NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-3120-22
MARMO AND SONS GENERAL CONTRACTING, LLC, APPROVED FOR PUBLICATION Plaintiff-Appellant, May 24, 2024 APPELLATE DIVISION v.
BIAGI FARMS, LLC,
Defendant-Respondent. _______________________________
BIAGI FARMS, LLC, TAMMIE AND NICHOLAS BIAGI,
Third-Party Plaintiffs- Respondents,
v.
MARMO AND SONS GENERAL CONTRACTING, LLC, WILLIAM AND HEATHER MARMO,
Third-Party Defendants- Appellants. _______________________________
Argued April 15, 2024 – Decided May 24, 2024
Before Judges Sabatino, Chase, and Vinci. On appeal from the Superior Court of New Jersey, Law Division, Gloucester County, Docket No. L-1109-22.
Sam Maybruch argued the cause for appellants (Arbus, Maybruch & Goode, LLC, attorneys; Sam Maybruch, on the briefs).
Justin D. Santagata argued the cause for respondent (Cooper Levenson, PA, attorneys; Justin D. Santagata, Samantha Edgell, and Katlin Trout, on the briefs).
The opinion of the court was delivered by
SABATINO, P.J.A.D.
This dispute involves whether a party to a contract waived its right to
compel arbitration by its conduct in a lawsuit it initiated.
Marmo & Sons General Contracting, LLC, and William and Heather
Marmo (collectively "Marmo") appeal from the trial court's denial of their
motion to compel arbitration of claims against Biagi Farms, LLC, and Tammie
and Nicholas Biagi (collectively "Biagi") for nonpayment of residential
construction services Marmo rendered to Biagi.
Marmo asserts the trial court incorrectly ruled that Marmo waived its
contractual right to arbitrate. Among other things indicative of such a waiver,
the record shows that: (1) Marmo filed claims as a plaintiff in the Law Division
beyond those necessary to assert a lien under the Construction Lien Law
("CLL"), N.J.S.A. 2A:44A-1 to -38; (2) asserted in its Rule 4:5-1(b)(2)
A-3120-22 2 certification accompanying its complaint that no arbitration was contemplated;
and (3) waited to move to compel arbitration after receiving the benefit of
significant discovery while failing to comply reciprocally with Biagi's discovery
demands.
Applying the multifactor test prescribed in Cole v. Jersey City Medical
Center, 215 N.J. 265, 280-81 (2013), we conclude Marmo waived its right to
compel arbitration for numerous reasons detailed in this opinion. In the course
of doing so, however, we reject Biagi's contention that the United States
Supreme Court's opinion in Morgan v. Sundance, Inc., 596 U.S. 411, 417-19
(2022), eradicates the Cole factor that considers whether the party opposing
arbitration was prejudiced by the movant's delay. Prejudice remains one of the
pertinent, but not individually dispositive, Cole factors after Morgan.
Nevertheless, that particular factor is not controlling in this case, given the
totality of the circumstances that otherwise, on balance, further establish waiver.
I.
In May 2021, the parties executed a written contract in which Marmo
agreed to build a house for Biagi in New Jersey for $907,679. The six-page
agreement, which was drafted by Marmo, contains a provision in which the
parties agreed that any disputes arising out of the contract are to be referred to
A-3120-22 3 binding arbitration administered by the American Arbitration Association
("AAA").
Marmo partially built the house before a dispute arose between the parties.
Biagi terminated the contract, refusing to pay Marmo anything further.
In August 2022, Marmo served Biagi with an arbitration demand and a
notice of unpaid balance under the CLL to assert a lien for $225,947.91 Marmo
claimed was due under the contract. Biagi opposed the lien. Pursuant to the
CLL, the residential lien dispute was presented to an arbitrator. N.J.S.A.
2A:44A-6(a)(2). After a one-day hearing, the CLL arbitrator 1 issued a decision
on October 3, 2022, authorizing the entry of a lien in Marmo's favor for a
reduced amount of $132,887. The lien reflected downward adjustments for
unsigned change orders ($54,949), claimed extra work for which there are no
signed change orders ($10,495), and "a set-off for certain remedial work claims"
($27,616).
Shortly after the lien arbitration concluded, Marmo filed a complaint on
October 20, 2022 against Biagi in the Law Division alleging: (1) breach of
1 We use the term "CLL arbitrator" to distinguish the pre-lawsuit arbitrator of the lien dispute from the arbitrator of plenary issues who Marmo sought to have appointed after it had been litigating its lawsuit for several months in the Law Division. A-3120-22 4 contract, (2) unjust enrichment, (3) enforcement of a residential construction
lien under the CLL, and (4) reasonable value of services.
Notably, Marmo's complaint was accompanied by the requisite Rule 4:5-
1(b)(2) certification disclosing whether other related proceedings were pending
or contemplated. 2 Marmo's certification attested that the matter is "not the
subject of any other action pending in any other court or of a pending arbitration
proceeding, to the best of our knowledge and belief. Also, to the best of our
belief, no other action or arbitration proceeding is contemplated." (emphasis
added). Although it is hedged by the insertion of the "best of our knowledge
and belief" and "best of our belief" language, not appearing in Rule 4:5-1(b)(2),
the certification otherwise tracks the Rule.
On January 6, 2023, Biagi filed an answer denying the complaint's
allegations and asserting affirmative defenses of fraud, nonperformance, and
entitlement to a set-off greater than the lien. The answer further asserts
2 Rule 4:5-1(b)(2) provides: "Each party shall include with the first pleading a certification as to whether the matter in controversy is the subject of any other action pending in any court or of a pending arbitration proceeding, or whether any other action or arbitration proceeding is contemplated; and, if so, the certification shall identify such actions and all parties thereto." Further, "[e]ach party shall have a continuing obligation during the course of the litigation to file and serve on all other parties and with the court an amended certification if there is a change in the facts stated in the original certification." A-3120-22 5 counterclaims against Marmo for: (1) breach of contract, (2) breach of the
covenant of good faith and fair dealing, (3) negligence, (4) consumer fraud under
N.J.S.A. 56:8-1, (5) racketeering under N.J.S.A. 2C:41-4, (6) tortious
interference with contract, and (7) restraint of trade under N.J.S.A. 56:9-12.
Biagi also pled a third-party complaint that included claims against the Marmos
individually. Biagi demanded a jury trial.
Biagi's pleadings were accompanied by its own Rule 4:5-1(b)(2)
certification, stating the matter is "not presently the subject of any . . . pending
arbitration or administrative proceeding." The certification did not address
whether any arbitration was contemplated.
Marmo filed an answer denying Biagi's counterclaims and third-party
claims and asserting various affirmative defenses. Again, Marmo's pleadings
failed to state that the disputes should be addressed in arbitration rather than in
court.
The case then proceeded through what the trial court characterized as
"significant discovery." The court noted that when Marmo answered the
counterclaim and third-party complaint, it simultaneously served Biagi with 100
written discovery demands. When Biagi did not timely respond, Marmo
threatened to file a motion to compel discovery. Two weeks later, Biagi
A-3120-22 6 produced to Marmo "over 800 pages of documents and several gigabytes of e-
discovery that required the use of an outside vendor to complete." Biagi also
answered Marmo's interrogatories and produced additional e-discovery. In
addition, the parties each received discovery produced through subpoenas
served by Biagi upon the project's four subcontractors. Marmo also participated
"without prejudice" in the scheduling of depositions, which, as it turned out, did
not transpire before Marmo's motion to compel arbitration.
Meanwhile, Marmo did not comply with Biagi's discovery demands. It
obtained an extension of time to comply, but, as the trial court found, "that date
came and Marmo produced no discovery." "As a consequence," the court found,
"Marmo has received and gained the benefit of [Biagi's] extensive discovery
production but has withheld its own discovery responses."
On April 14, 2023—about six months after it filed its complaint—Marmo
moved to stay the Law Division proceedings and to compel arbitration. After
hearing oral argument, the trial court denied the motion to compel arbitration in
a written decision.
For reasons we will discuss in depth in Part II, the trial court concluded
Marmo "waived its right to transfer the case to arbitration and therefore denies
the motion."
A-3120-22 7 This interlocutory appeal by Marmo ensued.
II.
As federal and New Jersey case law implementing the Federal Arbitration
Act ("FAA") have recognized, the voluntary arbitration of civil disputes by
mutual agreement is generally favored, subject to certain exceptions. See Epic
Sys. Corp. v. Lewis, 584 U.S. 497, 505 (2018); Atalese v. U.S. Legal Servs.
Grp., L.P., 219 N.J. 430, 440 (2014). One of those exceptions applies when a
party to a contractual arbitration provision has waived the right to compel
arbitration, by its actions or inactions. Cole, 215 N.J. at 276-77.
In its 2013 opinion in Cole, 215 N.J. at 281-83, the New Jersey Supreme
Court announced a multifactor "totality of the circumstances" test for evaluating
whether a party has waived its contractual right to arbitration. Those factors
are:
(1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party's litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its pleadings, particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any.
A-3120-22 8 [Id. at 280-81.]
Cole made clear that "[n]o one factor is dispositive." Id. at 281.
Applying those newly announced factors, the Court concluded the
arbitration movant in Cole "engaged in litigation conduct that was inconsistent
with its right to arbitrate the dispute with its former employee." Ibid. Among
other things, the movant had failed to assert arbitration as a defense in its
pleadings, participated in discovery during a pretrial period spanning over
twenty-one months, and had filed a partially successful dispositive motion. Id.
at 281-82.
Nearly a decade after Cole was decided, the United States Supreme Court
in 2022 addressed the standards for arbitration waiver in Morgan, 596 U.S. at
211. Morgan invalidated Eighth Circuit precedent that had "condition[ed] a
waiver of the right to arbitrate on a showing of prejudice." 596 U.S. at 417.
In Morgan, an hourly employee of a Taco Bell franchise owned by
defendant Sundance filed a nationwide collective action asserting Sundance
violated the Fair Labor Standards Act. 596 U.S. at 413-15. Sundance "initially
defended itself against Morgan's suit as if no arbitration agreement existed" by
moving to dismiss the suit as duplicative of a previous collective action by Taco
A-3120-22 9 Bell employees. Id. at 414. Sundance answered the complaint with fourteen
affirmative defenses, none of which mentioned arbitration. Ibid.
After participating in unsuccessful mediation and in scheduling
conferences with the court, Sundance moved to compel arbitration under the
FAA, nearly eight months after the filing of the complaint. Id. at 414-15. The
district court denied the motion to compel. Ibid. In doing so, the district court
applied Eighth Circuit precedent requiring a party alleging waiver to show
resulting prejudice. Ibid. The district court concluded that Morgan had shown
such prejudice. Ibid. Applying the same legal test, a split panel of the Eighth
Circuit reversed. Ibid. The majority ruled that Morgan had not established
prejudice, noting the parties had not yet engaged in formal discovery, nor
contested any matters going to the merits of the case. Ibid. The dissenting
circuit judge disagreed, noting that Morgan had wasted time and money in
opposing Sundance's dismissal motion and in a fruitless mediation. Id. at 415-
16. The dissenter also expressed doubts about the propriety of the prejudice
requirement.
The Supreme Court granted certiorari in Morgan to resolve a conflict
among the circuit courts about the propriety of a prejudice requirement. Id. at
A-3120-22 10 416. Nine circuits, including the Eighth, had imposed such a requirement, and
two circuits eschewed such a rule. Ibid.
The Court in Morgan adopted the circuits' minority position, holding that
it was incompatible with the policies of the FAA to impose an absolute
requirement of prejudice in establishing waiver of a right to arbitration. Id. at
419. Writing for a unanimous Court, Justice Kagan cautioned against devising
"arbitration-specific procedural rules" so as "to tilt the playing field in favor of
(or against) arbitration." Ibid. Because the Eighth Circuit's prejudice rule was
such an arbitration-specific precondition of waiver, the Court disavowed it.
Ibid. The Court noted that "[o]utside the arbitration context, a federal court
assessing waiver does not generally ask about prejudice." Id. at 417.
The Court accordingly ruled in Morgan the circuit "was wrong to
condition a waiver of the right to arbitrate on a showing of prejudice." Ibid. It
remanded the case for an analysis of whether Sundance "knowingly
relinquish[ed] the right to arbitrate by acting inconsistent with that right." Id. at
419.
Here, the parties cited Cole and Morgan in their arguments to the trial
court. Marmo argued the Cole factors weighed against a finding of waiver, and
noted that, among other things, Biagi was not prejudiced by the six-month delay
A-3120-22 11 in Marmo's filing of the dismissal motion. Biagi, meanwhile, asserted that
Morgan renders prejudice irrelevant to the waiver analysis, and that the
remaining Cole factors here weigh in favor of waiver. In this regard, Biagi has
relied on several recent circuit court opinions applying Morgan. See White v.
Samsung Elecs. Am., Inc., 61 F.4th 334, 339 (3d Cir. 2023) (holding that
Morgan disallows under the FAA "tests that placed prejudice to the party not
seeking arbitration as the focus of the waiver inquiry"); Armstrong v. Michaels
Stores, Inc., 59 F.4th 1011, 1015 (9th Cir. 2023) (construing Morgan to
"abrogate[] . . . precedents to the extent they required the party opposing
arbitration to demonstrate prejudice").
The trial court expressed ambivalence in its written decision. Initially, it
highlighted that Marmo had chosen to file a complaint in the Law Division with
broader contractual, quasi-contractual, and other claims that went beyond those
necessary to enforce the construction lien. The court also underscored that
"Marmo through its counsel certified [in its Rule 4:5-1(b)(2) statement] that 'no
other action or arbitration proceeding is contemplated.'" The court observed,
"[i]t is difficult to read that [certification] as other than a voluntary and
intentional relinquishment of a known right. What else does that mean than 'we
do not plan to go through arbitration?'"
A-3120-22 12 The trial court punctuated these initial observations with the following
discussion:
Marmo had full knowledge of the right and obligation to proceed through arbitration, but chose not to take that route, utilizing the court instead. To this court that action shows Marmo knew of the right and then abandoned it. Then in answer to defendants' counterclaim, no reference or affirmative defense is made as regards the contractual right to arbitration in an effort to enliven that right. Instead, plaintiff takes the opportunity to take discovery. Then through the benefit of discovery, plaintiff gained substantial materials in answer to its document request and interrogatories. But then, at least as last known to the court, did not reciprocate by responding to the defendant's inquiries. All of the elements of waiver are met.
[(Emphasis added).]
Despite those observations, the trial court noted that the amount of time
that had elapsed since the complaint was filed was not lengthy:
This is not an aged case by any means, nor anywhere approaching the eve of trial. There have been no motions filed in the case other than the motion to transfer, and while there have been lively efforts at discovery it would appear that process is closer to the beginning than at the end. There has been some delay in making the arbitration request, but not inordinate delay, the request having been made within six months from the filing of the complaint. Under Cole, those factors would likely favor transferring the claims to the contractually agreed arbitration.
A-3120-22 13 [(Emphasis added).]
The court then addressed the question of prejudice. It found that "the real
prejudice to the defendant is not having the benefit of the court system and the
opportunity to put the case before a jury if the matter is transferred to
arbitration." But even if no other prejudice is demonstrated, the court deemed
the lack of such additional prejudice inessential to a finding of waiver under the
Supreme Court's opinion in Morgan. The court construed Morgan to signify that
"resulting prejudice to the other party [here, Biagi] is not a consideration since
the elements of waiver look to the waiving party, and not the defendant in this
case."
Having analyzed these various considerations, the court concluded as
follows:
While the analysis under Cole would appear more favorable to the plaintiff's position, examining the application using the elements of waiver as directed by the U.S. Supreme Court in Morgan leads this court to the conclusion that plaintiff waived their right embodied in the Construction Contract to litigate the various claims enumerated in the complaint and counterclaim in arbitration. It is difficult for this court to see how the favorable factors arrived at under Cole would overcome plaintiff's own act in bringing the claim in court knowing that he had [a] right to proceed per the contract through arbitration and then certified as part of the court filing that no other arbitration proceeding is contemplated. The court finds that
A-3120-22 14 plaintiff has waived its right to transfer the case to arbitration and therefore denies the motion.
Marmo appealed the trial court's ruling. It contends the trial court should
have adhered to its tentative observation that the Cole factors weighed overall
against waiver, and that the court was unduly swayed by Morgan in its ultimate
assessment of the circumstances. Biagi counters that the trial court's ultimate
conclusion was correct, if not all of its reasoning. Biagi asserts that Morgan
forbids any consideration of prejudice and that, despite the trial court's
observation, the other Cole factors actually weigh in favor of waiver.
III.
We review the trial court's disposition of the legal issue of waiver de novo.
Skuse v. Pfizer, Inc., 244 N.J. 30, 46 (2020). Having done so, with the benefit
of helpful post-argument supplemental briefs submitted by the parties at our
request, we affirm the order denying arbitration, albeit for reasons somewhat
different than those expressed by the trial court.
A.
As a threshold matter, we construe Morgan to disallow consideration of
prejudice only if that is used by a court as a necessary element for waiver in the
arbitration context.
A-3120-22 15 Our New Jersey case law generally does not require prejudice to prove
waiver. Waiver is defined as "the voluntary and intentional relinquishment of a
known right." Knorr v. Smeal, 178 N.J. 169, 177 (2003). Waiver may be
inferred from conduct, in addition to explicit declarations. Ibid. In Shebar v.
Sanyo Business Systems Corp., 111 N.J. 276, 291 (1988), the Supreme Court
described the concept of waiver as follows:
Waiver, under New Jersey law, involves the intentional relinquishment of a known right, and thus it must be shown that the party charged with the waiver knew of [that party's] legal rights and deliberately intended to relinquish them. . . . [W]aiver implies an election by the party to dispense with something of value, or to forego some advantage which [one] might at [one's] option have demanded and insisted on. Questions of waiver, therefore, are usually questions of intent, which are factual determinations that should not be made on a motion for summary judgment.
[Ibid. (emphasis added) (quotations omitted).]
The definition of waiver therefore focuses predominantly on the intent of
the waiving party. Ibid. This accords with Morgan, which similarly observed
that "[t]o decide whether a waiver has occurred, the court focuses on the actions
of the person who held the right; the court seldom considers the effects of those
actions on the opposing party." 596 U.S. at 417.
A-3120-22 16 The Supreme Court's controlling opinion in Cole, however, does not
mandate a showing of prejudice by the party opposing arbitration. Instead,
prejudice is listed by the Court as only one of seven factors for trial courts to
consider. 215 N.J. at 280-81. As we noted above, Cole expressly instructed that
"[n]o one factor is dispositive." Id. at 281.
The Court recognized in Cole that some courts in other jurisdictions had
"require[d] a party to prove prejudice as an element of waiver," other courts had
"specifically declare[d] a party need not prove prejudice," while still others "find
prejudice is simply one factor to consider." Id. at 280 (citations omitted). The
Court declined to address the contention of an amicus, which had urged that
"prejudice to the party resisting arbitration is simply a factor, and certainly not
an indispensable factor, in a waiver analysis." Id. at 282. But the Court
implicitly treated prejudice in a non-dispositive way in its ensuing analysis. The
Court explained that "[i]f we define prejudice as 'the inherent unfairness—in
terms of delay, expense, or damage to a party's legal position—[then prejudice]
occurs when the party's opponent forces it to litigate an issue and later seeks to
arbitrate that same issue.'" Ibid. (internal citation omitted) (second alteration in
original).
A-3120-22 17 As the Court elaborated, that is exactly what occurred in Cole itself, in
which the defendant forced the plaintiff to litigate the case for twenty-one
months before it moved to compel arbitration on the eve of trial and "start over
in a different forum under different rules." Ibid. The Court concluded that the
defendant, having engaged in such conduct, waived its right to arbitrate. Id. at
283. It added that "[s]uch conduct undermines the fundamental principles
underlying arbitration and is strongly discouraged in our state." Ibid.
Cole illustrates that, under New Jersey law, prejudice can serve as one of
many waiver factors within the totality of circumstances. In this respect, Cole
displaced our own previous appellate decisions that had required a party
asserting an opponent's waiver of an arbitration right to demonstrate it had
suffered prejudice. See, e.g., Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J.
Super. 138, 150 (App. Div. 2008) ("A waiver of a right to arbitration based on
a delay in seeking that relief will be found only if that delay has resulted in
demonstrable prejudice to the party opposing arbitration." (emphasis added));
Spaeth v. Srinivasan, 403 N.J. Super. 508, 515 (App. Div. 2008) ("[T]he
presence or absence of prejudice has been deemed determinative of the issue of
waiver." (emphasis added)).
A-3120-22 18 Cole's inclusion of prejudice within its multifactor test as a non-
dispositive and non-essential consideration does not unduly tilt the waiver
analysis for or against arbitration. It is simply something the court should
consider within the overall mix of factors. We do not believe that such an
approach violates Morgan. In fact, we have held that the multifactor Cole test
of waiver should apply, by analogy, in a non-arbitration context involving a
plaintiff's assertion that a defendant had waived the application of a contractual
forum selection clause. See Largoza v. FKM Real Est. Holdings, Inc., 474 N.J.
Super. 61, 83-87 (App. Div. 2022). In our discussion in Largoza, we quoted
from a Texas opinion that deemed the "actual prejudice" to a plaintiff a relevant
factor in assessing whether defendant waived its right to invoke a forum
selection clause. Id. at 85 (quoting In re Nationwide Ins. Co. of Am., 494
S.W.3d 708, 713-17 (Tex. 2016)). Our post-Cole case law has therefore not
singled out arbitration.
For these various reasons, we reject Biagi's contention that Morgan
requires the elimination of prejudice from Cole's multifactor test. We now then
turn to the remaining arguments before us.
A-3120-22 19 B.
Marmo contends the trial court improperly penalized it for filing a case in
the Law Division after asserting and proving, in part, a residential construction
lien before a CLL arbitrator. Marmo argues the CLL requires lien claimants to
"commence an action in the Superior Court" within one year to enforce the lien
and to avoid "forfeit[ing] all rights to enforce the lien" per N.J.S.A. 2A:44A-14.
However, Marmo overlooks part (d) of N.J.S.A. 2A:44A-14, which states "[a]ny
disputes arising out of the improvement which is the subject of a lien claim but
which are unrelated to any action to enforce a lien claim may be brought in a
separate action or in a separate count in the same action." (emphasis added).
Thus, litigants have the option, but are not required, to include related claims in
a CLL complaint or to maintain separate actions to vindicate the distinct
interests. See also Orefice v. ADR, 315 N.J. Super. 493, 497-98 (App. Div.
1998) (finding lien claims supplement, but do not replace, traditional contract
claims). Orefice relied on N.J.S.A. 2A:44A-3 ("Nothing in this act shall be
construed to limit the right of any claimant from pursuing any other remedy
provided by law.") and the CLL's limitation on the amount of a lien to the
contract price (to the exclusion of claims for lost profits). Id. at 498.
A-3120-22 20 The trial court properly weighed against Marmo its inclusion of
contractual, quasi-contractual, and other claims in the complaint beyond the
CLL claim. In any event, there are sufficient grounds to find waiver, regardless
of whether that particular aspect of its complaint should be held against Marmo.
We turn now to a sequential analysis of the Cole factors.
C.
1. Delay. As we noted above, the trial court found that Marmo's delay
of approximately six months between filing its complaint and moving to compel
arbitration3 was "not inordinate." The delay is substantially less than the twenty-
one-month delay that the Court decried in Cole. Six months is approximately
the same delay we excused in Spaeth, 403 N.J. Super. at 516. However, unlike
the pro se litigant in Spaeth—who had asserted a right to arbitrate before
exchanging discovery or scheduling depositions—Marmo was represented here
by counsel, who was better equipped to recognize its right to arbitration and act
3 Delay is calculated as the time between the filing of the complaint and the first assertion of a right to arbitrate. See Cole, 215 N.J. at 271; Spaeth, 403 N.J. Super. at 512-17 (applying the same calculation to quantify delay by pro se defendant). Cole and Spaeth both calculated delays in situations where the waiving party was a defendant, whereas Marmo here is a plaintiff. We believe the filing of the complaint should remain the operative start date, as it marks the first time Marmo demonstrated an intention to litigate, not arbitrate. A-3120-22 21 upon it swiftly. In any event, if the delay factor is assessed purely by the passage
of time, it does not weigh heavily in favor of waiver.
2. Motion Practice. No motion practice, dispositive or otherwise,
occurred before Marmo moved to compel arbitration. The trial court did note
Marmo's threat to file a motion to compel discovery. The threat occurred four
months after the complaint was filed and was not carried out, as Biagi produced
the demanded discovery shortly thereafter. Even without the formal filing of a
discovery motion, we regard Marmo's threat to compel discovery as relevant to
the Cole analysis, because it evinces conduct by Marmo to invoke judicial
enforcement processes that are, by comparison, more robust than those in
arbitration.4
3. and 4. Litigation Strategy and the Extent of Discovery Conducted. We
next consider, under factor three, whether Marmo's delay in seeking arbitration
4 See Am. Arb. Ass'n, Constr. Indus. Arb. Rules & Mediation Procs. R-25 (rev. 2024) (the "AAA Construction Rules") (noting the "enforcement powers of the arbitrator" may be invoked "in the case of willful non-compliance with any order issued by the arbitrator" and include "drawing adverse inferences, excluding evidence and other submissions, and/or making special allocations of costs or an interim award of costs arising from such non-compliance"), as contrasted with the Part IV discovery rules in the Superior Court that provide for certain remedies for non-compliance as of right. Cf. R. 4:23-1 (concerning dismissal for failure to answer interrogatories); see also Hay Grp., Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 408-09 (3d Cir. 2004) (interpreting the FAA to find that arbitrators are not empowered to issue pre-hearing subpoenas). A-3120-22 22 was part of its "litigation strategy," and, relatedly, the fourth factor—"the extent
of discovery conducted." As we noted above, the trial court observed:
What plaintiff's strategy was in filing the court action knowing that the [] Contract required such disputes to be filed through arbitration is difficult to determine. . . . Plaintiff clearly received the benefit of the court filing through the discovery it received, but it is not clear from the record whether that same discovery could have been obtained through the arbitrator.
Here, as noted by the trial court, Marmo obtained substantial discovery
from Biagi, including hundreds of pages of documents and interrogatory
answers. It also obtained documents subpoenaed, albeit by Biagi, from four
subcontractors.
The AAA Construction Rules do not provide an automatic right to take
depositions in cases with claims under $1,000,000. Id. at L-4(f). This dispute
would likely not be afforded depositions, since Marmo's complaint seeks
recovery of a lien amount of only $132,887, plus unquantified other damages.
Although no depositions were conducted yet in the Law Division case, the
parties had scheduled them with the participation of Marmo's counsel. Biagi
was thereby deprived of the ability to carry out those depositions as of right
under the Rules of Court.
A-3120-22 23 Marmo's delay in moving to compel arbitration allowed it to obtain the
early benefit of discovery that might not have been as easily obtainable in
arbitration. Marmo requested additional time to answer Biagi's own discovery
demands and only moved to compel arbitration when it seemed likely that the
trial court would force Marmo to reciprocate in producing documents. Marmo
used the court system to its advantage before shifting the case to arbitration. We
accept the representation of Marmo's counsel concerning Cole factor three, that
Marmo's failure to recognize its right to arbitration sooner was a good-faith
mistake, but that does not eliminate the relevance of Cole factor four, that
strongly weighs against waiver.
5. The Pleadings. The fifth Cole factor, "whether the party raised the
arbitration issue in its pleadings, particularly as an affirmative defense, or
provided other notification of its intent to seek arbitration" also weighs against
Marmo. 215 N.J. at 281. Here, Marmo initiated the action by filing its
complaint rather than asserting its right to arbitration. As we noted above, and
as emphasized by the trial court, Marmo attested in its Rule 4:5-1(b)(2)
certification that no arbitration was pending and that, to "the best of its belief,"
none was contemplated. The Rule recognizes a party's "continuing obligation"
to amend the certification if the underlying facts change. Marmo made no such
A-3120-22 24 amendment, instead responding to Biagi's counterclaims with an answer alleging
eight affirmative defenses, none of which concerned arbitration. These
pleadings strongly weigh as a factor in favor of waiver.
We add, as a general point of guidance, that judicial resources are wasted
when a case is brought by a plaintiff and litigated in the Superior Court when it
should have been pursued instead in arbitration. Consequently, we emphasize
the importance of accurate Rule 4:5-1(b)(2) certifications at the outset of a case,
and counsel's due diligence in promptly advising the court and opposing counsel,
on a continuing basis, as to whether arbitration might be sought.
6. Proximity to a Trial Date. This factor weighs here against waiver,
since no trial date in the Law Division had been set.
7. Prejudice. Although it is non-dispositive for the reasons we have
already explained, we discern this factor weighs slightly here in favor of waiver.
We reach that assessment because Marmo was able to obtain, through the
Superior Court discovery process, a substantial and lopsided amount of early
discovery from Biagi that it might not have been able to obtain so readily in
arbitration. Even though the extent of prejudice to Biagi was arguably modest,
it is not completely insignificant.
A-3120-22 25 Having completed the foregoing de novo analysis of the Cole factors, we
conclude the totality of such factors weighs in favor of the trial court's ultimate
determination that Marmo waived the opportunity to compel arbitration. For the
reasons we have canvassed, Marmo's actions and inactions as the plaintiff in this
lawsuit justify, on the whole, waiver of its right to bring this dispute in
arbitration, pursuant to the terms of the contract that it drafted.
Affirmed.
A-3120-22 26