Opinion
DOCKET NO. A-4728-14T4
03-03-2016
DANIEL B. HELLER and DB CAPITAL, INC., Plaintiffs-Appellants, v. WELLS FARGO BANK, N.A., Defendant-Respondent.
Joseph M. Vento argued the cause for appellants (Peckar & Abramson, P.C., attorneys; Kevin J. O'Connor and Mr. Vento, on the briefs). Justin P. Kohlbenschlag argued the cause for respondent (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; John D. North, of counsel and on the brief; Mr. Kohlbenschlag, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Ostrer and Haas. On appeal from Superior Court of New Jersey, Law Division, Mercer County, Docket No. L-697-15. Joseph M. Vento argued the cause for appellants (Peckar & Abramson, P.C., attorneys; Kevin J. O'Connor and Mr. Vento, on the briefs). Justin P. Kohlbenschlag argued the cause for respondent (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; John D. North, of counsel and on the brief; Mr. Kohlbenschlag, on the brief). PER CURIAM
Plaintiffs Daniel B. Heller and DB Capital, Inc. appeal from the Law Division's June 5, 2015 order granting defendant Wells Fargo Bank, N.A.'s (Wells Fargo) cross-motion to compel arbitration; denying plaintiffs' motion to stay arbitration; and dismissing plaintiffs' complaint. We reverse and remand for further proceedings so that the trial court may determine on a complete record whether the parties clearly and unambiguously consented to arbitration.
On August 25, 2015, the trial court stayed the order compelling arbitration pending appeal.
We derive the following facts and procedural history from the motion record. Heller is the sole shareholder of DB Capital, Inc. According to plaintiffs' complaint, prior to 2008, they "kept a substantial sum of money in their commercial deposit account" at an East Windsor branch office of Wachovia Bank.
According to a certification provided by Jeanne Fischer-Hanson, a Wells Fargo employee, "Wells Fargo is the successor to Wachovia. Wachovia consolidated into Wells Fargo on March 20, 2010, and integration and conversion of Wachovia customers to Wells Fargo occurred in phases . . . over the course of approximately two . . . years." Fischer-Hanson certified that Wachovia accounts were converted to Wells Fargo accounts on July 23, 2011. At that time, Fischer-Hanson asserted that Wells Fargo mailed information to all converted account owners, including plaintiffs. This information included a 2011 "Wells Fargo Business Account Agreement[,]" which stated that disputes between the account owners and Wells Fargo would be resolved in arbitration. Heller alleged that he never received this mailing.
Sometime thereafter, a dispute arose between Heller and the bank branch manager concerning whether plaintiffs' commercial deposit account was interest bearing. Heller asserted that the manager continually told him that the account was earning interest and showed him computer "screenshots" of the account to support this claim.
This was plaintiffs' "primary account" with Wells Fargo.
On April 3, 2013, Heller signed "a Business Account Application on behalf of D.B. Capital, Inc. for a Wells Fargo Business High Yield Savings" account. The application contained an arbitration provision which stated in bold print:
The Customer's use of any Bank deposit account, product or service will confirm the Customer's receipt of, and agreement to be bound by, the Bank's applicable fee and information schedule and account agreement that include the Arbitration Agreement under which any dispute between the Customer and the Bank relating to the Customer's use of any Bank deposit account, product or service will be decided in an arbitration proceeding before a neutral arbitrator as described in the Arbitration Agreement and not by a jury or court trial.This arbitration provision appears on page four of the five-page application, right above Heller's signature. Heller did not provide a certification denying that he signed the application.
Thereafter, the dispute between Heller and the branch manager came to a head. In January 2014, Heller told the manager that he intended to close plaintiffs' commercial account because the 2013 IRS 1099 form he received indicated that the account earned no interest in that year. On April 29, 2014, Heller met with the manager and closed the account. The manager gave Heller a check for "$146,108.21, which represented the remaining balance of collected funds in the [a]ccount." Heller also asked the manager to give him a second check for $353,891.79, which was the amount of interest the manager previously told Heller had been earned on the account. The manager complied with this request.
Wells Fargo alleged that, sometime in April 2014, it mailed plaintiffs a new Business Account Agreement, which had an April 7, 2014 effective date. This new agreement had an arbitration provision, but plaintiffs argued that it did not clearly state that the customer waived his or her right to pursue claims against Wells Fargo in court and, therefore, the provision did not meet the requirements set forth by the Supreme Court in Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 448 (2014) (denying a motion to compel arbitration on the grounds that "the wording of the service agreement did not clearly and unambiguously signal to plaintiff that she was surrendering her right to purse her . . . claims in court"), cert. denied, ___ U.S. ___, 135 S. Ct. 2804, 192 L. Ed. 2d 847 (2015).
Asserting that the branch manager had no authority to issue Heller a check for interest that had not been earned on plaintiffs' commercial account, Wells Fargo demanded that Heller return the $353,891.79. Heller refused. On February 27, 2015, Wells Fargo filed a demand for arbitration against plaintiffs with the American Arbitration Association. Wells Fargo's demand stated that it was relying upon the April 2014 arbitration provision as the basis for its demand.
On March 27, 2015, plaintiffs filed a complaint and request for an order to show cause against Wells Fargo in the Law Division. Plaintiffs sought a declaratory judgment that the April 2014 arbitration provision did not comply with Atalese, supra. In response to the order to show cause, Wells Fargo filed a cross-motion seeking to compel arbitration. It provided the court with copies of the 2011 and 2014 account agreements. Wells Fargo also submitted a copy of Heller's signed 2013 account application. Significantly, however, Wells Fargo did not provide the court with a copy of the "Arbitration Agreement" referenced in the 2013 application. Therefore, that agreement is not part of the record and its terms are unknown.
Following oral argument, the trial judge issued a brief written decision granting Wells Fargo's cross-motion to compel arbitration and dismissing plaintiffs' complaint. The judge noted that plaintiffs "dispute[d] receipt of the 2011 agreement." The judge next observed that, in addition to their Atalese argument, plaintiffs contended "that they never agreed to the terms of the 2014 agreement[,]" and that it was "ineffective[, because] it was submitted after the dispute commenced." However, the judge did not address these factual and legal issues further.
Instead, the judge cited the language of the 2013 account application, which stated that the customer's use of the account constituted his or her agreement to be bound by the terms of the
Arbitration Agreement under which any dispute between the Customer and the Bank relating to the Customer's use of any Bank deposit account, product or service will be decided in an arbitration proceeding before a neutral arbitrator as described in the Arbitration Agreement and not by a jury or court trial.Relying upon this provision, the judge held that arbitration was required. The judge explained:
[(emphasis omitted).]
The [c]ourt reaches this conclusion because the 2013 application, which was endorsed by [p]laintiffs, plainly requires that all disputes relating to all accounts held by [p]laintiffs are subject to arbitration. In addition, the 2013 application contains clear and unambiguous language which states that [p]laintiffs are waiving a right to judicial adjudication. As the requirements of Atalese are clearly met in this instance, [p]laintiffs are subject to arbitration per the 2013 application.The judge made no mention of the missing "Arbitration Agreement" referenced in the 2013 application. This appeal followed.
On July 21, 2015, the trial judge filed a written amplification of his findings of fact and conclusions of law pursuant to Rule 2:5-1(b). However, the amplification did not differ from his prior written opinion in any material respect.
On appeal, plaintiffs argue that "the trial court erred in compelling [plaintiffs] to arbitrate their claims against [Wells Fargo] based solely on the language contained in the 2013 application." Plaintiffs also contend that "the trial court erred in its failure to evaluate whether the 2014 agreement's arbitration provision is in accordance with binding precedent[,]" and whether the 2014 agreement superseded any previous arbitration provision. We agree.
We exercise plenary review of the trial court's decision regarding the existence and applicability of an arbitration agreement. We review de novo the question of whether there is a valid and enforceable arbitration agreement. Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013); Barr v. Bishop Rosen & Co. Inc., 442 N.J. Super. 599, 605 (App. Div. 2015). Though the Federal Arbitration Act, 9 U.S.C.A. §§ 1-16, and the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32, reflect a preference for arbitration, "[a]rbitration's favored status does not mean that every arbitration clause, however phrased, will be enforceable." Atalese, supra, 219 N.J. at 440-41.
"Orders compelling arbitration are deemed final for purposes of appeal." Hirsch, supra, 215 N.J. at 186 (citing R. 2:2-3(a)). --------
Recently, we reviewed the principles governing enforceability of arbitration contracts:
An agreement to arbitrate "must be the product of mutual assent, as determined under customary principles of contract law." [Id. at 442]. Mutual assent requires that the parties understand the terms of their agreement. Ibid. In considering whether an agreement includes a waiver of a party's right to pursue a case in a judicial forum, "clarity is required." Moore v. Woman to Woman Obstetrics & Gynecology, L.L.C., 416 N.J. Super. 30, 37 (App. Div. 2010). That is, the waiver "must be clearly and unmistakably established," Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001), and "should clearly state its purpose," Marchak v. Claridge Commons, Inc. 134 N.J. 275, 282 (1993). And the parties must have full knowledge of the legal rights they intend to surrender. Knorr v. Smeal, 178 N.J. 169, 177 (2003). Although an arbitration clause need not identify "the specific
constitutional or statutory right guaranteeing a citizen access to the courts" that are being waived, it must "at least in some general and sufficiently broad way" convey that parties are giving up their right to bring their claims in court or have a jury resolve their dispute. Atalese, supra, 219 N.J. at 447.
[Barr, supra, 442 N.J. Super. at 605-06.]
Because arbitration involves a waiver of the right to pursue a case in a judicial forum, "courts take particular care in assuring the knowing assent of both parties to arbitrate, and a clear mutual understanding of the ramifications of that assent." NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 425 (App. Div.), certif. granted, 209 N.J. 96 (2011), appeal dismissed, 213 N.J. 47 (2013). Mutual assent to an agreement requires mutual understanding of its terms. Atalese, supra, 219 N.J. at 442-43.
Whether an arbitration agreement was formed is determined under general contract principles. Leodori v. CIGNA Corp., 175 N.J. 293, 302, cert. denied, 540 U.S. 938, 124 S. Ct. 74, 157 L. Ed. 2d 250 (2003). A court may not "subject an arbitration agreement to more burdensome requirements than those governing the formation of other contracts." Ibid. We consider "the contractual terms, the surrounding circumstances, and the purpose of the contract." Hirsch, supra, 215 N.J. at 188 (quoting Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993)).
Applying these principles, we are unable to conclude on this record that the arbitration provision contained in the 2013 account application Heller signed constituted a clear and unmistakable waiver of plaintiffs' right to file a lawsuit. On the one hand, the provision does state that disputes between a customer and Wells Fargo will be decided "in an arbitration proceeding before a neutral arbitrator as described in the Arbitration Agreement and not by a jury or court trial." Thus, the provision may conform to the Atalese requirement that an arbitration provision unambiguously advise the party that he or she is surrendering her right to pursue claims in court.
However, that determination cannot be made here because the provision also refers to an "Arbitration Agreement" that was apparently not attached to the application, and which was not presented to the trial court. Thus, we are unsure whether the terms set forth in the missing agreement are consistent with the arbitration provision in the account application, or whether they conflict with it. Therefore, we must remand this matter to the trial court for further proceedings.
On remand, the trial court should require Wells Fargo to submit the agreement referenced in the 2013 account application, and permit the parties to present arguments concerning it and the arbitration provision. While an evidentiary hearing may not be required, the court should consider conducting one should there be irreconcilable factual disputes between the parties.
In addition, the trial court should address the possible applicability of the arbitration provision in the April 2014 account agreement. In its demand for arbitration, and in its subsequent filings in the trial court, Wells Fargo argued that the April agreement superseded any prior arbitration provision. In response, plaintiffs argued: (1) they never agreed to the arbitration provision in the 2014 agreement; (2) Wells Fargo did not allegedly mail the agreement until after the dispute arose between the parties; and (3) the arbitration provision did not comply with Atalese.
In its written decision, the court did not address these issues and, instead, found without further explanation that the arbitration provision in the 2013 account application governed. In view of Wells Fargo's argument throughout the proceedings that the April 2014 agreement controlled, the judge should have made a definitive ruling, supported by findings of fact and conclusions of law, on that question. See Shulas v. Estabrook, 385 N.J. Super. 91, 96 (App. Div. 2006) (requiring court to clearly state its factual findings and correlate them with the relevant legal conclusions).
Finally, Wells Fargo continues to assert that, if the 2013 and 2014 arbitration provisions are insufficient to require arbitration, the 2011 agreement should control. As already noted, however, the parties sharply differed on the applicability of the 2011 agreement to this matter and the judge failed to resolve this dispute. Therefore, the judge must also address this question on remand.
Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION