CASTLE REALTY MANAGEMENT, LLC. VS. KEVIN BURBAGE(C-118-15, BURLINGTON 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NOT FOR PUBLICATION WITHOUT THE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-5399-15T4
CASTLE REALTY MANAGEMENT,
LLC, ASSIGNEE OF CC DAHMS,
LLC t/a RE/MAX CONNECTION
REALTORS,
Plaintiff-Respondent,
v.
KEVIN BURBAGE, AUGUSTA
INVESTMENTS, INC. d/b/a
RE/MAX PREFERRED,
Defendants-Appellants.
_______________________________
Argued May 4, 2017 – Decided July 13, 2017
Before Judges Lihotz and Whipple.
On appeal from Superior Court of New Jersey,
Chancery Division, Burlington County, Docket
No. C-118-15.
Barry W. Rosenberg argued the cause for
appellant.
Christopher C. Fallon, III, argued the cause
for respondent (Fox Rothschild LLP, attorneys;
Mr. Fallon, Adam Busler and Nathan M. Buchter,
on the brief).
PER CURIAM
Plaintiff, Castle Realty Management, t/a Re/Max Connection
Realtors and defendant, Augusta Investments, t/a Re/Max Preferred
are competing franchisees of Re/Max of New Jersey (Re/Max). Kevin
Burbage is a licensed real estate broker who worked for plaintiff
then left to work for defendant.
Plaintiff filed this ten-count verified complaint and order
to show cause against Burbage and defendant in the Chancery
Division, seeking equitable and monetary relief, alleging, among
other things, Burbage violated the non-compete clause of his
employment agreement, and defendant improperly solicited Burbage
and its other employees, by engaging in unfair competition.
Defendant moved to dismiss the complaint, arguing plaintiff's
franchise agreement required disputes be submitted to arbitration.
In a June 14, 2016 order, supported by a written opinion,
Judge Paula T. Dow denied the motion to dismiss. Judge Dow also
denied defendant's motion for reconsideration. Plaintiff withdrew
its requests for equitable remedies and the matter was transferred
to the Law Division.
The denial of defendant's motion to dismiss and compel
arbitration, although not a final judgment, is appealable of right.
See R. 2:2-3(a)(3) (An order "denying arbitration shall also be
deemed a final judgment of the court for appeal purposes."); see
also Jaworski v. Ernst & Young US LLP, 441 N.J. Super. 464, 472
2 A-5399-15T4
(App. Div.), certif. denied, 223 N.J. 406 (2015). On appeal,
defendant seeks reversal, maintaining plaintiff's action must be
dismissed based on the arbitration clause in its franchise
agreement with Re/Max. Defendant asserts the franchise structure
mandates dispute resolution procedures among franchisees, as well
as between franchisee and franchisor, and the contract clause
barring a third-party beneficiary's reliance was not applicable
to this matter. We are unpersuaded and affirm.
As franchisees, plaintiff and defendant separately executed
identical franchise agreements with Re/Max. The respective
agreements contain identical provisions regarding the resolution
of disputes arising from the relationship with Re/Max. Section
15 contains the following provisions:
A. DISPUTE RESOLUTION.
The RE/MAX Dispute Resolution System ("the
RDRS") is a set of rules and procedures for
the resolution of disputes, complaints, claims
or other problems ("Disputes") that arise
between you and other affiliates of the RE/MAX
Network of offices and real estate agents.
B. DISPUTES INVOLVING RE/MAX FRANCHISES, SALES
ASSOCIATES OR THEIR RE/MAX AFFILIATES.
In the event of a Dispute involving you, any
other RE/MAX franchisee, any RE/MAX Sales
Associate (whether affiliated with your Office
or any other RE/MAX office) or other RE/MAX
Affiliate, you agree to submit the Dispute to
mediation and, if unsuccessful, to binding
3 A-5399-15T4
arbitration using the RDRS, if it is then
available.
C. ALTERNATIVES.
If the RDRS is not offered or otherwise
available or the dispute is between RE/MAX
Regional and Franchise Owner, the Dispute
shall be submitted to an alternative mediation
and arbitration system mutually acceptable to
the parties of the Dispute. If the parties
cannot agree on an alternative mediation and
arbitration system, then the Dispute shall be
submitted to the American Arbitration
Association for mediation, and if
unsuccessful, for binding arbitration in
accordance with its Commercial Mediation Rules
or Commercial Arbitration Rules, as
appropriate.
Section 16 addresses the construction of the agreement and
its enforcement. Paragraph 16.N. specifically states:
N. NO LIABILITY TO OTHERS; NO OTHER
BENEFICIARIES.
We will not, because of this Agreement or by
virtue of any approvals, advice or services
provided to you, be liable to any person or
legal entity who is not a party to this
Agreement. You understand that you are not a
third party beneficiary of any other franchise
agreement between us and other RE/MAX
franchisees and that you have no independent
right to enforce the terms of, or require
performance under, any other franchise
agreement.
When Burbage left his employment with plaintiff and joined
defendant's office, plaintiff initiated this action. Plaintiff
alleged Burbage breached his employment contract. Other counts
4 A-5399-15T4
in the complaint alleged Burbage and defendant engaged in slander,
trade libel, unfair competition, and conspiracy, as well as
misappropriating trade secrets and confidential information.
Initial disagreements arose regarding discovery and venue.
Defendant moved to dismiss the complaint and transfer the matter
to the RE/Max Dispute Resolution System, pursuant to paragraph 15
of each parties' franchise agreement. Following oral argument,
Judge Dow entered an order which temporarily enjoined Burbage from
contacting plaintiff's employees and using its trade secrets. On
the return date of the order to show case, the pending motions
were adjourned and the parties were directed to proceed to
mediation, which proved unsuccessful.
Plaintiff withdrew its request for injunctive relief and
moved to transfer the matter to the Law Division. Oral argument
on the outstanding motions was conducted on June 10, 2016.
Construing the respective franchise agreements, Judge Dow
concluded defendant had no right to force plaintiff to an arbitral
forum. Plaintiff's motion to transfer the action to the Law
Division was granted. Defendant's motion for reconsideration was
denied. This appeal ensued.
We "review the denial of a request for arbitration de novo."
Frumer v. Nat'l Home Ins. Co., 420 N.J. Super. 7, 13 (App. Div.
2011). Whether parties have contracted to arbitrate as well as
5 A-5399-15T4
the applicability and scope of an arbitration agreement is a legal
issue, subject to this court's plenary review. See Atalese v.
U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 445-46 (2014) ("Our
review of a contract, generally, is de novo, and therefore we owe
no special deference to the trial court's . . . interpretation.
Our approach in construing an arbitration provision of a contract
is governed by the same de novo standard of review.") (citations
omitted), cert. denied, ___ U.S. ___, 135 S. Ct. 2804, 192 L. Ed.
2d 847 (2015). "Arbitrability . . . whether the parties have
agreed to submit to an arbitrator or a court the authority to
decide whether a dispute is subject to arbitration" is an issue
"for a court to resolve" absent a specific agreement to the
contrary. Morgan v. Sanford Brown Inst., 225 N.J. 289, 295-96
n.1, (2016).
An agreement to arbitrate, like any other
contract, "must be the product of mutual
assent, as determined under customary
principles of contract law." NAACP of Camden
Cnty. E. v. Foulke Mgmt., 421 N.J. Super. 404,
424 (App. Div.), certif. granted, 209 N.J. 96
(2011), and appeal dismissed, 213 N.J. 47
(2013). A legally enforceable agreement
requires "a meeting of the minds." Morton v.
4 Orchard Land Trust, 180 N.J. 118, 120
(2004). Parties are not required "to
arbitrate when they have not agreed to do so."
Volt Info. Scis. v. Bd. of Trs. of Leland
Stanford Jr. Univ., 489 U.S. 468, 478, 109 S.
Ct. 1248, 1255, 103 L. Ed. 2d 488, 499 (1989);
see Garfinkel[ v. Morristown Obstetrics &
Gynecology Assocs., P.A.], 168 N.J. [124,] 132
6 A-5399-15T4
[(2001)] ("'[O]nly those issues may be
arbitrated which the parties have agreed shall
be.'" (quoting In re Arbitration Between
Grover & Universal Underwriters Ins. Co., 80
N.J. 221, 228 (1979))).
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." Knorr v. Smeal, 178 N.J. 169, 177
(2003) (citing W. Jersey Title & Guar. Co. v.
Indus. Trust Co., 27 N.J. 144, 153 (1958)).
"By its very nature, an agreement to arbitrate
involves a waiver of a party's right to have
. . . claims and defenses litigated in court."
Foulke, supra, 421 N.J. Super. at 425.
[Atalese, supra, 219 N.J. at 442.]
Consequently, "a court may invalidate an arbitration clause
'upon such grounds as exist at law or in equity for the revocation
of any contract.'" Id. at 441. (quoting Martindale v. Sandvik,
Inc., 173 N.J. 76, 85 (2002)). "Our state-law jurisprudence makes
clear 'that when a contract contains a waiver of rights — whether
in an arbitration or other clause — the waiver must be clearly and
unmistakably established.'" Morgan, supra, 225 N.J. at 308-09
(quoting Atalese, supra, 219 N.J. at 444). "No magical language
is required to accomplish a waiver of rights in an arbitration
agreement." Id. at 309. Furthermore, "'courts operate under a
presumption of arbitrability in the sense that an order to
arbitrate the particular grievance should not be denied unless it
7 A-5399-15T4
may be said with positive assurance that the arbitration clause
is not susceptible of an interpretation that covers the asserted
dispute.'" Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super.
515, 518 (App. Div. 2010) (quoting EPIX Holdings Corp. v. Marsh &
McLennan Cos., 410 N.J. Super. 453, 471 (App. Div. 2009)); cf.,
Yale Materials Handling Corp. v. White Storage & Retrieval Sys.,
Inc., 240 N.J. Super. 370, 374 (App. Div. 1990) (A "court may not
rewrite a contract to broaden the scope of arbitration. . . .").
We turn to the agreement under review.
In our review of an arbitration agreement, the
agreement's terms "are to be given their plain
and ordinary meaning." M.J. Paquet v. N.J.
DOT, 171 N.J. 378, 396 (2002). We are tasked
with discerning "the intent of the parties."
Kieffer v. Best Buy, 205 N.J. 213, 223 (2011).
If the meaning of a provision is ambiguous,
the provision should be construed against the
drafter because, "as the drafter, it chose the
words that may be susceptible to different
meanings." Id. at 224.
[Roach v. BM Motoring, LLC, 228 N.J. 163, 174
(2017).]
Specifically, "[i]t is . . . the intent expressed or apparent in
the writing that controls." Garfinkel, supra, 168 N.J. at 135
(quoting Quigley v KPMG Peat Marwick, LLP, 330 N.J. Super. 252,
266 (App. Div.), certif. denied, 165 N.J. 527 (2000)); see also
Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993) (In
evaluating the existence of an agreement to arbitrate, a court
8 A-5399-15T4
"consider[s] the contractual terms, the surrounding circumstances,
and the purpose of the contract.").
Here, plaintiff's franchise agreement with Re/Max and
defendant's agreement with Re/Max each contain a dispute
resolution clause requiring mediation and arbitration.
Defendant's position is plaintiff's agreement mandates it
arbitrate not only disputes with its franchisor Re/Max, but also
disputes with any other Re/Max franchisee, including the issues
raised in this matter. The question is whether defendant can rely
on the clause in plaintiff's agreement with Re/Max to compel it
arbitrate its claims with defendant and Burbage.
The specific language of paragraph 15.B. states:
In the event of a Dispute involving you, any
other RE/MAX franchisee, any RE/MAX Sales
Associate (whether affiliated with your Office
or any other RE/MAX office) or other RE/MAX
Affiliate, you agree to submit the Dispute to
mediation and, if unsuccessful, to binding
arbitration using the RDRS, if it is then
available.
Logically, this clause appears to support defendant's position
that Re/Max intended to require all franchisees to resolve
disagreements using arbitration. However, the clause does not
stand alone. It is followed by paragraph 16.N., which suggests
such a possibility is foreclosed by stating: "You understand that
you are not a third party beneficiary of any other franchise
9 A-5399-15T4
agreement between us and other Re/Max franchisees and that you
have no independent right to enforce the terms of, or require
performance under, any other franchise agreement."
Our Supreme Court mandates arbitration clauses must clearly
show the parties to the agreement understand and agree to waive
their right to proceed before our courts. Atalese, supra, 219
N.J. at 442-43 ("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.'") (quoting Foulke, supra, 421 N.J. Super. at
425). Here, an ambiguity exists in the scope of matters covered
by paragraphs 15 and 16. In such an instance, the agreement should
be "strictly construed," which would reject the position taken by
defendant that plaintiff unequivocally agreed to submit to
arbitration its claims against defendant and Burbage. See Roach,
supra, 228 N.J. at 179.
Consequently, we must reject defendant's argument suggesting
the third-party beneficiary clause applies to non-Re/Max
franchisees making it inapplicable to this dispute. The appeal
does not present, and we do not comment on Re/Max's rights to
compel plaintiff's or plaintiff's obligations to its franchisor;
notably Re/Max is not a party to this litigation. "The standard
10 A-5399-15T4
applied by courts in determining third-party beneficiary status
is 'whether the contracting parties intended that a third party
should receive a benefit which might be enforced in the courts.'"
Reider Cmtys. v. N. Brunswick, 227 N.J. Super. 214, 222 (App. Div.
1988) (quoting Brooklawn v. Brooklawn Hous. Corp., 124 N.J.L. 73,
77 (E. & A. 1940)), certif. denied, 113 N.J. 638 (1988). "[T]he
intention of contracting parties to benefit an unnamed third party
must be garnered from an examination of the contract and a
consideration of the circumstances attendant to its execution."
Ibid.
Accordingly, our interpretation of paragraph 16.N. excludes
enforcement of the agreement by non-parties to that contract, and
only "a person for whose benefit a contract is made may sue on the
contract in any court." Id. at 221.
We affirm the June 14, 2016 order as well as the July 26,
2016 order denying reconsideration. We remand the matter to the
Law Division for further disposition.
Affirmed.
11 A-5399-15T4