Abe Cohen v. workshop/apd Architecture, D.P.C. ( 2024 )

NOT FOR PUBLICATION WITHOUT THE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-0566-23
ABE COHEN,
Plaintiff-Appellant,
v.
WORKSHOP/APD
ARCHITECTURE, D.P.C.,
Defendant-Respondent.
__________________________
Argued April 16, 2024 – Decided July 24, 2024
Before Judges Gooden Brown and Puglisi.
On appeal from the Superior Court of New Jersey, Law
Division, Monmouth County, Docket No. L-3464-22.
Anthony Sango argued the cause for appellant (Ansell
Grimm & Aaron, PC, attorneys; Anthony Sango and
Anthony J. D'Artiglio, on the briefs).
Alexander C. Banzhaf (Tuttle Yick, LLC) argued the
cause for respondent (Alexander C. Banzhaf, attorney;
Alexander C. Banzhaf, on the brief).
PER CURIAM
Plaintiff Abe Cohen appeals from the September 11, 2023, Law Division
order granting defendant Workshop/APD Architecture, D.P.C.'s motion to compel
arbitration, and dismissing without prejudice plaintiff's complaint and defendant's
counterclaim. We affirm.
I.
We glean these facts from the motion record. In October 2018, plaintiff hired
defendant, a New York architectural firm "specializing in luxury homes, high-end
commercial development, and hospitality design," to perform professional services
in connection with the construction of his multi-million-dollar home in Long Branch,
New Jersey. Pursuant to the fourteen-page contract entered into and executed by
both parties on October 22, 2018, defendant "would be involved in the architectural
design, on-site construction supervision, and interior design and decoration . . . from
design through construction and installation."
The contract was comprised of eight phases with the first seven phases to be
invoiced based on a percentage of estimated construction costs, and the eighth phase
to be performed on an hourly basis. Two addenda followed the signature page.
Addendum two, labelled "Terms and Conditions," included a section titled
"Disputes," which provided in small font:
(18) DISPUTES [I]n the event of any dispute arising
out of the services in this [a]greement, the parties agree
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to arbitration, before one . . . arbitrator in the [c]ounty,
[c]ity, and State of New York, to resolve the dispute.
This [a]greement shall be governed by the laws of New
York. To the extent the dispute involves a payment
dispute, the prevailing party shall be entitled to recover
all associated costs, expenses, and fees, including
attorneys' fees from the other party. The arbitration
procedure shall be as follows:
a. The party bringing the [c]laim shall, in
writing, set forth the details of its [c]laim
and its desire to resolve the dispute in
accordance with this [s]ection.
b. The other party shall, within
ten . . . days of receipt of the written
demand, accept arbitration and set forth at
its option, in detail, any counterclaim of its
own.
c. [Plaintiff] and Workshop agree to the
joinder of any other parties separately
retained by [plaintiff] and Workshop
(collectively, the "[p]arties"), as a party to
any arbitration called for in this
[a]greement. [Plaintiff] shall provide for
the joinder of these [p]arties in the
applicable and respective agreements with
other such [p]arties[.]
d. Within twenty . . . days after joinder of
all parties, the parties shall agree upon a
sole arbiter . . . who shall hear any disputes
arising under this [a]rticle. If the parties
cannot agree on an [a]rbiter, they agree to
use American Arbitration Association
("AAA") rules to appoint an [a]rbiter. The
AAA shall make such appointment within
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ten . . . days of receipt of a written request
by either party. The parties agree to share
equally the costs of the [a]rbiter associated
with the resolution of any dispute.
e. Within ten . . . days of his/her
appointment, the [a]rbiter shall hold a
hearing, limited to no more than
two . . . days per party, which limit shall
not be exceeded except for unusual reasons
and/or by agreement of the [a]rbiter and the
parties.
f. The [a]rbiter shall render his/her written
decision within forty-eight . . . hours after
the close of the hearing. The decision shall
be in writing and may, at the [a]rbiter's
option, provide an explanation for such
decision.
g. The [a]rbiter's decision shall be final
and binding upon all parties and judgment
may be entered upon it in the appropriate
court in the Supreme Court of the State of
New York. If a challenge to the [a]rbiter's
decision is made by a party in the
applicable court and such challenge is
thereafter rejected by appeal or otherwise,
the prevailing party shall be entitled to its
reasonable attorney's fees and expenses for
such proceeding(s).
A separate provision immediately preceding the "Disputes" provision read:
"(17) APPLICABLE LAW This [a]greement shall be governed by and construed
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in accordance with the laws of the State of New York without reference to its
conflicts of laws principles."
Plaintiff hired a contractor in February 2020 to build the home using
defendant's designs. However, disputes arose between plaintiff and defendant
during the performance of the contract, largely related to billing and workmanship.
As a result, the contract was terminated in February 2021 while the construction of
the home was still in its infancy. In March 2021, after plaintiff refused to pay
defendant's outstanding fees, defendant filed a notice of unpaid balance and a
demand for arbitration for a New Jersey Construction Lien on the new home.
N.J.S.A. 2A:44A-20 "provides for the filing of a notice of unpaid balance (NUB) or
potential construction lien claim to provide notice to persons claiming title to . . .
real property of the anticipated filing of a lien claim, as well as an anticipatory
priority." Sovereign Bank v. Silverline Holdings Corp., 368 N.J. Super. 1, 3 (App.
Div. 2004).
On April 19, 2021, defendant obtained confirmation that it satisfied all
procedural requirements under the Construction Lien Law and had the right to a lien
for its unpaid services, which lien defendant promptly filed. On November 17, 2022,
defendant filed an order to show cause in the Supreme Court of New York under
N.Y. C.P.L.R. § 3102(c), seeking an order compelling plaintiff to produce pre-action
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discovery to aid arbitration in connection with the construction lien claim.
Defendant sought to compel plaintiff to disclose construction costs to allow
defendant to calculate its claim amount for outstanding fees. Plaintiff opposed the
order to show cause, arguing, among other things, that the arbitration provision in
the contract was unenforceable because of the small typeface, see N.Y. C.P.L.R. §
4544.1While the New York action was pending,2 on December 16, 2022, plaintiff
filed a complaint against defendant in New Jersey asserting the following causes of
action: (1) lien discharge pursuant to N.J.S.A. 2A:44A-33 or N.J.S.A. 2A:44A-
1
N.Y. C.P.L.R. § 4544 provides:
The portion of any printed contract or agreement
involving a consumer transaction or a lease for space to
be occupied for residential purposes where the print is
not clear and legible or is less than eight points in depth
or five and one-half points in depth for upper case type
may not be received in evidence in any trial, hearing or
proceeding on behalf of the party who printed or
prepared such contract or agreement, or who caused
said agreement or contract to be printed or prepared.
As used in the immediately preceding sentence, the
term "consumer transaction" means a transaction
wherein the money, property or service which is the
subject of the transaction is primarily for personal,
family or household purposes.
2
Ultimately, on August 14, 2023, the New York Supreme Court denied
defendant's motion.
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21(b)(10); (2) breach of contract; (3) breach of the implied covenant of good faith
and fair dealing; (4) unjust enrichment; (5) professional negligence; and (6) violation
of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -229. The
contract and the two addenda were attached to the complaint. Prior to filing an
answer, on February 24, 2023, defendant moved to dismiss plaintiff's complaint and
compel arbitration. In support, defendant relied on the arbitration provision in the
contract. Plaintiff opposed the motion, arguing that the arbitration provision was
unenforceable under both New York and New Jersey law.
As to New York law, according to plaintiff's counsel, because the contract fit
the definition of a consumer transaction and the font size was smaller than the
allowable size to be admitted into evidence under N.Y. C.P.L.R. § 4544, the
arbitration provision was unenforceable. As to New Jersey law, counsel asserted the
provision was unenforceable based on the font size, legibility, and location.
On June 9, 2023, following oral argument, the judge entered an order denying
defendant's motion. In an oral decision, the judge applied the standards articulated
in Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577 (App. Div. 2004), and Atalese
v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), and concluded the
arbitration provision "should not be enforced." Initially, the judge pointed out that
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he was adjudicating "a motion to dismiss" that was "limited to the pleadings" and
"the contract itself," and heard before any discovery was conducted by the parties.
The judge also posited:
At the heart of all of it, despite a lot of the repartee back
and forth about the sophistication or relative
sophistication of [plaintiff], the nature of this
transaction, the size of the font, [and] which law should
apply, the underlying legal theory here really concerns
whether or not either of those provisions were accepted
as part of a contract knowingly.
In describing the contract, the judge commented that "[n]one of the things
contained within the written portion of what [he] would consider the binding
contract reference anything about arbitration, about alternate means of resolving
disputes outside of trial, [or] about waiving a statutory right." In addition,
according to the judge, the addendum containing the arbitration provision
followed the signature page, and was not labeled "arbitration provision" for
clarity, but was "ambiguous[ly]" labelled "[t]erms and conditions."
The judge expounded:
Regardless of the size of the font, . . . . [i]t does not
anywhere specifically say that [plaintiff's] right to a
trial is waived, that there's any statutory restrictions on
[plaintiff's] right to recover, nor does it specifically set
forth in a straightforward way the nature and extent or
powers of the arbitrator or how the arbitration would
proceed. It fails on a number of points . . . .
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Accordingly, the judge concluded that "there[ was] no proof on the documents
presented that there was a knowing . . . determination on behalf of [plaintiff] to
consent to arbitration as the sole remedy."
As to the choice-of-law provision, the judge continued:
My finding regarding choice of law is that New
Jersey certainly has a significant interest and nexus to
this litigation. The home involved is a New Jersey
home. [Plaintiff] is a New Jersey resident. All the work
that was performed by . . . defendant essentially ended
up actually being performed in New Jersey. The lien in
this matter is also in New Jersey.
. . . . I find here the choice-of-law provision is
buried in the same attachment that . . . follows the
signatures. And there is a denial here that there was a
knowing voluntary acceptance of that choice of law.
That being the case, based on the pleadings,
which is what I[ am] limited to [hear] in a motion to
dismiss, I find that there[ is] no knowing choice of law
at this point that I am aware of. And, therefore, New
Jersey law applies.
Thereafter, on June 26, 2023, defendant filed a contesting answer, affirmative
defenses, and a counterclaim. In the counterclaim, defendant asserted breach of
contract and sought a judgment of foreclosure on the construction lien claim. On
July 7, 2023, defendant again filed a motion to compel arbitration. In support,
defendant submitted a certification by Jonah Kaplan, defendant's Director of
Business Development and Communication, along with numerous e-mail chains
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showing that the terms of the October 22, 2018, contract were negotiated and
finalized after over a month of communications between the parties during
September and October of 2018.
In the certification, Kaplan, who "personally negotiated" with plaintiff on
defendant's behalf, averred that on September 7, 2018, he emailed plaintiff the
initial contract proposal. After a phone conversation with plaintiff, a few days
later, on September 12, 2018, Kaplan sent plaintiff another copy of the proposal
as a Word document "with [t]rack [c]hanges turned on" so plaintiff could modify
the language. On September 14, 2018, plaintiff e-mailed Kaplan a "redlined
proposed contract" with "some changes" made by Emily Rokeach, plaintiff's
"corporate [g]eneral [c]ounsel who reviewed [the proposal] with [plaintiff]."
According to the certification, the September 14 redline contract included
several proposed changes to the entire contract, including revisions to the
arbitration provision contained in paragraph eighteen. Specifically, the fee-
shifting portion of the arbitration provision was modified to read:
To the extent the dispute involves a payment dispute,
the prevailing party shall be entitled to recover all
associated costs, expenses, and fees, including
attorneys' fees from the other party.
[(Emphasis added).]
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Plaintiff also submitted a minor modification to paragraph seventeen.3
Kaplan certified that on September 21, 2018, plaintiff emailed defendant "an
updated redlined proposed contract," reflecting the parties' discussions about further
changes to various provisions of the contract. However, there were no further
modifications to the arbitration provision. The negotiations continued through
September into October 2018, with further changes to various terms unrelated to the
arbitration provision. Finally, on October 22, 2018, plaintiff emailed Kaplan "the
final executed [c]ontract," writing that he and his wife "[were] excited to share the
fully executed agreement."
Plaintiff opposed the motion to compel arbitration but did not file a responding
certification. During oral argument conducted on August 25, 2023, the judge
confirmed that plaintiff did not submit a certification "in opposition to the allegations
made . . . regarding his involvement in the redaction and/or modification of the
arbitration clause and the choice of law clause."
Following oral argument, the judge granted defendant's motion to compel
arbitration. In an oral decision, the judge stressed that "the crux" of plaintiff's
3
The word "reference" in paragraph seventeen was modified as follows: "(17)
APPLICABLE LAW This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
conflicts of laws principles." (Emphasis added).
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argument during the prior motion was that plaintiff had no "knowledge,
understanding, [or] belief that there was an arbitration provision attached in any way
to th[e] contract." The judge expounded that:
[Plaintiff] clearly claimed that he was an unknowing
participant to an arbitration provision that he did not
know existed and/or would not understand and/or . . .
would have not agreed to, including the choice of law
provision.
I find, based upon a review of all the documents
provided, including the documents provided under the
. . . certification of . . . Kaplan, which is unrefuted, that
those arguments are false, that [plaintiff] did know
there was an arbitration provision, that the reason I do[
not] see a certification of [plaintiff] is because he knew
it.
He negotiated it and he fully understood the
implication of it. He is not an unsophisticated
homeowner. . . . [A]nd even if he was, the fact that he
engaged counsel to help negotiate a provision that
would allow for . . . mutual fee responsibility for the
arbitration clause clearly shows a . . . very good
understanding of what an arbitration means and what
the ramifications of losing or winning an arbitration
would mean.
As to the choice of law provision, the judge found that it was "made
knowingly" and "[would] be adhered to." As a result, according to the judge,
"New York law will apply to th[e] case." The judge further noted that under
either New York or New Jersey law, "knowing" and "understanding . . . the
A-0566-23
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existence of the arbitration provision will result in an enforceable arbitration
provision." The judge also determined that N.Y. C.P.L.R. § 4544 was
"inapplicable" because "not only was the text readable," but plaintiff was able
to "read[]," "redact[]," "change[]," and "modif[y]" the arbitration provision.
The judge explained his reason for reaching a different result from his prior
decision as follows:
[I]t is true that the initial motion was a motion to
dismiss based solely on the pleadings.
This is not that. An answer was filed. This is a
substantive motion and I can consider the certification
which w[as] provided and the lack of a certification
provided in response and I am.
The judge concluded:
[Plaintiff] knew what he was negotiating away with this
arbitration agreement. He had an attorney help him
decide to sign the arbitration agreement and it[ is] also
clear that not only did he know about it, he decided to
sign the contract despite it, understanding it was there.
There can be no doubt about that at this point.
On September 11, 2023, the judge entered a memorializing order granting
defendant's motion to dismiss without prejudice plaintiff's complaint and defendant's
counterclaim in favor of arbitration. The judge also determined that bifurcation of
the construction lien action was not warranted because "all of the damages in th[e]
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case do result directly from the contract," making it appropriate to adjudicate all the
issues at the arbitration at the same time. This appeal followed.
On appeal, plaintiff raises the following issues for our consideration:
I. THE TRIAL COURT ERRONEOUSLY
RECONSIDERED ITS PRIOR HOLDING THAT THE
ARBITRATION PROVISION AND CHOICE OF
LAW PROVISION WERE UNENFORCEABLE AS A
MATTER OF LAW[.]
II. THE TRIAL COURT ERRONEOUSLY APPLIED
THE CHOICE OF LAW PROVISION AND NEW
YORK LAW[.]
III. THE TRIAL COURT ERRONEOUSLY
ENFORCED THE ARBITRATION PROVISION BY
MISAPPLYING THE PAROL EVIDENCE RULE[.]
A. The Trial Court Expanded The Parol
Evidence Rule Beyond Its Long-
Established Construction[.]
B. This Court Must Preclude The Use Of
Parol Evidence To Alter The Facially
Unenforceable Arbitration Provision[.]
IV. THE TRIAL COURT ERRONEOUSLY FOUND
THAT THE ARBITRATION PROVISION IS
ENFORCEABLE UNDER NEW YORK LAW[.]
II.
The enforceability of an arbitration agreement is a question of law, which
we review de novo. Skuse v. Pfizer, Inc., 244 N.J. 30, 46 (2020). "Similarly,
A-0566-23
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the issue of whether parties have agreed to arbitrate is a question of law that is
reviewed de novo." Jaworski v. Ernst & Young U.S. LLP., 441 N.J. Super. 464,
472 (App. Div. 2015). Likewise, we review de novo choice-of-law
determinations. Cont'l Ins. Co. v. Honeywell Int'l., Inc., 234 N.J. 23, 46 (2018).
Thus, we exercise de novo review of a trial court's order compelling arbitration,
Goffe v. Foulke Mgmt. Corp., 238 N.J. 191, 207 (2019), and "[i]n reviewing
such orders, we are mindful of the strong preference to enforce arbitration
agreements, both at the state and federal level," Hirsch v. Amper Fin. Servs.,
LLC, 215 N.J. 174, 186 (2013). That preference, "however, is not without
limits." Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168
N.J. 124, 132 (2001).
Arbitration agreements are subject to customary contract law principles.
Atalese, 219 N.J. at 442. Under our State's defined contract-law principles, a
valid and enforceable agreement requires: (1) consideration; (2) a meeting of
the minds based on a common understanding of the contract terms; and (3)
unambiguous assent. Id. at 442-45. Consequently, to be enforceable, the terms
of an arbitration agreement must be clear, and any legal rights being waived
must be identified. Id. at 442-43; see also Kernahan v. Home Warranty Adm'r
of Fla., Inc., 236 N.J. 301, 319-20 (2019). "No particular form of words is
A-0566-23
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necessary to accomplish a clear and unambiguous waiver of rights." Atalese,
219 N.J. at 444. If, "at least in some general and sufficiently broad way," the
language of the clause conveys that arbitration is a waiver of the right to bring
suit in a judicial forum, the clause will be enforced. Id. at 447; see also Morgan
v. Sanford Brown Inst., 225 N.J. 289, 309 (2016) ("No magical language is
required to accomplish a waiver of rights in an arbitration agreement.").
Here, we agree with the judge that the arbitration provision conformed to
the dictates of Atalese, satisfied the elements necessary for the formation of a
contract, and was therefore enforceable. Plaintiff argues "the [a]rbitration
[p]rovision is ambiguous, lacking an explanation, and inconspicuously sized and
positioned within the [c]ontract." However, plaintiff's claims are undermined
by the fact that the overwhelming and undisputed evidence in the record clearly
establishes that plaintiff was aware of, understood, knowingly assented to, and
even negotiated terms in the arbitration provision.
"An arbitration agreement is valid only if the parties intended to arbitrate
because parties are not required 'to arbitrate when they have not agreed to do
so.'" Kernahan, 236 N.J. at 317 (quoting Volt Info. Scis., Inc. v. Bd. of Trs.,
489 U.S. 468, 478 (1989)). As such, "[a] court's objective in construing a
contract is to determine the intent of the parties," and, in that quest, "'the court
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must consider the relations of the parties, the attendant circumstances, and the
objects they were trying to attain.'" Id. at 320-21 (quoting Tessmar v. Grosner,
23 N.J. 193, 201 (1957)).
In County of Passaic v. Horizon Healthcare Services, Inc., 474 N.J. Super.
498, 501 (App. Div. 2023), where the parties were a county and a health
insurance company with a longstanding contractual relationship involving the
management of the County's self-funded health benefit plan, we rejected the
County's assertion that the arbitration provision in dispute was "unenforceable
because it lack[ed] the explicit waiver of access to the courts prominently
featured" in Atalese. We reasoned that "even though the arbitration provision
does lack such an explicit waiver, the County is a sophisticated contracting party
and is not – as in Atalese and other authorities – an employee or consumer
lacking sufficient bargaining power to resist the extraction of an agreement to
arbitrate." Ibid.Similarly, in Grandvue Manor, LLC v. Cornerstone Contracting Corp.,
471 N.J. Super. 135 (App. Div. 2022), we deemed the contractor corporation
and couple who, through an LLC, contracted for construction of a $10 million
home, "sophisticated parties who elected arbitration clearly and
unambiguously." Id. at 139-40, 146. As a result, we upheld the arbitration
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clause which clearly delineated that the parties had a choice between arbitration
or "'[l]itigation in a court of competent jurisdiction.'" Id. at 140.
Here, there was no contract of adhesion or unequal bargaining relationship
between the contracting parties. Unlike a form consumer contract, this contract,
including the arbitration provision, was individually negotiated by plaintiff who
was assisted by counsel and "versed in the meaning of law-imbued terminology
about procedures." Kernahan, 236 N.J. at 319. Accordingly, despite the absence
of an explicit waiver of access to the courts, this is a setting where plaintiff is
"presumed to understand . . . what was being agreed to," including the
provision's terms and legal effect. Id. at 320-21.
Plaintiff argues that "to overcome" the deficiencies in the arbitration
provision, the judge erroneously considered "parol evidence which, as a matter
of law, cannot alter the substance or meaning of the [a]rbitration [p]rovision."
"In general, the parol evidence rule prohibits the introduction of evidence that
tends to alter an integrated written document." Conway v. 287 Corp. Ctr.
Assocs., 187 N.J. 259, 268 (2006) (citing Restatement (Second) of Conts. § 213
(Am. L. Inst. 1981)). It "is a rule of substantive law, not a rule of evidence."
Ibid.
As such, in Conway, our Supreme Court explained:
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[W]e permit a broad use of extrinsic evidence to
achieve the ultimate goal of discovering the intent of
the parties. Extrinsic evidence may be used to uncover
the true meaning of contractual terms. It is only after
the meaning of the contract is discerned that the parol
evidence rule comes into play to prohibit the
introduction of extrinsic evidence to vary the terms of
the contract.
[Id. at 270.]
Here, the judge did not rely on parol evidence to alter the terms of an
integrated contract. Instead, the judge considered Kaplan's certification and
email attachments as relevant to the circumstances in which the contract was
entered, which he was permitted to do. See Atl. N. Airlines, Inc. v. Schwimmer,
12 N.J. 293, 301 (1953) ("Evidence of the circumstances is always admissible
in aid of the interpretation of an integrated agreement.").
Plaintiff also argues the judge erred in reversing his "prior determination"
when he adjudicated the first motion "without conducting the required analysis
for reconsideration of interlocutory orders" under Rule 4:42-2. "Under Rule
4:42-2, interlocutory orders are 'subject to revision at any time before the entry
of final judgment in the sound discretion of the court in the interest of justice.'"
In re Est. of Jones, 477 N.J. Super. 203, 216-17 (App. Div. 2023) (quoting
Lawson v. Dewar, 468 N.J. Super. 128, 134 (App. Div. 2021)).
"Reconsideration under this rule offers a 'far more liberal approach' than Rule
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4:49-2, governing reconsideration of a final order." JPC Merger Sub LLC v.
Tricon Enters., Inc., 474 N.J. Super. 145, 160 (App. Div. 2022) (quoting
Lawson, 468 N.J. Super. at 134).
"Interlocutory orders are always subject to revision in the interests of
justice" and a trial court "'may revise them when it would be consonant with the
interests of justice to do so.'" Lombardi v. Masso, 207 N.J. 517, 536 (2011)
(quoting Ford v. Weisman, 188 N.J. Super. 614, 619 (App. Div. 1983)). Indeed,
where "the judge later sees or hears something that convinces him[ or her] that
a prior ruling is not consonant with the interests of justice, he[ or she] is not
required to sit idly by and permit injustice to prevail" but "is empowered to
revisit the prior ruling and right the proverbial ship." Id. at 537.
That is exactly what occurred here. Relying on the arbitration provision
in the parties' agreement, defendant moved pre-answer to compel arbitration and
the judge denied the motion, limiting his findings of fact and conclusions of law
to the pleadings and the contract itself. After defendant moved post-answer to
compel arbitration and submitted a supporting certification, sufficient evidence
existed in the motion record to support the judge's findings that plaintiff assented
to the arbitration and choice of law provisions based on his counseled
negotiations with defendant prior to executing the agreement. Therefore, based
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on the newly adduced evidence, the judge revised his decision consonant with
the interests of justice. See R. 4:6-2(a) (permitting defense to move to dismiss
complaint for lack of jurisdiction, which permits consideration of matters
outside the pleadings without converting the motion to one for summary
judgment); cf. R. 4:6-2(e) (permitting defense to move to dismiss complaint for
"failure to state a claim upon which relief can be granted," which requires
converting the motion to one for summary judgment if matters beyond the
pleadings are presented).
Plaintiff also asserts that the judge "conducted an inadequate choice of
law analysis" "to determine which states['] law should apply," "rendering the
entirety of [his] decision to compel arbitration a nullity." Even if the judge was
correct in applying New York law, defendant argues he erred in finding the
arbitration provision enforceable under New York law.
"Ordinarily, when parties to a contract have agreed to
be governed by the laws of a particular state, New
Jersey courts will uphold the contractual choice if it
does not violate New Jersey's public policy."
[Instructional Sys., Inc. v. Comput. Curriculum Corp.,
130 N.J. 324, 341 (1992)].
[T]he law of the state chosen by the
parties will apply, unless either:
(a) the chosen state has no
substantial relationship to the parties or the
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transaction and there is no other reasonable
basis for the parties' choice, or
(b) application of the law of the
chosen state would be contrary to a
fundamental policy of a state which has a
materially greater interest than the chosen
state in the determination of the particular
issue and which would be the state of the
applicable law in the absence of an
effective choice of law by the parties.
[Id. at 342.]
[Grandvue Manor, LLC, 471 N.J. Super. at 142 (second
alteration in original).]
Here, the parties clearly and unambiguously chose to be governed by New
York law. Defendant is a New York company and several planning meetings
between the parties occurred in New York. We conclude that New York has
sufficient contacts with the parties to make the choice of law governing the
arbitration clause "a reasonable contractual term, not offensive to any previously
enunciated or presently viable public policy of this forum," Kalman Floor Co.
v. Jos. L. Muscarelle, Inc., 196 N.J. Super. 16, 22 (App. Div. 1984), and we
discern no principled basis in law or fact why the law of the state chosen by the
parties should not apply.
Next, we consider whether the arbitration provision would be enforceable
under New York law. New York law regarding the enforceability of contractual
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arbitration provisions is not unlike New Jersey law, and New Jersey courts are
not unfamiliar with New York law. In Grandvue, we explained:
[W]ith respect to the effect of an arbitration agreement,
New York law provides:
A written agreement to submit any
controversy thereafter arising or any
existing controversy to arbitration is
enforceable without regard to the
justiciable character of the controversy and
confers jurisdiction on the courts of the
state to enforce it and to enter judgment on
an award. In determining any matter
arising under this article, the court shall not
consider whether the claim with respect to
which arbitration is sought is tenable, or
otherwise pass upon the merits of the
dispute.
[N.Y. C.P.L.R. § 7501 (2021).]
The New York Court of Appeals elaborated as follows:
[T]he announced policy of [the State
of New York] favors and encourages
arbitration as a means of conserving the
time and resources of the courts and the
contracting parties. "One way to
encourage the use of the arbitration forum"
we recently noted "would be to prevent
parties to such agreements from using the
courts as a vehicle to protract litigation.
This conduct has the effect of frustrating
both the initial intent of the parties as well
as legislative policy[.]" Matter of Weinrott
(Carp), 32 N.Y.2d 190, 199 (1973). To this
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end the Legislature has assigned the courts
a minimal role in supervising arbitration
practice and procedures.
Generally it is for the courts to make
the initial determination as to whether the
dispute is arbitrable, that is "whether the
parties have agreed to arbitrate the
particular dispute." Steelworkers v. Am.
Mfg. Co., 363 U.S. 564, 570-71 (1960).
The ultimate disposition of the merits is of
course reserved for the arbitrators and the
courts are expressly prohibited from
considering "whether the claim with
respect to which arbitration is sought is
tenable, or otherwise pass(ing) upon the
merits of the dispute[.]" C.P.L.R. § 7501.
Ideally then the courts should confine
themselves to the arbitration clause and
leave the overall contract to the arbitrators.
This, of course, is facilitated when the
arbitration clause specifies the issues
which are subject to arbitration and those
which are not.
....
. . . . Basically the courts perform the
initial screening process designed to
determine in general terms whether the
parties have agreed that the subject matter
under dispute should be submitted to
arbitration. Once it appears that there is, or
is not a reasonable relationship between the
subject matter of the dispute and the
general subject matter of the underlying
contract, the court's inquiry is ended.
Penetrating definitive analysis of the scope
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of the agreement must be left to the
arbitrators whenever the parties have
broadly agreed that any dispute involving
the interpretation and meaning of the
agreement should be submitted to
arbitration[.] See, e.g., Matter of
Exercycle Corp. (Maratta), 9 N.Y.2d 329,
334 (1961).
[Nationwide Gen. Ins. Co. v. Invs. Ins. Co.
of Am., 332 N.E.2d 333, 335 (N.Y. 1975).]
Thus, New York law instructs that courts perform
an initial screening "to determine in general terms
whether the parties have agreed that the subject matter
under dispute should be submitted to arbitration."
[Ibid.]
[Grandvue, 471 N.J. Super. at 143-44 (all but first and
last alteration in original).]
Here, the parties clearly and unambiguously agreed to submit to
arbitration "any dispute arising out of the services in this [a]greement." Because
the dispute arose out of the services in the agreement and plaintiff never
questioned the scope of the arbitration agreement, we conclude a New York
court would likely enforce the arbitration provision. See Singer v. Jefferies &
Co., 575 N.E.2d 98, 99-101 (N.Y. 1991) (upholding an arbitration provision
covering "any controversy arising out of the business of the employer"); Atlas
Drywall Corp. v. Dist. Council of N.Y.C. & Vicinity of United Brotherhood of
Carpenters & Joiners, 576 N.Y.S.2d 319, 320-21 (App. Div. 1991) (upholding
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an arbitration provision covering "'all disputes between [the parties], both within
and without the agreement'" (alteration in original) (emphasis omitted)).
Plaintiff reprises his argument that the arbitration provision would be
unenforceable under New York law because the provision would be
inadmissible under N.Y. C.P.L.R. § 4544, "prohibit[ing] the admission of
exhibits with text that is not clear and legible or is smaller than eight-point font"
in disputes involving a consumer transaction or a residential lease.
In Drelich v. Kenlyn Homes, Inc., 446 N.Y.S.2d 408, 409 (App. Div.
1982), the court interpreted a "consumer transaction" within the meaning of the
statute as follows:
Pursuant to the provisions of [N.Y. C.P.L.R. § 4544], a
"'consumer transaction'" is one "wherein the money,
property or service which is the subject of the
transaction is primarily for personal, family or
household purposes". If, in fact, the subject written
contract was part of a consumer transaction as so
defined and the print size failed to comply with the
minimum requirements set forth in the statute, then the
contract may not be received in evidence upon behalf
of defendant.
The Drelich court concluded that the contract at issue in the case, which
involved the sale and construction of a home, did not qualify as a consumer
transaction under the statute. Id. at 410. The court explained:
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The express terms of the statute in question establish
that it is applicable first to consumer transactions for
goods, property and services, and second, to leases for
residential property. The statute reflects the legislative
intent to regulate transactions for such property and
services which are primarily personal in nature in order
to protect the unwary consumer from the sharp
practices of various dubious business enterprises which
deal in such services and goods which are attractive to
consumers. In addition to these personal transactions,
the statute is also made applicable to leases for
residential property, which, as chattels real, constitute
personal property. To extend the statute so as to make
it applicable to a contract for the construction and sale
of a one-family dwelling would require a strained
reading of the express language of the statute and would
require that such meaning be determined by
implication. This we decline to do, and we determine
that such a contract is not within the scope of a
consumer transaction since it is not included in the
express terms of the statute in question.
[Ibid.]
For the same reasons, we are satisfied that N.Y. C.P.L.R. § 4544 does not
apply to the transaction here. Designing a home and building it are part and
parcel of the same process. To extend the statute to encompass a contract
regulating the former would likewise require a strained reading of the statute's
express language.
Affirmed.
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