SIGNIFICANT CASE SUMMARY
New Jersey Case Summary
McDermott v. Guaranteed Rate, Inc.
New Jersey Superior Court, Appellate Division
Nos. A-0921-24, A-1568-24
Decided: December 26, 2025
Appellate Division concludes that the EFAA renders pre-dispute arbitration agreements unenforceable as to all claims in a multi-claim dispute involving sexual harassment.
Background
The Plaintiff, a loan officer, alleged a multitude of claims, including: three violations of the Law Against Discrimination, disparate pay in violation of the New Jersey Equal Pay Act, two violations of the New Jersey Wage Payment and Collection Law, two counts of breach of contract, two counts of the breach of the covenant of good faith and fair dealing, commercial misappropriation of likeness, unfair competition, tortious interference with prospective contractual relationships, and misappropriation in violation of the New Jersey Unfair Competition Law. The claims were filed against her former employer, Guaranteed Rate, Inc. (“GRI”). When GRI first became Plaintiff’s employer, she signed a contract that included an arbitration agreement and forum selection clause. GRI sought to compel arbitration for all of the claims that did not deal directly with sexual harassment. The Trial Court concluded that the EFAA did not bar arbitration for claims sufficiently unrelated to sexual harassment. The Court denied Plaintiff’s Application to reconsider compelling the arbitration of these claims. Plaintiff appealed. Of note, the consolidated Rivera-Santana case deals with the same claim-splitting issue.
Holding
On appeal, the Plaintiff argued that (1) the EFAA exempts all claims in a properly joined single case involving a sexual harassment cause of action, (2) the EFAA expressly displaced prior federal legislation and its claim-splitting rules, (3) the language of Section 402(a) of the EFAA should be interpreted broadly, (4) claim-splitting undermines the EFAA’s core purpose and principles, and (5) the arbitration clause is unconscionable and unenforceable.
The Appellate Division agreed with Plaintiff’s contention that the EFAA prohibits arbitration for entire cases related to sexual harassment. The Court ultimately concluded that the Lower Court erred in interpreting the EFAA in a circumspect manner, as it is contrary to the plain language and the growing body of federal and state case law. The Court did not have to rule on whether or not the arbitration clause was unconscionable and unenforceable because Plaintiff was successful on the EFAA issue. Thus, the Appellate Division reversed the Lower Court and did not compel arbitration.
Questions about this case can be directed to Nick Stolte at 856.334.0415 ext. 8925 or nstolte@tthlaw.com.