GRANDVUE MANOR, LLC v. CORNERSTONE CONTRACTING CORP. (L-1602-20, BERGEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3702-20
GRANDVUE MANOR, LLC,
APPROVED FOR PUBLICATION
Plaintiff-Appellant,
March 7, 2022
v. APPELLATE DIVISION
CORNERSTONE CONTRACTING
CORP., GEORGE PUSSER, and
DEREK D'AMBRA,
Defendants-Respondents.
_____________________________
Argued January 12, 2022 – Decided March 7, 2022
Before Judges Hoffman, Whipple and Geiger.
On appeal from the Superior Court of New Jersey,
Law Division, Bergen County, Docket No. L-1602-20.
Joseph B. Fiorenzo argued the cause for appellant
(Sills Cummis & Gross, PC, attorneys; James M.
Hirschhorn and David Phillips, of counsel and on the
briefs; Joseph B. Fiorenzo, on the briefs).
Andrea C. Sisca (Ivey, Barnum & O'Mara, LLC) of
the New York and Connecticut bars, admitted pro hac
vice, argued the cause for respondents (Mueller Law
Group, Andrea C. Sisca and Stephen G. Walko (Ivey,
Barnum & O'Mara, LLC) of the New York and
Connecticut bars, admitted pro hac vice, attorneys;
Gregory K. Mueller, Paul S. Haberman, Andrea C.
Sisca, and Stephen G. Walko, on the brief).
The opinion of the court was delivered by
WHIPPLE, J.A.D.
Plaintiff Grandvue Manor, LLC, (Grandvue) appeals from a July 7,
2021, Law Division order granting a motion to dismiss and compel arbitration
with defendant Cornerstone Contracting Corp. (Cornerstone) and dismissing
the complaint for lack of personal jurisdiction over defendants George Pusser
and Derek D'Ambra. We affirm but remand to the trial court to correct the
order and enter a stay pending completion of arbitration.
In 2017, Linda and Anthony Palmeri wanted to build a luxury home in
Stanfordville, New York. They established Grandvue as a New Jersey limited
liability corporation headquartered in Hackensack as the vehicle to build the
home. On December 7, 2017, Grandvue entered into a contract with
Cornerstone to build the $10 million residence. Cornerstone is a corporation
headquartered in Greenwich, Connecticut. George Pusser is the President of
Cornerstone and Derek D'Ambra is its Chief Financial Officer. The contract
consisted of two American Institute of Architect (AIA) agreements; the
Standard Form of Agreement Between Owner and Contractor (the Agreement),
and the General Conditions for the Contract of Construction (General
Conditions). The contract required substantial completion by April 7, 2019,
which was within sixteen months from the date of the contract.
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The contract contained a choice of law provision to govern by the law of
the place where the project was located, excluding that jurisdiction's choice of
law rules, and if the parties selected arbitration as the method of binding
dispute resolution, then the Federal Arbitration Act would govern. Thus, the
parties selected the law of New York, the place of the project, to govern the
contract. With respect to initial dispute resolution, the Agreement provided
that the architect would serve as the initial decision-maker unless the parties
appoint another individual who was not a party to the Agreement.
Under section 6.2 of the Agreement, the parties checked the box
"Arbitration pursuant to Section 15.4 of AIA Document A201-2017."
§ 6.2 Binding Dispute Resolution
For any [c]laim subject to, but not resolved by,
mediation pursuant to Article [fifteen] of AIA
Document A201-2017, the method of binding dispute
resolution shall be as follows: . . .
[X] Arbitration pursuant to Section 15.4 of AIA
Document A201-2017
[ ] Litigation in a court of competent jurisdiction
[ ] Other ([s]pecify)
If the [o]wner and [c]ontractor do not select a method
of binding dispute resolution, or do not subsequently
agree in writing to a binding resolution method other
than litigation, [c]laims will be resolved by litigation
in a court of competent jurisdiction.
Section 15.4 of the General Conditions states, in pertinent part:
§ 15.4 Arbitration
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§ 15.4.1 If the parties have selected arbitration as the
method for binding dispute resolution in the
Agreement, any [c]laim subject to, but not resolved
by, mediation shall be subject to arbitration which,
unless the parties mutually agree otherwise, shall be
administered by the American Arbitration Association
in accordance with its Construction Industry
Arbitration Rules in effect on the date of the
Agreement. The [a]rbitration shall be conducted in
the place where the [p]roject is located, unless another
location is mutually agreed upon. A demand for
arbitration shall be made in writing, delivered to the
other party to the [c]ontract, and filed with the person
or entity administering the arbitration. The party
filing a notice of demand for arbitration must assert in
the demand all [c]laims then known to that party on
which arbitration is permitted to be demanded.
....
§ 15.4.2 The award rendered by the arbitrator or
arbitrators shall be final, and judgment may be entered
upon it in accordance with applicable law in any court
having jurisdiction thereof.
The General Conditions define "claims," in pertinent part as follows:
A [c]laim is a demand or assertion by one of the
parties seeking, as a matter of right, payment of
money, a change in the [c]ontract [t]ime, or other
relief with respect to the terms of the [c]ontract. The
term "[c]laim" also includes other disputes and matters
in question between the [o]wner and [c]ontractor
rising out of or relating to the [c]ontract. . . .
On March 6, 2020, Grandvue filed a complaint against Cornerstone,
Pusser, and D'Ambra. Grandvue alleged that defendants had not achieved
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substantial completion of the project, breached the contract and the implied
covenant of good faith and fair dealing, committed fraud and negligent
misrepresentation, breached New York lien law, breached their fiduciary
duties, committed conversion, unjustly enriched themselves, and violated the
New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -224, and the New
Jersey Racketeer Influenced Corrupt Organization Act (RICO), N.J.S.A.
2C:41-1 to -6.2.
Defendants moved to dismiss for lack of personal jurisdiction over
Cornerstone and Pusser and to compel arbitration pursuant to the provisions of
the Agreement. A revised motion to dismiss for lack of personal jurisdiction
included D'Ambra. Initially, the court denied the motions without prejudice
and ordered discovery on the issue of personal jurisdiction. After
jurisdictional discovery, defendants renewed their motions.
On July 2, 2021, the court delivered an oral opinion finding sufficient
minimum contacts for personal jurisdiction over the individual defendants but
dismissing the complaint for the matter to be submitted to arbitration. The
court concluded that, under New Jersey law, the arbitration provision is clear
and unambiguous as to the requirement that the parties submit to arbitration
and as to the parties' waiver of their right to a jury trial. The court noted that
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the litigants are sophisticated parties that freely entered into a contract to build
a house for over $10 million.
On July 7, 2021, without explanation regarding the discrepancy with the
transcript, the court entered an order dismissing the action for lack of personal
jurisdiction as to Pusser and D'Ambra and compelling arbitration. This appeal
followed.
I.
We review the interpretation of a contract de novo. See Jennings v.
Pinto, 5 N.J. 562, 569-70 (1950). We pay no special deference to the trial
court's interpretation, so we review the contract with fresh eyes. Kieffer v.
Best Buy, 205 N.J. 213, 222-23 (2011). Grandvue argues that, under this
contract, it did not voluntarily waive its right to a jury trial for its statutory
claims under CFA and RICO. We disagree.
As a threshold matter, we address whether the law of New Jersey or New
York applies to the enforceability and construction of the arbitration provision.
"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.
Computer Curriculum Corp., 130 N.J. 324, 341 (1992).
[T]he law of the state chosen by the parties will apply,
unless either:
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(a) the chosen state has no substantial relationship to
the parties or the 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.]
Here, the parties clearly and unambiguously chose New York law, where
the project is located. New York's law on choice of law provisions provides:
The parties to any contract, agreement or undertaking,
contingent or otherwise, in consideration of, or
relating to any obligation arising out of a transaction
covering in the aggregate not less than two hundred
fifty thousand dollars, including a transaction
otherwise covered by subsection (a) of section 1-301
of the uniform commercial code, may agree that the
law of this state shall govern their rights and duties in
whole or in part, whether or not such contract,
agreement or undertaking bears a reasonable relation
to this state. This section shall not apply to any
contract, agreement or undertaking (a) for labor or
personal services, (b) relating to any transaction for
personal, family or household services, or (c) to the
extent provided to the contrary in subsection (c) of
section 1-301 of the uniform commercial code.
[N.Y. Gen. Oblig. § 5-1401(1) (2018).]
In addition, with respect to the effect of an arbitration agreement, New
York law provides:
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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 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
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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.
More typically the parties adopt a "broad"
arbitration clause agreeing generally to submit to
arbitration all disputes arising out of the contract, or
any dispute relating to the meaning and interpretation
of the underlying agreement. Then the scope of the
arbitration clause and the scope of the underlying
agreement are identical, and disputes over
interpretation run the hazard of being refined into
questions of arbitrability. For instance in this case,
the petitioners argue that since the "arbitration clause
has no greater scope than does the treaty to which it
relates" the courts must first define the limits of the
substantive agreement before they can determine
whether the dispute is arbitrable. Thus in order to
reach the threshold question, the petitioners would
have the courts first resolve the merits of the
dispute—the ultimate issue in this case.
The way out of this apparent dilemma of course
is to recognize that although the courts and the
arbitrators in these cases cover the same field, they
perform very different functions. 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 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
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of Exercycle Corp. (Maratta), 9 N.Y.2d 329, 214
(1961).
[Nationwide Gen. Ins. Co. v. Invs. Ins. Co. of Am.,
332 N.E.2d 333, 335 (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." Id. at 335.
Turning to this case, the parties clearly and unambiguously agreed to
submit "any claim" not resolved by mediation to binding arbitration. "Claim"
is broadly defined in the General Conditions as:
[A] demand or assertion by one of the parties seeking,
as a matter of right, payment of money, a change in
the [c]ontract [t]ime, or other relief with respect to the
terms of the [c]ontract. The term "[c]laim" also
includes other disputes and matters in question
between the [o]wner and [c]ontractor arising out of or
relating to the [c]ontract. . . .
Because all of plaintiff's claims arise out of or relate to the contract, we
conclude a New York court would likely enforce the arbitration provision as it
is less broad than those it upheld in Singer v. Jefferies & Co., 575 N.E.2d 98,
99-101 (1991) (upholding an arbitration provision covering "any controversy
arising out of the business of the employer"), Atlas Drywall Corp. v. Dist.
Council of New York City & Vicinity of United Bhd. of Carpenters & Joiners ,
177 A.D.2d 612, 612-14 (2d Dept. 1991) (alteration in original) (upholding an
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arbitration provision covering "all disputes between [the parties], both within
and without the agreement"), and Nationwide.
Moreover, the United States and the State of New Jersey have declared
policies favoring arbitration. Martindale v. Sandvik, Inc., 173 N.J. 76, 84-85
(2002).
As "the supreme law of the land regarding
arbitration," Goffe v. Foulke Management Corp., 238
N.J. 191, 207 (2019), "[the Federal Arbitration Act,]
FAA . . . preempts any state rule discriminating on its
face against arbitration," Kindred Nursing Ctrs. Ltd.
P'ship v. Clark, 137 S. Ct. 1421, 1426 (2017).
Significantly, however, the FAA "contains no express
pre-emptive provision, nor does it reflect a
congressional intent to occupy the entire field of
arbitration." Volt Info. Scis. v. Bd. of Trs., 489 U.S.
468, 477 (1989). And, although the FAA preempts
state laws that treat arbitration agreements differently
from other contracts, "the FAA specifically permits
states to regulate contracts, including contracts
containing arbitration agreements[,] under general
contract principles." Martindale, 173 N.J. at 85.
[Arafa v. Health Express Corp., 243 N.J. 147, 164-65
(2020).]
"[B]y agreeing to arbitrate a statutory claim, a party does not forgo the
substantive rights afforded by the statute; it only submits to their resolution in
an arbitral rather than a judicial forum." Arafa v. Health Express Corp., 243
N.J. 147, 170 (2020) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 628 (1985)).
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With respect to the enforceability of arbitration agreements, the law of
New Jersey diverges slightly from that of New York. Unlike New York
courts, which perform an "initial screening" to determine whether the parties
generally agreed to arbitrate claims, Nationwide, 332 N.E.2d at 335, New
Jersey courts inquire into the substance of the arbitration provision to
determine whether the parties expressly waived their right to seek relief in
court. Our Supreme Court explained that
[a]n arbitration clause, like any contractual clause
providing for the waiver of a constitutional or
statutory right, must state its purpose clearly and
unambiguously. In choosing arbitration, consumers
must have a basic understanding that they are giving
up their right to seek relief in a judicial forum.
....
The absence of any language in the arbitration
provision that plaintiff was waiving her statutory right
to seek relief in a court of law renders the provision
unenforceable. An arbitration provision—like any
comparable contractual provision that provides for the
surrendering of a constitutional or statutory right—
must be sufficiently clear to a reasonable consumer.
[Atalese v. U.S. Legal Services Group, L.P., 219 N.J.
430, 435-36 (2014).]
The Court elaborated:
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
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least in some general and sufficiently broad way, must
explain that the plaintiff is 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.
See Knorr v. Smeal, 178 N.J. 169, 177 (2003).
....
We emphasize that no prescribed set of words
must be included in an arbitration clause to
accomplish a waiver of rights. Whatever words
compose an arbitration agreement, they must be clear
and unambiguous that a consumer is choosing to
arbitrate disputes rather than have them resolved in a
court of law. [] In this way, the agreement will assure
reasonable notice to the consumer. To be clear, under
our state contract law, we impose no greater burden on
an arbitration agreement than on any other agreement
waiving constitutional or statutory rights.
[Id. at 446-47 (some alterations in original).]
We do not conclude, however, that the divergence of state case law calls
for a different result than what the trial court determined because we agree
with the trial court that these were sophisticated parties who elected arbitration
clearly and unambiguously and that their statutory claims were arbitrable.
Here, we discern no error in the order compelling arbitration because the
arbitration provision is clear and unambiguous in waiving the right to a jury
trial and covers the alleged disputes.
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II.
Plaintiff argues that the trial court erred in entering an order dismissing
its complaint for lack of personal jurisdiction over Pusser and D'Ambra in
contradiction of its findings that it had personal jurisdiction over these
individuals. We agree that the trial court's order is inconsistent with its stated
finding.
Here, because the error appears to be clerical, we remand for the trial
court to correct the order pursuant to Rule 1:13-1. Additionally, we conclude
the trial court should not have dismissed the complaint because the FA A
provides that a party may request a stay if a court action has been commenced
and that action involves "any issue referable to arbitration under an agreement
in writing for such arbitration." 9 U.S.C. § 3. Accordingly, we remand with
direction that the trial court enter a new order.
Affirmed in part, remanded in part. We do not retain jurisdiction.
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