SAND CASTLE DEVELOPMENT, LLC, VS. AVALON DEVELOPMENTGROUP, LLC(L-0176-16, CAPE MAY 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NOT FOR PUBLICATION WITHOUT THE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-3325-16T1
SAND CASTLE DEVELOPMENT, LLC,
Plaintiff-Appellant,
v.
AVALON DEVELOPMENT GROUP, LLC,
CHRISTOPHER SMITH, SIGNATURE
BUILDING SYSTEMS OF PA, LLC,
and JUSTIN DEPHILLIPS,
Defendants-Respondents.
__________________________________________
Argued September 18, 2017 – Decided October 26, 2017
Before Judges Messano and Accurso.
On appeal from Superior Court of New Jersey,
Law Division, Cape May County, Docket No. L-
0176-16.
Michael E. Holzapfel argued the cause for
appellant (Becker, LLC, attorneys; Mr.
Holzapfel, on the briefs).
Katrina M. Register argued the cause for
respondents Signature Building Systems of PA,
LLC and Justin DePhillips (Trimble & Armano,
attorneys; John W. Trimble, Jr. and Ms.
Register, on the brief).
PER CURIAM
Plaintiff Sand Castle Development, LLC, entered into a
construction agreement (the Contract) with defendant Avalon
Development Group, LLC, to demolish an existing motel and construct
twenty-four condominium units utilizing modular construction.
Avalon, in turn, entered into a "Master Purchase Agreement" (MPA)
with defendant Signature Building Systems of PA, LLC, whereby
Signature agreed to manufacture and deliver the modular units.
Avalon's representative, defendant Christopher Smith, and
Signature's Director of Sales and Marketing, defendant Justin
DePhillips, executed the MPA and a separate purchase order for the
units. Apparently, to assure favorable tax-exempt status for the
project, the MPA and purchase order were modified to include
plaintiff. Its principal executed copies of both and forwarded
them to Signature with a deposit of $300,000.1
After the motel was demolished, disputes broke out between
the parties, leading ultimately to the filing of plaintiff's
complaint naming Avalon, Smith, Signature and DePhillips as
defendants and asserting breach of contract, fraud and other causes
of action.
1
The second MPA was identical to the original, except it added
plaintiff as the "owner."
2 A-3325-16T1
The Contract between plaintiff and Avalon contained no
arbitration provision. However, the MPA contained two provisions
that are the crux of the present appeal. Section 15(e), entitled
"Mandatory Mediation," provided:
If at any time there is a claim or dispute
arising out of or relating to this Agreement,
including the alleged breach, termination or
validity thereof, the Parties shall within ten
(10) days following mailing by either party
of written notice of a dispute, engage in
face-to-face negotiations in an attempt to
resolve the dispute and shall, upon failing
to negotiate a resolution, choose a mutually
agreeable third party neutral, who shall
mediate the dispute between the Parties. . . .
If the Parties are unable to resolve the
dispute in good faith within six (6) months
of the date of the initial demand by either
party for such fact finding, the dispute shall
be finally determined by a court of competent
jurisdiction as set forth in Section 15(f).
Neither party may bring any court proceedings
until completion of the mediation process, the
Court shall dismiss such action with prejudice
and the party bringing such action shall
reimburse the other party for all its costs
and expenses in defending same.
[(Emphasis added).]
Section 15(f), entitled "Dispute Resolution Arbitration,"
provided:
Mindful of the high cost of litigation, not
only in dollars, but also in time and energy,
the parties intend to and do hereby establish
the following out-of-court alternative
dispute resolution procedure to be followed
in the event any controversy or dispute shall
arise out of, or relating to this contract or
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relating to any change orders or other changes
or addendums to this contract. If a dispute
develops between the parties to this contract,
the parties will submit to binding arbitration
to address any controversy or claim arising
out of, or relating to this contract or
relating to any change orders or other changes
or addendums to this contract. The arbitration
shall be conducted by and according to the
rules and procedures of Construction Dispute
Resolution Services, LLC. The Arbitration
Award shall be binding upon the parties and
shall be enforceable in any court of competent
jurisdiction.
[(Emphasis added).]
Additionally, paragraph 15(g) entitled, "Jury Trial Waiver"
provided in capital letters, "EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE
OTHER ON ALL MATERS ARISING OUT OF THIS AGREEMENT." Finally,
paragraph 15(j) provided the agreement would be "governed . . .
in accordance with the laws . . . of Pennsylvania."
Avalon filed an answer before the parties consented to
mediation, which proved unsuccessful. Prior to filing its
responsive pleading, Signature moved to compel arbitration.
Plaintiff and Avalon both filed opposition.
In a thoughtful written opinion, Judge J. Christopher Gibson
first noted that while the parties failed to reference the choice
of law provision in the MPA, Pennsylvania law regarding the
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enforceability of contractual arbitration provisions "generally
mirror[ed]" New Jersey law. Judge Gibson rejected plaintiff's
argument that the MPA was a contract of adhesion. He also rejected
plaintiff's contention that Sections 15(e) and 15(f) were
ambiguous, or that plaintiff could not be compelled to arbitrate
its disputes with Avalon because the contract contained no
arbitration provision. Lastly, Judge Gibson rejected plaintiff's
claim that Signature's assertion of rights under the arbitration
provision was untimely.
He entered an order staying any further proceedings and
compelling plaintiff to arbitrate its claims against Avalon and
Signature. This appeal followed.
Plaintiff reiterates its arguments that the MPA's arbitration
provision is ambiguous because it does not clearly provide for
arbitration as the proper forum, and, as a contract of adhesion,
the doctrine of contra proferentem applies and the MPA must be
strictly construed against Signature and in favor of plaintiff.
Plaintiff also argues that it was error to compel arbitration of
its claims against Avalon because the Contract contained no
2
arbitration provision.
2
In Point III of its brief, plaintiff argues Judge Gibson made
factual findings unsupported by the record on issues not raised
(footnote continued next page)
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We have considered these arguments in light of the record and
applicable legal standards. We affirm, substantially for the
reasons expressed by Judge Gibson. We add only the following.
We review de novo 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. We must
first determine whether the parties have entered into a valid and
enforceable agreement to arbitrate disputes. Id. at 187. Second,
we must determine whether the dispute falls within the scope of
the agreement. Id. at 188.
Agreements to arbitrate must "be the product of mutual assent,
as determined under customary principles of contract law."
Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 442 (2014),
cert. denied, __ U.S. __, 135 S. Ct. 2804, 192 L. Ed. 2d 847(2015) (quoting NAACP of Camden Cty. E. v. Foulke Mgmt. Corp.,
(footnote continued)
by Signature's motion, citing the judge's reference to Smith as
plaintiff's agent in its dealings with Signature. We find any
reference was irrelevant to the legal conclusions reached by the
judge, which were firmly tethered to the provisions of the MPA and
applicable case law. In Point IV of its brief, plaintiff argues
it was error for Judge Gibson to apply Pennsylvania law, since
Signature argued New Jersey law was applicable. However, plaintiff
does not assert any meaningful difference exists between the two,
which, based upon our review of the record, was the only point
Judge Gibson intended to make in his opinion. These arguments
require no further discussion. R. 2:11-3(e)(1)(E).
6 A-3325-16T1
421 N.J. Super. 404, 424 (App. Div.), certif. granted, 209 N.J.
96 (2011), appeal dismissed, 213 N.J. 47 (2013)). "[B]ecause
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 (internal quotations omitted).
Plaintiff contends the MPA is inherently ambiguous as to
compelling arbitration as the proper forum for dispute resolution.
It cites Section 15(e)'s language that any "dispute shall be
finally determined by a court of competent jurisdiction as set
forth in Section 15(f)," and the latter section's provision
requiring binding arbitration.
Plaintiff relies upon our decision in Rockel v. Cherry Hill
Dodge, 368 N.J. Super. 577, 581 (App. Div. 2004), where we found
the plaintiff signed two "separate and somewhat disparate
arbitration clauses." We concluded "the presence of two
conflicting arbitration provisions, the expression of a waiver of
the right to trial by jury in small print, and the absence of any
other clear warning or caution of the waiver of statutory rights,
require[d] a rejection of [the] defendant's attempt to compel
arbitration." Id. at 587.
7 A-3325-16T1
Unlike the provisions at issue in Rockel, the MPA's
alternative dispute resolution scheme was unambiguous. Under
paragraph 15(e), any party could compel mediation. If
unsuccessful, "the dispute shall be finally determined by a court
of competent jurisdiction as set forth in Section 15(f)." Section
15(f) clearly and unequivocally compelled the parties to submit
the dispute to "binding arbitration," after which any award "shall
be enforceable in any court of competent jurisdiction." Unlike
the provisions at issue in Rockel, Section 15(g) of the MPA
clearly advised the parties they were waiving their right to a
jury trial. We conclude the agreement was unambiguous —
arbitration was the appropriate forum for resolving any dispute
and the court's role was limited to enforcement of any award.
Plaintiff's contention that the MPA was a contract of adhesion
is equally unavailing. Whether a contract is an unconscionable
contract of adhesion, and therefore unenforceable, requires a
fact sensitive inquiry. Martindale v. Sandvik, Inc., 173 N.J.
76, 90 (2002). To determine unconscionability in this context,
we consider: "[(1)] the subject matter of the contract, [(2)] the
parties' relative bargaining positions, [(3)] the degree of
economic compulsion motivating the adhering party, and [(4)] the
public interests affected by the contract." Delta Funding Corp.
8 A-3325-16T1
v. Harris, 189 N.J. 28, 40 (2006) (internal quotation marks and
citation omitted).
None of these factors weighs in favor of plaintiff. The
record demonstrates plaintiff was not an "average member of the
public," Atalese, supra, 219 N.J. at 442, thereby triggering the
level of increased scrutiny the Court has applied to consumer
contracts. Rather, plaintiff was engaged in a multi-million
dollar real estate development and entered into the MPA to obtain
favorable tax treatment. There was no evidence that plaintiff
was at an unfair disadvantage or that any public interest was
implicated.3
Lastly, plaintiff argues it cannot be compelled to arbitrate
its claims against Avalon because the Contract contained no
arbitration agreement. It cites our decision in Angrisani v.
Financial Technology Ventures, L.P., 402 N.J. Super. 138 (App.
Div. 2008), for support. It is true that Angrisani involved two
contracts, one that contained an arbitration provision and one
that did not. Id. at 145. However, that is where any similarity
to this case ends.
3
Plaintiff's argument that the doctrine of contra proferentem
applies lacks sufficient merit to warrant extensive discussion.
R. 2:11-3(e)(1)(E). "[C]ontra proferentem may be employed as a
doctrine of last resort[,]" and "is only available in situations
where the parties have unequal bargaining power." Pacifico v.
Pacifico, 190 N.J. 258, 268 (2007).
9 A-3325-16T1
In Agrisani, the plaintiff executed an employment contract
with his employer that contained an arbitration provision and a
second stock purchase agreement with another defendant that
contained no arbitration provision. Ibid. He brought suit against
both defendants and the trial court dismissed both complaints and
compelled arbitration of all the plaintiff's claims under both
agreements. Id. at 146-47. We reversed and bifurcated the
plaintiff's actions because the plaintiff could not be compelled
to arbitrate claims against the non-employer defendant simply
because the employment agreement contained an arbitration
provision. Id. at 152.
Plaintiff conceded at oral argument that its claims against
Avalon were intertwined to some degree with its claims against
Signature, such that conducting both an arbitration and a trial
was impractical and unwarranted. The Court recently clarified
that factual "intertwinement" of claims "as a theory for compelling
arbitration" should be rejected "when its application is
untethered to any written arbitration clause between the parties,
evidence of detrimental reliance, or at a minimum an oral agreement
to submit to arbitration." Hirsch, supra, 215 N.J. 192-93. Here,
however, plaintiff sued Avalon, Signature and their
representatives, all of whom were signatories to the MPA, which
10 A-3325-16T1
contained a clear, unambiguous and enforceable arbitration
agreement.
Affirmed.
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