ROBERT M. BECKER VS. OLLIE SLOCUM & SON, INC. (L-1599-17, MONMOUTH COUNTY AND STATEWIDE) ( 2019 )

NOT FOR PUBLICATION WITHOUT THE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
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-4992-17T1
ROBERT M. BECKER and
CATHERINE T. BECKER,
Plaintiffs-Appellants,
v.
OLLIE SLOCUM & SON, INC.,
d/b/a SLOCUM & SON, INC.,
KEITH KINSEY, LOUISE
KINSEY, and TANYA VERDI,
Defendants-Respondents.
______________________________
Submitted September 25, 2019 – Decided October 4, 2019
Before Judges Koblitz and Mawla.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-1599-17.
Law Offices of Michael R. Scully, LLC, attorneys for
appellants (Michael R. Scully, on the briefs).
Krenkel & Krenkel, LLC, attorneys for respondents
Slocum & Son, Inc., Louise Kinsey and Tanya Verdi
(David A. Krenkel, of counsel and on the brief; Lisa C.
Krenkel, on the brief).
Ansell Grimm & Aaron, PC, attorneys for respondent
Keith Kinsey, join in the brief of respondents Slocum
& Son, Inc., Louise Kinsey and Tanya Verdi.
PER CURIAM
Plaintiffs Robert and Catherine Becker appeal from a May 25, 2018 order
granting defendants Ollie Slocum & Son, Inc., Louise Kinsey, and Tanya Verdi's
motion to compel arbitration and deny discovery in a dispute over a home
construction contract. Because the arbitration clause in the contract is
unenforceable under Atalese v. U.S. Legal Servs. Grp., 219 N.J. 430 (2014), we
reverse that portion of the order and affirm the discretionary denial of discovery.
The parties entered into an agreement in November 2011 for the $1.85
million construction of a new home in Middletown. (Agreement). The
Agreement provided that the construction of the home would be substantially
completed within fifty-two weeks of the commencement of excavation work.
Defendants substantially completed construction of plaintiffs' home in 2014,
approximately eighteen months past the agreed-upon date of completion. The
relevant provision at issue in this Agreement is the arbitration clause found in
Section 9, which states:
All claims and disputes relating to this contract shall be
subject to arbitration at the option of either the [o]wner
or the [g]eneral [c]ontractor, in accordance with the
Arbitration Rules of the American Arbitration
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Association for the construction industry in effect at the
time of the arbitration. Written notice of demand for
arbitration shall be filed with the other party to the
contract and with the American Arbitration
Association, within a reasonable time after the dispute
has arisen. The costs associated with the Arbitration
Association shall be equally borne by the [p]arties
hereto in a prompt and timely manner.
After the completion of construction, plaintiffs found several alleged
defects in the home, including water penetration into the living quarters and
basement, and deterioration of outdoor decking, siding, and finishing. Plaintiffs
filed a complaint and jury demand claiming breach of contract, negligence,
interference with contractual relations, and consumer fraud, and seeking an
accounting. The amount in contention is an alleged overpayment of $35,000.
Plaintiffs also sought discovery from the settlement of prior litigation
concerning the ownership of defendant Ollie Slocum & Son, Inc.
The motion judge denied the discovery motion without prejudice,
determining the settlement agreement was not relevant to plaintiffs' claim, but
might become relevant later in connection with an effort to collect a judgment.
Defendants' motion to compel arbitration was granted.
I.
We apply a de novo standard of review when reviewing a motion judge's
determination of the enforceability of a contract. Goffe v. Foulke Mgmt. Corp.,
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238 N.J. 191, 207 (2019). When reviewing arbitration clauses within contracts,
"the enforceability of arbitration provisions is a question of law; therefore, it is
one to which we need not give deference to the analysis by the trial court." Ibid.
The Federal and New Jersey Arbitration Acts express a general policy
favoring arbitration. Atalese, 219 N.J. at 440. "The public policy of this State
favors arbitration as a means of settling disputes that otherwise would be
litigated in a court." Badiali v. N.J. Mfrs. Ins. Grp., 220 N.J. 544, 556 (2015).
While enforcement is favored, it "does not mean that every arbitration clause,
however phrased, will be enforceable." Atalese, 219 N.J. at 441.
A valid arbitration clause "must state its purpose clearly and
unambiguously." Atalese, 219 N.J. at 435. When agreeing to arbitration,
"consumers must have a basic understanding that they are giving up their right
to seek relief in a judicial forum." Ibid. Because arbitration necessarily involves
a waiver of the right to bring the case to court, courts should "'take particular
care in assuring the knowing assent of both parties to arbitrate, and a clear
mutual understanding of the ramifications of that assent.'" Id. at 442–43
(quoting NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421 N.J. Super.
404, 425 (App. Div. 2011)).
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Our Supreme Court has made clear that a "consumer cannot be required
to arbitrate when it cannot fairly be ascertained from the contract's language that
[he or] she knowingly assented to the provision's terms or knew that arbitration
was the exclusive forum for dispute resolution." Kernahan v. Home Warranty
Adm'r of Fla., Inc., 236 N.J. 301, 322 (2019). "[W]hen a contract contains a
waiver of rights — whether in an arbitration clause or other clause — the waiver
'must be clearly and unmistakably established.'" Atalese, 219 N.J. at 444
(quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168
N.J. 124, 132 (2001)).
The Court in Atalese set forth a test to determine the enforceability of an
arbitration clause. An arbitration clause "must be sufficiently clear to a
reasonable consumer." Id. at 436. An arbitration provision will be deemed
unenforceable when there is "[t]he absence of any language in the arbitration
provision that plaintiff [is] waiving [his or] her statutory right to seek relief in a
court of law." Ibid. While no precise set of words must be included in the
arbitration provision, the words that make up the clause "must be clear and
unambiguous that a consumer is choosing to arbitrate disputes rather than have
them resolved in a court of law." Id. at 447.
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In Atalese, our Supreme Court examined the language of an arbitration
provision that was deemed valid and enforceable by the trial and appellate
courts, reversing because the provision was deficient, rendering it
unenforceable. Id. at 448. The Court found the provision to be deficient because
it: 1) did not include any explanation that the plaintiff was waiving her right to
seek relief in court; 2) did not explain what arbitration is or how it differs from
seeking judicial relief; and 3) lacked the plain language necessary to convey to
the average consumer that he or she is waiving the right to sue in court. Id. at
446.
The arbitration provision here presents the same deficiencies the Court
addressed in Atalese. It does not include any language explaining what
arbitration is and how it serves as a replacement for judicial relief. It simply
states: "All claims and disputes relating to this contract shall be subject to
arbitration at the option of either the [o]wner or the [g]eneral [c]ontractor, in
accordance with the Arbitration Rules of the American Arbitration Association
for the construction industry in effect at the time of the arbitration." The
language of this provision does not convey to the average consumer that he or
she is waiving a constitutional right to seek relief in a court of law.
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Defendants argue plaintiffs should not be viewed as "average consumers"
and should instead be viewed as "sophisticated owners of a multimillion dollar
home." The Agreement was not negotiated through attorneys and defendants
point only to the value of the home to suggest plaintiffs are sophisticated parties
with knowledge of arbitration provisions. Wealth alone does not confer
expertise on non-lawyer unrepresented parties.
Plaintiffs provide further support for their argument by contrasting the
arbitration provision contained in their contract with an enforceable arbitration
provision found in Roman v. Bergen Logistics, LLC, 456 N.J. Super. 157 (App.
Div. 2018). In Roman we found the arbitration clause to be enforceable because
it "informed plaintiff that the exclusive forum for resolution of her claims was
arbitration, she was prohibited from filing any other lawsuits or legal
proceedings and she waived her right to a trial by jury." Id. at 172. The
arbitration provision in Roman stated that plaintiff and defendant agreed not to
"file or maintain any lawsuit, action or legal proceeding of any nature with
respect to any dispute" and that "by signing this agreement you and [c]ompany
are waiving any right, statutory or otherwise, to a trial by jury." Id. at 162–63.
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The Agreement's arbitration provision does not state that arbitration is the
exclusive forum for dispute resolution, nor that plaintiffs are waiving their right
to a jury trial.
II.
Plaintiffs also argue on appeal that the motion judge erred in denying
without prejudice plaintiffs' discovery request for the settlement documents
pertaining to defendants' previous February 2015 litigation. We "defer to the
trial judge's discovery rulings absent an abuse of discretion or a judge's
misunderstanding or misapplication of the law." Capital Health Sys., Inc. v.
Horizon Healthcare Servs., Inc., 230 N.J. 73, 79–80 (2017).
The motion judge did not abuse his discretion when determining that the
settlement agreement from a prior dispute among the owners of the defendant
company is not currently relevant to plaintiffs' claim. As the judge stated, the
settlement documents may become relevant if plaintiffs' obtain a judgment in
their favor. We thus reverse the compelled arbitration and affirm the denial of
discovery.
Reversed in part and affirmed in part and remanded to the trial court for
further proceedings consistent with this opinion. We do not retain jurisdiction.
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