Court Opinion

ID: 4186224
Source: CourtListenerOpinion
Date Created: 2017-07-14 12:09:21.467444+00
Date Added: 2024-06-11T14:39:51.174503
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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-5399-15T4

CASTLE REALTY MANAGEMENT,
LLC, ASSIGNEE OF CC DAHMS,
LLC t/a RE/MAX CONNECTION
REALTORS,

        Plaintiff-Respondent,

v.

KEVIN BURBAGE, AUGUSTA
INVESTMENTS, INC. d/b/a
RE/MAX PREFERRED,

     Defendants-Appellants.
_______________________________

              Argued May 4, 2017 – Decided July 13, 2017

              Before Judges Lihotz and Whipple.

              On appeal from Superior Court of New Jersey,
              Chancery Division, Burlington County, Docket
              No. C-118-15.

              Barry W. Rosenberg          argued    the   cause    for
              appellant.

              Christopher C. Fallon, III, argued the cause
              for respondent (Fox Rothschild LLP, attorneys;
              Mr. Fallon, Adam Busler and Nathan M. Buchter,
              on the brief).

PER CURIAM
      Plaintiff, Castle Realty Management, t/a Re/Max Connection

Realtors and defendant, Augusta Investments, t/a Re/Max Preferred

are competing franchisees of Re/Max of New Jersey (Re/Max).                 Kevin

Burbage is a licensed real estate broker who worked for plaintiff

then left to work for defendant.

      Plaintiff filed this ten-count verified complaint and order

to show cause against Burbage and defendant in the                     Chancery

Division, seeking equitable and monetary relief, alleging, among

other things, Burbage violated the non-compete clause of his

employment agreement, and defendant improperly solicited Burbage

and   its   other    employees,   by   engaging     in   unfair    competition.

Defendant moved to dismiss the complaint, arguing plaintiff's

franchise agreement required disputes be submitted to arbitration.

      In a June 14, 2016 order, supported by a written opinion,

Judge Paula T. Dow denied the motion to dismiss.              Judge Dow also

denied defendant's motion for reconsideration.            Plaintiff withdrew

its requests for equitable remedies and the matter was transferred

to the Law Division.

      The   denial    of   defendant's     motion   to   dismiss    and    compel

arbitration, although not a final judgment, is appealable of right.

See R. 2:2-3(a)(3) (An order "denying arbitration shall also be

deemed a final judgment of the court for appeal purposes."); see

also Jaworski v. Ernst & Young US LLP, 441 N.J. Super. 464, 472

                                       2                                  A-5399-15T4
(App. Div.), certif. denied, 223 N.J. 406 (2015).                     On appeal,

defendant seeks reversal, maintaining plaintiff's action must be

dismissed   based   on   the   arbitration       clause    in   its    franchise

agreement with Re/Max.     Defendant asserts the franchise structure

mandates dispute resolution procedures among franchisees, as well

as between franchisee and franchisor, and the contract clause

barring a third-party beneficiary's reliance was not applicable

to this matter.     We are unpersuaded and affirm.

     As franchisees, plaintiff and defendant separately executed

identical   franchise    agreements       with   Re/Max.        The   respective

agreements contain identical provisions regarding the resolution

of disputes arising from the relationship with Re/Max.                   Section

15 contains the following provisions:

            A. DISPUTE RESOLUTION.

            The RE/MAX Dispute Resolution System ("the
            RDRS") is a set of rules and procedures for
            the resolution of disputes, complaints, claims
            or other problems ("Disputes") that arise
            between you and other affiliates of the RE/MAX
            Network of offices and real estate agents.

            B. DISPUTES INVOLVING RE/MAX FRANCHISES, SALES
               ASSOCIATES OR THEIR RE/MAX AFFILIATES.

            In the event of a Dispute involving you, any
            other RE/MAX franchisee, any RE/MAX Sales
            Associate (whether affiliated with your Office
            or any other RE/MAX office) or other RE/MAX
            Affiliate, you agree to submit the Dispute to
            mediation and, if unsuccessful, to binding

                                      3                                  A-5399-15T4
         arbitration using the RDRS, if it is then
         available.

         C.   ALTERNATIVES.

         If the RDRS is not offered or otherwise
         available or the dispute is between RE/MAX
         Regional and Franchise Owner, the Dispute
         shall be submitted to an alternative mediation
         and arbitration system mutually acceptable to
         the parties of the Dispute. If the parties
         cannot agree on an alternative mediation and
         arbitration system, then the Dispute shall be
         submitted   to   the    American   Arbitration
         Association    for     mediation,    and    if
         unsuccessful, for binding arbitration in
         accordance with its Commercial Mediation Rules
         or    Commercial    Arbitration   Rules,    as
         appropriate.

    Section 16 addresses the construction of the agreement and

its enforcement.   Paragraph 16.N. specifically states:

         N.   NO   LIABILITY    TO   OTHERS;   NO   OTHER
              BENEFICIARIES.

         We will not, because of this Agreement or by
         virtue of any approvals, advice or services
         provided to you, be liable to any person or
         legal entity who is not a party to this
         Agreement. You understand that you are not a
         third party beneficiary of any other franchise
         agreement   between   us   and  other   RE/MAX
         franchisees and that you have no independent
         right to enforce the terms of, or require
         performance   under,   any   other   franchise
         agreement.

    When Burbage left his employment with plaintiff and joined

defendant's office, plaintiff initiated this action.        Plaintiff

alleged Burbage breached his employment contract.     Other counts

                                4                             A-5399-15T4
in the complaint alleged Burbage and defendant engaged in slander,

trade    libel,   unfair   competition,     and   conspiracy,       as   well     as

misappropriating trade secrets and confidential information.

       Initial disagreements arose regarding discovery and venue.

Defendant moved to dismiss the complaint and transfer the matter

to the RE/Max Dispute Resolution System, pursuant to paragraph 15

of each parties' franchise agreement.             Following oral argument,

Judge Dow entered an order which temporarily enjoined Burbage from

contacting plaintiff's employees and using its trade secrets.                     On

the return date of the order to show case, the pending motions

were    adjourned   and    the   parties   were   directed   to     proceed       to

mediation, which proved unsuccessful.

       Plaintiff withdrew its request for injunctive relief and

moved to transfer the matter to the Law Division.               Oral argument

on   the   outstanding     motions   was   conducted   on    June    10,     2016.

Construing    the    respective      franchise    agreements,        Judge      Dow

concluded defendant had no right to force plaintiff to an arbitral

forum.     Plaintiff's motion to transfer the action to the Law

Division was granted.       Defendant's motion for reconsideration was

denied.    This appeal ensued.

       We "review the denial of a request for arbitration de novo."

Frumer v. Nat'l Home Ins. Co., 420 N.J. Super. 7, 13 (App. Div.

2011).     Whether parties have contracted to arbitrate as well as

                                       5                                   A-5399-15T4
the applicability and scope of an arbitration agreement is a legal

issue, subject to this court's plenary review.       See Atalese v.

U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 445-46 (2014) ("Our

review of a contract, generally, is de novo, and therefore we owe

no special deference to the trial court's . . . interpretation.

Our approach in construing an arbitration provision of a contract

is governed by the same de novo standard of review.") (citations

omitted), cert. denied, ___ U.S. ___, 135 S. Ct. 2804, 192 L. Ed.
2d 847 (2015).     "Arbitrability . . . whether the parties have

agreed to submit to an arbitrator or a court the authority to

decide whether a dispute is subject to arbitration" is an issue

"for a court to resolve" absent a specific agreement to the

contrary.    Morgan v. Sanford Brown Inst., 225 N.J. 289, 295-96

n.1, (2016).

                 An agreement to arbitrate, like any other
            contract, "must be the product of mutual
            assent,   as   determined    under   customary
            principles of contract law." NAACP of Camden
            Cnty. E. v. Foulke Mgmt., 421 N.J. Super. 404,
            424 (App. Div.), certif. granted, 209 N.J. 96
            (2011), and appeal dismissed, 213 N.J. 47
            (2013).    A legally enforceable agreement
            requires "a meeting of the minds." Morton v.
            4 Orchard Land Trust, 180 N.J. 118, 120
            (2004).     Parties are not required "to
            arbitrate when they have not agreed to do so."
            Volt Info. Scis. v. Bd. of Trs. of Leland
            Stanford Jr. Univ., 489 U.S. 468, 478, 109 S.
            Ct. 1248, 1255, 103 L. Ed. 2d 488, 499 (1989);
            see Garfinkel[ v. Morristown Obstetrics &
            Gynecology Assocs., P.A.], 168 N.J. [124,] 132

                                  6                          A-5399-15T4
          [(2001)] ("'[O]nly those issues may be
          arbitrated which the parties have agreed shall
          be.'" (quoting In re Arbitration Between
          Grover & Universal Underwriters Ins. Co., 80
N.J. 221, 228 (1979))).

               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." Knorr v. Smeal, 178 N.J. 169, 177
          (2003) (citing W. Jersey Title & Guar. Co. v.
          Indus. Trust Co., 27 N.J. 144, 153 (1958)).
          "By its very nature, an agreement to arbitrate
          involves a waiver of a party's right to have
          . . . claims and defenses litigated in court."
          Foulke, supra, 421 N.J. Super. at 425.

          [Atalese, supra, 219 N.J. at 442.]

     Consequently, "a court may invalidate an arbitration clause

'upon such grounds as exist at law or in equity for the revocation

of any contract.'"     Id. at 441. (quoting Martindale v. Sandvik,

Inc., 173 N.J. 76, 85 (2002)).      "Our state-law jurisprudence makes

clear 'that when a contract contains a waiver of rights — whether

in an arbitration or other clause — the waiver must be clearly and

unmistakably established.'"        Morgan, supra, 225 N.J. at 308-09

(quoting Atalese, supra, 219 N.J. at 444).         "No magical language

is required to accomplish a waiver of rights in an arbitration

agreement."   Id. at 309.    Furthermore, "'courts operate under a

presumption   of   arbitrability    in   the   sense   that   an   order    to

arbitrate the particular grievance should not be denied unless it

                                    7                                A-5399-15T4
may be said with positive assurance that the arbitration clause

is not susceptible of an interpretation that covers the asserted

dispute.'" Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super.
515, 518 (App. Div. 2010) (quoting EPIX Holdings Corp. v. Marsh &

McLennan Cos., 410 N.J. Super. 453, 471 (App. Div. 2009)); cf.,

Yale Materials Handling Corp. v. White Storage & Retrieval Sys.,

Inc., 240 N.J. Super. 370, 374 (App. Div. 1990) (A "court may not

rewrite a contract to broaden the scope of arbitration. . . .").

     We turn to the agreement under review.

          In our review of an arbitration agreement, the
          agreement's terms "are to be given their plain
          and ordinary meaning."    M.J. Paquet v. N.J.
          DOT, 171 N.J. 378, 396 (2002). We are tasked
          with discerning "the intent of the parties."
          Kieffer v. Best Buy, 205 N.J. 213, 223 (2011).
          If the meaning of a provision is ambiguous,
          the provision should be construed against the
          drafter because, "as the drafter, it chose the
          words that may be susceptible to different
          meanings." Id. at 224.

          [Roach v. BM Motoring, LLC, 228 N.J. 163, 174
          (2017).]

Specifically, "[i]t is . . . the intent expressed or apparent in

the writing that controls."   Garfinkel, supra, 168 N.J. at 135

(quoting Quigley v KPMG Peat Marwick, LLP, 330 N.J. Super. 252,

266 (App. Div.), certif. denied, 165 N.J. 527 (2000)); see also

Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993) (In

evaluating the existence of an agreement to arbitrate, a court

                                8                          A-5399-15T4
"consider[s] the contractual terms, the surrounding circumstances,

and the purpose of the contract.").

       Here,    plaintiff's    franchise      agreement    with     Re/Max    and

defendant's      agreement     with   Re/Max     each    contain     a   dispute

resolution       clause      requiring       mediation    and      arbitration.

Defendant's      position     is   plaintiff's      agreement      mandates     it

arbitrate not only disputes with its franchisor Re/Max, but also

disputes with any other Re/Max franchisee, including the issues

raised in this matter.        The question is whether defendant can rely

on the clause in plaintiff's agreement with Re/Max to compel it

arbitrate its claims with defendant and Burbage.

       The specific language of paragraph 15.B. states:

           In the event of a Dispute involving you, any
           other RE/MAX franchisee, any RE/MAX Sales
           Associate (whether affiliated with your Office
           or any other RE/MAX office) or other RE/MAX
           Affiliate, you agree to submit the Dispute to
           mediation and, if unsuccessful, to binding
           arbitration using the RDRS, if it is then
           available.

Logically, this clause appears to support defendant's position

that   Re/Max    intended     to   require    all   franchisees     to   resolve

disagreements using arbitration.             However, the clause does not

stand alone.      It is followed by paragraph 16.N., which suggests

such a possibility is foreclosed by stating: "You understand that

you are not a third party beneficiary of any other franchise

                                         9                               A-5399-15T4
agreement between us and other Re/Max franchisees and that you

have no independent right to enforce the terms of, or require

performance under, any other franchise agreement."

      Our Supreme Court mandates arbitration clauses must clearly

show the parties to the agreement understand and agree to waive

their right to proceed before our courts.           Atalese, supra, 219
N.J. at 442-43 ("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.'") (quoting Foulke, supra, 421 N.J. Super. at

425).    Here, an ambiguity exists in the scope of matters covered

by paragraphs 15 and 16. In such an instance, the agreement should

be "strictly construed," which would reject the position taken by

defendant    that     plaintiff   unequivocally   agreed   to   submit    to

arbitration its claims against defendant and Burbage.           See Roach,

supra, 228 N.J. at 179.

      Consequently, we must reject defendant's argument suggesting

the     third-party    beneficiary    clause   applies     to   non-Re/Max

franchisees making it inapplicable to this dispute.             The appeal

does not present, and we do not comment on Re/Max's rights to

compel plaintiff's or plaintiff's obligations to its franchisor;

notably Re/Max is not a party to this litigation.           "The standard

                                     10                            A-5399-15T4
applied by courts in determining third-party beneficiary status

is 'whether the contracting parties intended that a third party

should receive a benefit which might be enforced in the courts.'"

Reider Cmtys. v. N. Brunswick, 227 N.J. Super. 214, 222 (App. Div.

1988) (quoting Brooklawn v. Brooklawn Hous. Corp., 124 N.J.L. 73,

77 (E. & A. 1940)), certif. denied, 113 N.J. 638 (1988).                 "[T]he

intention of contracting parties to benefit an unnamed third party

must    be   garnered   from   an   examination   of   the   contract    and    a

consideration of the circumstances attendant to its execution."

Ibid.

       Accordingly, our interpretation of paragraph 16.N. excludes

enforcement of the agreement by non-parties to that contract, and

only "a person for whose benefit a contract is made may sue on the

contract in any court."        Id. at 221.

       We affirm the June 14, 2016 order as well as the July 26,

2016 order denying reconsideration.          We remand the matter to the

Law Division for further disposition.

       Affirmed.

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