Christine A. Dispenziere v. Kushner Companies

101 A.3d 1126, 438 N.J. Super. 11

• Court: New Jersey Superior Court Appellate Division
• Decided: November 21, 2014
• Docket: A-3022-13
• Status: Published

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3022-13T4

CHRISTINE A. DISPENZIERE, DANIEL SANTO PIETRO, SUBRATA CHOUDHURI, DAISY GONZALEZ, MICHAEL & ELLA SHAYKEVICH, ERIC & MICHAEL HORN, JOSEPH APPROVED FOR PUBLICATION & LINDA HORN, NEIL & LAUREN HUNTER, JOHN & NANCY ENG, November 21, 2014 RICHARD PAVLOWSKI, CHARLES YAREMKO, RAO & VASUNDLARA APPELLATE DIVISION DESU, ROY & GLORYA MATTHEWS, HERBERT LEARY and NICHOLAS JULIANO,

Plaintiffs-Appellants,

and

INGRID ARMSTRONG, TRACY JORDAN, BART & BIANCA KWIATKOWSKI, DAVID MAYS, SUDHANSHU AND GEETI SHUKLA, JENNIFER AND FRANCISCO CHACON, and JAMES AND MARGARET FLYNN,

Plaintiffs,

v.

KUSHNER COMPANIES, WESTMINSTER COMMUNITIES, WESTMINSTER REALTY, LLC, THE LANDINGS AT HARBORSIDE, LLC, THE LANDINGS, INC., LANDINGS BUILDING 136A, LLC, LANDINGS BUILDING 136B, LLC, and BUILDER MARKETING SERVICES CO., INC.,

Defendants-Respondents,

and INTEGRA MANAGEMENT CORP., and THE LANDINGS AT HARBORSIDE MASTER ASSOCIATION, INC.,

Defendants. _______________________________________

Argued November 6, 2014 - Decided November 21, 2014

Before Judges Waugh, Maven, and Carroll.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-7384-12.

Patrick J. Whalen argued the cause for appellants.

Paul Bishop argued the cause for respondents (Brach Eichler LLC, attorneys; Mr. Bishop, Charles X. Gormally and Thomas Kamvosoulis, on the brief).

The opinion of the court was delivered by

CARROLL, J.A.D.

In Atalese v. United States Legal Services Group, L.P., 219

N.J. 430, 446 (2014), our Supreme Court recently held a

contractual arbitration provision unenforceable because it

lacked the necessary "clear and unambiguous language that the

plaintiff is waiving her right to sue or go to court to secure

relief." In the present appeal, because we conclude that the

arbitration provision upon which defendants rely suffers from

the same infirmity, we reverse the trial court's February 11,

2014 order compelling plaintiffs to submit their claims to

arbitration.

2 A-3022-13T4 I.

We briefly summarize the most salient facts. Plaintiffs

are twenty-two of thirty-three purchasers of condominium units

in a real estate development in Perth Amboy known as "The

Landings at Harborside" (The Landings). As currently comprised,

The Landings consists of two buildings – the "Admiral" and the

"Bayview." These plaintiffs purchased condominium units in the

Admiral during 2004 through 2007. The remaining eleven

plaintiffs purchased condominium units in the Bayview and are

not part of this appeal.

According to plaintiffs' first amended complaint, filed on

February 1, 2013, the Perth Amboy Redevelopment Agency (PARA)

adopted a resolution in August 2000, authorizing the City of

Perth Amboy to enter into a redevelopment agreement with

defendant The Landings at Harborside, LLC. The resolution

provided that the development was to be known as "The Landings,"

and would consist of, among other things: (1) "190,000 square

feet of retail space"; (2) "2094 [u]nits of residential housing

consisting of 98 townhomes, 102 row houses, and almost 1900 low-

rise and mid-rise [c]ondominium homes"; (3) "[a] hotel"; (4)

"2569 parking spaces"; (5) "[a] [c]ultural [c]ommunity

[c]enter"; (6) "[a] public waterfront walkway"; and (7) "Gateway

Festival Park and Founders Park."

3 A-3022-13T4 In September 2000, Perth Amboy entered into a redevelopment

agreement with The Landings at Harborside, LLC, designating it

as the redeveloper. The project was allegedly marketed to

plaintiffs and the general public as a $600 million mixed-use

development that, as previously noted, would include townhouses,

condominiums, retail space, and parks.

In 2004, defendant Landings Building 136A, LLC, issued a

public offering statement (POS) concerning the Admiral, and

began entering into agreements with plaintiffs for the purchase

of condominium units in that building. The purchase agreement

used in these transactions is a seventeen-page document. On the

tenth page, in the same format as the preceding sections of the

agreement, the following language regarding arbitration appears:

20. Disputes

Any disputes arising in connection with this Agreement other than the failure to close title or in relation to any amendment to this Agreement either before or after closing of title (if not otherwise governed by the provisions of the homeowner's warranty provided by Seller at closing) or in relation to any of the warranties given by Seller pursuant to Paragraphs 21(B), 21(C), 21(D), 21(E), 21(G), 21(H), 21(I) and 21(J) of this Agreement, shall be heard and determined by arbitration before a single arbitrator of the American Arbitration Association in Morris County, New Jersey. The decision of the arbitrator shall be final and binding. Costs of arbitration shall be borne equally between the Seller

4 A-3022-13T4 and the Purchaser. This clause shall survive closing of title.

In executing the purchase agreement, unit buyers also

acknowledged receipt of the POS, as indicated in section thirty-

six of the agreement.1 The POS consists of approximately sixty-

six pages, with approximately 450 pages of schedules. After the

cover page and table of contents, on the fourth page of the

document, there is a stand-alone page with centered, boldface

type, and a capitalized heading with the words "SPECIAL RISKS."

Beneath that, the following paragraph appears:

Prospective purchasers should take note of the fact that Paragraph 20 of the Purchase Agreement (Schedule 10 to this Public Offering Statement) that purchasers will be required to sign should they wish to purchase a Unit within the Admiral, a Condominium, requires certain disputes which a purchaser may have with Landings Building 136A, L.L.C. be addressed through binding arbitration before a single arbitrator of the American Arbitration Association in Morris County, New Jersey. The decision of any such arbitrator will be final and binding and the costs of such arbitration will be borne equally by purchaser and Landings Building 136A, L.L.C.

1 In opposition to defendants' motion to compel arbitration, sixteen of the twenty-two plaintiffs certified, however, that they had not received the POS when they executed the purchase agreement. Instead, the POS was not provided to them until closing which, they contend, constitutes a violation of the New Jersey Consumer Fraud Act.

5 A-3022-13T4 Plaintiffs allege that when they purchased their units,

they were led to believe that they were to be part of "a large

waterfront condominium community, which was to include diverse

amenities, including a Community Center, a Health Club, a

waterfront esplanade, [three] parks, and other recreational

improvements, all of which were to be completed by 2012." By

2011, however, the project was scaled back, and the developers

presented PARA with a proposal that plaintiffs maintain was

"completely inconsistent with the development project promise[d]

to and relied upon by [p]laintiffs who had already purchased

their [u]nits." The revised proposal provided for rental

housing instead of owner-occupied units and eliminated "nearly

all of the promised amenities."

Plaintiffs contend that they reasonably relied on these

promises and representations when they purchased their

condominium units. They also allege that the buildings were

negligently constructed. Plaintiffs' first amended complaint

asserts claims for: (1) violations of the New Jersey Consumer

Fraud Act (CFA), N.J.S.A. 56:8-1 to -20; (2) negligence; (3)

rescission; (4) breach of contract; (5) breach of the implied

covenant of good faith and fair dealing; (6) breach of warranty

(7) breach of the implied warranty of habitability; (8) fraud

6 A-3022-13T4 and misrepresentation; (9) promissory estoppel; and (10) unjust

enrichment.

Defendants, who for purposes of this appeal are the project

developer and its affiliated entities, moved to compel

arbitration of the claims against them, relying upon the

arbitration provision in the purchase agreements. Plaintiffs

opposed the motion. Following oral argument, on November 8,

2013, the judge granted defendants' motion. A memorializing

order was entered on February 11, 2014. Plaintiffs appeal,

arguing, among other things, that the arbitration provision is

unenforceable.

II.

Orders compelling or denying arbitration are deemed final

and appealable as of right. R. 2:2-3(a); GMAC v. Pittella, 205

N.J. 572, 587 (2011). Because the issue of whether the parties

have agreed to arbitrate is a question of law, we review a

judge's decision to compel or deny arbitration de novo. Hirsch

v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013). Therefore,

"the trial court's interpretation of the law and the legal

consequences that flow from established facts are not entitled

to any special deference." Waskevich v. Herold Law, P.A., 431

N.J. Super. 293, 297 (App. Div. 2013) (citations and internal

quotation marks omitted).

7 A-3022-13T4 In fairness to the motion judge, when ordering plaintiffs'

claims to arbitration, he did not yet have the guidance provided

by the Court's decision in Atalese, which we find dispositive of

the issues raised in this appeal. In Atalese, the plaintiff

entered into a contract with defendant United States Legal

Services Group, L.P. (USLSG) for debt-adjustment services.

Atalese, supra, 219 N.J. at 446. An arbitration clause appeared

on page nine of the twenty-three page contract, which provided:

Arbitration: In the event of any claim or dispute between Client and the USLSG related to this Agreement or related to any performance of any services related to this Agreement, the claim or dispute shall be submitted to binding arbitration upon the request of either party upon the service of that request on the other party. The parties shall agree on a single arbitrator to resolve the dispute. The matter may be arbitrated either by the Judicial Arbitration Mediation Service or American Arbitration Association, as mutually agreed upon by the parties or selected by the party filing the claim. The arbitration shall be conducted in either the county in which Client resides, or the closest metropolitan county. Any decision of the arbitrator shall be final and may be entered into any judgment in any court of competent jurisdiction. The conduct of the arbitration shall be subject to the then current rules of the arbitration service. The costs of arbitration, excluding legal fees, will be split equally or be born[e] by the losing party, as determined by the arbitrator. The parties shall bear their own legal fees.

[Id. at 437.]

8 A-3022-13T4 After a dispute developed, plaintiff filed a complaint

alleging that defendant violated the CFA and the Truth-in-

Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A.

56:12-14 to -18. Atalese, supra, 219 N.J. at 436. Defendant

moved to compel arbitration based on the arbitration provision

in the contract. Id. at 437. The trial court granted the

motion, finding that the arbitration provision gave plaintiff

sufficient notice that any disputes arising out of the agreement

would be subject to arbitration. Ibid.

In an unpublished opinion we affirmed the trial court's

order, concluding that "the lack of [an] express reference to a

waiver of the right to sue in court or to arbitration as the

'exclusive' remedy [did not] bar [] enforcement of the

[arbitration] clause." Atalese v. U.S. Legal Servs. Grp., L.P.,

No. A-0654-12 (App. Div. Feb. 22, 2013) (slip op. at 7-8).

Despite not finding an explicit waiver of the plaintiff's right

to sue in court, the panel was satisfied that the provision

"clearly and unambiguously stated that . . . any dispute

relating to the underlying agreement shall be submitted to

arbitration and the resolution of that forum shall be binding

and final." Id. at 8-9. Thus, the clause provided the parties

"reasonable notice of the requirement to arbitrate all claims

under the contract," and that "a reasonable person, by signing

9 A-3022-13T4 the agreement, [would have understood] that arbitration [was]

the sole means of resolving contractual disputes." Id. at 8.

In reversing, the Court first looked to customary contract

principles regarding the requirement of mutual assent and a

meeting of the minds. Atalese, supra, 219 N.J. at 442. It

noted that:

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. By its very nature, an agreement to arbitrate involves a waiver of a party’s right to have her claims and defenses litigated in court. But 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.

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.

[Id. at 442-43 (citations and internal quotation marks omitted).]

The Court explained that: "a clause depriving a citizen of

access to the courts should clearly state its purpose. We have

repeatedly stated that [t]he point is to assure that the parties

know that in electing arbitration as the exclusive remedy, they

are waiving their time-honored right to sue." Id. at 444

10 A-3022-13T4 (alteration in original) (citations and internal quotation marks

omitted). In sum, "[t]he waiver-of-rights language . . . must

be clear and unambiguous[;] . . . the parties must know that

there is a distinction between resolving a dispute in

arbitration and in a judicial forum." Id. at 445.

Applying these principles, the Court held the arbitration

agreement unenforceable because it did not contain "any

explanation that plaintiff [was] waiving her right to seek

relief in court for a breach of her statutory rights." Id. at

446. Elaborating, the Court noted:

The contract states that either party may submit any dispute to "binding arbitration," that "[t]he parties shall agree on a single arbitrator to resolve the dispute," and that the arbitrator's decision "shall be final and may be entered into judgment in any court of competent jurisdiction." The provision does not explain what arbitration is, nor does it indicate how arbitration is different from a proceeding in a court of law. Nor is it written in plain language that would be clear and understandable to the average consumer that she is waiving statutory rights. The clause here has none of the language our courts have found satisfactory in upholding arbitration provisions -- clear and unambiguous language that the plaintiff is waiving her right to sue or go to court to secure relief. We do not suggest that the arbitration clause has to identify the specific constitutional or statutory right guaranteeing a citizen access to the courts that is waived by agreeing to arbitration. But the clause, at least in some general and sufficiently broad way, must explain that the plaintiff is

11 A-3022-13T4 giving up her right to bring her claims in court or have a jury resolve the dispute. Mutual assent to an agreement requires mutual understanding of its terms. After all, [a]n effective waiver requires a [consumer] to have full knowledge of [her] legal rights before she relinquishes them.

[Id. at 446-47 (alterations in original) (footnote omitted) (internal quotation marks omitted).]

In the present case, the arbitration provision in the

purchase agreements is similarly devoid of any language that

would inform unit buyers such as plaintiffs that they were

waiving their right to seek relief in a court of law. Following

Atalese, we deem this lack of notice fatal to defendants'

efforts to compel plaintiffs to arbitrate their claims.

We recognize that the plaintiff in Atalese only sought

recovery for violations of statutory rights under the CFA and

the TCCWNA, whereas here plaintiffs' claims involve both

statutory and common-law causes of action. However, we do not

view this as a meaningful distinction, since we do not read

Atalese as restricting its application to statutory claims.

Rather, the Court was careful to mention both statutory rights

granting citizens access to the courts and the more expansive

right to a jury trial guaranteed by the New Jersey Constitution.

Id. at 447, n.1. See also id. at 435 (noting that the

requirement of a clear and unambiguous waiver has not only been

12 A-3022-13T4 applied to arbitration provisions waiving a constitutional or

statutory right, but has also been applied to any contractual

waiver-of-rights provision).

In seeking to enforce the arbitration provision, defendants

point out that many of the plaintiffs were represented by

counsel when they executed their purchase agreements.

Defendants argue that these purchasers therefore had an

opportunity, through counsel, to fully review the arbitration

provision, object to its inclusion in the purchase agreement,

and terminate the contract if they were not satisfied. We do

not find this argument persuasive.

First, as defendants acknowledge, not all plaintiffs were

represented by counsel in their real estate transaction.

Equally important, respecting those who were, defendants'

argument runs counter to the weight of persuasive authority.

In Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282-83

(1993), the presence of an arbitration clause in a home

construction contract did not preclude suit by a homeowner

against the builder for construction defects, where it did not

clearly express the election of arbitration as the sole remedy.

Notably, the Court stated:

When reading a contract, our goal is to discover the intention of the parties. Generally, we consider the contractual terms, the surrounding circumstances, and

13 A-3022-13T4 the purpose of the contract. Here, we need not go beyond the actual terms of the agreement to find that it did not clearly express the election of arbitration as the sole remedy. In so finding, we are aware that Marchak was represented by counsel at all relevant times, including when he signed the "Contract for Sale of Real Estate." The problem, therefore, is not inequality of bargaining power between the parties. Rather, it is something more fundamental: the agreement simply does not state that the buyer elects arbitration as the sole remedy.

[Ibid.]

A similar argument was also rejected in Garfinkel v.

Morristown Obstetrics & Gynecology Associates, P.A., 168 N.J.

124, 136 (2001), where, in the context of an employment

agreement between a physician and a medical practice, the Court

noted:

Defendants suggest that the Court should focus predominately on plaintiff's level of sophistication to ensure that he acted of his own volition. That suggestion is misplaced. Irrespective of plaintiff's status or the quality of his counsel, the Court must be convinced that he actually intended to waive his statutory rights. An unambiguous writing is essential to such a determination.

Because we find this authority persuasive, if not binding,

we reject defendants' contention that the presence of counsel

during the real estate transaction suffices to cure the

inadequacy of the contractual arbitration provision.

14 A-3022-13T4 Summarizing, the arbitration provision in the parties'

purchase agreements failed to provide plaintiffs any notice that

they were giving up their right to seek relief in a judicial

forum. This deficiency renders the provision unenforceable.

Consequently, plaintiffs cannot be compelled to arbitrate their

claims.

Reversed.

15 A-3022-13T4