TEJANDRA AND ARUNA SHAH VS. T&S BUILDERS, LLC (L-3509-17, ESSEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-0276-17T2
TEJANDRA AND ARUNA SHAH,
Plaintiffs-Appellants,
v.
T&S BUILDERS, LLC,
Defendant-Respondent.
_______________________________
Argued April 30, 2018 - Decided July 24, 2018
Before Judges Accurso and Vernoia.
On appeal from Superior Court of New Jersey
Law Division, Essex County, Docket No.
L-3509-17.
Paul A. Sandars, III, argued the cause for
appellants (Lum, Drasco & Positan, LLC,
attorneys; Paul A. Sandars, III, of counsel
and on the brief; Bernadette H. Condon, on
the brief).
Matthew Lakind argued the cause for
respondent (Tesser & Cohen, attorneys;
Matthew Lakind, on the brief).
PER CURIAM
Plaintiffs Tejandra and Aruna Shah engaged defendant T&S
Builders, LLC in February 2014 to build an addition on their
home in Livingston for the lump sum of $315,000. The contract,
which was heavily negotiated between the parties, without
counsel, was drafted by plaintiffs. The contract contained an
arbitration clause, which provides:
Section Thirteen: Disputes
Should any dispute arise relative to
the performance of this contract that the
parties cannot satisfactorily resolve, then
the parties agree that the dispute shall be
resolved by binding arbitration conducted by
the American Arbitration Association. The
party demanding arbitration shall give
written notice to the opposite party and the
American Arbitration Association promptly
after the matter in dispute arises. In no
event, however, shall a written notice of
demand for arbitration be given after the
date on which a legal action concerning the
matter in dispute would be barred by the
appropriate statute of limitations.
After disputes arose between the parties over change orders
and payments, plaintiffs, in October 2014, purported to
terminate the contract in accordance with its terms. On October
21, defendant filed a demand for arbitration with the AAA.
Plaintiffs filed an answer with thirteen affirmative defenses,
none of which addressed the arbitration clause, and a
counterclaim alleging breach of contract, negligence, breach of
the covenant of good faith and fair dealing, violation of the
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Consumer Fraud Act, N.J.S.A. 56:8-1 to -204, and
misrepresentation.
The parties, through counsel, thereafter pursued their
claims in arbitration, exchanging discovery and an expert report
and participating in a site inspection and several conferences
with the appointed arbitrator. Pursuant to a scheduling order
issued by the arbitrator, plaintiffs filed their "Statement of
Counterclaim" in December 2016, laying out their claims under
the Consumer Fraud Act. The parties agreed the first hearing
date would be on April 26, 2017.
Defendant submitted its pre-arbitration brief two weeks
before the hearing date in accordance with the arbitrator's
scheduling order. Defendant devoted two pages of its eighteen-
page brief to argue plaintiffs' Consumer Fraud Act claims were
"not properly before the AAA, and should be rejected in their
entirety." Specifically, defendant argued the contract's
arbitration provision was ineffective as to the Consumer Fraud
Act claims because it failed to make any reference to statutory
claims. Defendant claimed it "agree[d] to arbitrate claims
relating to the Contract, but never waived its right to a trial
on statutory claims under the [Consumer Fraud Act]." Defendant
further argued plaintiffs could have brought their Consumer
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Fraud Act claims "before a court if they chose, and that right
remains to this day."
Plaintiffs opposed defendant's in limine motion to dismiss
their Consumer Fraud Act claims and defendant's "attempts to
characterize this matter as something other than a simple
commercial dispute sounding in negligence and breach of
contract." Plaintiffs argued Garfinkel v. Morristown Obstetrics
& Gynecology Associates, P.A., 168 N.J. 124, 131 (2001), the
case on which defendant relied, reaffirmed that "parties to an
agreement may waive statutory remedies in favor of arbitration"
and that "it is also well-established that claims arising under
the [Consumer Fraud Act] are subject to agreements to
arbitrate," relying on our unpublished opinion in Atalese v.
United States Legal Services Group, L.P., No. A-0654-12 (App.
Div. Feb. 22, 2013) (slip op. at 5).
Plaintiffs further claimed the wording of the arbitration
clause, in which the parties agreed to arbitrate, "any dispute
. . . relative to the performance of this contract," was clear
and sufficiently broad to provide notice that all possible
claims arising out of the performance of the contract would be
resolved in arbitration. Plaintiffs concluded by stating:
All of the claims in [plaintiffs']
Counterclaim, including its statutory
[Consumer Fraud Act] claims, are founded on
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the same set of facts and "arise from" the
performance of the contract. Accordingly[,]
since the factual basis of [plaintiffs']
Counterclaim also "arises from" disputes
relative to the performance of the contract,
all of the causes of action set forth in the
Counterclaim, including the [Consumer Fraud
Act] claim should also be heard in
arbitration.
That was how matters stood until the evening before the
hearing when the arbitrator sent counsel a copy of the Supreme
Court's opinion in Atalese v. United States Legal Services
Group, L.P., 219 N.J. 430, 436 (2014), which reversed our
decision and held that "[t]he absence of any language in the
arbitration provision that plaintiff was waiving her statutory
right to seek relief in a court of law" rendered the arbitration
provision in that case unenforceable. The arbitrator asked
counsel to review the case "in connection with the pending
motion in limine."
By the time the parties appeared for the hearing the next
morning, they had reversed their positions, with plaintiffs
arguing the arbitration clause they drafted was unenforceable
and defendant claiming plaintiffs' Consumer Fraud Act claims had
to be heard by the arbitrator. The arbitrator recapped the
parties' positions in an email sent the same day.
Last evening, in connection with the
pending [defendant] motions in limine, I
reviewed the parties' submissions.
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[Plaintiffs] provided to me the unreported
Appellate Division decision in Atalese v.
United States Legal Services Group. I
happened to know that this had been reversed
by the New Jersey Supreme Court [Justice
Albin having attended and discussed the
decision at one of the Garibaldi ADR Inn of
Court meetings].
I provided a copy of the attached NJ
Supreme Court decision to counsel last
evening.
When we began the hearing this morning,
I was advised that [plaintiffs] wished to
make an application to stay the arbitration.
The concern expressed by [plaintiffs'
counsel] was that perhaps the Consumer Fraud
claims would be waived if they were not
within the arbitration clause, or perhaps
under the authority of Atalese, the
arbitration clause is unenforceable.
I suggested that I withdraw from the
conference room and give counsel time to
determine if the concerns could be addressed
in a manner acceptable to all parties (since
prior to my circulating the attached
decision, the parties were ready to proceed
today).
I returned to the hearing and was
advised that the [plaintiffs] wish to make
an application to the NJ Superior Court to
have all the claims heard in litigation
rather than arbitration.
As a result, I feel that I have no
option but to stay the arbitration at this
time. If it is determined by the New Jersey
Superior Court that any (or all) claims are
to be arbitrated, then we will lift the stay
and reschedule the arbitration hearings.
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The arbitrator subsequently "confirm[ed] that [defendant] agreed
to have all claims, including any [Consumer Fraud Act] claims,
submitted to arbitration" and "that [defendant] withdrew its
motion in limine."
Plaintiffs then filed a complaint in the Law Division,
identical to the counterclaim they filed in arbitration, which
defendant moved to dismiss. Judge Vena, in a cogent and
comprehensive opinion from the bench, granted the motion,
sending the parties back to arbitration. The judge analyzed the
case relying on the Supreme Court's opinion in Cole v. Jersey
City Medical Center, 215 N.J. 265, 280-81 (2013), although
acknowledging that case involved a waiver of a right to
arbitration and not litigation. Applying the factors the Court
identified to gauge whether a party's litigation conduct was
consistent with a purportedly reserved right to arbitrate,1 Judge
1
The seven factors identified by the Cole Court are:
(1) the delay in making the arbitration
request; (2) the filing of any motions,
particularly dispositive motions, and their
outcomes; (3) whether the delay in seeking
arbitration was part of the party's
litigation strategy; (4) the extent of
discovery conducted; (5) whether the party
raised the arbitration issue in its
pleadings, particularly as an affirmative
defense, or provided other notification of
its intent to seek arbitration; (6) the
(continued)
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Vena had no hesitation in concluding plaintiffs, by their
conduct, waived any right to bring their claims in the Law
Division. Acknowledging the result of the motion "might not
[have been] the same" if made almost three years earlier when
defendant filed its demand for arbitration, the judge found
plaintiffs participation in the arbitration proceeding in the
interim precluded a "do-over" in the Law Division.
Specifically, the judge found plaintiffs' delay in asserting
their right to litigate the issues until the day of the hearing,
after "[a]ll paper discovery was conducted; experts' reports
were exchanged [and] arbitration briefs were prepared and
exchanged" substantially prejudiced defendant and could not be
countenanced by the court.
Plaintiffs appeal. Relying on our courts' solicitude of
consumers forced to arbitrate statutory claims buried in
contracts of adhesion, which do not inform them that they are
surrendering their rights to pursue those claims in court, see,
e.g., NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421 N.J.
(continued)
proximity of the date on which the party
sought arbitration to the date of trial; and
(7) the resulting prejudice suffered by the
other party, if any.
[Cole, 215 N.J. at 280-81.]
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Super. 404, 425 (App. Div. 2011), certif. granted, 209 N.J. 96(2011), and appeal dismissed, 213 N.J. 47 (2013), plaintiffs
argue the arbitration clause in this consumer contract "by its
own terms, only encompasses contract-based claims and does not
evidence a specific agreement among the parties to refer
statutory claims to binding arbitration." Plaintiffs further
contend the trial court erred in relying on Cole, as "that case
concerned waiver in the context of a delay in asking the court
to send the case to arbitration."
Although our review here is de novo, the trial court's
factual findings underlying its ruling that the case should
proceed in arbitration are entitled to deference and subject to
review for clear error. See Cole, 215 N.J. at 275.
Neither we nor the Supreme Court has apparently had the
opportunity to consider whether the principles enunciated in
Cole would apply where a party has participated in arbitration
for well over two years before asserting a right to proceed in
Superior Court. But see, Cole, 215 N.J. at 277 (noting the
"Court has addressed waiver of the right to a judicial
determination when the parties engage in arbitration, see, e.g.,
Johnson v. Johnson, 204 N.J. 529, 545 (2010); Fawzy v. Fawzy,
199 N.J. 456, 462, 482 (2009)"). We do not do so here, as the
peculiar circumstances that give rise to this appeal make it a
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poor vehicle for considering the issue, and the case is easily
resolved by resort to basic contract principles.
"Although arbitration is traditionally described as a
favored remedy, it is, at its heart, a creature of contract."
Fawzy, 199 N.J. at 469 (quoting Kimm v. Blisset, LLC, 388 N.J.
Super. 14, 25 (App. Div. 2006)). Accordingly, our focus is
always on whether the agreement to arbitrate was the product of
mutual assent, the so-called "meeting of the minds." Atalese,
219 N.J. at 442. Here, unlike in the usual consumer case, it
was plaintiffs, the consumer in this transaction, who drafted
the contract containing the arbitration clause. And it was
plaintiffs who filed a counterclaim with the AAA asserting
Consumer Fraud Act claims. Both parties thereafter proceeded in
arbitration for the next two years, exchanging written discovery
and an expert report, participating in multiple conferences and
a site inspection and preparing for and attending the first day
of the hearing.
Those acts, as found by Judge Vena, are all powerful
indicators that these parties understood and agreed that all
claims between them, including the Consumer Fraud Act claims,
were subject to arbitration in accordance with their agreement.
Indeed, neither party gave any indication otherwise until just
before the scheduled arbitration hearing when their counsel
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engaged in the procedural maneuvering giving rise to this
appeal. As our Supreme Court observed almost forty years ago,
"[a]rbitration is a substitution, by consent of the parties, of
another tribunal" for the one provided by law, with the "goal of
providing final, speedy and inexpensive settlement of disputes."
Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179,
187 (1981) (internal quotation omitted). It is "meant to be a
substitute for and not a springboard for litigation." Ibid.(internal quotation omitted).
We agree with Judge Vena this controversy should remain in
the arbitral forum the parties plainly chose to resolve all
aspects of their dispute. Accordingly, we affirm, substantially
for the reasons he expressed from the bench on August 4, 2017.
Affirmed.
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