Ragucci v. Professional Constr. Servs.

• Decision Date: 31 October 2005
• Docket Number: 2004-02479.
• Citation: 2005 NY Slip Op 08095,25 A.D.3d 43,803 N.Y.S.2d 139
• Parties: MARTIN RAGUCCI et al., Respondents, v. PROFESSIONAL CONSTRUCTION SERVICES et al., Defendants, and MARANGA ARCHITECT & ASSOCIATES, INC., et al., Appellants.
• Court: New York Supreme Court — Appellate Division

25 A.D.3d 43

803 N.Y.S.2d 139

2005 NY Slip Op 08095

MARTIN RAGUCCI et al., Respondents, v. PROFESSIONAL CONSTRUCTION SERVICES et al., Defendants, and MARANGA ARCHITECT & ASSOCIATES, INC., et al., Appellants.

2004-02479.

Appellate Division of the Supreme Court of the State of New York, Second Department.

October 31, 2005.

APPEAL from an order of the Supreme Court, Kings County (Gloria Cohen Aronin, J.), entered January 7, 2004. The order denied defendant-appellants' motion to stay all proceedings in the action insofar as asserted against them and to compel arbitration.

L'Abbate, Balkan, Colavita & Contini, LLP, Garden City (Keith J. Stevens and Douglas R. Halstrom of counsel), for appellants.

Borchert, Genovesi, LaSpina & Landicino, P.C., Whitestone (Anthony W. Vaughn, Jr., of counsel), for respondents.

OPINION OF THE COURT

KRAUSMAN, J.

More than 20 years ago, the Legislature enacted General Business Law § 399-c, which prohibits the use of mandatory arbitration clauses in contracts for the sale or purchase of "consumer goods." We are now asked to examine the scope of General Business Law § 399-c, and determine whether it applies to a contract to provide architectural services in connection with the construction of a home. For the reasons which follow, we find that the parties' contract falls within the statute's broad definition of "consumer goods," and that the clause requiring the plaintiff homeowners to submit their dispute to arbitration is thus unenforceable. Accordingly, we affirm the order of the Supreme Court which denied the architect defendants' motion to stay all proceedings in this action insofar as asserted against them, and to compel arbitration.

In December 1999 the plaintiffs Martin Ragucci and Margaret Ragucci entered into a contract to purchase property on Royce Street in Brooklyn for the construction of a new home. The plaintiffs' daughter, Maureen, is severely disabled, and thus they intended their new home to be handicapped-accessible, with special features including an elevator which would enable Maureen to be transported from the basement-level garage to the upper floors. After purchasing the Royce Street property, the plaintiffs entered into a contract retaining the architectural firm of Maranga Architect & Associates to design and supervise the construction of their new home. The parties' contract, which was a standard form created by the American Institute of Architects, contained a compulsory arbitration clause requiring all claims or disputes "arising out of . . . this agreement" to be decided by arbitration unless the parties "mutually agree otherwise." The arbitration clause further specified that arbitration of potential disputes was to be conducted in accordance with the "Construction Industry Arbitration Rules of the American Arbitration Association." In addition, the arbitration clause provided that "[t]he 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."

During the construction of their new home, the plaintiffs became dissatisfied both with the work being performed by their general contractor, and the services being provided by the architectural firm of Maranga Architect & Associates. The plaintiffs ultimately fired their general contractor and hired other contractors to complete the work. The plaintiffs claim that before firing their general contractor, they repeatedly asked the architectural firm to send an employee to the premises to monitor construction. According to the plaintiffs, the firm did not do so until January 18, 2001, and by that date there allegedly were numerous inconsistencies between the construction performed and the architectural drawings, which could have been avoided by proper monitoring. The plaintiffs also allege that the architectural firm "unilaterally" terminated the parties' contract on April 8, 2002.

About one year later, the plaintiffs commenced this action against several parties, including the general contractor they had fired, the architectural firm of Maranga Architect & Associates, and the firm's principal, Gary Maranga (hereinafter the architect defendants). The complaint alleged, inter alia, that the architect defendants committed malpractice by designing the home with an inclined driveway too steep to allow Maureen's customized van to be driven into the garage, or to safely accommodate her wheelchair. The complaint further charged that the architect defendants breached the parties' contract by refusing to send an employee to monitor construction of the premises, and by failing to notify the New York City Department of Buildings of "As-Built" revisions to the architectural plans. The complaint additionally alleged that the architect defendants engaged in deceptive trade practices in violation of General Business Law § 349, the Deceptive Trade Practices Act.

Shortly after the commencement of the action, the architect defendants moved pursuant to CPLR 2201 and 7503 to stay all proceedings in the action insofar as asserted against them, and to compel arbitration. In support of the motion, the architect defendants pointed out that their services were performed in accordance with a written contract which contained an arbitration clause. The architect defendants thus submitted that arbitration was the forum which the parties had agreed to use in the event of a dispute arising out of the performance of the contract. In opposition to the motion, the plaintiffs argued that enforcement of the arbitration clause contained in the parties' contract was barred by General Business Law § 399-c, which prohibits mandatory arbitration clauses in contracts for the sale or purchase of consumer goods. In support of their position, the plaintiffs contended that the subject contract for architectural services fell within the scope of the statute because General Business Law § 399-c (1) (b) defines the term "consumer goods" to include "services purchased or paid for by a consumer, the intended use or benefit of which is intended for the personal, family or household purposes of such consumer." In reply, the architect defendants submitted that General Business Law § 399-c was inapplicable because the subject contract called for the provision of professional services in connection with the construction of a house, and not merely for the purchase of consumer goods.

The Supreme Court denied the architect defendants' motion, holding that the services they provided in connection with the construction of the plaintiffs' home fell within the ambit of the statute's definition of "consumer goods." On appeal, the architect defendants continue to maintain that General Business Law § 399-c does not apply because the subject contract for architectural services cannot be considered a contract for the sale or purchase of consumer goods as contemplated by the statute.

At issue on appeal is the scope of General Business Law § 399-c. This statute, which became effective on September 5, 1984, was "designed to prevent sales contracts from including clauses precommitting consumers to arbitrate disputes rather than resort to Small Claims suits, refusal to pay for defective goods, or other remedies" (Givens, Practice Commentaries, McKinney's Cons Laws of NY, Book 19, General Business Law § 399-c, at 771). In urging the enactment of section 399-c, the New York State Consumer Protection Board noted that while arbitration can sometimes provide a "quick, inexpensive and simple resolution" to disputes between consumers and sellers, no contract "should deprive a consumer of the right to take the dispute further and seek judicial redress" (Mem of State Consumer Protection Board, Bill Jacket, L 1984, ch 946, at 9). Similarly, in a memorandum submitted in connection with the enactment of General Business Law § 399-c, Assemblyman Jose E. Serrano stated that "[c]onsumers should have the advantage of having contract disputes handled by the judicial system or by an arbitrator," as well as "the ability to choose between arbitration or judicial resolution of their disputes after the time when a dispute arises" (Mem in Support of L 1984, ch 946, 1984 NY Legis Ann, at 325).

Before beginning our analysis of whether the services provided by the architect defendants in this case fall within the ambit of General Business Law § 399-c, we note that there are cases which have recognized or upheld the enforceability of arbitration clauses in contracts for architectural services (see Matter of Anagnostopoulos v Union Turnpike Mgt. Corp., 300 AD2d 393 [2002]; Ambassador Constr. Co. v 40 Wall St. Dev. Assoc., 264 AD2d 317 [1999]; Matter of Chapnick v Cohen, 203 AD2d 362 [1994]). However, it appears that General Business Law § 399-c was not raised as a bar to the enforceability of the arbitration clauses at issue in those cases, and thus those cases are not dispositive of the issue raised on this appeal.

Although General Business Law § 399-c was enacted over 20 years ago, there are no reported cases analyzing its provisions. Thus, this Court is now called upon to construe its intended scope. The starting point of our analysis must...