Are “After the Fact” Arbitration Agreements Enforceable? New Jersey Weighs In
When parties enter into contracts, the inclusion of arbitration clauses is often a point of negotiation or at least a matter acknowledged before the agreement is signed. But what happens when an arbitration provision is introduced after the underlying services have already been rendered? Can such an "after the fact" arbitration agreement still be enforced?
This question recently landed before a New Jersey appellate court in the emotionally charged case of Kay v. SCI New Jersey Funeral Services, LLC, doing business as Bloomfield-Cooper Jewish Chapels. The case provides a unique lens through which to examine issues of timing, enforceability, and unconscionability when it comes to arbitration agreements — particularly in the context of contracts signed under emotional strain or following traumatic events.
A Disturbing Set of Facts
The underlying facts in Kay are striking, both in their emotional gravity and in the legal issues they raise. The plaintiff, a surviving spouse, had arranged for the burial of his late wife through Bloomfield-Cooper Jewish Chapels. On the day of the funeral, however, the unthinkable happened: the funeral home informed the grieving family and friends that it could not locate the decedent’s body.
Despite this catastrophic failure, the memorial service proceeded without the body present, as mourners had already gathered. It was later discovered that the decedent had been mistakenly buried at a different cemetery — a mix-up that only compounded the family’s anguish. Two days later, the body was disinterred and reburied properly at the intended location.
The chaos, heartbreak, and confusion that surrounded this incident are difficult to overstate. And it is against that backdrop that the legal dispute over arbitration emerged.
A Contract Presented After Services Rendered
Following the reburial, the funeral home presented the plaintiff with a standard written contract to memorialize the services already performed. Included in this contract was an arbitration clause — a provision requiring that any disputes arising from the funeral services be resolved outside of court, through binding arbitration.
Given the circumstances, this raised an obvious question: could the funeral home bind the plaintiff to arbitrate a dispute arising from events that had already occurred, especially when the agreement memorializing those services was signed only after the services were completed?
The plaintiff filed suit in court, and the funeral home sought to compel arbitration. The trial court refused, finding the contract — and specifically the arbitration clause — to be unconscionable under the circumstances. But the appellate court wasn’t ready to reach that conclusion just yet.
The Appellate Court’s Approach
The New Jersey appellate court reversed the trial court’s denial of arbitration — not by declaring the arbitration clause enforceable outright, but by requiring additional factual development. The court held that limited discovery was necessary to assess whether the arbitration clause, separate from the contract as a whole, was unconscionable.
As the court explained:
“[Q]uestions remain regarding [Plaintiff’s] level of sophistication, his capacity to review and understand the agreement, and whether he was unduly influenced by other factors. In reaching our conclusion, we recognize that generally, defendants do not dispute the circumstances leading to the agreement's execution, including the fact that the agreement was presented as an invoice for services already performed as well as the horrendous series of events leading to Janet's final funeral service at Mount Sinai Cemetery. Nevertheless, we remain convinced that discovery limited to the issues of arbitrability and unconscionability is necessary and appropriate as critical unresolved facts relevant to unconscionability are within Plaintiff's knowledge and control.”
In short, while the appellate court did not enforce the arbitration clause outright, it did recognize the need to separate the analysis of the arbitration agreement from the broader emotional weight of the funeral home’s failure. The clause could still potentially be enforceable, depending on the outcome of the factual inquiry.
The Key Legal Takeaway: Severability of Arbitration Provisions
One of the central legal doctrines at play here is the severability of arbitration agreements. Even when a contract includes an integration clause — stating that the document represents the final and complete agreement between the parties — arbitration provisions are often treated as independent agreements within the larger contract.
This principle is important because courts are required to distinguish between challenges to the enforceability of the contract as a whole and specific challenges to the arbitration clause itself. Only the latter can preclude enforcement of arbitration. Otherwise, arbitrators are tasked with resolving disputes arising under otherwise valid agreements.
In Kay, the court emphasized this distinction. The plaintiff’s objections to arbitration, though emotionally compelling, could not rest solely on the mishandling of the funeral. Instead, the court sought to examine whether the arbitration clause itself was presented in an unconscionable manner — such as being buried in fine print, slipped into a post-service invoice, or presented under circumstances where the plaintiff was unlikely to comprehend or meaningfully consent to its terms.
Evaluating Unconscionability in Context
Unconscionability is a contract defense rooted in both procedural unfairness and substantive imbalance. Courts look at whether a party lacked a meaningful choice in agreeing to a term (procedural unconscionability) and whether the term itself is overly one-sided or oppressive (substantive unconscionability).
In Kay, the funeral home’s decision to wait until after services were completed before presenting the contract raises red flags in both areas:
Was the plaintiff in an emotional state that made meaningful consent impossible?
Was the arbitration clause clearly presented or buried in boilerplate?
Did the funeral home use the guise of an invoice to bind the plaintiff retroactively?
These are precisely the types of questions the court believed merited targeted discovery.
Why This Case Matters Beyond New Jersey
While this case arose in New Jersey, its implications stretch beyond state lines. The practice of introducing arbitration agreements after services have been rendered — whether through retroactive contracts, “confirmatory” invoices, or follow-up correspondence — is not uncommon. And when these agreements surface after a triggering event (like a consumer injury, professional error, or customer dispute), courts will increasingly need to determine whether such agreements are enforceable.
The Kay decision illustrates the delicate balance courts must strike between respecting the enforceability of arbitration agreements and protecting individuals from procedural abuse. It also underscores the importance of timing, transparency, and context in determining whether parties have truly agreed to arbitrate.
Practical Considerations for Practitioners and Neutrals
For attorneys, businesses, and ADR professionals alike, this case is a cautionary tale. Best practices in the formation of arbitration agreements include:
Presenting the agreement clearly and at the outset of a commercial relationship
Avoiding retroactive arbitration clauses inserted after a dispute has already emerged
Ensuring that parties are in a position to review and understand the agreement
Being mindful of emotional contexts, especially in personal service industries such as healthcare, funerals, and family law
For neutrals, especially those involved in administering or enforcing arbitration provisions, this case underscores the importance of not only fairness but also the appearance of fairness. When a party feels blindsided by an arbitration clause they never expected, the legitimacy of the process is put at risk — and potentially the enforceability of the entire proceeding.
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