ERCO INTERIOR SYSTEMS, INC. VS. NATIONAL COMMERCIAL BUILDERS, INC., ETC. (L-0259-18, GLOUCESTER COUNTY AND STATEWIDE)

CourtNew Jersey Superior Court Appellate Division
DecidedMay 7, 2019
DocketA-4640-17T1
StatusUnpublished

This text of ERCO INTERIOR SYSTEMS, INC. VS. NATIONAL COMMERCIAL BUILDERS, INC., ETC. (L-0259-18, GLOUCESTER COUNTY AND STATEWIDE) (ERCO INTERIOR SYSTEMS, INC. VS. NATIONAL COMMERCIAL BUILDERS, INC., ETC. (L-0259-18, GLOUCESTER COUNTY AND STATEWIDE)) is published on Counsel Stack Legal Research, covering New Jersey Superior Court Appellate Division primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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ERCO INTERIOR SYSTEMS, INC. VS. NATIONAL COMMERCIAL BUILDERS, INC., ETC. (L-0259-18, GLOUCESTER COUNTY AND STATEWIDE), (N.J. Ct. App. 2019).

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-4640-17T1

ERCO INTERIOR SYSTEMS, INC.,

Plaintiff-Appellant,

v.

NATIONAL COMMERCIAL BUILDERS, INC., d/b/a NCB BUILDERS OF NEW JERSEY, INC. c/o REGISTERED AGENTS, INC.,

Defendant-Respondent. ______________________________

Submitted March 5, 2019 – Decided May 7, 2019

Before Judges Yannotti and Natali.

On appeal from Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-0259-18.

Kreiser & Associates, PC, attorneys for appellant (Travis L. Kreiser, on the briefs).

Hurvitz & Waldman, LLC, attorneys for respondent (Mitchell A. Waldman and Joshua K. Givner, on the brief). PER CURIAM

Plaintiff ERCO Interior Systems, Inc. (ERCO) appeals from the Law

Division's May 25, 2018 order dismissing its complaint against defendant

National Commercial Builders, Inc. (National) with prejudice under Rule 4:6-

2(e) based on a forum selection clause in the parties' subcontract, which

provides that litigation relating to the subcontract "shall be brought only in the

District Court of Johnson County, Kansas, and in no other court or location."

We reverse.

I.

National, a corporation located in Lenexa, Kansas, entered into a

contract with Rio Mall LLC, to construct movie screens in a theater at the Rio

Mall in Rio Grande, New Jersey. National entered into a subcontract with

ERCO, a New Jersey-based corporation, to install acoustical tiling in the

theater. Paragraph D of the parties' subcontract provides that:

[a]ny litigation arising out of or related to the Agreement shall be brought only in the District Court of Johnson County, Kansas, and in no other court or location. Regardless of where it is signed, this Agreement is deemed made in Kansas and shall be interpreted under Kansas law.

A dispute arose between ERCO and National regarding payment.

Specifically, ERCO claimed it completed all the work as required by the

A-4640-17T1 2 subcontract and invoiced defendant $23,500, but was only paid $10,019.75.

Accordingly, ERCO filed a complaint in the Law Division against National

seeking to recover the remaining $13,480.25 owed to it, plus pre- and post-

judgment interest and attorney's fees. ERCO's complaint asserted claims for

breach of contract, quantum meruit, unjust enrichment, violation of the Prompt

Payment Act (PPA), N.J.S.A. 2A:30A–1 to –2, and amounts owed on a book

account/account stated. With respect to its claim under the PPA, ERCO

averred that National did not provide written notice of any disputes as to the

invoices, and that it lacked a good faith basis to withhold payment.

National moved to dismiss ERCO's complaint and argued that the forum

selection clause in the subcontract was knowingly and voluntarily entered by

both parties. ERCO, relying on Kubis v. Perszk, Inc. v. Sun Microsystems,

Inc., 146 N.J. 176 (1996), opposed the motion and asserted the forum section

clause was invalid because it violated New Jersey's strong public policy, as

codified in N.J.S.A. 2A:30A-2(f), which provides that "any civil action

brought to collect payments [under the PPA] . . . shall be conducted inside of

this State . . . ."

After hearing oral arguments, the court issued a written decision and

order on May 25, 2018, granting National's motion and declining to invalidate

A-4640-17T1 3 the forum selection clause. In its written decision, the court noted that forum

selection clauses are presumed valid and enforceable in New Jersey unless

they are the result of fraud or overreaching, or if enforcement would violate

strong public policy, or would be unreasonable. The court found "no

indication" that the clause resulted from fraud or overreaching, and determined

the parties agreed to work on the project in New Jersey "freely and voluntarily

in the interest of each of their respective businesses and trades."

Further, after reviewing the pertinent sections of the PPA, including the

provision that civil actions brought under the PPA for payment must be

conducted in New Jersey, the court rejected ERCO's claim that enforcement of

the forum selection clause would violate New Jersey public policy. The court

acknowledged that "New Jersey public policy does, in some circumstances,

favor providing legislative protection to subcontractors performing

construction work in New Jersey," but did "not find that this public policy was

shown to be strong enough to override a freely negotiated forum selection

clause." Finally, the court determined ERCO could cost-effectively litigate its

claim in Kansas, that enforcement would not be so inconvenient as to be

unreasonable, and that ERCO failed to establish "any exception to the

A-4640-17T1 4 presumption of validity and the enforceability" of the parties' forum selection

clause. This appeal followed.

II.

On appeal, ERCO maintains the "plain and unambiguous" language of

N.J.S.A. 2A:30A-2(f) establishes that "all claims under the [PPA] must be

litigated in New Jersey," and contends "any forum selection clause at odds

with the statutory mandate is invalid and unenforceable." According to ERCO,

the PPA "includes a provision which confirms that the Act is controlling over

any other applicable law," and the trial court "erred when it relied on . . . other

conflicting law in granting" National's motion to dismiss.

Further, ERCO argues that the forum selection clause "is invalid and

unenforceable because it violates New Jersey's strong public policy in favor of

providing legislative protection to subcontractors performing construction

work in New Jersey." Specifically, ERCO contends N.J.S.A. 2A:30A-2(f)

expresses New Jersey's "right and public policy goal to protect the payment

rights of all construction subcontractors" in "the State of New Jersey by and

through the New Jersey [c]ourts." Moreover, ERCO claims that it would lose

its protections under the PPA and "its basic contract right" to receive payment

"if it were forced to litigate this $13,000.00 debt in Kansas" because ERCO's

A-4640-17T1 5 "ability to obtain payment would no longer be prompt or cost efficient." Thus,

according to ERCO, "[a]s a practical matter," enforcement of the "forum

selection clause would force ERCO to abandon its legitimate claims for

payment and cause it to lose the benefits of the [PPA]." We agree with ERCO

that the parties' forum selection clause is invalid because it subverts New

Jersey's strong public policy, as embodied in the PPA, for the prompt and

efficient payment of claims related to New Jersey-based construction disputes.

We further conclude the requirement codified at N.J.S.A. 2A:30A-2(f), that all

actions brought to collect payments under the PPA "shall be conducted inside

of this State," is an integral part of that policy.

III.

"We review a grant of a motion to dismiss a complaint for failure to state

a cause of action de novo, applying the same standard under Rule 4:6–2(e) that

governed the motion court." Wreden v. Twp. of Lafayette, 436 N.J. Super.

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ERCO INTERIOR SYSTEMS, INC. VS. NATIONAL COMMERCIAL BUILDERS, INC., ETC. (L-0259-18, GLOUCESTER COUNTY AND STATEWIDE), Counsel Stack Legal Research, https://law.counselstack.com/opinion/erco-interior-systems-inc-vs-national-commercial-builders-inc-etc-njsuperctappdiv-2019.