and was unenforceable under both the EFAA and the NJ LAD’s own anti-waiver provisions.
In reviewing the terms of the arbitration provision, the court focused on whether the NDA clearly and unambiguously required arbitration of Chen’s statutory claims and expressly informed her she was waiving her right to a judicial forum. While the NDA referenced discrimination claims generally, it did not specifically mention the NJ LAD, retaliation, or termination-related claims, and it did not clearly specify that that post-employment disputes were covered. The court described the NDA as “convoluted” and observed that it “includes circuitous run-on language, refers to ‘claims concerning Employee’s employment or relationship’ – not specifically its termination – and toggles between court and arbitration without clear notice as to whether all types of claims must be arbitrated.” Similar language in other recent cases had been found to be insufficient to compel arbitration of LAD claims.
The court also held that the EFAA independently barred forced arbitration. Although Chen did not bring a sexual-harassment claim, her retaliation and termination claims, as well as the Jets’ counterclaims, arose from the underlying allegation of sexual harassment and the ensuing investigation. Because these claims were “related to” a sexual-harassment dispute, the EFAA prohibited enforcement of the arbitration clause.
Finally, the court relied on the NJ LAD provision (Section 12.7), which declares unenforceable any employment-contract provision that waives substantive or procedural rights relating to discrimination, retaliation, or harassment claims. Thus, the court stated that the “NDA’s attempt to waive plaintiff’s statutory right to pursue discrimination and retaliation in court was not enforceable [under] Section 12.7 for this type of case.”
Accordingly, the court denied the Jets’ motion to compel arbitration, finding the NDA neither clear nor enforceable under state or federal law.
Takeaways
This case reinforces the importance of drafting arbitration agreements with explicit, unambiguous language specifying which statutory claims are covered and clearly stating that employees are waiving their rights to a court or jury trial. Moreover, both the EFAA and the NJ LAD create carveouts for harassment, discrimination, and retaliation claims that cannot be waived by contract. Arbitration agreements should be reviewed and updated to ensure compliance with these requirements.
McDermott v. Guaranteed Rate, Inc. & Rivera-Santana v. CJF Shipping, LLC (NJ App. Div. 2025)
Two recent cases McDermott v. Guaranteed Rate, Inc., No. A-0921-24 (N.J. Super. Ct. App. Div. Dec. 26, 2025) and Santana v. CJF Shipping, LLC, No. A-1568-24 (N.J. Super. Ct. App. Div. Dec. 26, 2025) further explored the scope of the EFAA. In McDermott v. Guaranteed Rate, Inc., the plaintiff, McDermott, alleged that she was “subjected to pervasive acts of sexual harassment and gender discrimination,” during her employment with defendant, Guaranteed Rate, Inc. (GRI). She claimed the harassment and discrimination were primarily carried out by her supervisors, and as such, the behavior caused her to resign in 2022.
The plaintiff brought fourteen claims against defendants, including claims under the NJ LAD. When the plaintiff began working for GRI, “she signed a Sales Compensation Plan that included an arbitration agreement.” Thus, defendants moved to compel arbitration on all counts but sought to dismiss the plaintiff’s sexual harassment claim as time-barred. The trial court denied defendants’ motion to dismiss the sexual harassment claim, but severed the NJ LAD related claims, retaining jurisdiction over those, and ordered the rest to arbitration.
In a similar case, Santana v. CJF Shipping, LLC, the plaintiff, Rivera-Santana, alleged that since the beginning of her employment with defendant CJF Shipping, she had been “subjected to discrimination, hostile workplace sexual harassment, and wrongful termination on the basis of her gender.” At the start of her employment, the plaintiff signed an arbitration agreement.
The plaintiff filed suit and later amended the complaint to include “sexual harassment, gender discrimination, and hostile work environment.” Defendants sought to dismiss her amended complaint as time-barred and to compel arbitration for the remaining claims. The trial court denied defendants’ motion to dismiss the sexual harassment claim. However, the court applied the EFAA only to the plaintiff’s NJ LAD hostile work environment sexual harassment claim and directed her remaining claims to be arbitrated because they “arose out of a different set of operative facts.”
On appeal, the court simultaneously considered both cases, and determined the scope of the EFAA, a matter of first impression in NJ. Specifically, the court explored whether the EFAA invalidated arbitration agreements for an entire case, when that case includes harassment claims, or if the EFAA only invalidated arbitration agreements relating to the individual harassment claims.
On appeal, both plaintiffs, McDermott, and Rivera-Santana, challenged the trial court’s narrow application of the EFAA to their cases, which barred forced arbitration only for their sexual harassment-related claims, but not for their remaining claims, some of which were also under the NJ LAD.
The appellate court reversed both trial court rulings, finding that the trial courts erred in interpreting the EFAA. Having first determined that the EFAA was applicable to the plaintiffs’ cases because each complaint included “a viable claim for hostile work environment sexual harassment in violation of the LAD.” The appellate court adopted the majority view held by federal and state courts which says that the language of the EFAA plainly and unambiguously invalidates all pre-dispute arbitration agreements, not just those relating to harassment claims, when a case “relates to” the sexual assault or harassment dispute.
The court found that both plaintiffs met the threshold necessary to establish “a nexus between the sexual harassment dispute and other non-sexual harassment claims […] to satisfy the meaning of ‘relate to’ in the EFAA,” as their “additional ostensibly non-sexual harassment claims are materially and substantially informed by the nature of the sexual-harassing employment relationship.”
Takeaways
This case determined the scope of the EFAA, finding that the EFAA applies broadly, to all claims when the case itself is related to a sexual harassment claim, and does not bar forced arbitration only for individual sexual harassment claims. Thus, if a lawsuit includes a viable sexual harassment claim, all claims in that case are barred from forced arbitration by the EFAA.
This summary is for informational purposes only and is not intended to constitute legal advice. This information should not be reused without permission.