TEJANDRA AND ARUNA SHAH VS. T&S BUILDERS, LLC (L-3509-17, ESSEX COUNTY AND STATEWIDE) ( 2018 )


Menu:
  •                         NOT FOR PUBLICATION WITHOUT THE
    APPROVAL OF THE APPELLATE DIVISION
    This opinion shall not "constitute precedent or be binding upon any court."
    Although it is posted on the internet, this opinion is binding only on the
    parties in the case and its use in other cases is limited. R. 1:36-3.
    SUPERIOR COURT OF NEW JERSEY
    APPELLATE DIVISION
    DOCKET NO. A-0276-17T2
    TEJANDRA AND ARUNA SHAH,
    Plaintiffs-Appellants,
    v.
    T&S BUILDERS, LLC,
    Defendant-Respondent.
    _______________________________
    Argued April 30, 2018 - Decided July 24, 2018
    Before Judges Accurso and Vernoia.
    On appeal from Superior Court of New Jersey
    Law Division, Essex County, Docket No.
    L-3509-17.
    Paul A. Sandars, III, argued the cause for
    appellants (Lum, Drasco & Positan, LLC,
    attorneys; Paul A. Sandars, III, of counsel
    and on the brief; Bernadette H. Condon, on
    the brief).
    Matthew Lakind argued the cause for
    respondent (Tesser & Cohen, attorneys;
    Matthew Lakind, on the brief).
    PER CURIAM
    Plaintiffs Tejandra and Aruna Shah engaged defendant T&S
    Builders, LLC in February 2014 to build an addition on their
    home in Livingston for the lump sum of $315,000.     The contract,
    which was heavily negotiated between the parties, without
    counsel, was drafted by plaintiffs.     The contract contained an
    arbitration clause, which provides:
    Section Thirteen:   Disputes
    Should any dispute arise relative to
    the performance of this contract that the
    parties cannot satisfactorily resolve, then
    the parties agree that the dispute shall be
    resolved by binding arbitration conducted by
    the American Arbitration Association. The
    party demanding arbitration shall give
    written notice to the opposite party and the
    American Arbitration Association promptly
    after the matter in dispute arises. In no
    event, however, shall a written notice of
    demand for arbitration be given after the
    date on which a legal action concerning the
    matter in dispute would be barred by the
    appropriate statute of limitations.
    After disputes arose between the parties over change orders
    and payments, plaintiffs, in October 2014, purported to
    terminate the contract in accordance with its terms.    On October
    21, defendant filed a demand for arbitration with the AAA.
    Plaintiffs filed an answer with thirteen affirmative defenses,
    none of which addressed the arbitration clause, and a
    counterclaim alleging breach of contract, negligence, breach of
    the covenant of good faith and fair dealing, violation of the
    2                           A-0276-17T2
    Consumer Fraud Act, N.J.S.A. 56:8-1 to -204, and
    misrepresentation.
    The parties, through counsel, thereafter pursued their
    claims in arbitration, exchanging discovery and an expert report
    and participating in a site inspection and several conferences
    with the appointed arbitrator.     Pursuant to a scheduling order
    issued by the arbitrator, plaintiffs filed their "Statement of
    Counterclaim" in December 2016, laying out their claims under
    the Consumer Fraud Act.   The parties agreed the first hearing
    date would be on April 26, 2017.
    Defendant submitted its pre-arbitration brief two weeks
    before the hearing date in accordance with the arbitrator's
    scheduling order.    Defendant devoted two pages of its eighteen-
    page brief to argue plaintiffs' Consumer Fraud Act claims were
    "not properly before the AAA, and should be rejected in their
    entirety."   Specifically, defendant argued the contract's
    arbitration provision was ineffective as to the Consumer Fraud
    Act claims because it failed to make any reference to statutory
    claims.   Defendant claimed it "agree[d] to arbitrate claims
    relating to the Contract, but never waived its right to a trial
    on statutory claims under the [Consumer Fraud Act]."    Defendant
    further argued plaintiffs could have brought their Consumer
    3                         A-0276-17T2
    Fraud Act claims "before a court if they chose, and that right
    remains to this day."
    Plaintiffs opposed defendant's in limine motion to dismiss
    their Consumer Fraud Act claims and defendant's "attempts to
    characterize this matter as something other than a simple
    commercial dispute sounding in negligence and breach of
    contract."   Plaintiffs argued Garfinkel v. Morristown Obstetrics
    & Gynecology Associates, P.A., 
    168 N.J. 124
    , 131 (2001), the
    case on which defendant relied, reaffirmed that "parties to an
    agreement may waive statutory remedies in favor of arbitration"
    and that "it is also well-established that claims arising under
    the [Consumer Fraud Act] are subject to agreements to
    arbitrate," relying on our unpublished opinion in Atalese v.
    United States Legal Services Group, L.P., No. A-0654-12 (App.
    Div. Feb. 22, 2013) (slip op. at 5).
    Plaintiffs further claimed the wording of the arbitration
    clause, in which the parties agreed to arbitrate, "any dispute
    . . . relative to the performance of this contract," was clear
    and sufficiently broad to provide notice that all possible
    claims arising out of the performance of the contract would be
    resolved in arbitration.   Plaintiffs concluded by stating:
    All of the claims in [plaintiffs']
    Counterclaim, including its statutory
    [Consumer Fraud Act] claims, are founded on
    4                         A-0276-17T2
    the same set of facts and "arise from" the
    performance of the contract. Accordingly[,]
    since the factual basis of [plaintiffs']
    Counterclaim also "arises from" disputes
    relative to the performance of the contract,
    all of the causes of action set forth in the
    Counterclaim, including the [Consumer Fraud
    Act] claim should also be heard in
    arbitration.
    That was how matters stood until the evening before the
    hearing when the arbitrator sent counsel a copy of the Supreme
    Court's opinion in Atalese v. United States Legal Services
    Group, L.P., 
    219 N.J. 430
    , 436 (2014), which reversed our
    decision and held that "[t]he absence of any language in the
    arbitration provision that plaintiff was waiving her statutory
    right to seek relief in a court of law" rendered the arbitration
    provision in that case unenforceable.   The arbitrator asked
    counsel to review the case "in connection with the pending
    motion in limine."
    By the time the parties appeared for the hearing the next
    morning, they had reversed their positions, with plaintiffs
    arguing the arbitration clause they drafted was unenforceable
    and defendant claiming plaintiffs' Consumer Fraud Act claims had
    to be heard by the arbitrator.   The arbitrator recapped the
    parties' positions in an email sent the same day.
    Last evening, in connection with the
    pending [defendant] motions in limine, I
    reviewed the parties' submissions.
    5                       A-0276-17T2
    [Plaintiffs] provided to me the unreported
    Appellate Division decision in Atalese v.
    United States Legal Services Group. I
    happened to know that this had been reversed
    by the New Jersey Supreme Court [Justice
    Albin having attended and discussed the
    decision at one of the Garibaldi ADR Inn of
    Court meetings].
    I provided a copy of the attached NJ
    Supreme Court decision to counsel last
    evening.
    When we began the hearing this morning,
    I was advised that [plaintiffs] wished to
    make an application to stay the arbitration.
    The concern expressed by [plaintiffs'
    counsel] was that perhaps the Consumer Fraud
    claims would be waived if they were not
    within the arbitration clause, or perhaps
    under the authority of Atalese, the
    arbitration clause is unenforceable.
    I suggested that I withdraw from the
    conference room and give counsel time to
    determine if the concerns could be addressed
    in a manner acceptable to all parties (since
    prior to my circulating the attached
    decision, the parties were ready to proceed
    today).
    I returned to the hearing and was
    advised that the [plaintiffs] wish to make
    an application to the NJ Superior Court to
    have all the claims heard in litigation
    rather than arbitration.
    As a result, I feel that I have no
    option but to stay the arbitration at this
    time. If it is determined by the New Jersey
    Superior Court that any (or all) claims are
    to be arbitrated, then we will lift the stay
    and reschedule the arbitration hearings.
    6                         A-0276-17T2
    The arbitrator subsequently "confirm[ed] that [defendant] agreed
    to have all claims, including any [Consumer Fraud Act] claims,
    submitted to arbitration" and "that [defendant] withdrew its
    motion in limine."
    Plaintiffs then filed a complaint in the Law Division,
    identical to the counterclaim they filed in arbitration, which
    defendant moved to dismiss.   Judge Vena, in a cogent and
    comprehensive opinion from the bench, granted the motion,
    sending the parties back to arbitration.      The judge analyzed the
    case relying on the Supreme Court's opinion in Cole v. Jersey
    City Medical Center, 
    215 N.J. 265
    , 280-81 (2013), although
    acknowledging that case involved a waiver of a right to
    arbitration and not litigation.       Applying the factors the Court
    identified to gauge whether a party's litigation conduct was
    consistent with a purportedly reserved right to arbitrate,1 Judge
    1
    The seven factors identified by the Cole Court are:
    (1) the delay in making the arbitration
    request; (2) the filing of any motions,
    particularly dispositive motions, and their
    outcomes; (3) whether the delay in seeking
    arbitration was part of the party's
    litigation strategy; (4) the extent of
    discovery conducted; (5) whether the party
    raised the arbitration issue in its
    pleadings, particularly as an affirmative
    defense, or provided other notification of
    its intent to seek arbitration; (6) the
    (continued)
    7                          A-0276-17T2
    Vena had no hesitation in concluding plaintiffs, by their
    conduct, waived any right to bring their claims in the Law
    Division.    Acknowledging the result of the motion "might not
    [have been] the same" if made almost three years earlier when
    defendant filed its demand for arbitration, the judge found
    plaintiffs participation in the arbitration proceeding in the
    interim precluded a "do-over" in the Law Division.
    Specifically, the judge found plaintiffs' delay in asserting
    their right to litigate the issues until the day of the hearing,
    after "[a]ll paper discovery was conducted; experts' reports
    were exchanged [and] arbitration briefs were prepared and
    exchanged" substantially prejudiced defendant and could not be
    countenanced by the court.
    Plaintiffs appeal.     Relying on our courts' solicitude of
    consumers forced to arbitrate statutory claims buried in
    contracts of adhesion, which do not inform them that they are
    surrendering their rights to pursue those claims in court, see,
    e.g., NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421 N.J.
    (continued)
    proximity of the date on which the party
    sought arbitration to the date of trial; and
    (7) the resulting prejudice suffered by the
    other party, if any.
    [Cole, 215 N.J. at 280-81.]
    8                         A-0276-17T2
    Super. 404, 425 (App. Div. 2011), certif. granted, 
    209 N.J. 96
    (2011), and appeal dismissed, 
    213 N.J. 47
     (2013), plaintiffs
    argue the arbitration clause in this consumer contract "by its
    own terms, only encompasses contract-based claims and does not
    evidence a specific agreement among the parties to refer
    statutory claims to binding arbitration."    Plaintiffs further
    contend the trial court erred in relying on Cole, as "that case
    concerned waiver in the context of a delay in asking the court
    to send the case to arbitration."
    Although our review here is de novo, the trial court's
    factual findings underlying its ruling that the case should
    proceed in arbitration are entitled to deference and subject to
    review for clear error.   See Cole, 215 N.J. at 275.
    Neither we nor the Supreme Court has apparently had the
    opportunity to consider whether the principles enunciated in
    Cole would apply where a party has participated in arbitration
    for well over two years before asserting a right to proceed in
    Superior Court.   But see, Cole, 215 N.J. at 277 (noting the
    "Court has addressed waiver of the right to a judicial
    determination when the parties engage in arbitration, see, e.g.,
    Johnson v. Johnson, 
    204 N.J. 529
    , 545 (2010); Fawzy v. Fawzy,
    
    199 N.J. 456
    , 462, 482 (2009)").    We do not do so here, as the
    peculiar circumstances that give rise to this appeal make it a
    9                          A-0276-17T2
    poor vehicle for considering the issue, and the case is easily
    resolved by resort to basic contract principles.
    "Although arbitration is traditionally described as a
    favored remedy, it is, at its heart, a creature of contract."
    Fawzy, 
    199 N.J. at 469
     (quoting Kimm v. Blisset, LLC, 
    388 N.J. Super. 14
    , 25 (App. Div. 2006)).    Accordingly, our focus is
    always on whether the agreement to arbitrate was the product of
    mutual assent, the so-called "meeting of the minds."    Atalese,
    219 N.J. at 442.   Here, unlike in the usual consumer case, it
    was plaintiffs, the consumer in this transaction, who drafted
    the contract containing the arbitration clause.    And it was
    plaintiffs who filed a counterclaim with the AAA asserting
    Consumer Fraud Act claims.   Both parties thereafter proceeded in
    arbitration for the next two years, exchanging written discovery
    and an expert report, participating in multiple conferences and
    a site inspection and preparing for and attending the first day
    of the hearing.
    Those acts, as found by Judge Vena, are all powerful
    indicators that these parties understood and agreed that all
    claims between them, including the Consumer Fraud Act claims,
    were subject to arbitration in accordance with their agreement.
    Indeed, neither party gave any indication otherwise until just
    before the scheduled arbitration hearing when their counsel
    10                         A-0276-17T2
    engaged in the procedural maneuvering giving rise to this
    appeal.   As our Supreme Court observed almost forty years ago,
    "[a]rbitration is a substitution, by consent of the parties, of
    another tribunal" for the one provided by law, with the "goal of
    providing final, speedy and inexpensive settlement of disputes."
    Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 
    86 N.J. 179
    ,
    187 (1981) (internal quotation omitted).   It is "meant to be a
    substitute for and not a springboard for litigation."   
    Ibid.
    (internal quotation omitted).
    We agree with Judge Vena this controversy should remain in
    the arbitral forum the parties plainly chose to resolve all
    aspects of their dispute.   Accordingly, we affirm, substantially
    for the reasons he expressed from the bench on August 4, 2017.
    Affirmed.
    11                       A-0276-17T2