STATE OF NEW JERSEY VS. WILSON MORALES(05-04-1576, CAMDEN COUNTY AND STATEWIDE) ( 2017 )

NOT FOR PUBLICATION WITHOUT THE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-5215-15T3
REGINA M. FOTI,
Individually and
On Behalf of All
Others Similarly
Situated,
Plaintiff-Appellant,
v.
TOYOTA MOTOR SALES,
U.S.A., INC.,
Defendant-Respondent.
______________________________________________
Argued January 24, 2017 – Decided April 24, 2017
Before Judges Messano and Espinosa.
On appeal from the Superior Court of New
Jersey, Law Division, Gloucester County,
Docket No. L-0981-15.
Lewis G. Adler argued the cause for appellant
(Mr. Adler and Law Office of Paul DePetris,
attorneys; Mr. Adler, on the briefs).
J. Gordon Cooney, Jr. (Morgan, Lewis &
Bockius) of the Pennsylvania bar, admitted pro
hac vice, and Franco A. Corrado argued the
cause for respondent (Morgan, Lewis & Bockius,
attorneys; Mr. Corrado and Sean J. Radomski,
on the brief).
PER CURIAM
Plaintiff Regina M. Foti leased a 2014 Toyota Corolla from
Classic Imports, Inc. (Classic).1 She executed a written lease
agreement (the lease) that bore the insignia and name of Toyota
Financial Services, and specifically defined the term "lessor" as
including Classic, its anticipated assignee, Toyota Lease Trust
(TLT), and any future assignee. The lease also stated that Toyota
Motor Credit Corporation (TMCC) would be "servicing the [l]ease."
The final page was an assignment of the lease from Classic to TLT.
The lease contained a broad arbitration provision (the
arbitration agreement) that provided in part:
You agree that any claims arising from or
relating to this Lease or related agreements
or relationships, including the validity,
enforceability, arbitrability or scope of this
Provision, at your or our election, are
subject to arbitration. This includes,
without limitation, claims in contract, tort,
pursuant to statute, regulation, ordinance or
in equity or otherwise, and claims asserted
by you against us, and the following Covered
Parties: [TLT], TMCC, and/or any of our or its
affiliates and/or any of our or their
employees, officers, successors, assigns or
against any third party providing any product
or service in connection with the Lease that
you name as a co-defendant in any action
against any of the foregoing.2
1 Classic apparently did business as Toyota of Turnersville.
2 When we quote the language of the lease, we continue to use its
defined terms: "you," "your," or "yours" refer to plaintiff; and
"we," "us," and "our" refer to Classic, TLT and any future
assignee.
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[(Emphasis added).]
The arbitration agreement also included in bold print a class
action waiver:
We, the Covered Parties and you are prohibited
from participating in a class action or
private attorney general action in court or
class-wide arbitration with respect to any
claims we, the Covered Parties or you have
asserted against one another or other
beneficiaries of this Provision. There should
also be no joinder or consolidation of
parties, except for multiple parties to this
Lease.
The arbitration agreement further provided in capitalized text:
IF ANY PARTY ELECTS ARBITRATION WITH RESPECT
TO A CLAIM, NEITHER YOU NOR WE NOR ANY COVERED
PARTY WILL HAVE THE RIGHT TO LITIGATE THAT
CLAIM IN COURT; TO HAVE A JURY TRIAL ON THAT
CLAIM; TO ENGAGE IN PREARBITRATION DISCOVERY
EXCEPT AS PROVIDED FOR IN THE RULES OF THE
ADMINISTRATOR; OR TO PARTICIPATE AS A
REPRESENTATIVE OR MEMBER OF ANY CLASS OF
CLAIMANTS PERTAINING TO SUCH CLAIM. . . .
OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT
TO COURT MAY NOT BE AVAILABLE IN ARBITRATION.
The following appeared at the end of the arbitration agreement in
bold print: "By signing below, you agree that at the request of
either you or us any controversy or claim between you and us shall
be determined by neutral binding arbitration in accordance with
the terms of this Arbitration Provision." Plaintiff executed the
lease in two places — immediately below this bold-print provision
and again at the end of the lease.
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In July 2015, plaintiff filed a complaint on behalf of herself
and other similarly situated consumers against defendant Toyota
Motor Sales, U.S.A., Inc., alleging two violations of the Truth-
in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A.
56:12-14 to -18. She claimed the vehicle's warranty notice (1)
contradicted and misstated consumers' rights under New Jersey's
Lemon Law (Lemon Law), N.J.S.A. 56:12-29 to -49, requiring notice
by certified mail return receipt requested to the manufacturer
prior to making a Lemon Law complaint; and (2) in doing so, failed
to include the verbatim language required by the Lemon Law and its
regulations.
Before filing an answer, defendant moved to compel
arbitration, and plaintiff cross-moved for partial summary
judgment. After considering oral argument, the motion judge
granted defendant's motion, entering an order compelling
arbitration, requiring plaintiff to "pursue the claims . . . on
an individualized basis" and dismissing the complaint without
prejudice.3
Before us, plaintiff argues the judge erred, because there
was "no meeting of the minds" and therefore no "enforceable
agreement"; as non-signatory to the lease, defendant was not
3 A second order denied plaintiff's cross-motion.
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entitled to enforce the arbitration agreement; the arbitration
agreement does not apply to plaintiff's claim because issues
concerning the manufacturer's warranty are exempted from its
terms; because plaintiff's complaint is brought as a "private
attorney general" action, it is beyond the scope of the arbitration
agreement; and, the arbitration agreement is "unenforceable as to
the putative class." Having considered these arguments in light
of the record and applicable legal standards, we affirm.
We conduct a de novo review of the trial court's order
compelling arbitration. Hirsch v. Amper Fin. Servs., LLC, 215
N.J. 174, 186 (2013). "In reviewing such orders, we are mindful
of the strong preference to enforce arbitration agreements
. . . ." Ibid. When evaluating a motion to dismiss a complaint
and compel arbitration, a court must undertake a two-pronged
analysis. First, the court must determine whether the parties
have entered into a valid and enforceable agreement to arbitrate
disputes. Id. at 188. Second, the court must determine whether
the dispute falls within the scope of the agreement. Ibid.
"[S]tate contract-law principles generally . . . determin[e]
whether a valid agreement to arbitrate exists." Hojnowski v.
Vans Skate Park, 187 N.J. 323, 342 (2006). "In evaluating the
existence of an agreement to arbitrate, a court 'consider[s] the
contractual terms, the surrounding circumstances, and the purpose
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of the contract.'" Hirsch, supra, 215 N.J. at 188 (alteration in
original) (quoting Marchak v. Claridge Commons, Inc., 134 N.J.
275, 282 (1993)). Plaintiff argues that, while she may have
agreed to arbitrate certain disputes, she never agreed to
arbitrate any disputes with defendant, who was a non-signatory to
the lease.
"The United States Supreme Court has recognized that, in the
context of arbitration, 'traditional principles of state law allow
a contract to be enforced by or against nonparties to the contract
through assumption, piercing the corporate veil, alter ego,
incorporation by reference, third party beneficiary theories,
waiver and estoppel.'" Ibid. (emphasis added) (quoting Arthur
Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S. Ct. 1896,
1902, 173 L. Ed. 2d 832, 840 (2009)). The arbitration agreement
in this case specifically included TLT, TMCC, "and/or any of our
or its affiliates." We reject plaintiff's assertion that she did
not know defendant was affiliated with TLT or TMCC because the
language of the arbitration agreement was confusing.4
4 Plaintiff's brief cites a number of California decisions and
argues the federal Ninth Circuit Court of Appeals has specifically
rejected defendant's asserted grounds for compelling arbitration
as an affiliate of the signatory. Close examination reveals none
of those decisions are particularly persuasive, because the
arbitration agreement at issue in those decisions did not include
the "affiliate" language contained in this lease. See Kramer v.
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Plaintiff further argues that her claims fall outside the
scope of the arbitration agreement. She contends the TCCWNA
claims involve inadequacies and inaccuracies of the Lemon Law
statement provided by defendant and "in no way implicate the
lease, which expressly leaves plaintiffs to pursue such remedies
against the manufacturer alone via its warranty." We again
disagree.
Clearly, "a court may not rewrite a contract to broaden the
scope of arbitration." Hirsch, supra, 215 N.J. at 188 (quoting
Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A.,
168 N.J. 124, 132 (2001)). However, the arbitration agreement in
this case covered
any claims arising from or relating to th[e]
Lease or related agreements or relationships,
including the validity, enforceability,
arbitrability or scope of this Provision, at
your or our election, are subject to
arbitration. This includes, without
limitation, claims in contract, tort, pursuant
to statute, regulation . . . or otherwise
. . . .
Toyota Motor Corp., 705 F.3d 1122, 1124, 1127 n.3 (9th Cir. 2013)
(arbitration provisions did not include "covered party" language
and Toyota did not contend it was "a transferee, employee or agent
of the dealership" such that it could compel arbitration); In re
Toyota Motor Corp., 838 F. Supp. 2d 967, 988-90 (C.D. Cal. 2012)
(no express "covered party" language in the arbitration
provisions); Soto v. Am. Honda Motor Co., 946 F. Supp. 2d 949,
955 (N.D. Cal. 2012) (reasoning the term "third parties" in the
arbitration provision did not include the defendant
manufacturer).
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[(Emphasis added).]
Plaintiff acknowledges that the Lemon Law requires defendant to
provide the notice, see N.J.S.A. 56:12-34(a), and TCCWNA required
Classic, as lessor, to deliver the notice. N.J.S.A. 56:12-15.
Moreover, the lease expressly advised plaintiff that the car was
"subject to the standard new warranty from the manufacturer." In
short, the Lemon Law notice was clearly a related agreement that
arose from the lease itself, and we reject any contention that the
terms and conditions in the Lemon Law notice rendered the
provisions of the arbitration agreement sufficiently ambiguous so
as to foreclose its enforceability.
Plaintiff argues that, even if the class-action waiver
provision applies, claims on behalf of the putative class must be
stayed pending her individual arbitration. We again disagree.
Plaintiff misconstrues AT&T Mobility LLC v. Concepcion, 563
U.S. 333, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011), to support
her claim. In Concepcion, the Supreme Court upheld the validity
of class action waiver provisions, stating businesses may require
consumers to bring claims only in individual arbitrations, rather
than in court as part of a class. Concepcion, supra, 563 U.S. at
346-52, 131 S. Ct. at 1749-53, 179 L. Ed. 2d at 755-59. Plaintiff
cites to our Court's decision in Muhammad v. County Bank of
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Rehoboth Beach, Delaware, 189 N.J. 1, 22 (2006), cert. denied, 549
U.S. 1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007), as support
for the proposition that a class-arbitration waiver in a consumer
contract was unconscionable. However, the Third Circuit Court of
Appeals held the Federal Arbitration Act (the FAA), 9 U.S.C.A. §
1 to § 16, pre-empted that holding.
[A] state law that seeks to impose class
arbitration despite a contractual agreement
for individualized arbitration is
inconsistent with, and therefore preempted by,
the FAA, irrespective of whether class
arbitration is desirable for unrelated
reasons. Therefore, . . . the rule
established by the New Jersey Supreme Court
in Muhammad is preempted by the FAA.
[Litman v. Cellco P'ship, 655 F.3d 225, 231
(3d Cir. 2011) (emphasis added) (internal
quotations and citation omitted).]
Lastly, plaintiff contends she filed her complaint as a
"private attorney general action," which is expressly excluded by
the arbitration agreement. We find no support for this proposition
either in plaintiff's brief or elsewhere. By the express terms
of the arbitration agreement, plaintiff waived her right to
"participat[e] in a class action or private attorney general action
in court or class-wide arbitration." There is nothing in the
arbitration agreement that exempts plaintiff's individual claims,
however characterized, from arbitration.
Affirmed.
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