Opinion
DOCKET NO. A-3232-12T3
02-03-2014
MARYAM NAJMEE and SHUJAUDEEN NAJMEE, Plaintiffs-Appellants, v. THE BROWNSTONES AT ESSEX FELLS, LLC, STEVEN KATZ, WILLIAM MANICONE, and THE STERLING PROPERTIES GROUP, LLC, Defendants-Respondents.
Vafa Sarmasti argued the cause for appellants (Sarmasti, PLLC, attorneys; Ms. Sarmasti and Stacy A. Orvetz, on the briefs). Lance N. Olitt argued the cause for respondents (Mandelbaum, Salsburg, Lazris & Discenza, P.C., attorneys; Mr. Olitt, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Yannotti and Leone.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2084-12.
Vafa Sarmasti argued the cause for appellants (Sarmasti, PLLC, attorneys; Ms. Sarmasti and Stacy A. Orvetz, on the briefs).
Lance N. Olitt argued the cause for respondents (Mandelbaum, Salsburg, Lazris & Discenza, P.C., attorneys; Mr. Olitt, on the brief). PER CURIAM
Plaintiffs Maryam Najmee and Shujaudeen Najmee appeal from an order granting defendants' motion for summary judgment. Because plaintiffs agreed to submit their disputes to arbitration, we affirm.
I.
The record on summary judgment indicates the following. Plaintiffs sought to purchase a condominium unit from defendant The Brownstones at Essex Fells, L.L.C. (BEF). After discussions with defendant William Manicone, an agent of BEF's sales representative, plaintiffs and BEF entered into a Purchase and Sale Agreement, and two subsequent amendments (collectively "the Agreement"). The Agreement was signed by defendant Steven Katz, a managing member of BEF. Plaintiffs allege, and the record supports the inference, that Katz and Manicone were also employed by defendant The Sterling Properties Group, L.L.C. (SPG), and that SPG was working in tandem with BEF before and after the Agreement.
Under the Agreement, plaintiffs were to pay a total deposit of $80,000, and BEF was to construct the condominium unit. Closing of title was set for June 30, 2012. Plaintiffs could terminate the Agreement and receive their deposit back if title was not closed within sixty days after June 30, 2012, i.e., August 29, 2012. The Agreement also provided:
DISPUTES. With the exception of warranty claims, any disputes arising in connection with this Agreement or in relation to any amendment to this Agreement, either before
or after closing of title, shall be heard and determined by arbitration before an arbiter of the American Arbitration Association in Essex County. The decision of the arbiter shall be final and binding on all parties. Costs of arbitration shall be borne equally between the Seller and the Buyer. This clause shall survive closing of title.
Plaintiffs and their counsel communicated with Katz and Manicone regarding the progress of construction on the unit. It became clear that the unit would not be completed by June 30, 2012, so plaintiffs requested an extension of the mortgage contingency deadline, which was granted in a letter signed by Katz on behalf of BEF. It then became apparent that the unit would not be ready by August 29, 2012. On or about August 14, 2012, plaintiffs sent a letter terminating the Agreement and demanding the return of their $80,000 deposit. On August 16, 2012, plaintiffs filed a complaint against defendants in the Law Division, alleging breach of contract and other causes of action. BEF eventually returned $40,000, but claimed the rest of the deposit as liquidated damages and demanded arbitration.
Defendants filed a motion for summary judgment based on the Agreement's arbitration provision. On January 28, 2013, the judge entered an order granting summary judgment, dismissing plaintiffs' complaint, and referring all parties and all issues to binding arbitration. Plaintiffs appeal.
II.
We must hew to our standard of review, which is the same summary judgment standard that governed the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010). Summary judgment must be granted if "the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). "'The interpretation of contracts and their construction are matters of law for the court subject to de novo review.'" Duddy v. Gov't Emps. Ins. Co., 421 N.J. Super. 214, 217 (App. Div. 2011) (citation omitted). Orders compelling arbitration are similarly reviewed "de novo." Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013).
III.
Plaintiffs challenge the judge's order requiring them to arbitrate with BEF. Plaintiffs do not dispute that "'a valid agreement to arbitrate exists.'" Id. at 187 (quoting Hojnowski v. Vans Skate Park, 187 N.J. 323, 342 (2006)). We note that plaintiffs entered into the Agreement only after their attorney reviewed it, negotiated two amending documents, and made over thirty changes to the Agreement. Thus, it was not a contract of adhesion, which "'is presented on a take-it-or-leave-it basis, . . . without opportunity for the 'adhering' party to negotiate except perhaps on a few particulars.'" Estate of Anna Ruszala, ex rel. Mizerak v. Brookdale Living Cmtys., Inc., 415 N.J. Super. 272, 294-95 (App. Div. 2010) (quoting Rudbart v. N.J. Dist. Water Supply Comm'n, 127 N.J. 344, 353, cert. denied, 506 U.S. 871, 113 S. Ct. 203, 121 L. Ed. 2d 145 (1992)).
Instead, plaintiffs contest whether the claims in their complaint "fall within the clause's scope." Hirsch, supra, 215 N.J. at 188. "A court must look to the language of the arbitration clause to establish its boundaries. Importantly, 'a court may not rewrite a contract to broaden the scope of arbitration.'" Ibid. (quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132 (2001)).
At the same time, we must be mindful that arbitration "'is a favored means of dispute resolution,'" Cole v. Jersey City Med. Cntr., 215 N.J. 265, 276 (2013) (quoting Hojnowski, supra, 187 N.J. at 342), and that New Jersey courts have a "strong preference to enforce arbitration agreements," Hirsch, supra, 215 N.J. at 186. "Because of the favored status afforded to arbitration, '[a]n agreement to arbitrate should be read liberally in favor of arbitration.'" Garfinkel, supra, 168 N.J. at 132 (quoting Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993)). "[U]nless the arbitration clause is not susceptible of an interpretation that covers the asserted dispute, the matter is arbitrable[.]" Amalgamated Transit Union, Local 880 v. N.J. Transit Bus Operations, Inc., 200 N.J. 105, 125 (2009) (citations and quotation marks omitted).
Plaintiffs claim that by agreeing to arbitrate "any disputes arising in connection with this Agreement or in relation to any amendment to this Agreement," they did not agree to arbitrate disputes relating to the unit or its construction. The construction and sale of the unit, however, were the essence of the Agreement. Plaintiffs' interest in the unit and its construction, arises solely from the Agreement.
Plaintiffs next claim that by agreeing to arbitrate "disputes," they did not agree to arbitrate legal claims or causes of action. "Dispute" is a broad term encompassing a "verbal controversy" or "quarrel," Webster's II New College Dictionary 335 (1995), and a "conflict or controversy, esp[ecially] one that has given rise to a particular law suit," Black's Law Dictionary 505 (8th ed. 2004). See M.J. Paquet, Inc. v. N.J. Dep't of Transp., 171 N.J. 378, 396 (2002) ("Generally, the terms of an agreement are to be given their plain and ordinary meaning."). Indeed we have cited an arbitration clause covering "'any dispute'" as an example of "an inclusive arbitration clause" that binds parties "to arbitration under all circumstances." See Alamo Rent A Car, Inc. v. Galarza, 306 N.J. Super. 384, 394 (App. Div. 1997). Moreover, by mandating the arbitration of "any disputes" "with the exception of warranty claims," the Agreement made clear that all other "claims" and "disputes" would be arbitrated.
Plaintiffs' argument also ignores a fundamental purpose of arbitration. Arbitration is favored because it fosters the out-of-court resolution of legal claims, "thus minimizing the need to expend judicial resources on those diverted cases." Riding v. Towne Mills Craft Ctr., 166 N.J. 222, 226 (2001).
Arbitration is "a substitution, by consent of the parties, of another tribunal for the tribunal provided by the ordinary processes of law," and its object is "the final disposition, in a speedy, inexpensive, expeditious and perhaps less formal manner, of the controversial differences between the parties." . . . [I]t is, after all, "meant to be a substitute for and not a springboard for litigation."By arguing that they agreed to arbitrate disputes but not claims in litigation, plaintiffs ignore the essence of the arbitration clause.
[Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179, 187 (1981) (citations omitted).]
Plaintiffs argue arbitration is improper because their complaint contains tort claims. "As a general rule, courts have construed broadly worded arbitration clauses to 'encompass[] tort, as well as contract claims.'" Garfinkel, supra, 168 N.J. at 137 (citation omitted). Plaintiffs' tort claims are based on defendants' alleged negligence, fraud, and misrepresentations in the creation and implementation of the Agreement, and "are subject to arbitration because they depend in part on an interpretation of the parties' rights under the" Agreement. Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 520-521 (App. Div. 2010); See Alfano v. BDO Seidman, LLP, 393 N.J. Super. 560, 575-77 (App. Div. 2007) (ruling that a clause requiring arbitration of "all controversies" is broad enough to cover tort claims). As the judge concluded, pleading disputes "as tort violations [do] not bring them outside the class of 'disputes' covered by the arbitration clause."
Plaintiffs similarly argue that the arbitration clause is inapplicable to the complaint's statutory claims under the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Planned Real Estate Development Full Disclosure Act (PREDFDA), N.J.S.A. 45:22A-21 to -56. However, "[t]hat parties to an agreement may waive statutory remedies in favor of arbitration is a settled principle of law in this state." Garfinkel, supra, 168 N.J. at 131; see Curtis v. Cellco P'ship, 413 N.J. Super. 26, 37 (App. Div.) (noting that parties can agree to arbitration of CFA claims), certif. denied, 203 N.J. 94 (2010); see also Bell Tower Condo. Ass'n v. Haffert, 423 N.J. Super. 507, 516 (App. Div.) (applying "the strong public policy of this State favoring arbitration" to PREDFDA), certif. denied, 210 N.J. 217 (2012).
For a waiver of statutory, claims in favor of arbitration to be valid, the parties must "agree[] clearly and unambiguously to arbitrate the disputed claim." Leodori v. Cigna Corp., 175 N.J. 293, 300-02, cert. denied, 540 U.S. 938, 124 S. Ct. 74, 157 L. Ed. 2d 250 (2003); see Fawzy v. Fawzy, 199 N.J. 456, 469 (2009). Garfinkel ruled that a termination claim under the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42, did not fall within the scope of an arbitration clause covering "'any controversy or claim' that arises from the agreement or its breach." Garfinkel, supra, 168 N.J. at 128, 134. The Court reasoned that the importance of eradicating discrimination requires an unambiguous waiver; LAD claims do not "involv[e] a contract term, a condition of employment, or some other element of the contract;" and the clause contained exceptions concerning termination. Id. at 134-35.
The Supreme Court distinguished Garfinkel in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). There, the Court ruled that an arbitration agreement covering "all disputes" relating to employment or termination thereof was "sufficiently broad to encompass reasonably plaintiff's statutory causes of action," because it did "not contain any limiting references," and "addressed specifically a waiver of the right to a jury trial, augmenting the notice to all parties to the agreement that claims involving jury trials would be resolved instead through arbitration." Id. at 95-96.
This case does not involve the eradication of discrimination, but merely a routine commercial dispute. See EPIX Holdings Corp. v. Marsh & McLennan Cos., Inc., 410 N.J. Super. 453, 476 (App. Div. 2009). In EPIX, we reiterated that Garfinkel's "limits to otherwise broadly-worded arbitration clauses do not apply outside 'the special area' of a 'plaintiff's enforcement of statutory employment claims.'" Ibid. (quoting Alfano, supra, 393 N.J. Super. at 576). Thus, we ruled that statutory claims were covered by an arbitration clause stating that "[a]ny other unresolved dispute arising out of this Agreement must be submitted to arbitration." Id. at 461, 472-75.
EPIX Holding's discussion of the claims covered by arbitration, id. at 469-79, was not invalidated by Hirsch's partial rejection of EPIX Holding's analysis of the litigants covered by arbitration, id. at 463-67, discussed below. See Hirsch, supra, 215 N.J. at 185, 190, 193.
Even assuming that Garfinkel's limits apply here, the Agreement is broad enough to cover plaintiffs' statutory claims. Unlike the LAD claims in Garfinkel, plaintiffs' statutory claims involve disputes "arising in connection with this Agreement" and thus covered by the arbitration clause. In Curtis, we ruled that the plaintiff's CFA claims were arbitrable because they "'touch matters covered by the parties' contract,'" and because "'[c]ourts have generally read the terms "arising out of" or "relating to" [in] a contract as indicative of an "extremely broad" agreement to arbitrate any dispute relating in any way to the contract.'" Curtis, supra, 413 N.J. Super. at 37-39 (citations omitted).
Further, the Agreement's arbitration clause covers "any disputes" and contains no limiting references or pertinent exceptions. See Martindale, supra, 173 N.J. at 95-96. Moreover, the Agreement provides that arbitration will be "final and binding." Thus, the clause is "'clear and unambiguous' in [its] intent and purpose to inform the reader that all disputes must be presented in an arbitral forum, not a court." Curtis, supra, 413 N.J. Super. at 38.
We recognize that in Martindale and Curtis, the arbitration clauses made specific reference to waiver of trial by jury. What was crucial in those cases, however, was notice of waiver of judicial proceedings, not of a particular trier of fact. We stressed that "the Agreement employs language reflecting that disposition of disputes will occur outside the courts" and "gave plaintiff reasonable notice that, upon signing, he was waiving his right to judicial adjudication." Ibid. Here, as the judge ruled, the Agreement gives that notice by proclaiming that "[t]he decision of the arbiter shall be final and binding on all parties." That language "provided plaintiff[s] with sufficient notice at the time [they] signed the agreement that all claims . . . would be resolved through arbitration." Martindale, supra, 173 N.J. at 96.
Explicit mention of the right to a jury trial was not necessary for a valid agreement to submit a statutory cause of action to arbitration. See Young v. Prudential Ins. Co. of Am., Inc., 297 N.J. Super. 605, 614-19 (App. Div.), certif. denied, 149 N.J. 408 (1997) (finding an agreement to arbitrate waived the right to jury trial even though the right was not specifically mentioned); see also Littman v. Morgan Stanley Dean Witter, 337 N.J. Super. 134, 146-48 (App. Div. 2001) (following Young because "the right to jury trial, even under an anti- discrimination statute, does not alone control the issue of enforceability of an agreement to arbitrate").
Plaintiffs cite Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577 (App. Div.), certif. denied, 181 N.J. 595 (2004), but there the arbitration terms were "highly ambiguous because the parties executed two documents which contain separate and somewhat disparate arbitration clauses." Id. at 581. One clause did not mention that the arbitration would waive a jury trial or be final and binding. Id. at 585. The other clause was "in small print on the back of a document," and thus "difficult to locate and, once found, onerous to read," rendering it invalid because it was in a contract of adhesion. Id. at 585-86. Plaintiffs also cite Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J. Super. 138, 152 (App. Div. 2008), but there the pertinent "agreement did not contain any provision for arbitration of disputes between the contracting parties." In contrast to those cases, here the parties entered into a single, valid, binding arbitration clause.
Plaintiffs note that BEF's public offering statement contained a sample purchase and sale agreement, which, after the "DISPUTES" paragraph quoted above, included a second paragraph:
BY AGREEING TO ARBITRATE ALL DISPUTES WITH THE SELLER, WHETHER STATUTORY, CONTRACTUAL OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, PERSONAL INJURIES AND/OR ILLNESS, HE OR SHEPlaintiffs argue that the absence of this language from the Agreement shows that BEF wanted to narrow the arbitration clause. Defendants argued, and the judge agreed, that this explanatory language was "unnecessary in light of the breadth of the first paragraph." We agree that the "DISPUTES" paragraph in the Agreement was itself broad enough to require arbitration of plaintiffs' claims, because it required "any disputes" be determined by "final and binding" arbitration. See Alamo, supra, 306 N.J. Super. at 394 (stating that "[t]he 'any dispute' language is the very least" needed "to guarantee arbitration of all disputes").
IS GIVING UP HIS OR HER RIGHT TO TRIAL IN COURT, EITHER WITH OR WITHOUT A JURY[.]
Although plaintiffs acknowledged receiving BEF's public offering prior to finalizing the Agreement, it is not claimed that plaintiff was aware of this language. Thus, we do not opine of the effect of such knowledge on their claim.
Finally, plaintiffs complain that arbitration does not necessarily provide the discovery tools available in judicial litigation. Plaintiffs, however, have not shown any needed discovery will be unavailable to them under American Arbitration Association procedures. Plaintiffs cannot thus escape their agreement to arbitrate. See Quigley v. KPMG Peat Marwick, LLP, 330 N.J. Super. 252, 261-62 (App. Div.), certif. denied, 165 N.J. 527 (2000).
Accordingly, plaintiffs' claims fall within the scope of the arbitration clause of their Agreement with BEF. We thus affirm the grant of summary judgment as to BEF.
IV.
The judge also required arbitration of the claims against defendants Katz, Manicone, and SPG. The judge relied on the analysis concerning which litigants are covered by arbitration in EPIX Holdings, supra, 410 N.J. Super. at 463-68, and an unpublished decision relying on that analysis, Hirsch v. Amper Fin. Servs., LLC, No. A-5637-10T2 (App. Div. 2012) (slip op. at 12-14). In those opinions, we found that equitable estoppel required arbitration of intertwined claims against non-signatories to an arbitration agreement.
Subsequently, however, our Supreme Court reversed our decision in Hirsch, regarding the use "of equitable estoppel to compel arbitration." Hirsch, supra, 215 N.J. at 179, 188, 193. The Court ruled that "[e]stoppel cannot be applied solely because the parties and claims are intertwined, and, to the extent that EPIX Holdings suggests otherwise in its rationale, it extends equitable estoppel beyond its proper scope." Id. at 193.
Nonetheless, the Supreme Court recognized that "arbitration may be compelled by a non-signatory against a signatory to a contract on the basis of agency principles." Id. at 192. The Court reaffirmed Alfano, supra, 393 N.J. Super. at 569-70, which had ruled that the plaintiff had to arbitrate against a non-signatory of the principal agent, even though the plaintiff's agreement with the principal did not refer to agents or to the non-signatory. Ibid. Indeed, the Court stated that "[t]he decision to compel arbitration in EPIX Holdings was appropriate given the agency relationship between the parent and subsidiary insurance corporations in the litigation." Hirsch, supra, 215 N.J. at 193.
Here, plaintiffs' complaint and conduct were predicated on the concept that there was an agency relationship between BEF and the other defendants. Indeed, plaintiffs' complaint referred to the other defendant's as BEF's "agents."
The record shows an agency relationship between BEF and the two individual defendants. Plaintiffs' complaint alleges that Manicone and Katz were employees of BEF, and the record supports that inference. When plaintiffs first started discussing the unit, defendant William Manicone gave them a business card which listed him as BEF's Sales Manager. He signed some of his emails as "William Manicone/The Brownstones at Essex Falls." Katz, a managing member of BEF, signed the Agreement, amendments, and the mortgage extension on behalf of BEF. Thereafter, plaintiffs communicated with Katz and Manicone as agents of BEF in their efforts to obtain BEF's compliance with the Agreement. Because plaintiff's claims against Manicone and Katz "stemmed from their actions relating to or arising out of the performances of the contract by" BEF, arbitration of the claims against them is required. Wasserstein v. Kovatch, 261 N.J. Super. 277, 286 (App. Div.) (requiring a home owner, whose contract with the contractor contained an arbitration clause, to arbitrate its claims against the contractor's employees), certif. denied, 133 N.J. 440 (1993). "A contrary view would only subvert the policy of favoring arbitration and allow avoidance of an agreement to arbitrate merely by naming the principals of the corporation or non-signatory parties in a complaint." Ibid.
The record also indicates an agency relationship between BEF and SPG. It is undisputed that Katz is a managing member of SPG as well as of BEF, and signed the Agreement between plaintiffs and BEF. Dual employment, standing alone, is insufficient to show an agency relationship. See Hirsch, supra, 215 N.J. at 180-81, 195. However, there are additional indicia here. Katz's role as managing member for both BEF and SPG suggests that there is shared ownership. Cf. id. at 195. Moreover, the Agreement listed SPG at the same address as BEF, and indicated that the notices under the Agreement should be sent to Katz at the shared address "c/o Sterling Properties." It was care of Sterling Properties that Katz received the extension and other letters from plaintiffs. Katz always communicated with plaintiffs using a "sterlingpropertiesnj.com" email address, and copied other persons with an SPG email address. The business card Manicone gave to plaintiffs similarly gave a "sterlingpropertiesnj.com" email address, some of his emails used that address, and others were signed "William Manicone/Sterling Properties" and "Billy/Sterling Properties." The SPG website listed the Brownstones at Essex Fells among the single family homes it had developed, and invited prospective purchasers to "call for an appointment" to visit it. Together, these facts support a reasonable inference that there was an agency relationship between SPG and BEF. That suffices to require arbitration of plaintiffs' claims against SPG. See Alfano, supra, 393 N.J. Super. at 568-70.
Indeed, plaintiffs' entire complaint against SPG, and its certification in opposition to the summary judgment motion, are premised on the relationship between SPG and BEF. To paraphrase Alfano, "the purchase of the [unit from BEF under the Agreement] was integral to [plaintiffs'] pled causes of action; [plaintiffs] must rely on the [BEF] transaction to assert his claims against [SPG]." Id. at 569. Had plaintiffs not purchased the unit under the Agreement, "no cause of action against any defendant would arise." Ibid. Accordingly, plaintiffs cannot "circumvent the strong federal and state policy favoring the use of arbitration" and escape the arbitration clause in the Agreement. Id. at 570; see Bruno v. Mark MaGrann Assocs., Inc., 388 N.J. Super. 539, 546-47 (App. Div. 2006).
By contrast, defendant's motion for summary judgment included a certification that SPG could be liable because it was The Sterling Realty Group, L.L.C., which was Brownstones' sales representative in connection with the Agreement and which employed Manicone, and that SPG "is a related company but has no connection with the Agreement." However, we "'must accept as true all the evidence which supports the position of the part[ies] defending against the motion,'" and view the evidence "in the light most favorable to the non-moving party." Brill, supra, 142 N.J. at 535, 540 (citation omitted).
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We therefore affirm the grant of summary judgment as to SPG, Katz, and Manicone.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION