Court Opinion

ID: 2754027
Source: CourtListenerOpinion
Date Created: 2014-11-21 15:18:54.377447+00
Date Added: 2024-06-11T11:26:19.999816
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                APPROVAL OF THE APPELLATE DIVISION

                                    SUPERIOR COURT OF NEW JERSEY
                                    APPELLATE DIVISION
                                    DOCKET NO. A-3022-13T4

CHRISTINE A. DISPENZIERE,
DANIEL SANTO PIETRO, SUBRATA
CHOUDHURI, DAISY GONZALEZ,
MICHAEL & ELLA SHAYKEVICH,
ERIC & MICHAEL HORN, JOSEPH            APPROVED FOR PUBLICATION
& LINDA HORN, NEIL & LAUREN
HUNTER, JOHN & NANCY ENG,                 November 21, 2014
RICHARD PAVLOWSKI, CHARLES
YAREMKO, RAO & VASUNDLARA                APPELLATE DIVISION
DESU, ROY & GLORYA MATTHEWS,
HERBERT LEARY and NICHOLAS JULIANO,

      Plaintiffs-Appellants,

and

INGRID ARMSTRONG, TRACY JORDAN,
BART & BIANCA KWIATKOWSKI,
DAVID MAYS, SUDHANSHU AND GEETI
SHUKLA, JENNIFER AND FRANCISCO
CHACON, and JAMES AND MARGARET
FLYNN,

      Plaintiffs,

v.

KUSHNER COMPANIES, WESTMINSTER
COMMUNITIES, WESTMINSTER REALTY,
LLC, THE LANDINGS AT HARBORSIDE,
LLC, THE LANDINGS, INC., LANDINGS
BUILDING 136A, LLC, LANDINGS
BUILDING 136B, LLC, and BUILDER
MARKETING SERVICES CO., INC.,

      Defendants-Respondents,

and
INTEGRA MANAGEMENT CORP., and THE
LANDINGS AT HARBORSIDE MASTER
ASSOCIATION, INC.,

     Defendants.
_______________________________________

           Argued November 6, 2014 - Decided November 21, 2014

           Before Judges Waugh, Maven, and Carroll.

           On appeal from the Superior Court of New
           Jersey, Law Division, Middlesex County,
           Docket No. L-7384-12.

           Patrick J.        Whalen    argued      the   cause   for
           appellants.

           Paul Bishop argued the cause for respondents
           (Brach Eichler LLC, attorneys; Mr. Bishop,
           Charles X. Gormally and Thomas Kamvosoulis,
           on the brief).

       The opinion of the court was delivered by

CARROLL, J.A.D.

       In Atalese v. United States Legal Services Group, L.P., 219
N.J. 430,    446   (2014),    our   Supreme     Court    recently     held     a

contractual      arbitration      provision     unenforceable       because     it

lacked the necessary "clear and unambiguous language that the

plaintiff is waiving her right to sue or go to court to secure

relief."       In the present appeal, because we conclude that the

arbitration provision upon which defendants rely suffers from

the same infirmity, we reverse the trial court's February 11,

2014   order    compelling      plaintiffs    to   submit   their      claims   to

arbitration.

                                       2                                 A-3022-13T4
                                                I.

         We briefly summarize the most salient facts.                            Plaintiffs

are twenty-two of thirty-three purchasers of condominium units

in   a    real     estate     development           in   Perth    Amboy   known     as   "The

Landings at Harborside" (The Landings).                      As currently comprised,

The Landings consists of two buildings – the "Admiral" and the

"Bayview."         These plaintiffs purchased condominium units in the

Admiral      during         2004    through         2007.        The    remaining     eleven

plaintiffs purchased condominium units in the Bayview and are

not part of this appeal.

         According to plaintiffs' first amended complaint, filed on

February 1, 2013, the Perth Amboy Redevelopment Agency (PARA)

adopted a resolution in August 2000, authorizing the City of

Perth      Amboy       to   enter    into       a    redevelopment        agreement      with

defendant        The    Landings     at   Harborside,            LLC.     The    resolution

provided that the development was to be known as "The Landings,"

and would consist of, among other things: (1) "190,000 square

feet of retail space"; (2) "2094 [u]nits of residential housing

consisting of 98 townhomes, 102 row houses, and almost 1900 low-

rise and mid-rise [c]ondominium homes"; (3) "[a] hotel"; (4)

"2569      parking          spaces";      (5)        "[a]    [c]ultural         [c]ommunity

[c]enter"; (6) "[a] public waterfront walkway"; and (7) "Gateway

Festival Park and Founders Park."

                                                3                                   A-3022-13T4
      In September 2000, Perth Amboy entered into a redevelopment

agreement with The Landings at Harborside, LLC, designating it

as   the   redeveloper.       The   project   was   allegedly    marketed   to

plaintiffs and the general public as a $600 million mixed-use

development that, as previously noted, would include townhouses,

condominiums, retail space, and parks.

      In 2004, defendant Landings Building 136A, LLC, issued a

public     offering   statement     (POS)   concerning   the    Admiral,    and

began entering into agreements with plaintiffs for the purchase

of condominium units in that building.              The purchase agreement

used in these transactions is a seventeen-page document.              On the

tenth page, in the same format as the preceding sections of the

agreement, the following language regarding arbitration appears:

             20.   Disputes

                  Any disputes arising in connection with
             this Agreement other than the failure to
             close title or in relation to any amendment
             to this Agreement either before or after
             closing of title (if not otherwise governed
             by   the   provisions  of   the  homeowner's
             warranty provided by Seller at closing) or
             in relation to any of the warranties given
             by Seller pursuant to Paragraphs 21(B),
             21(C), 21(D), 21(E), 21(G), 21(H), 21(I) and
             21(J) of this Agreement, shall be heard and
             determined by arbitration before a single
             arbitrator   of   the  American  Arbitration
             Association in Morris County, New Jersey.
             The decision of the arbitrator shall be
             final and binding.     Costs of arbitration
             shall be borne equally between the Seller

                                       4                             A-3022-13T4
          and the Purchaser.        This    clause   shall
          survive closing of title.

    In   executing   the   purchase   agreement,   unit   buyers   also

acknowledged receipt of the POS, as indicated in section thirty-

six of the agreement.1     The POS consists of approximately sixty-

six pages, with approximately 450 pages of schedules.        After the

cover page and table of contents, on the fourth page of the

document, there is a stand-alone page with centered, boldface

type, and a capitalized heading with the words "SPECIAL RISKS."

Beneath that, the following paragraph appears:

               Prospective purchasers should take note
          of the fact that Paragraph 20 of the
          Purchase Agreement (Schedule 10 to this
          Public Offering Statement) that purchasers
          will be required to sign should they wish to
          purchase a Unit within the Admiral, a
          Condominium, requires certain disputes which
          a purchaser may have with Landings Building
          136A, L.L.C. be addressed through binding
          arbitration before a single arbitrator of
          the American Arbitration Association in
          Morris County, New Jersey.   The decision of
          any such arbitrator will be final and
          binding and the costs of such arbitration
          will be borne equally by purchaser and
          Landings Building 136A, L.L.C.

1
  In opposition to defendants' motion to compel arbitration,
sixteen of the twenty-two plaintiffs certified, however, that
they had not received the POS when they executed the purchase
agreement.   Instead, the POS was not provided to them until
closing which, they contend, constitutes a violation of the New
Jersey Consumer Fraud Act.

                                  5                           A-3022-13T4
    Plaintiffs      allege       that   when    they    purchased     their     units,

they were led to believe that they were to be part of "a large

waterfront condominium community, which was to include diverse

amenities,    including      a    Community       Center,     a   Health   Club,       a

waterfront    esplanade,       [three]     parks,      and    other   recreational

improvements, all of which were to be completed by 2012."                             By

2011, however, the project was scaled back, and the developers

presented    PARA   with   a     proposal      that    plaintiffs     maintain      was

"completely inconsistent with the development project promise[d]

to and relied upon by [p]laintiffs who had already purchased

their   [u]nits."      The       revised       proposal   provided     for      rental

housing instead of owner-occupied units and eliminated "nearly

all of the promised amenities."

    Plaintiffs      contend      that    they    reasonably       relied   on    these

promises     and    representations            when    they       purchased      their

condominium units.         They also allege that the buildings were

negligently constructed.            Plaintiffs' first amended complaint

asserts claims for: (1) violations of the New Jersey Consumer

Fraud Act (CFA), N.J.S.A. 56:8-1 to -20; (2) negligence; (3)

rescission; (4) breach of contract; (5) breach of the implied

covenant of good faith and fair dealing; (6) breach of warranty

(7) breach of the implied warranty of habitability; (8) fraud

                                           6                                  A-3022-13T4
and misrepresentation; (9) promissory estoppel; and (10) unjust

enrichment.

       Defendants, who for purposes of this appeal are the project

developer      and   its    affiliated      entities,      moved       to    compel

arbitration     of   the    claims   against      them,    relying      upon      the

arbitration provision in the purchase agreements.                      Plaintiffs

opposed the motion.         Following oral argument, on November 8,

2013, the judge granted defendants' motion.                     A memorializing

order was entered on February 11, 2014.                   Plaintiffs appeal,

arguing, among other things, that the arbitration provision is

unenforceable.

                                      II.

       Orders compelling or denying arbitration are deemed final

and appealable as of right.          R. 2:2-3(a); GMAC v. Pittella, 205
N.J. 572, 587 (2011).        Because the issue of whether the parties

have agreed to arbitrate is a question of law, we review a

judge's decision to compel or deny arbitration de novo.                      Hirsch

v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013).                   Therefore,

"the   trial   court's     interpretation    of    the    law    and   the     legal

consequences that flow from established facts are not entitled

to any special deference."           Waskevich v. Herold Law, P.A., 431
N.J. Super. 293, 297 (App. Div. 2013) (citations and internal

quotation marks omitted).

                                       7                                    A-3022-13T4
    In fairness to the motion judge, when ordering plaintiffs'

claims to arbitration, he did not yet have the guidance provided

by the Court's decision in Atalese, which we find dispositive of

the issues raised in this appeal.                 In Atalese, the plaintiff

entered    into   a   contract   with       defendant   United   States   Legal

Services    Group,    L.P.   (USLSG)        for   debt-adjustment   services.

Atalese, supra, 219 N.J. at 446.             An arbitration clause appeared

on page nine of the twenty-three page contract, which provided:

            Arbitration: In the event of any claim or
            dispute between Client and the USLSG related
            to   this   Agreement    or    related   to  any
            performance of any services related to this
            Agreement, the claim or dispute shall be
            submitted to binding arbitration upon the
            request of either party upon the service of
            that request on the other party.             The
            parties shall agree on a single arbitrator
            to resolve the dispute.       The matter may be
            arbitrated     either     by     the    Judicial
            Arbitration Mediation Service or American
            Arbitration Association, as mutually agreed
            upon by the parties or selected by the party
            filing the claim.     The arbitration shall be
            conducted in either the county in which
            Client resides, or the closest metropolitan
            county.    Any decision of the arbitrator
            shall be final and may be entered into any
            judgment    in   any    court     of   competent
            jurisdiction.        The     conduct    of   the
            arbitration shall be subject to the then
            current rules of the arbitration service.
            The costs of arbitration, excluding legal
            fees, will be split equally or be born[e] by
            the losing party, as determined by the
            arbitrator.    The parties shall bear their
            own legal fees.

            [Id. at 437.]

                                        8                             A-3022-13T4
      After   a    dispute    developed,         plaintiff        filed       a   complaint

alleging   that     defendant       violated      the    CFA      and       the   Truth-in-

Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A.

56:12-14 to -18.           Atalese, supra, 219 N.J. at 436.                       Defendant

moved to compel arbitration based on the arbitration provision

in the contract.           Id. at 437.            The trial court granted the

motion, finding that the arbitration provision gave plaintiff

sufficient notice that any disputes arising out of the agreement

would be subject to arbitration.                Ibid.

      In an unpublished opinion we affirmed the trial court's

order, concluding that "the lack of [an] express reference to a

waiver of the right to sue in court or to arbitration as the

'exclusive'       remedy     [did    not]       bar     []    enforcement           of    the

[arbitration] clause."         Atalese v. U.S. Legal Servs. Grp., L.P.,

No.   A-0654-12     (App.    Div.    Feb.       22,   2013)    (slip        op.    at    7-8).

Despite not finding an explicit waiver of the plaintiff's right

to sue in court, the panel was satisfied that the provision

"clearly   and     unambiguously       stated         that    .   .     .    any    dispute

relating   to     the   underlying     agreement         shall        be     submitted     to

arbitration and the resolution of that forum shall be binding

and final."       Id. at 8-9.       Thus, the clause provided the parties

"reasonable notice of the requirement to arbitrate all claims

under the contract," and that "a reasonable person, by signing

                                            9                                       A-3022-13T4
the agreement, [would have understood] that arbitration [was]

the sole means of resolving contractual disputes."              Id. at 8.

      In reversing, the Court first looked to customary contract

principles    regarding   the   requirement      of    mutual   assent     and    a

meeting of the minds.        Atalese, supra, 219 N.J. at 442.                    It

noted that:

                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.     By its very nature, an
           agreement to arbitrate involves a waiver of
           a party’s right to have her claims and
           defenses litigated in court. But an average
           member of the public may not know -- without
           some explanatory comment -- that arbitration
           is a substitute for the right to have one’s
           claim adjudicated in a court of law.

                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.

           [Id. at 442-43 (citations              and     internal
           quotation marks omitted).]

      The Court explained that: "a clause depriving a citizen of

access to the courts should clearly state its purpose.                   We have

repeatedly stated that [t]he point is to assure that the parties

know that in electing arbitration as the exclusive remedy, they

are   waiving   their   time-honored     right    to    sue."    Id.     at    444

                                    10                                   A-3022-13T4
(alteration in original) (citations and internal quotation marks

omitted).      In sum, "[t]he waiver-of-rights language . . . must

be clear and unambiguous[;] . . . the parties must know that

there    is    a   distinction     between        resolving     a    dispute      in

arbitration and in a judicial forum."             Id. at 445.

       Applying these principles, the Court held the arbitration

agreement      unenforceable     because     it     did   not       contain     "any

explanation     that   plaintiff   [was]     waiving      her   right    to     seek

relief in court for a breach of her statutory rights."                        Id. at

446.    Elaborating, the Court noted:

              The contract states that either party may
              submit any dispute to "binding arbitration,"
              that "[t]he parties shall agree on a single
              arbitrator to resolve the dispute," and that
              the arbitrator's decision "shall be final
              and may be entered into judgment in any
              court of competent jurisdiction."         The
              provision does not explain what arbitration
              is, nor does it indicate how arbitration is
              different from a proceeding in a court of
              law.   Nor is it written in plain language
              that would be clear and understandable to
              the average consumer that she is waiving
              statutory rights.   The clause here has none
              of the language our courts have found
              satisfactory    in   upholding    arbitration
              provisions -- clear and unambiguous language
              that the plaintiff is waiving her right to
              sue or go to court to secure relief. We do
              not suggest that the arbitration clause has
              to identify the specific constitutional or
              statutory   right  guaranteeing   a   citizen
              access to the courts that is waived by
              agreeing to arbitration. But the clause, at
              least in some general and sufficiently broad
              way, must explain that the plaintiff is

                                     11                                   A-3022-13T4
            giving up her right to bring her claims in
            court or have a jury resolve the dispute.
            Mutual assent to an agreement requires
            mutual understanding of its terms.      After
            all,   [a]n  effective   waiver  requires   a
            [consumer] to have full knowledge of [her]
            legal rights before she relinquishes them.

            [Id. at 446-47 (alterations in original)
            (footnote omitted) (internal quotation marks
            omitted).]

      In   the     present    case,       the    arbitration          provision      in    the

purchase agreements is similarly devoid of any language that

would    inform    unit    buyers        such    as   plaintiffs         that    they     were

waiving their right to seek relief in a court of law.                             Following

Atalese,    we     deem    this    lack     of    notice        fatal    to     defendants'

efforts to compel plaintiffs to arbitrate their claims.

      We   recognize       that    the    plaintiff        in    Atalese      only    sought

recovery for violations of statutory rights under the CFA and

the     TCCWNA,    whereas        here     plaintiffs'          claims     involve        both

statutory and common-law causes of action.                           However, we do not

view this as a meaningful distinction, since we do not read

Atalese    as     restricting      its     application          to   statutory       claims.

Rather, the Court was careful to mention both statutory rights

granting citizens access to the courts and the more expansive

right to a jury trial guaranteed by the New Jersey Constitution.

Id.   at   447,     n.1.      See    also       id.   at    435      (noting      that     the

requirement of a clear and unambiguous waiver has not only been

                                            12                                       A-3022-13T4
applied to arbitration provisions waiving a constitutional or

statutory right, but has also been applied to any contractual

waiver-of-rights provision).

    In seeking to enforce the arbitration provision, defendants

point   out    that     many    of    the    plaintiffs        were   represented       by

counsel       when     they      executed          their     purchase      agreements.

Defendants      argue     that       these        purchasers      therefore      had    an

opportunity, through counsel, to fully review the arbitration

provision, object to its inclusion in the purchase agreement,

and terminate the contract if they were not satisfied.                               We do

not find this argument persuasive.

    First, as defendants acknowledge, not all plaintiffs were

represented      by     counsel       in    their     real       estate    transaction.

Equally   important,          respecting          those    who    were,    defendants'

argument runs counter to the weight of persuasive authority.

    In Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282-83

(1993),   the        presence    of    an     arbitration         clause   in    a     home

construction     contract       did    not    preclude       suit     by   a    homeowner

against the builder for construction defects, where it did not

clearly express the election of arbitration as the sole remedy.

Notably, the Court stated:

              When reading a contract, our goal is to
              discover the intention of the parties.
              Generally,  we consider  the   contractual
              terms, the surrounding circumstances, and

                                             13                                  A-3022-13T4
                 the purpose of the contract. Here, we need
                 not go beyond the actual terms of the
                 agreement to find that it did not clearly
                 express the election of arbitration as the
                 sole remedy.   In so finding, we are aware
                 that Marchak was represented by counsel at
                 all relevant times, including when he signed
                 the "Contract for Sale of Real Estate." The
                 problem, therefore, is not inequality of
                 bargaining   power   between   the   parties.
                 Rather, it is something more fundamental:
                 the agreement simply does not state that the
                 buyer elects arbitration as the sole remedy.

                 [Ibid.]

       A    similar    argument      was   also   rejected    in    Garfinkel    v.

Morristown Obstetrics & Gynecology Associates, P.A., 168 N.J.
124,       136    (2001),   where,    in    the   context    of    an   employment

agreement between a physician and a medical practice, the Court

noted:

                 Defendants suggest that the Court should
                 focus predominately on plaintiff's level of
                 sophistication to ensure that he acted of
                 his own volition.       That suggestion is
                 misplaced.     Irrespective of plaintiff's
                 status or the quality of his counsel, the
                 Court must be convinced that he actually
                 intended to waive his statutory rights.  An
                 unambiguous writing is essential to such a
                 determination.

                 [Ibid.]

       Because we find this authority persuasive, if not binding,

we reject defendants' contention that the presence of counsel

during       the    real    estate   transaction     suffices      to   cure    the

inadequacy of the contractual arbitration provision.

                                           14                             A-3022-13T4
    Summarizing,    the   arbitration    provision   in    the   parties'

purchase agreements failed to provide plaintiffs any notice that

they were giving up their right to seek relief in a judicial

forum.    This   deficiency   renders   the   provision   unenforceable.

Consequently, plaintiffs cannot be compelled to arbitrate their

claims.

    Reversed.

                                  15                             A-3022-13T4