Christine A. Dispenziere v. Kushner Companies , 438 N.J. Super. 11 ( 2014 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3022-13T4
CHRISTINE A. DISPENZIERE,
DANIEL SANTO PIETRO, SUBRATA
CHOUDHURI, DAISY GONZALEZ,
MICHAEL & ELLA SHAYKEVICH,
ERIC & MICHAEL HORN, JOSEPH APPROVED FOR PUBLICATION
& LINDA HORN, NEIL & LAUREN
HUNTER, JOHN & NANCY ENG, November 21, 2014
RICHARD PAVLOWSKI, CHARLES
YAREMKO, RAO & VASUNDLARA APPELLATE DIVISION
DESU, ROY & GLORYA MATTHEWS,
HERBERT LEARY and NICHOLAS JULIANO,
Plaintiffs-Appellants,
and
INGRID ARMSTRONG, TRACY JORDAN,
BART & BIANCA KWIATKOWSKI,
DAVID MAYS, SUDHANSHU AND GEETI
SHUKLA, JENNIFER AND FRANCISCO
CHACON, and JAMES AND MARGARET
FLYNN,
Plaintiffs,
v.
KUSHNER COMPANIES, WESTMINSTER
COMMUNITIES, WESTMINSTER REALTY,
LLC, THE LANDINGS AT HARBORSIDE,
LLC, THE LANDINGS, INC., LANDINGS
BUILDING 136A, LLC, LANDINGS
BUILDING 136B, LLC, and BUILDER
MARKETING SERVICES CO., INC.,
Defendants-Respondents,
and
INTEGRA MANAGEMENT CORP., and THE
LANDINGS AT HARBORSIDE MASTER
ASSOCIATION, INC.,
Defendants.
_______________________________________
Argued November 6, 2014 - Decided November 21, 2014
Before Judges Waugh, Maven, and Carroll.
On appeal from the Superior Court of New
Jersey, Law Division, Middlesex County,
Docket No. L-7384-12.
Patrick J. Whalen argued the cause for
appellants.
Paul Bishop argued the cause for respondents
(Brach Eichler LLC, attorneys; Mr. Bishop,
Charles X. Gormally and Thomas Kamvosoulis,
on the brief).
The opinion of the court was delivered by
CARROLL, J.A.D.
In Atalese v. United States Legal Services Group, L.P., 219
N.J. 430, 446 (2014), our Supreme Court recently held a
contractual arbitration provision unenforceable because it
lacked the necessary "clear and unambiguous language that the
plaintiff is waiving her right to sue or go to court to secure
relief." In the present appeal, because we conclude that the
arbitration provision upon which defendants rely suffers from
the same infirmity, we reverse the trial court's February 11,
2014 order compelling plaintiffs to submit their claims to
arbitration.
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I.
We briefly summarize the most salient facts. Plaintiffs
are twenty-two of thirty-three purchasers of condominium units
in a real estate development in Perth Amboy known as "The
Landings at Harborside" (The Landings). As currently comprised,
The Landings consists of two buildings – the "Admiral" and the
"Bayview." These plaintiffs purchased condominium units in the
Admiral during 2004 through 2007. The remaining eleven
plaintiffs purchased condominium units in the Bayview and are
not part of this appeal.
According to plaintiffs' first amended complaint, filed on
February 1, 2013, the Perth Amboy Redevelopment Agency (PARA)
adopted a resolution in August 2000, authorizing the City of
Perth Amboy to enter into a redevelopment agreement with
defendant The Landings at Harborside, LLC. The resolution
provided that the development was to be known as "The Landings,"
and would consist of, among other things: (1) "190,000 square
feet of retail space"; (2) "2094 [u]nits of residential housing
consisting of 98 townhomes, 102 row houses, and almost 1900 low-
rise and mid-rise [c]ondominium homes"; (3) "[a] hotel"; (4)
"2569 parking spaces"; (5) "[a] [c]ultural [c]ommunity
[c]enter"; (6) "[a] public waterfront walkway"; and (7) "Gateway
Festival Park and Founders Park."
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In September 2000, Perth Amboy entered into a redevelopment
agreement with The Landings at Harborside, LLC, designating it
as the redeveloper. The project was allegedly marketed to
plaintiffs and the general public as a $600 million mixed-use
development that, as previously noted, would include townhouses,
condominiums, retail space, and parks.
In 2004, defendant Landings Building 136A, LLC, issued a
public offering statement (POS) concerning the Admiral, and
began entering into agreements with plaintiffs for the purchase
of condominium units in that building. The purchase agreement
used in these transactions is a seventeen-page document. On the
tenth page, in the same format as the preceding sections of the
agreement, the following language regarding arbitration appears:
20. Disputes
Any disputes arising in connection with
this Agreement other than the failure to
close title or in relation to any amendment
to this Agreement either before or after
closing of title (if not otherwise governed
by the provisions of the homeowner's
warranty provided by Seller at closing) or
in relation to any of the warranties given
by Seller pursuant to Paragraphs 21(B),
21(C), 21(D), 21(E), 21(G), 21(H), 21(I) and
21(J) of this Agreement, shall be heard and
determined by arbitration before a single
arbitrator of the American Arbitration
Association in Morris County, New Jersey.
The decision of the arbitrator shall be
final and binding. Costs of arbitration
shall be borne equally between the Seller
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and the Purchaser. This clause shall
survive closing of title.
In executing the purchase agreement, unit buyers also
acknowledged receipt of the POS, as indicated in section thirty-
six of the agreement.1 The POS consists of approximately sixty-
six pages, with approximately 450 pages of schedules. After the
cover page and table of contents, on the fourth page of the
document, there is a stand-alone page with centered, boldface
type, and a capitalized heading with the words "SPECIAL RISKS."
Beneath that, the following paragraph appears:
Prospective purchasers should take note
of the fact that Paragraph 20 of the
Purchase Agreement (Schedule 10 to this
Public Offering Statement) that purchasers
will be required to sign should they wish to
purchase a Unit within the Admiral, a
Condominium, requires certain disputes which
a purchaser may have with Landings Building
136A, L.L.C. be addressed through binding
arbitration before a single arbitrator of
the American Arbitration Association in
Morris County, New Jersey. The decision of
any such arbitrator will be final and
binding and the costs of such arbitration
will be borne equally by purchaser and
Landings Building 136A, L.L.C.
1
In opposition to defendants' motion to compel arbitration,
sixteen of the twenty-two plaintiffs certified, however, that
they had not received the POS when they executed the purchase
agreement. Instead, the POS was not provided to them until
closing which, they contend, constitutes a violation of the New
Jersey Consumer Fraud Act.
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Plaintiffs allege that when they purchased their units,
they were led to believe that they were to be part of "a large
waterfront condominium community, which was to include diverse
amenities, including a Community Center, a Health Club, a
waterfront esplanade, [three] parks, and other recreational
improvements, all of which were to be completed by 2012." By
2011, however, the project was scaled back, and the developers
presented PARA with a proposal that plaintiffs maintain was
"completely inconsistent with the development project promise[d]
to and relied upon by [p]laintiffs who had already purchased
their [u]nits." The revised proposal provided for rental
housing instead of owner-occupied units and eliminated "nearly
all of the promised amenities."
Plaintiffs contend that they reasonably relied on these
promises and representations when they purchased their
condominium units. They also allege that the buildings were
negligently constructed. Plaintiffs' first amended complaint
asserts claims for: (1) violations of the New Jersey Consumer
Fraud Act (CFA), N.J.S.A. 56:8-1 to -20; (2) negligence; (3)
rescission; (4) breach of contract; (5) breach of the implied
covenant of good faith and fair dealing; (6) breach of warranty
(7) breach of the implied warranty of habitability; (8) fraud
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and misrepresentation; (9) promissory estoppel; and (10) unjust
enrichment.
Defendants, who for purposes of this appeal are the project
developer and its affiliated entities, moved to compel
arbitration of the claims against them, relying upon the
arbitration provision in the purchase agreements. Plaintiffs
opposed the motion. Following oral argument, on November 8,
2013, the judge granted defendants' motion. A memorializing
order was entered on February 11, 2014. Plaintiffs appeal,
arguing, among other things, that the arbitration provision is
unenforceable.
II.
Orders compelling or denying arbitration are deemed final
and appealable as of right. R. 2:2-3(a); GMAC v. Pittella, 205
N.J. 572, 587 (2011). Because the issue of whether the parties
have agreed to arbitrate is a question of law, we review a
judge's decision to compel or deny arbitration de novo. Hirsch
v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013). Therefore,
"the trial court's interpretation of the law and the legal
consequences that flow from established facts are not entitled
to any special deference." Waskevich v. Herold Law, P.A., 431
N.J. Super. 293, 297 (App. Div. 2013) (citations and internal
quotation marks omitted).
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In fairness to the motion judge, when ordering plaintiffs'
claims to arbitration, he did not yet have the guidance provided
by the Court's decision in Atalese, which we find dispositive of
the issues raised in this appeal. In Atalese, the plaintiff
entered into a contract with defendant United States Legal
Services Group, L.P. (USLSG) for debt-adjustment services.
Atalese, supra, 219 N.J. at 446. An arbitration clause appeared
on page nine of the twenty-three page contract, which provided:
Arbitration: In the event of any claim or
dispute between Client and the USLSG related
to this Agreement or related to any
performance of any services related to this
Agreement, the claim or dispute shall be
submitted to binding arbitration upon the
request of either party upon the service of
that request on the other party. The
parties shall agree on a single arbitrator
to resolve the dispute. The matter may be
arbitrated either by the Judicial
Arbitration Mediation Service or American
Arbitration Association, as mutually agreed
upon by the parties or selected by the party
filing the claim. The arbitration shall be
conducted in either the county in which
Client resides, or the closest metropolitan
county. Any decision of the arbitrator
shall be final and may be entered into any
judgment in any court of competent
jurisdiction. The conduct of the
arbitration shall be subject to the then
current rules of the arbitration service.
The costs of arbitration, excluding legal
fees, will be split equally or be born[e] by
the losing party, as determined by the
arbitrator. The parties shall bear their
own legal fees.
[Id. at 437.]
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After a dispute developed, plaintiff filed a complaint
alleging that defendant violated the CFA and the Truth-in-
Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A.
56:12-14 to -18. Atalese, supra, 219 N.J. at 436. Defendant
moved to compel arbitration based on the arbitration provision
in the contract. Id. at 437. The trial court granted the
motion, finding that the arbitration provision gave plaintiff
sufficient notice that any disputes arising out of the agreement
would be subject to arbitration. Ibid.
In an unpublished opinion we affirmed the trial court's
order, concluding that "the lack of [an] express reference to a
waiver of the right to sue in court or to arbitration as the
'exclusive' remedy [did not] bar [] enforcement of the
[arbitration] clause." Atalese v. U.S. Legal Servs. Grp., L.P.,
No. A-0654-12 (App. Div. Feb. 22, 2013) (slip op. at 7-8).
Despite not finding an explicit waiver of the plaintiff's right
to sue in court, the panel was satisfied that the provision
"clearly and unambiguously stated that . . . any dispute
relating to the underlying agreement shall be submitted to
arbitration and the resolution of that forum shall be binding
and final." Id. at 8-9. Thus, the clause provided the parties
"reasonable notice of the requirement to arbitrate all claims
under the contract," and that "a reasonable person, by signing
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the agreement, [would have understood] that arbitration [was]
the sole means of resolving contractual disputes." Id. at 8.
In reversing, the Court first looked to customary contract
principles regarding the requirement of mutual assent and a
meeting of the minds. Atalese, supra, 219 N.J. at 442. It
noted that:
Mutual assent requires that the parties
have an understanding of the terms to which
they have agreed. An effective waiver
requires a party to have full knowledge of
his legal rights and intent to surrender
those rights. By its very nature, an
agreement to arbitrate involves a waiver of
a party’s right to have her claims and
defenses litigated in court. But an average
member of the public may not know -- without
some explanatory comment -- that arbitration
is a substitute for the right to have one’s
claim adjudicated in a court of law.
Moreover, 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.
[Id. at 442-43 (citations and internal
quotation marks omitted).]
The Court explained that: "a clause depriving a citizen of
access to the courts should clearly state its purpose. We have
repeatedly stated that [t]he point is to assure that the parties
know that in electing arbitration as the exclusive remedy, they
are waiving their time-honored right to sue." Id. at 444
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(alteration in original) (citations and internal quotation marks
omitted). In sum, "[t]he waiver-of-rights language . . . must
be clear and unambiguous[;] . . . the parties must know that
there is a distinction between resolving a dispute in
arbitration and in a judicial forum." Id. at 445.
Applying these principles, the Court held the arbitration
agreement unenforceable because it did not contain "any
explanation that plaintiff [was] waiving her right to seek
relief in court for a breach of her statutory rights." Id. at
446. Elaborating, the Court noted:
The contract states that either party may
submit any dispute to "binding arbitration,"
that "[t]he parties shall agree on a single
arbitrator to resolve the dispute," and that
the arbitrator's decision "shall be final
and may be entered into judgment in any
court of competent jurisdiction." The
provision does not explain what arbitration
is, nor does it indicate how arbitration is
different from a proceeding in a court of
law. Nor is it written in plain language
that would be clear and understandable to
the average consumer that she is waiving
statutory rights. The clause here has none
of the language our courts have found
satisfactory in upholding arbitration
provisions -- clear and unambiguous language
that the plaintiff is waiving her right to
sue or go to court to secure relief. We do
not suggest that the arbitration clause has
to identify the specific constitutional or
statutory right guaranteeing a citizen
access to the courts that is waived by
agreeing to arbitration. But the clause, at
least in some general and sufficiently broad
way, must explain that the plaintiff is
11 A-3022-13T4
giving up her right to bring her claims in
court or have a jury resolve the dispute.
Mutual assent to an agreement requires
mutual understanding of its terms. After
all, [a]n effective waiver requires a
[consumer] to have full knowledge of [her]
legal rights before she relinquishes them.
[Id. at 446-47 (alterations in original)
(footnote omitted) (internal quotation marks
omitted).]
In the present case, the arbitration provision in the
purchase agreements is similarly devoid of any language that
would inform unit buyers such as plaintiffs that they were
waiving their right to seek relief in a court of law. Following
Atalese, we deem this lack of notice fatal to defendants'
efforts to compel plaintiffs to arbitrate their claims.
We recognize that the plaintiff in Atalese only sought
recovery for violations of statutory rights under the CFA and
the TCCWNA, whereas here plaintiffs' claims involve both
statutory and common-law causes of action. However, we do not
view this as a meaningful distinction, since we do not read
Atalese as restricting its application to statutory claims.
Rather, the Court was careful to mention both statutory rights
granting citizens access to the courts and the more expansive
right to a jury trial guaranteed by the New Jersey Constitution.
Id. at 447, n.1. See also id. at 435 (noting that the
requirement of a clear and unambiguous waiver has not only been
12 A-3022-13T4
applied to arbitration provisions waiving a constitutional or
statutory right, but has also been applied to any contractual
waiver-of-rights provision).
In seeking to enforce the arbitration provision, defendants
point out that many of the plaintiffs were represented by
counsel when they executed their purchase agreements.
Defendants argue that these purchasers therefore had an
opportunity, through counsel, to fully review the arbitration
provision, object to its inclusion in the purchase agreement,
and terminate the contract if they were not satisfied. We do
not find this argument persuasive.
First, as defendants acknowledge, not all plaintiffs were
represented by counsel in their real estate transaction.
Equally important, respecting those who were, defendants'
argument runs counter to the weight of persuasive authority.
In Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282-83
(1993), the presence of an arbitration clause in a home
construction contract did not preclude suit by a homeowner
against the builder for construction defects, where it did not
clearly express the election of arbitration as the sole remedy.
Notably, the Court stated:
When reading a contract, our goal is to
discover the intention of the parties.
Generally, we consider the contractual
terms, the surrounding circumstances, and
13 A-3022-13T4
the purpose of the contract. Here, we need
not go beyond the actual terms of the
agreement to find that it did not clearly
express the election of arbitration as the
sole remedy. In so finding, we are aware
that Marchak was represented by counsel at
all relevant times, including when he signed
the "Contract for Sale of Real Estate." The
problem, therefore, is not inequality of
bargaining power between the parties.
Rather, it is something more fundamental:
the agreement simply does not state that the
buyer elects arbitration as the sole remedy.
[Ibid.]
A similar argument was also rejected in Garfinkel v.
Morristown Obstetrics & Gynecology Associates, P.A., 168 N.J.
124, 136 (2001), where, in the context of an employment
agreement between a physician and a medical practice, the Court
noted:
Defendants suggest that the Court should
focus predominately on plaintiff's level of
sophistication to ensure that he acted of
his own volition. That suggestion is
misplaced. Irrespective of plaintiff's
status or the quality of his counsel, the
Court must be convinced that he actually
intended to waive his statutory rights. An
unambiguous writing is essential to such a
determination.
[Ibid.]
Because we find this authority persuasive, if not binding,
we reject defendants' contention that the presence of counsel
during the real estate transaction suffices to cure the
inadequacy of the contractual arbitration provision.
14 A-3022-13T4
Summarizing, the arbitration provision in the parties'
purchase agreements failed to provide plaintiffs any notice that
they were giving up their right to seek relief in a judicial
forum. This deficiency renders the provision unenforceable.
Consequently, plaintiffs cannot be compelled to arbitrate their
claims.
Reversed.
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