NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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 NOS. A-5657-18T1 A-5658-18T1
SAL ELECTRIC COMPANY, INC.,
Plaintiff-Respondent,
v.
THE PIKE COMPANY, INC., WEGMANS FOOD MARKETS, INC., THE FIDELITY AND DEPOSIT COMPANY OF MARYLAND,
Defendants-Appellants. ______________________________
Argued January 13, 2020 – Decided April 13, 2020
Before Judges Messano, Vernoia and Susswein.
On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-1169-19, and Morris County, Docket No. L-0347-19.
William L. Ryan argued the cause for appellants (Archer & Greiner, PC, attorneys; William L. Ryan, Daniel J. DeFiglio, and Amy E. Pearl, on the briefs). Lee M. Tesser and Gina A. Makoujy argued the cause for respondent (Tesser & Cohen, attorneys; Lee M. Tesser and Gina A. Makoujy, on the briefs).
PER CURIAM
These appeals were argued back-to-back, and we consolidate them now in
a single opinion because they involve the same parties and present common legal
issues. Defendant, The Pike Company, Inc. (Pike), a New York general
contractor, entered into contracts (the Prime Contracts) with Wegmans Food
Markets, Inc. (Wegmans), to construct two supermarkets in Montvale and
Hanover, New Jersey. Pike, in turn, executed a master subcontractor agreement
(MSA) with plaintiff, SAL Electric Company, Inc. (SAL), to perform electrical
work at both locations. Pike and SAL executed a "[w]ork [o]rder" for each
location under the terms of the MSA.
The Prime Contract included a forum selection clause by which Pike and
Wegmans "consent[ed], with respect to any litigation arising out of or related to
[the Prime Contract], to the exclusive jurisdiction and venue of the Supreme
Court, Monroe County, New York[,] or the United Federal District Court in
Rochester, New York." Pike and Wegmans agreed to follow the dispute
resolution procedures thereafter outlined in the Prime Contract prior to
commencing any litigation.
A-5657-18T1 2 The MSA contained no forum selection clause. However, it required all
disputes to be submitted first to mediation in Monroe County, New York, and,
failing resolution, all disputes were to be "settled according to the dispute s
resolution procedures in the Prime Contract."
As we discuss more fully below, SAL claimed payments were due and
owing under the MSA, and it eventually filed construction liens against both
projects and complaints in two vicinages alleging, among other causes of action,
breach of contract, breach of the implied covenant of good faith and fair dealing,
unjust enrichment, and claims under the Construction Lien Law (CLL), N.J.S.A.
2A:44A-1 to -38, and the Prompt Payment Act (PPA), N.J.S.A. 2A:30A-1 to -2.
Representing all defendants, 1 Pike moved to dismiss the complaints, arguing the
Law Division lacked subject matter jurisdiction because the forum selection
clause in the Prime Contracts required any litigation be brought in New York
state. The two Law Division judges took different paths, but each denied Pike's
motion.
In whole or in part, both judges relied upon N.J.S.A. 2A:30A-2(f), that
provision of the PPA which states, "In any civil action brought to collect
1 The complaints also named Wegmans as a defendant, and The Fidelity and Deposit Company of Maryland, which issued a surety bond to Pike, as a defendant. A-5657-18T1 3 payments pursuant to this section, the action shall be conducted inside of this
State and the prevailing party shall be awarded reasonable costs and attorney
fees." (emphasis added). And, relying on a recently issued unpublished opinion
of this court, both judges concluded that because N.J.S.A. 2A:30A-2(f) reflected
the strong public policy of this state, the forum selection provision in the Prime
Contracts violated that public policy and was unenforceable. We granted Pike's
motions for leave to appeal.
I.
Relevant Provisions of the Prime Contracts and MSA
Article 13 of the Prime Contracts, entitled "General Provisions[,]" said:
13.1 GOVERNING LAW, JURISDICTION AND VENUE
13.1.1 The Contract shall be governed by the internal laws of the State of New York. Each party hereto consents, with respect to any litigation arising out of or related to this Agreement, to the exclusive jurisdiction and venue of the Supreme Court, Monroe County, New York[,] or the United States Federal District Court in Rochester, New York.
....
A-5657-18T1 4 13.7 DISPUTES
13.7.1 If [Pike] disagrees with a determination of [Wegmans] or if, in the opinion of either party, the other party has failed to comply with the requirements of the Contract Documents, then the dispute resolution procedure set forth herein shall be invoked. Exhaustion of these procedures is a precondition to any lawsuit or other legal remedy by [Pike].
13.7.2 In order to expedite the prompt resolution of any disputes which may arise hereunder, the parties agree that the dispute resolution procedure set forth herein will be employed by both parties prior to either party availing itself of any legal remedies . . . against the other party.
The next five subsections described the dispute resolution procedure. Wegmans
and Pike agreed to submit the dispute to each side's "First Level" representative,
identified on a separate exhibit, and, failing agreement, either side could
"escalat[e] the dispute to the 'Second Level' representatives[,]" again identified
on a separate exhibit. In the event the dispute was not resolved at the Second
Level, "then the determination of [Wegmans'] Second Level representative
[was] conclusive, final and binding on the parties." Lastly, if Pike remained
unsatisfied, it could "commence a lawsuit in one of the courts named in
Paragraph 13.1.1 . . . it being understood that review by such court shall be
A-5657-18T1 5 limited to the question of whether . . . the determination of [Wegmans'] Second
Level representative [was] arbitrary, capricious or so grossly erroneous as to
evidence bad faith."
Subsection 1.8.1 of the MSA between SAL and Pike listed the Prime
Contract as one of the "Subcontract Documents[.]"2 Article 11 of the MSA,
entitled "DISPUTES RESOLUTION PROCESS[,]" provided:
11.1 Initial Dispute Resolution If a dispute arises out of or relates to this [MSA] . . . , the parties shall endeavor to settle the dispute first through direct discussions between corporate officers . . . . If the dispute cannot be resolved through direct discussions, the parties shall participate in mediation under the . . . Rules of the American Arbitration Association [(AAA)] before recourse to any other form of binding dispute resolution. The location of the mediation shall be Monroe County[,] New York. Once a party files a request for mediation with the other . . . and with the [AAA], the parties agree to commence such mediation within thirty (30) calendar days . . . . Either party may terminate the mediation at any time after the first
2 SAL contended in the Law Division, and has reiterated the claim before us, that it was unaware of the terms of the Prime Contracts when it executed the MSA or the respective work orders. On the record before us, we find no merit to the contention. R. 2:11-3(e)(1)(E). Pike and Wegmans entered into the Hanover Prime Contract in April 2016, and the Prime Contract for Montvale in September 2016. Pike and SAL executed the MSA in May 2016, and the work order for the Hanover project the same day, and they executed the Montvale work order in October 2016. The motion judges did not make any finding as to whether SAL's representative received and reviewed the terms of the Prime Contract for Hanover before executing the MSA and work order, and the issue is unimportant to our resolution of the appeals. A-5657-18T1 6 session . . . . Engaging in mediation is a condition precedent to any other form of binding dispute resolution.
11.2 Any controversy or claim not resolved through mediation shall be settled according to the disputes resolution procedures in the Prime Contract.
The following subsections, 11.3 and 11.4, dealt with disputes that involved the
work of any subcontractor. They permitted SAL to participate in "the assertion
or defense" of its work in the procedure outlined under the Prime Contract, and
obligated Pike to pay SAL its share of any recovery it obtained against
Wegmans, or have SAL pay its share of any award Wegmans obtained against
Pike that involved SAL's work. The next subsection provided:
11.5 If the Prime Contract does not provide a disputes resolution procedure, or if, in the sole judgment of [Pike], the . . . dispute . . . is principally between [Pike] and [SAL,] and is not governed by Subparagraphs 11.1 through 11.4, then such . . . dispute . . . shall be determined as . . . provided in Paragraph 11.9.
11.6 Completion of the dispute resolution procedure shall be a condition precedent to the right of [SAL] to commence . . . any legal action against [Pike].
11.9 All . . . disputes, and other matters in question between [SAL] and [Pike] arising out of or related to the [MSA] . . . , except as specifically governed by the foregoing provisions . . . shall be decided by arbitration in accordance with the . . . Rules of the American
A-5657-18T1 7 Arbitration Association . . . at the sole option of [Pike]. If a demand for arbitration is filed by [SAL], [Pike] shall advise [SAL], within thirty (30) days . . . if [it] exercises the option to arbitrate or rejects arbitration[,] such election, once made, shall be binding. . . . This agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction thereof. The award rendered by the arbitrators shall be final and judgment may be entered upon it in accordance with the applicable law in any court having jurisdiction thereof.
Procedural History Relevant to Both Appeals
The commonality of the motion record before each judge allows us to
condense the procedural history of the appeals. Pike's motions to dismiss
alleged the forum selection provision of the Prime Contracts, incorporated by
reference into the MSA, deprived the Law Division of subject matter
jurisdiction. R. 4:6-2(e). Each motion was supported by a certification from
Pike's vice-president that essentially only identified copies of the applicable
Prime Contract and the MSA and the respective work order for that project.
In opposing the motions, SAL provided certifications from its president
and CEO, as well as additional documentary information. Citing overdue
payments exceeding $2.7 million, SAL filed a construction lien against the
Hanover project in May 2018, and, citing more than $1.8 million in overdue
payments, it filed a similar lien against the Montvale project in June. SAL's
A-5657-18T1 8 president cited the "confusing, ambiguous and unclear" dispute resolution
provisions in the MSA. In a September 2018 letter citing both projects, SAL's
counsel requested Pike "advise . . . as to the manner" it wished to proceed under
the MSA. He stated that if no response was received in four days, "SAL w[ould]
presume that Pike has elected to arbitrate, and . . . file a demand for arbitration
with the [AAA]."
On October 22, 2018, plaintiff paid the necessary filing fee and requested
AAA mediation as to its claims for both projects. The record reveals that in
November, AAA noted "the parties [were] still reviewing the locale for the
mediation[.]" Apparently, hearing no objection from Pike to mediating in New
Jersey, SAL's counsel contacted AAA for a list of New Jersey-based mediators.
In late November, SAL's counsel forwarded its ranking of those mediators
supplied by AAA; having not heard from Pike, AAA asked if it agreed to "any
of the . . . mediators." AAA followed with an email on December 13, 2018,
indicating it still had not received any response from Pike's counsel. On
December 14, SAL's counsel notified AAA that it was taking Pike's failure to
respond as an "elect[ion] to waive mediation."
Pike's counsel sent an email to SAL's attorney on December 17, noting the
press of his schedule and his intention to "confer . . . regarding scheduling and
A-5657-18T1 9 location of the mediation later" that day. Pike's counsel intended to "get the
mediation on track without further delay." SAL's counsel responded, indicating
a "willing[ness] to mediate if it can be scheduled to take place by the first week
in January. If not, SAL w[ould] deem the mediation process to have been
waived[] and move forward accordingly." A December 26 email from Pike's
counsel to AAA indicated an agreement to mediate in Rochester and asked for
a list of possible mediators in that area. Although AAA supplied a list, SAL
responded with its choices, and AAA asked on two more occasions for Pike's
selection, the record lacks any response. SAL's counsel sent written notification
to AAA and to Pike's counsel that it deemed the lack of response a waiver of
mediation. AAA closed its case file. On February 22 and 25, 2019, SAL filed
first amended complaints in Morris and Bergen County, respectively.
A-5657-18
Following oral arguments on Pike's motion to dismiss in the Bergen
County litigation, the judge granted the motion in part. In a thorough written
opinion, the judge noted the "general rule in New Jersey . . . that 'forum selection
clauses are prima facie valid and enforceable.'" (quoting Caspi v. Microsoft
Network, LLC, 323 N.J. Super 118, 122 (App. Div. 1999)). She found that
"[p]laintiff d[id] not dispute the existence of the forum selection clause or its
A-5657-18T1 10 incorporation into the subcontract."3 The judge concluded the forum selection
clause was clear, unambiguous and enforceable. She did not, however, dismiss
SAL's Construction Lien Law cause of action, noting the statute required venue
lay in Bergen County.
Plaintiff filed a motion for reconsideration relying solely on an
unpublished opinion decided shortly before oral argument on Pike's motion,
ERCO Interior Sys., Inc. v. Nat'l Commercial Builders, Inc., No. A-4640-17
(App. Div. May 7, 2019). 4 There, our colleagues considered a forum selection
clause in a subcontractor agreement between a New Jersey subcontractor and a
Kansas general contractor for a New Jersey project that expressly required all
litigation arising from the agreement to be filed in Kansas. In a well-reasoned
3 A transcript of the oral argument is not included in the record, but it would appear from SAL's submissions in opposition to the motion to dismiss, it did contest incorporation of the forum selection clause by arguing the terms of the documents were ambiguous and confusing. SAL also argued that PIKE waived enforcement of the forum selection and disputes resolution provisions by failing to respond appropriately to the mediation process. The judge did not addr ess the waiver argument, and it is not asserted by SAL on appeal. We nevertheless described the documents contained in the motion record regarding SAL's efforts to arrange for the mediation for another reason, which we describe below. 4 Although citing an unpublished opinion is generally forbidden, we do so here "to provide a full understanding of the issues presented[.]" Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121, 126 n.4 (App. Div. 2012), aff'd, 220 N.J. 544 (2015). A-5657-18T1 11 opinion, the panel concluded the forum selection provision was unenforceable
because it violated the public policy undergirding N.J.S.A. 2A:30A-2(f). Id. at
5–6.
After oral argument, the judge granted SAL's reconsideration motion. In
her written statement of reasons, the judge noted that unlike the subcontractor
agreement in ERCO, the MSA did not include a forum selection clause, and the
Prime Contract was not attached to or included as an addendum to the MSA.
Instead, the MSA only listed the Prime Contract by reference. Reasoning that
"where there is no forum selection clause specifically contracted for as a
provision in the subcontract, the public policy favoring litigation of these claims
in New Jersey is stronger[,]" and the MSA's "general references to the terms of
the [P]rime [C]ontract, not attached or otherwise provided, [are] not sufficient."
We granted Pike leave to appeal from the judge's order.
A-5658-18
The ERCO decision was issued between the filing of Pike's motion to
dismiss and oral argument before the judge in the Morris County litigation. In
a thorough written statement of reasons, the judge rejected Pike's argument that
the parties "contract[ed] around" the PPA. After considering ERCO and the
language and legislative history of the statute, the judge concluded it expressed
A-5657-18T1 12 a clear public policy that "dispute resolution and civil actions arising out of
construction contracts should proceed in this State[,]" and denied Pike's motion.
It appeals from that order.
II.
Pike presents the same arguments in both appeals. It contends the PPA
does not express a "[s]trong" public policy that deprived the parties of their right
to contract through "the [c]lear and [u]nambiguous [f]orum[ s]election
[p]rovision" of the [MSA]. It argues that the PPA itself permits the parties to
contract around its provisions. Alternatively, Pike asserts that if we conclude
the PPA prohibits the forum selection clause in this case, we should apply our
holding prospectively.
SAL posits the same arguments in its opposition to both appeals. It
contends that the dispute resolution provisions of the MSA were "ambiguous"
and did not clearly incorporate the forum selection provision in the Prime
Contracts. SAL also argues that the PPA evinces a strong public policy of New
Jersey and trumps enforceability of the forum selection provision. Lastly, SAL
contends that the PPA, the CLL, and the entire controversy doctrine (ECD)
compel that the litigation proceed in New Jersey.
A-5657-18T1 13 Having considered these arguments, we affirm for reasons different than
those expressed by the two motion judges. See Hayes v. Delamotte, 231 N.J.
373, 387 (2018) ("[I]t is well-settled that appeals are taken from orders and
judgments and not from opinions, oral decisions, informal written decisions, or
reasons given for the ultimate conclusion." (quoting Do-Wop Corp. v. City of
Rahway, 168 N.J. 191, 199 (2001))).
We recognize some landmarks that guide our review. "A court lacks
subject matter jurisdiction over a case if it is brought in an ineligible forum."
Hoffman v. Supplements Togo Mgmt., LLC, 419 N.J. Super. 596, 606 (App.
Div. 2011) (citing Peper v. Princeton Univ. Bd. of Trs., 77 N.J. 55, 65, (1978)).
"In particular, a plaintiff cannot file suit in a court if he or she has entered into
an enforceable agreement to bring such claims in another forum." Ibid. (citing
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593–94 (1991)).
The enforceability of a forum selection clause presents a legal issue,
which we examine de novo without deference to the motion court's reasoning.
Id. at 605; see also Salovaara v. Jackson Nat'l Life Ins. Co., 246 F.3d 289, 295
(3d Cir. 2001) (explaining the "interpretation and enforcement of a forum
selection clause is a matter of law" subject to plenary review). "As a general
rule, a forum selection clause is enforceable unless it is the result of 'fraud,
A-5657-18T1 14 undue influence, or overweening bargaining power,' is 'unreasonable,' or
violates a 'strong public policy.'" Paradise Enters., Ltd. v. Sapir, 356 N.J. Super.
96, 103 (App. Div. 2002) (quoting M/S Bremen v. Zapata Off-Shore Co., 407
U.S. 1, 10–15 (1972)).
Here, relying on ERCO's rationale, the motion judge in the Morris County
litigation concluded the forum selection provision in the Prime Contract violated
the strong public policy of New Jersey as expressed in the PPA. The Bergen
County judge also concluded that the forum selection provision violated the
public policy expressed by the PPA, but she reached that determination by
relying on the lack of any forum selection clause in the MSA itself, and Pike's
failure to include the Prime Contract as an exhibit or addendum to the MSA.
We discern this latter aspect of the judge's decision reflects her conclusion that
the forum selection clause was not properly incorporated into the MSA.
We need not determine whether N.J.S.A. 2A:30A-2(f) is a such strong
statement of public policy that sophisticated business parties, like SAL and
PIKE, may not contract it away. In other words, we do not decide whether every
contract "for the improvement of structures" in New Jersey, see ibid., that
includes a foreign forum selection clause is per se unenforceable whenever one
party objects. Our hesitation in deciding that issue should not be taken
A-5657-18T1 15 necessarily as our disagreement with the decision in ERCO, which presented
different facts than those present in these two appeals.
Rather, we agree with SAL's other contention, i.e., that the terms of the
MSA and Prime Contracts were so ambiguous that there was never mutual assent
to the forum selection provision. We therefore refuse to enforce it against SAL.
"When a trial court's decision turns on its construction of a contract,
appellate review of that determination is de novo." Manahawkin Convalescent
v. O'Neill, 217 N.J. 99, 115 (2014) (citing Kieffer v. Best Buy, 205 N.J. 213,
222 (2011)). "Appellate courts give 'no special deference to the trial court's
interpretation and look at the contract with fresh eyes.'" Ibid. (quoting Kieffer,
205 N.J. at 223).
"As a general principle of contract law, there must be a meeting of the
minds for an agreement to exist before enforcement is considered." Kernahan
v. Home Warranty Adm'r of Fla., Inc., 236 N.J. 301, 319 (2019). When "the
cumulative effect of the many inconsistencies and unclear passages" in a series
of documents are apparent, we have not hesitated to find a lack of mutual assent.
NAACP of Camden Cty. East v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 438
(App. Div. 2011). Ambiguity arises "if the terms of the contract are susceptible
to at least two reasonable alternative interpretations." Cooper River Plaza East,
A-5657-18T1 16 LLC v. Briad Grp., 359 N.J. Super. 518, 528 (App. Div. 2003) (quoting Nester
v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997)). It is for the court to
decide as a matter of law whether the terms of a contract are clear or ambiguous.
Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 191 (App. Div. 2002) (citing
Nester, 301 N.J. Super. at 210).
The MSA and the work orders, the only agreements to which SAL was a
party and signatory, did not contain a forum selection clause. Indeed, the only
provision in those documents that discussed venue at all was section 11.1 of the
MSA, and that required only that SAL first submit its dispute to mediation in
Monroe County, New York. We set forth the evidence in the motion record to
demonstrate not that Pike waived mediation, but rather to show that SAL
undisputedly repeatedly attempted to comply with the provision without
success. The evidence also demonstrates the confusion as to what was to occur
in the absence of any mediation.
Under section 11.2 of the MSA, in the event of a failed mediation, "[a]ny
controversy or claim" was to "be settled according to the disputes resolution
procedures in the Prime Contract." The disputes resolution procedures in the
Prime Contracts were contained in Article 13, the agreement's "General
Provisions." The forum selection provision was contained in Article 13.1,
A-5657-18T1 17 entitled "Governing Law, Jurisdiction and Venue." It did not describe the
disputes resolution process at all. A separate article, Article 13.7, entitled
"Disputes[,]" set forth the actual procedure.
Moreover, the dispute resolution procedure as described in the Prime
Contracts had little to do with resolving any dispute between SAL, a
subcontractor, and Pike, the general contractor. Under Article 13.7.1, the
procedure only became operative "[i]f [Pike] disagree[d] with a determination
of [Wegmans] or if, in the opinion of either party, the other party ha[d] failed to
comply with the requirements of the Contract Documents[.]" The five
subsections in Article 13.7.2 described the actual process, setting forth informal
attempts at resolution by Pike's and Wegmans "First Level" and "Second Level"
representatives, and culminating in a "conclusive, final and binding" decision
by Wegmans' representative. Nothing in the procedure describes how SAL
could initiate the dispute resolution process of the Prime Contracts without
Pike's agreement to present the claim to Wegmans.
The terms of the MSA becoming even more confusing thereafter. Under
Article 11.5, "if, in the sole judgment of [Pike], the . . . dispute . . . is principally
between [Pike] and [SAL,] . . . then such . . . dispute . . . shall be determined as
. . . provided in Paragraph 11.9. Paragraph 11.6 made "[c]ompletion of the
A-5657-18T1 18 dispute resolution procedure," presumably, the dispute resolution procedure in
the MSA, "a condition precedent to the right of [SAL] to commence . . . any
legal action against [Pike]." Notably, it contains no forum selection clause.
Finally, under Paragraph 11.9, "except as specifically governed by the foregoing
provisions," all disputes between SAL and Pike must "be decided by arbitration
in accordance with the . . . Rules of the American Arbitration Association . . . at
the sole option of [Pike]." The arbitration provision does not contain a forum
selection clause, nor does it describe SAL's remedy if Pike unilaterally refused
to arbitrate any dispute.
In short, we conclude that the MSA's incorporation by reference of the
Prime Contracts did not include the forum selection provision, because the
forum selection provision was in a separate section of the Prime Contracts,
distinct from the disputes resolution provisions referenced by the MSA and
allegedly incorporated into the MSA. Moreover, even if our assessment in this
regard is incorrect, the ambiguity and confusion of the documents' terms as to
how and in which forum SAL could resolve any dispute between it and Pike is
unassailable. Indeed, nowhere does Pike suggest the proper interpretation of the
provisions so as to provide SAL with a remedy. Instead, Pike simply relies on
A-5657-18T1 19 the forum selection clause of the MSA as a talisman that it contends compels
dismissal of the complaints.
We hasten to add that our decision is limited only to the unenforceability
of the forum selection provision under the particular facts presented by these
appeals.
Affirmed in both appeals.
A-5657-18T1 20