1567 S. Realty, LLC v. Strategic Contract Brands, Inc.
| Decision Date | 09 July 2020 |
| Docket Number | DOCKET NO. A-0935-19T2 |
| Parties | 1567 SOUTH REALTY, LLC and BUTLER NISSAN, Plaintiffs-Appellants, v. STRATEGIC CONTRACT BRANDS, INC., d/b/a AUTOSTONE FLOOR SYSTEMS, Defendant-Respondent. |
| Court | New Jersey Superior Court — Appellate Division |
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION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.
Before Judges Hoffman and Firko.
On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket No. C-000061-19.
Bruce E. Baldinger, attorney for appellants.
Brach Eichler LLC, attorneys for respondent (Anthony M. Rainone, of counsel and on the brief; Mark Edward Critchley, on the brief).
Plaintiffs 1567 South Realty, LLC and Butler Nissan appeal from an October 18, 2019 Chancery Division order dismissing their complaint and compelling arbitration. We affirm.
On March 14, 2018, Butler Nissan and defendant Strategic Contract Brands, Inc., D/B/A AutoStone Floor Systems (AutoStone) entered into a commercial construction contract for AutoStone to install new flooring at Butler Nissan's motor vehicle dealership. The original contract price of $75,000 was later amended to $78,045. Kevin DiPiano, the president of Butler Nissan, signed the contract on behalf of Butler Nissan.1 The arbitration provision at issue states:
Arbitration. If a controversy or dispute arises out of or related to AutoStone's performance under this Contract, and if said dispute cannot be settled between the parties to this Contract themselves, the parties hereto hereby agree to settle the dispute as provided under the Federal Arbitration Act, by binding arbitration according to the Commercial Arbitration Rules of the American Arbitration Association [AAA], and the judgment upon the award rendered by the arbitration(s) may be entered in any court having jurisdiction thereof. The parties hereto further agree that a controversy be submitted to one or three arbitrator(s), at either party's option, selected from the panels of arbitrators of the [AAA]. All requests for arbitration shall be submitted to the Dallas office of the [AAA] and all arbitrationadministration costs shall be borne equally by all of the parties to the dispute.
The contract also included the following venue provision: "The law of the State of Texas shall govern this [c]ontract, with venue to be in any court of competent jurisdiction in Dallas County, Texas."
AutoStone alleged that after it completed the floor installation on April 10, 2019, Butler Nissan owed a remaining balance of $40,545 on the contract. Butler Nissan's representative sent emails to AutoStone complaining of problems with the overall quality of AutoStone's workmanship, including use of inadequate materials, and unevenness and "pooling" in the flooring. After Butler Nissan refused to pay its remaining balance, AutoStone filed a construction lien against Butler Nissan's property on May 31, 2019, pursuant to N.J.S.A. 2A:44A-1 to -38.
In June 2019, plaintiffs filed a Chancery Division complaint in Morris County, seeking removal of the construction lien and alleging AutoStone violated the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20. On August 16, 2019, AutoStone filed a motion to dismiss plaintiffs' complaint, pursuant to the arbitration provision in its construction contract, and sought to bind 1567 South Realty to the arbitration provision in the contract as an alter ego of Butler Nissan.
On October 18, 2019, the motion judge issued an order granting AutoStone's motion to dismiss and compelling arbitration. Relying on Roman v. Bergen Logistics, LLC, 456 N.J. Super. 157 (App. Div. 2018), the judge found the parties were sophisticated commercial entities, had equal bargaining power, and entered into a commercial construction contract at arm's-length. The judge noted Butler Nissan did not allege fraud, duress, or that the arbitration provision was inconspicuous. Additionally, the judge found no evidence the contract was invalid or unenforceable. Thus, she ruled, "[T]he parties entered into a valid agreement to arbitrate claims arising out of or related to [AutoStone]'s performance pursuant to the March 14 [c]ontract."
The judge then analyzed whether the dispute fell within the scope of the March 14 contract. She reasoned that the underling dispute was AutoStone's performance pursuant to the contract and Butler Nissan alleged dissatisfaction about the installation and products used. Thus, she concluded whether the construction lien was timely filed fell within the scope of the contract because the validity of the lien necessitated an evaluation of AutoStone's performance.
The judge also concluded AutoStone proved 1567 South Realty and Butler Nissan were alter egos and compelled the arbitration apply to 1567 South Realtybecause the companies operated at the same business address, had the same president and Butler Nissan failed to dispute the claim.
On November 1, 2019, plaintiffs filed a notice of appeal. On February 12, 2020, the motion judge granted plaintiffs' request to stay arbitration pending appeal.
Plaintiffs argue the arbitration provision is unenforceable because it failed to advise Butler Nissan that its statutory rights were being waived. Specifically, plaintiffs contend Atalese2 applies to this case. They further assert the judge failed to analyze the facts under the CFA.
We apply a de novo standard of review when reviewing a motion judge's determination of the enforceability of a contract. Goffe v. Foulke Mgmt. Corp., 238 N.J. 191, 207, 208 (2019). When reviewing arbitration clauses within contracts, "the enforceability of arbitration provisions is a question of law; therefore, it is one to which we need not give deference to the analysis by the trial court." Ibid.
The Federal and New Jersey Arbitration Acts express a general policy favoring arbitration. Atalese, 219 N.J. at 440; see also 9 U.S.C. §§ 1 to 16;N.J.S.A. 2A:23B-1 to - 32. "The public policy of this State favors arbitration as a means of settling disputes that otherwise would be litigated in a court." Badiali v. N.J. Mfrs. Ins. Grp., 220 N.J. 544, 556 (2015). Although enforcement is generally favored, it "does not mean that every arbitration clause, however phrased, will be enforceable." Atalese, 219 N.J. at 441.
A valid arbitration clause "must state its purpose clearly and unambiguously." Id. at 435. Further, an arbitration agreement "must be the product of mutual assent," which "requires that the parties have an understanding of the terms to which they have agreed." Id. at 442 (quoting NAACP of Camden Cty. E. v. Foulke Mgmt., 421 N.J. Super. 404, 424 (App. Div. 2011)). Our Supreme Court clearly set forth that a party "cannot be required to arbitrate when it cannot fairly be ascertained from the contract's language that [he or] she knowingly assented to the provision's terms or knew that arbitration was the exclusive forum for dispute resolution." Kernahan v. Home Warranty Adm'r of Fla., Inc., 236 N.J. 301, 322 (2019).
We reject plaintiffs' contention that Atalese applies here and controls the outcome of this case. Atalese arose in the context of a consumer fraud action, involving an average member of the public. The Court observed that "[b]y its very nature, an agreement to arbitrate involves a waiver of a party's right to haveher claims and defenses litigated in court." 219 N.J at 442. Nevertheless, "an average member of the public may not know - without some explanatory comment - that arbitration is a substitute for the right to have one's claim adjudicated in a court of law." Ibid.
The Court found the arbitration provision in Atalese deficient and unenforceable because it: 1) did not include any explanation that the plaintiff was waiving her right to seek relief in court; 2) did not explain what arbitration is or how it differs from seeking judicial relief; and 3) lacked the plain language necessary to convey to the average consumer that he or she is waiving the right to sue in court. Id. at 446.
The Court held, "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." Id. at 436. Here, we acknowledge there is no language explaining what arbitration is and how it serves as a replacement for judicial relief. The language of the provision does not convey that plaintiff is waving a constitutional right to seek relief in a court of law. While the language required in Atalese to satisfy one's knowing waiver of a basic right may be simple in its words, it is crucial in its significance. Without a reference to a waiver of a right, we recognize an average consumer cannot know withcertainty "that arbitration is a substitute for the right to have one's claim adjudicated in a court of law." Id. at 442.
However, plaintiffs are not average consumers and the contract was not a "consumer contract of adhesion where one party possessed superior bargaining power and was the more sophisticated party[,]" Delta Funding Corp. v. Harris, 189 N.J. 28, 40 (2006); instead, it was a negotiated contract between sophisticated business entities. Neither party here is an average member of the public. Plaintiffs are sophisticated enough to operate a car dealership, an LLC, and negotiate contracts with customers on a daily basis. We therefore find the heightened standard of Atalese does not apply here. Additionally, the arbitration provision states the arbitration would be conducted under a specified set of rules, the AAA, which sophisticated parties could consult if needed. See GAR Disability Advocates, LLC v. Taylor, 365 F. Supp. 3d 522, 531(D. N.J. 2019) (...
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