Court Opinion

ID: 4640888
Source: CourtListenerOpinion
Date Created: 2020-12-09 15:09:32.992641+00
Date Added: 2024-06-11T08:00:18.022134
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NOT FOR PUBLICATION WITHOUT THE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-4222-19T4

NAVIGATORS SPECIALTY
INSURANCE COMPANY, as
subrogee of AJD
CONSTRUCTION CO., INC.,

          Plaintiff-Appellant,

v.

JANGHO CURTAIN WALL
AMERICAS CO., LTD.,
SAFEGATE SAFETY
SOLUTIONS, AIG PROPERTY
CASUALTY, INC., and THE
TRAVELERS COMPANY, INC.,

          Defendants,

and

BLADE CONTRACTING, INC.,

     Defendant-Respondent,
______________________________

                   Submitted November 16, 2020 – Decided December 9, 2020

                   Before Judges Messano and Hoffman.
             On appeal from the Superior Court of New Jersey, Law
             Division, Bergen County, Docket No. L-8246-19.

             Koster, Brady & Nagler, LLP, attorneys for appellant
             (Joseph F. Herbert, III, on the briefs).

             Langsam Stevens Silver & Hollaender, LLP, attorneys
             for respondent (Charles M. Adams, on the brief).

PER CURIAM

      Plaintiff Navigators Specialty Insurance Company issued a commercial

general liability insurance policy to AJD Construction Co., Inc. (AJD), the

general contractor for a construction project in Jersey City. AJD hired Jangho

Curtain Wall America Companies, Ltd. (Jangho) as a subcontractor on the

project, and one of Jangho's employees alleged he was injured at the worksite

when he stepped on broken cinder blocks. AJD settled the suit brought by

Jangho's employee, and, as AJD's subrogee, plaintiff filed a complaint naming

as defendants Jangho, its alleged insurers, the OSHA workplace supervisor hired

by AJD, and Blade Contracting Inc. (Blade), the masonry subcontractor AJD

hired for the project.

      As to Blade, the complaint: sought contractual indemnification (count

three); alleged Blade breached the subcontract by failing to procure the required

insurance (count five); and, sought declaratory relief for reimbursement of

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defense costs and indemnification resulting from the underlying settlement

(count six).1

      After filing an answer, crossclaims and counterclaims, Blade moved to

dismiss these three counts, alleging lack of subject matter jurisdiction. Blade

argued the contract with AJD contained alternate dispute resolution procedures

that required mandatory mediation and arbitration of any claim arising out of

the agreement.

      Blade's motion was supported by two copies of the contract, which was a

form agreement that contained the following language:

                ARTICLE 6    MEDIATION             AND      BINDING
                DISPUTE RESOLUTION

                § 6.1 MEDIATION

                § 6.1.1 Any claim arising out of or related to this
                Subcontract . . . shall be subject to mediation as a
                condition precedent to binding dispute resolution.

                      ....

                § 6.2 BINDING DISPUTE RESOLUTION
                For any claim subject to, but not resolved by mediation
                pursuant to Section 6.1, the method of binding dispute
                resolution shall be as follows:

1
   Plaintiff also sought contribution under the Joint Tortfeasors Contribution
Law, N.J.S.A. 2A:53A-1 to -5, and the Comparative Negligence Act, N.J.S.A.
2A:15–5.1 to -5.8 (count one); common law indemnification (count two); and
also alleged Blade breached the implied warranty of requisite skill (count four),
and was negligent (count seven).
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                                       3
(Check the appropriate box. If the Contractor and
Subcontractor do not select a method of binding dispute
resolution below, or do not subsequently agree in
writing to a binding dispute resolution method other
than litigation, claims will be resolved by litigation in
a court of competent jurisdiction.)

      [ ] Arbitration pursuant to Section 6.3 of this
      Agreement

      [ ] Litigation in a court of competent jurisdiction

      [ ] Other: (Specify)

§ 6.3 ARBITRATION

§ 6.3.1 If the Contractor and Subcontractor have
selected arbitration as the method of binding dispute
resolution in Section 6.2, any claim subject to, but not
resolved by, mediation shall be subject to arbitration
which, unless the parties mutually agree otherwise,
shall be administered by the American Arbitration
Association in accordance with its Construction
Industry Arbitration Rules in effect on the date of the
Agreement.

      ....

§ 6.3.6 This agreement to arbitrate and any other
written agreement to arbitrate with an additional
persons or persons referred to herein shall be
specifically enforceable under applicable law in any
court having jurisdiction thereof. The award rendered
by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with
applicable law in any court having jurisdiction thereof.

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                             4
      In the contract Blade contended was the final version:          1) the box

indicating the parties selected arbitration was checked; in the other version, no

box was checked; 2) the name and title of Blade's secretary/treasurer was hand-

printed below his signature; no printed name appeared under the signature in the

other version; and 3) the typed-in amount of the subcontract was initialed by

representatives of both parties; only AJD's representative's initials appeared in

the other version. Blade also included an exchange between its counsel and

plaintiff's counsel, in which Blade contended the "metadata" for the two PDF

versions of the contract indicated Blade's version was created earlier than the

one supplied by AJD's counsel.

      In opposing the motion, plaintiff supplied a certification from AJD's

project supervisor, Jayanti Patel. Patel stated that AJD's version of the contract

was the "true and accurate version of the agreement." He denied ever checking

the arbitration "box," claimed he was "[un]aware of anyone from Blade checking

this selection[,]" and had not authorized or consented to anyone checking the

arbitration provision for AJD. Patel claimed he was familiar with "this standard

form contract," and it was his "custom and practice" to leave the arbitration box

unchecked. Additionally, plaintiff argued that Blade's version failed to include

addenda that were critical to the agreement.

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      The Law Division judge considered oral arguments and granted Blade's

motion, dismissing counts three, five and six of plaintiff's complaint with

prejudice. He ordered plaintiff to submit its claims "to mediation and thereafter,

if necessary, to binding arbitration." In a written statement of reasons, quoting

Kernahan v. Home Warranty Administrator of Florida, Inc., the judge correctly

noted that to be enforceable, an arbitration agreement must be "the product of

mutual assent, as determined under customary principles of contract law." 236

N.J. 301, 319 (2019) (quoting Atalese v. U.S. Legal Servs. Grp., LP, 219 N.J.

430, 442 (2014)). The judge reasoned that only Blade's version of the contract

included the "name and title of [its] representative . . . under the signature

line[.]" He concluded, therefore, that Blade's version "was the final version of

the parties['] agreement."

      Citing Atalese, 219 N.J. at 443, the judge further considered "[t]he second

prong of the . . . Court's test for enforcing binding arbitration agreements[,]"

specifically, whether AJD and Blade "clearly and unmistakably waive[d] their

right to adjudicate the[] claim in court." He noted that plaintiff and Blade were

sophisticated commercial parties and observed that portions of the form contract

were "crossed out" to change the terms of the agreement. However, "no part of

the arbitration provision was crossed out" in either version of the contract. The

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judge reasoned this failure to excise the alternative dispute resolution provisions

reflected AJD's agreement to arbitrate disputes.

      Plaintiff appealed as of right. See R. 2:2-3(a) (providing that "any order

either compelling arbitration . . . or denying arbitration shall also be deemed a

final judgment of the court for appeal purposes").2 It contends that the judge

erred by finding the parties mutually assented to the arbitration provisions

because genuine material factual disputes existed regarding differences in the

two versions of the contract. It argues that whether either one was the final

version of the agreement requires at least limited discovery. We agree.

      "De novo review applies when appellate courts review determinations

about the enforceability of contracts, including arbitration agreemen ts."

Kernahan, 236 N.J. at 316 (citing Hirsch v. Amper Fin. Servs., LLC, 215 N.J.

174, 186 (2013)). "Whether a contractual arbitration provision is enforceable is

a question of law, and we need not defer to the interpretative analysis of the trial

. . . court[] unless we find it persuasive." Ibid. (citing Morgan v. Sanford Brown

Inst., 225 N.J. 289, 302–03 (2016)).

      Although "arbitration [i]s a favored method for resolving disputes[] . . .

[t]hat favored status . . . is not without limits."      Garfinkel v. Morristown

2
  Both parties include arguments in their briefs that treat plaintiff's appeal as
one seeking leave to appeal an interlocutory order pursuant to Rule 2:5-6(a).
We need not address those contentions.
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Obstetrics & Gynecology Assocs., PA, 168 N.J. 124, 131–32 (2001). "A court

must first apply 'state contract-law principles . . . [to determine] whether a valid

agreement to arbitrate exists.'" Hirsch, 215 N.J. at 187 (alteration in original)

(quoting Hojnowski v. Vans Skate Park, 187 N.J. 323, 342 (2006)). "This

preliminary question, commonly referred to as arbitrability, underscores the

fundamental principle that a party must agree to submit to arbitration." Ibid.

(citing Garfinkel, 168 N.J. at 132); see also Kernahan, 236 N.J. at 319 ("[A]

court's initial inquiry must be — just as it is for any other contract — whether

the agreement to arbitrate . . . is 'the product of mutual assent, as determined

under customary principles of contract law.'" (quoting Atalese, 219 N.J. at 442)).

"[T]he arbitrability analysis is expressly included in the Arbitration Act."

Hirsch, 215 N.J. at 187–88 (citing N.J.S.A. 2A:23B-6(b)).

      Here, the motion judge decided Blade's version of the contract was the

"true and accurate" version because it bore the handwritten name of Blade's

secretary/treasurer. However, the judge never addressed the fact that the same

individual's signature appears on the version produced by AJD, albeit, without

his handprinted name under the signature line. Nor did the judge address the

facts contained in Patel's certification, particularly important because Blade

offered no certification from its representative in support of the motion, relying

only on the two versions of the contract and the email from its counsel.

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      The judge found further evidence of the parties' intention to arbitrate

because although some portions of the agreement were crossed out, the

arbitration provisions were not. This ignores, however, the plain language of

§6.2 of the agreement, which provided that unless the arbitration box was

checked, the parties, by default, agreed to litigate any disputes "by litigation in

a court of competent jurisdiction."

      To be sure, Blade's claim that its version of the contract was the true final

version relied, in part, on assertions obvious from the document itself. Most

notably, on Blade's version, the inserted price of the contract was initialed by

both parties' representatives; AJD's version only included its representative's

initials. Logically, one would assume that the final version of a nearly $2

million contract would include the initials of both parties' representatives next

to the amount inserted in the form agreement.

      In discussing the issue of arbitrability in Hirsch, the Court cited with

approval the Third Circuit's opinion in Guidotti v. Legal Helpers Debt

Resolution, LLC, 716 F.3d 764 (3d Cir. 2013). 215 N.J. at 187. In Guidotti, the

court extensively considered the standard courts should employ when evaluating

motions brought to compel arbitration under the Federal Arbitration Act, 9

U.S.C.A. §§ 1 to 16 (the FAA). Guidotti, 716 F.3d at 771–74. "[W]here the

affirmative defense of arbitrability of claims is apparent on the face of a

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complaint (or . . . documents relied upon in the complaint), the FAA would favor

resolving a motion to compel arbitration under a motion to dismiss standard

without the inherent delay of discovery[.]" Id. at 773–74 (alteration in original)

(quoting Somerset Consulting, LLC v. United Cap. Lenders, LLC, 832 F. Supp.

2d 474, 481–82 (E.D. Pa. 2011)).

      In other instances, "a more deliberate pace is required[.]" Id. at 774. The

Court held that the standard applicable to a motion to dismiss under Federal Rule

of Civil Procedure 12(b)(6) was

            inappropriate when either "the motion to compel
            arbitration does not have as its predicate a complaint
            with the requisite clarity" to establish on its face that
            the parties agreed to arbitrate, or the opposing party has
            come forth with reliable evidence that is more than a
            "naked assertion . . . that it did not intend to be bound"
            by the arbitration agreement, even though on the face
            of the pleadings it appears that it did.

            [Ibid. (quoting first Somerset, 832 F. Supp. 2d at 482,
            then Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,
            636 F.2d 51, 55 (3d Cir. 1980), superseded by statute
            on other grounds, see Stedor Enters. Ltd. v. Armtex,
            Inc., 947 F.2d 727, 729–30 n.1–2 (4th Cir. 1991)).]

The court concluded that "if the plaintiff has responded to a motion to compel

arbitration with additional facts sufficient to place the agreement to arbitrate in

issue," then the judge should deny the motion and permit "discovery on the

question of arbitrability[.]" Id. at 776. "After limited discovery, the court may

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entertain a renewed motion to compel arbitration, this time judging the motion

under a summary judgment standard." Ibid.

      In Goffe v. Foulke Management Corp., the Court recognized a limited

"place for Guidotti in our arbitration jurisprudence[,]" consonant "with federal

case law that allows a court to decide matters that relate directly to the formation

of the arbitration agreement." 238 N.J. 191, 216 (2019). The Court noted that

"Guidotti['s] summary judgment standard does not apply" when the plaintiff, as

did the plaintiff in Goffe, challenges the "contract as a whole rather than the

arbitration agreement itself[.]" Ibid.

      Here, plaintiff specifically challenges §6.2 of the contract — its

arbitration provision — and whether AJD and Blade mutually assented to its

terms. Based on the motion record, the issue of mutual assent was incapable of

resolution as a matter of law given the genuine, material factual disputes. R.

4:46-2(c). Accordingly, the judge should have denied without prejudice Blade's

motion to dismiss, permitted limited discovery on the issue of arbitrability, and

entertained a renewed motion to dismiss if appropriately made by Blade at a

future date.

      We note, and plaintiff seemingly concedes in its brief, that the contract

required the parties to mediate their dispute prior to either party invoking §6.2

of the contract, including the default litigation proviso. Therefore, the judge

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may require the parties to mediate their dispute prior to engaging in any

discovery.

      Reversed.   The matter is remanded to the Law Division for further

proceedings consistent with this opinion. We do not retain jurisdiction .

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