Roach v. BM Motoring, LLC

Citation155 A.3d 985,228 N.J. 163
Parties Tahisha ROACH and Emelia Jackson, on behalf of themselves and all others similarly situated, Plaintiffs–Appellants, v. BM MOTORING, LLC and Federal Auto Brokers, Inc., both corporations, t/a BM Motor Cars, Boris Fidelman and Mikhail Fidelman, Defendants–Respondents.
Decision Date09 March 2017
CourtUnited States State Supreme Court (New Jersey)

228 N.J. 163
155 A.3d 985

Tahisha ROACH and Emelia Jackson, on behalf of themselves and all others similarly situated, Plaintiffs–Appellants,
v.
BM MOTORING, LLC and Federal Auto Brokers, Inc., both corporations, t/a BM Motor Cars, Boris Fidelman and Mikhail Fidelman, Defendants–Respondents.

Supreme Court of New Jersey.

Argued January 3, 2017
Decided March 9, 2017


Henry P. Wolfe argued the cause for appellants (The Wolf Law Firmand Law Office of David C. Ricci, attorneys; Mr. Wolfe, Mr. Ricciand Andrew R. Wolf, on the briefs).

155 A.3d 987

Thomas C. Jardim argued the cause for respondents (Jardim, Meisner & Susser, attorneys; Mr. Jardimand Matthew A. Stoloff, on the brief).

Andrew P. Bell argued the cause for amicus curiaeConsumers League of New Jersey (Locks Law Firm, attorneys; Mr. Bell, James A. Barry and Michael A. Galpern, on the brief).

Thaddeus P. Mikulski, Jr., submitted a brief on behalf of amicus curiaeNational Employment Lawyers Association of New Jersey.

JUSTICE SOLOMON delivered the opinion of the Court.

228 N.J. 166

Plaintiffs Emelia Jackson and Tahisha Roach purchased used cars from BM Motoring, LLC, and Federal Auto Brokers, Inc., which do business as BM Motor Cars (collectively, BM). Each plaintiff signed an identical Dispute Resolution Agreement (DRA) as part of the transaction. The DRA provided for arbitration "in accordance with the rules" of the American Arbitration Association (AAA), "before a single arbitrator, who shall be a retired judge or attorney."

After Jackson purchased her car, she filed an arbitration demand against BM with the AAA. Despite repeated requests by the AAA, BM did not advance any filing fees or otherwise respond to

228 N.J. 167

the claim. The AAA dismissed Jackson's arbitration claim for non-payment of fees.

A few months after Roach's vehicle purchase, she filed a complaint against BM and its president and vice president (collectively, defendants) in the Law Division of the Superior Court. The court granted defendants' motion to dismiss Roach's complaint and compelled arbitration. Roach, accordingly, filed an arbitration demand with the AAA. The AAA, however, dismissed Roach's arbitration claim because BM had previously failed to comply with the AAA's rules and procedures.

Plaintiffs then filed this case against defendants, who moved to dismiss plaintiffs' complaint in favor of arbitration. In opposition to defendants' motion, plaintiffs asserted two affirmative defenses: (1) defendants materially breached the DRA by failing to advance filing and arbitration fees in response to plaintiffs' AAA arbitration demands; and (2) defendants waived their right to compel arbitration through their conduct. Defendants countered that they neither breached the DRA nor waived arbitration because the AAA was not the appropriate arbitral forum. The trial court dismissed plaintiffs' complaint with prejudice, and the Appellate Division affirmed.

We find that plaintiffs' choice of the AAA as the arbitral forum complied with the DRA and hold that defendants' failure to advance arbitration fees was a material breach of that agreement. We conclude, therefore, that defendants are barred from compelling arbitration. Thus, we reverse the judgment of the Appellate Division without reaching the issue of whether defendants' conduct constituted a waiver of the right to compel arbitration.

I.

The facts of record, which are not in dispute for the purposes of this appeal, are as follows.

228 N.J. 168

A.

In August 2013, plaintiff Emelia Jackson purchased a used 2007 BMW from BM. As part of the purchase, Jackson signed a DRA obligating the parties to resolve "any and all claims, disputes or issues" through arbitration. The DRA specifies that

[t]he arbitration shall be conducted in accordance with the rules of the American Arbitration Association [AAA] before
155 A.3d 988
a single arbitrator, who shall be a retired judge or attorney. Dealership shall advance both party's [sic] filing, service, administration, arbitrator, hearing, or other fees, subject to reimbursement by decision of the arbitrator.1

In October 2013, Jackson filed an individual arbitration claim with the AAA against BM and served a copy on BM. Jackson sought treble damages under the Consumer Fraud Act, N.J.S.A. 56:8–1 to –204, alleging that BM refused to sell the vehicle for its advertised price, overcharged for title and registration, and misrepresented the terms of an extended warranty.

Approximately one week later, the AAA advised BM by letter that it was required to pay the applicable filing fees and arbitrator compensation deposit by October 29, 2013. BM failed to pay, and the AAA notified both parties by a second letter that it could decline to administer future consumer disputes involving BM if BM did not adhere to the AAA's policies. The AAA extended the payment deadline for ten days and suggested that "the opposing party" could pay the outstanding amount and seek recovery of the fees through the arbitrator's award. BM again failed to pay the

228 N.J. 169

required fees or to take any action to acknowledge the letters from the AAA.

On November 13, 2013, the AAA sent a final letter to both parties, stating that the AAA declined to administer Jackson's claim for non-payment of fees. The letter also indicated that the AAA would not administer "any other consumer disputes" involving BM due to BM's failure to comply with the AAA's rules and instructed BM to remove the AAA name from its arbitration agreement. At no time did Jackson receive a response to her arbitration demand from BM.

B.

In February 2013, plaintiff Tahisha Roach purchased a used 2000 Nissan from BM and signed a DRA as part of the purchase agreement. Six months later, Roach filed a complaint in the Law Division against defendants, alleging violations of the Consumer Fraud Act, the Automotive Sales Practices Regulations, N.J.A.C. 13:45A–26A.1 to –26B.4, the New Jersey Uniform Commercial Code, N.J.S.A. 12A:9–101 to –809, and the Truth in Consumer Contract, Warranty and Notice Act, N.J.S.A. 56:12–14 to –18.

Defendants filed a motion to dismiss for lack of jurisdiction based on the terms of the DRA. The court dismissed the action without prejudice in favor of arbitration.

In January 2014, Roach filed an arbitration demand with the AAA and sent notice of the demand to defendants. The AAA replied by letter to both parties, stating that BM had "previously not complied with [the AAA's] request to adhere [to its] policies regarding consumer claims; therefore, [the AAA] currently cannot accept for administration any disputes involving [defendants]." Two weeks later, the AAA sent a second letter repeating that it "must decline

155 A.3d 989

to administer this claim and any other claims between this business and its consumers." The AAA closed Roach's claim. As with Jackson, Roach never received a response to her arbitration demand from BM.

228 N.J. 170

C.

In March 2014, Roach and Jackson filed a complaint in the Superior Court, Law Division, asserting individual and other claims against defendants.

Defendants moved to dismiss plaintiffs' complaint and compel arbitration. In support of their motion, defendants asserted that the DRA did not "contemplate using AAA as the forum and venue for arbitration" and that BM had "consistently not arbitrated disputes with its customers by utilizing AAA ... primarily because of the excessive filing and administrative fees charged by AAA." Defendants also claimed that Jackson and Roach never pursued arbitration in accordance with the DRA.

In response, plaintiffs explained their efforts to comply with the DRA and represented that "[a]t no time prior to filing the present motion papers did [d]efendants or their attorney express any objections about the AAA administering arbitrations under the [DRA]." Plaintiffs asserted that they terminated the DRA because defendants materially breached the agreement by failing to pay the AAA fees and engage in arbitration.

The trial court found that the parties intended "to go to arbitration" by signing the DRA and, thus, they "should remain faithful to that clause, and ... [the matter] should be arbitrated." The court ordered the parties to attempt to reinstate plaintiffs' claims with the AAA and to comply with AAA rules. If the AAA refused to administer the claim, the trial court provided that plaintiffs could return to court and reinstate their complaint. The AAA reinstated arbitration, and the court entered a final order dismissing plaintiffs' complaint with prejudice.2

On appeal, the Appellate Division affirmed the dismissal. The panel concluded that the record showed a sufficient factual dispute

228 N.J. 171

as to the proper forum for arbitration to justify defendants' failure to...

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