Jeffrey Alvarez v. Toyota of Hackensack

• Court: New Jersey Superior Court Appellate Division
• Decided: October 7, 2024
• Docket: A-3179-22
• Status: Unpublished

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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-3179-22

JEFFREY ALVAREZ,

Plaintiff-Appellant,

v.

TOYOTA OF HACKENSACK and MIRIAM SHANKEN,

Defendants-Respondents. ______________________________

Submitted September 24, 2024 – Decided October 7, 2024

Before Judges Smith and Chase.

On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1918-20.

Lueddeke Law Firm, attorneys for appellant (Karri Lueddeke, on the brief).

Respondents have not filed a brief.

PER CURIAM Plaintiff appeals from the trial court's orders of April 5, 2023 and May 26,

2023, vacating an arbitration award, and then denying reconsideration. We

reverse and remand for the trial court to confirm the award.

I.

Plaintiff Jeffrey Alvarez purchased a used car from co-defendant Toyota

of Hackensack. The June 29, 2019 purchase contract included an arbitration

clause. In pertinent part, the clause stated, "either you or we may choose to have

any dispute between us decided by arbitration and not in court or by jury trial."

The clause also stated, "[y]ou may choose the American Arbitration Association

. . . . You may get a copy of the rules of an arbitration association by contacting

the organization or visiting its website."

Shortly after his purchase, plaintiff contacted co-defendant Miriam

Shanken, a Toyota of Hackensack employee, seeking a summary of the

maintenance performed on the car by the dealer prior to selling it to him.

Shanken responded via text message, stating, "We did an oil change while it was

here . . . ." Shortly after this exchange, plaintiff's car suffered engine failure and

broke down. Plaintiff took the car to a different dealership and learned that the

cause of the engine failure was a defective oil filter and gasket. Plaintiff further

learned that repairs were estimated to cost $9,185.72. When plaintiff contacted

A-3179-22 2 Toyota of Hackensack about the damage, they told him they had not performed

a pre-sale oil change or inspection, a statement which conflicted with what

Miriam Shanken had previously told him.

Plaintiff sued defendants in Superior Court on March 19, 2020, alleging

violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -20, breach of contract,

and negligence. After a protracted delay caused in part by defendant's failure to

pay the American Arbitration Association (AAA) fee, the trial court eventually

dismissed the complaint and ordered the parties to arbitration on January 8,

2021.

The AAA appointed Felicia Farber, Esq. as arbitrator. The parties

participated in preliminary hearings in April 2021, October 2021, and January

2022. Arbitration was scheduled first for January, then May 2022, but each date

was adjourned at request of defense counsel. Farber eventually recused herself

as arbitrator, and the AAA appointed Angela Foster, Esq. in her stead.

The new arbitrator conducted a preliminary hearing on June 16, 2022, and

issued a scheduling order. Key terms of the order stated: all deadlines would

be strictly enforced; the Federal Arbitration Act would control; defendants were

to provide plaintiff with a list of deficient written discovery by June 17, 2022;

defendants were to provide its expert report by August 1, 2022; the parties were

A-3179-22 3 to exchange all witness lists and exhibit lists by August 10, 2022; the final

arbitration hearing would take place via Zoom on August 30, 2022; and the

parties agreed that no stenographic record of the hearing would be taken .

On August 30, 2022, the arbitrator commenced the hearing. Before it

began, defendants sought to have the virtual proceeding recorded. This was

defendants' first request to record the hearing. The arbitrator denied it. After

the hearing, the arbitrator entered a scheduling order for submission of post-

hearing briefs. Defendants did not file a brief.

The arbitrator issued an award on October 21, 2022, finding defendants

violated the Consumer Fraud Act (CFA). The arbitrator found plaintiff

sustained $15,301 in damages and trebled those damages under the CFA to

$45,903. The arbitrator imposed statutory counsel fees and costs in the amount

of $34,047, bringing plaintiff's total award to $79,950. Plaintiff moved to

confirm the award, and defendants cross-moved to vacate it. A different trial

court heard argument on March 28, 2023.

On April 5, 2023, the court issued an order vacating the award, making

findings in a written statement of reasons. It stated:

It is uncontested that . . . [d]efendants requested that the arbitrator record the proceedings. While the Court recognizes, and generally defers to the discretion of the

A-3179-22 4 arbitrator, in the instant matter the [arbitrator's] rejection of said request was clearly a prejudicial error.

....

[T]he September 2022 amendments to the AAA rules . . . provide for recording upon the request of a party. In light of the background and the complaints by [defendants] throughout these proceedings, it would seem logical for the arbitrator to order such a recording (and perhaps the [p]laintiff to make a similar request) if not only in anticipation of the proceeding now before this [c]ourt. None of this was done. This [c]ourt cannot act as a reviewing [c]ourt in the absence of such record and thus finds that the award must be vacated in accordance with N.J.S.A 2A:23B-23(3) in that the arbitrator conducted the hearing in a manner prejudicial to the rights of [defendants] by failing to grant the . . . request to record the hearing when detailed and numerous objections to the same were presented to the arbitrator and placed upon the record throughout the proceedings.

The trial court ordered a new hearing before a different arbitrator, and

directed that defendant pay the cost of recording the new proceeding. The court

next denied plaintiff's motion for reconsideration.

On appeal, plaintiff argues that the trial court erred by: analyzing the facts

under N.J.S.A. 2A:23B-23(3) of the New Jersey Arbitration Act, instead of 9

U.S.C. § 10(a) of the Federal Arbitration Act; finding that the arbitrator's denial

of defendant's request to record the arbitration was misconduct under state law;

A-3179-22 5 and not deferring to the arbitrator's award in the absence of a violation of the

Federal Arbitration Act.

II.

A.

We review de novo a trial court's legal conclusions to affirm or vacate

arbitration awards. Pami Realty, LLC v. Locations XIX Inc., 468 N.J. Super

546, 556 (App. Div. 2021) (citing Yarborough v. State Operated Sch. Dist. of

City of Newark, 455 N.J. Super 136, 139 (App. Div. 2018)). "[T]he decision to

vacate an arbitration award is a decision of law [and] this court reviews the

denial of a motion to vacate an arbitration award de novo." Minkowitz v. Israeli,

433 N.J. Super. 111, 136 (App. Div. 2013).

"We will not disturb the trial court's reconsideration decision 'unless it

represents a clear abuse of discretion.'" Kornbleuth v. Westover, 241 N.J. 289,

301 (2020). "An abuse of discretion 'arises when a decision is made without a

rational explanation, inexplicably departed from established policies, or rested

on an impermissible basis.'" Id. at 302.

B.

To promote arbitration as a judicially efficient dispute-resolution method,

New Jersey law strongly favors enforcing arbitration awards and grants such

A-3179-22 6 awards considerable deference. Borough of E. Rutherford v. E. Rutherford PBA

Local 275, 213 N.J. 190, 201 (2013). As such, "arbitration awards are given a

wide berth, with limited bases for a court's interference." Ibid.

Under Rule 1:40-2(a)(1), arbitration is "[a] process by which each party

or its counsel presents its case to a neutral third party, who then renders a

specific award." The "arbitrator's role is evaluative, requiring the parties to

present their evidence for a final determination." Kernahan v. Home Warranty

Adm'r of Fla., Inc., 236 N.J. 301, 324 (2019) (quoting Minkowitz, 433 N.J.

Super. at 144 (citing R. 1:40-2(b)(2))). The Federal Arbitration Act (FAA), 9

U.S.C. §§ 1-16, and the New Jersey Arbitration Act (NJAA), N.J.S.A. 2A:23B-

1 to 32, represent a legislative choice "to keep arbitration agreements on 'equal

footing' with other contracts." Ogunyemi v. Garden State Med. Ctr., 478 N.J.

Super. 310, 315 (App. Div. 2024) (quoting Roach v. BM Motoring, LLC, 228

N.J. 163, 174 (2017)). Under both statutes, "arbitration is fundamentally a

matter of contract," and should be regulated according to general contract

principles. Ibid. (quoting Antonucci v. Curvature Newco, Inc., 470 N.J. Super.

553, 561 (App. Div. 2022)).

A court may not rewrite a contract "by substituting a new or different

provision from what is clearly expressed in the instrument." Rahway Hosp. v.

A-3179-22 7 Horizon Blue Cross Blue Shield of N.J., 374 N.J. Super. 101, 111 (App. Div.

2005) (quoting E. Brunswick Sewerage Auth. v. E. Mill Assocs., 365 N.J. Super.

120, 125 (App. Div. 2004)). Further, a court may not "make a better contract

for either party, or supply terms that have not been agreed upon." Ibid. (quoting

Bar on the Pier, Inc. v. Bassinder, 358 N.J. Super. 473, 480 (App. Div. 2003)).

Arbitrators have broad powers to resolve disputes, and judicial

involvement is limited—once parties contract for binding arbitration, the court

may only enforce orders or subpoenas issued by the arbitrator, confirm the

arbitration award, correct or modify an award, or, in limited circumstances,

vacate an award. Minkowitz, 433 N.J. Super. at 134 (citing N.J.S.A. 2A:23B-

17(g), -22, and -23 to -24). Arbitrators have "broad discretion over discovery

and other procedural matters to 'conduct an arbitration in such manner as the

arbitrator considers appropriate for a fair and expeditious disposition of the

proceeding.'" Id. at 144 (quoting N.J.S.A. 2A:23B-15(a)).

III.

The dispositive issue is: did the trial court commit error when it found

that the arbitrator's denial of defendants' eleventh-hour request to record the

proceedings was a sufficient basis to vacate the arbitration award? We conclude

that it did.

A-3179-22 8 The parties' arbitration agreement expressly states that the law the parties

would use to govern the arbitration is the Federal Arbitration Act, 9 U.S.C. §§

1-16 (FAA). Under the FAA, once a party applies to the court for an order

confirming an arbitration award, "the court must grant such an order unless the

award is vacated, modified, or corrected." 9 U.S.C. § 9. The court may vacate

an award:

(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

[9 U.S.C. § 10(a)]

We note that the parties and the court each referenced and applied the New

Jersey Arbitration Act, rather than the Federal Arbitration Act agreed upon by

A-3179-22 9 the parties. We note that our analysis does not change 1 as the two statutes are

nearly identical concerning the question of vacating an award.

We apply the FAA to the undisputed terms of the parties' arbitration

clause. The parties contracted to arbitrate their disputes, and in doing so, they

agreed to utilize the services of the AAA or another arbitration organization.

1 N.J.S.A. 2A:23B-23(a) provides the court shall vacate an award made in the arbitration proceeding if:

(1) the award was procured by corruption, fraud, or other undue means;

(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this act, so as to substantially prejudice the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers;

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; or

(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding.

A-3179-22 10 Each party agreed their arbitration would proceed according to the rules of the

selected organization, in this case the AAA. By agreeing to these terms, the

parties acknowledged that their discovery and appeal rights would be less robust

than if they took their dispute to court. Significantly, the record shows that the

AAA Consumer Arbitration Rules govern the process for creating a record of

the arbitration. 2 AAA Consumer Arbitration Rule R-27 states that, "[i]f a party

wants a written record of the hearing, that party must make such arrangement

directly with a stenographer (court reporter) and notify the opposing parties, the

AAA, and the arbitrator of these arrangements at least three business days before

the hearing." Am. Arb. Ass'n, Consumer Arbitration Rules and Mediation

Procedures R-27 (rev. 2014). The rule continues, "[n]o other type of recording

will be allowed unless the parties agree or the arbitrator directs a different form

of recording." Id.

The parties contracted for arbitration, and the clause included language

binding them to the rules of the arbitration organization that they selected. AAA

rule 27 requires an interested party to request a transcript in advance. The

parties never agreed on another manner for recording the arbitration. See

2 The record shows the trial court cited to the AAA's Commercial Arbitration Rules and Mediation Procedures. We conclude the AAA's commercial rules are inapplicable, and that the AAA's consumer rules apply. A-3179-22 11 Rahway Hosp., 374 N.J. Super. at 111 (holding a court may not "make a better

contract for either party, or supply terms that have not been agreed upon"

(quoting Bar on the Pier, Inc., 358 N.J. Super. at 480)). Because the arbitrator

was not obligated to grant defendant's request under the AAA consumer

arbitration rules, we conclude her denial of defendants' request was not

"misbehavior" which prejudiced defendants under 9 U.S.C. § 10(a)(3).

Additionally, there is no basis for vacatur under 9 U.S.C. § 10(a)(4), as the

arbitrator acted within her explicit powers. Viewing the record through this

analytical lens, we conclude the trial court committed error as to its order of

April 5, when it vacated the award. The court also committed error as to its

order of May 23, when it denied reconsideration on an impermissible basis.

We observe that the trial court found it "[could] act as a reviewing Court

in the absence of [the arbitration] record and thus [found] the award must be

vacated." We decline to employ such a bright-line approach, as this does not

reflect our jurisprudence. See Luskey v. Carteret Bd. of Educ., 459 N.J. Super.

150, 153 (App. Div. 2019) (affirming the trial court's denial of a motion to vacate

even though "there is no transcript of the testimony presented to the arbitrator").

Reversed. We remand to the trial court to enter an order confirming the

arbitration award in favor of plaintiff in the amount of $79,950.

A-3179-22 12