Court Opinion

ID: 4444275
Source: CourtListenerOpinion
Date Created: 2019-10-04 14:07:57.435052+00
Date Added: 2024-06-11T13:33:17.751140
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NOT FOR PUBLICATION WITHOUT THE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-4992-17T1
ROBERT M. BECKER and
CATHERINE T. BECKER,

         Plaintiffs-Appellants,

v.

OLLIE SLOCUM & SON, INC.,
d/b/a SLOCUM & SON, INC.,
KEITH KINSEY, LOUISE
KINSEY, and TANYA VERDI,

     Defendants-Respondents.
______________________________

                   Submitted September 25, 2019 – Decided October 4, 2019

                   Before Judges Koblitz and Mawla.

                   On appeal from the Superior Court of New Jersey, Law
                   Division, Monmouth County, Docket No. L-1599-17.

                   Law Offices of Michael R. Scully, LLC, attorneys for
                   appellants (Michael R. Scully, on the briefs).

                   Krenkel & Krenkel, LLC, attorneys for respondents
                   Slocum & Son, Inc., Louise Kinsey and Tanya Verdi
                   (David A. Krenkel, of counsel and on the brief; Lisa C.
                   Krenkel, on the brief).
            Ansell Grimm & Aaron, PC, attorneys for respondent
            Keith Kinsey, join in the brief of respondents Slocum
            & Son, Inc., Louise Kinsey and Tanya Verdi.

PER CURIAM

      Plaintiffs Robert and Catherine Becker appeal from a May 25, 2018 order

granting defendants Ollie Slocum & Son, Inc., Louise Kinsey, and Tanya Verdi's

motion to compel arbitration and deny discovery in a dispute over a home

construction contract.     Because the arbitration clause in the contract is

unenforceable under Atalese v. U.S. Legal Servs. Grp., 219 N.J. 430 (2014), we

reverse that portion of the order and affirm the discretionary denial of discovery.

      The parties entered into an agreement in November 2011 for the $1.85

million construction of a new home in Middletown.             (Agreement).     The

Agreement provided that the construction of the home would be substantially

completed within fifty-two weeks of the commencement of excavation work.

Defendants substantially completed construction of plaintiffs' home in 2014,

approximately eighteen months past the agreed-upon date of completion. The

relevant provision at issue in this Agreement is the arbitration clause found in

Section 9, which states:

            All claims and disputes relating to this contract shall be
            subject to arbitration at the option of either the [o]wner
            or the [g]eneral [c]ontractor, in accordance with the
            Arbitration Rules of the American Arbitration

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            Association for the construction industry in effect at the
            time of the arbitration. Written notice of demand for
            arbitration shall be filed with the other party to the
            contract and with the American Arbitration
            Association, within a reasonable time after the dispute
            has arisen. The costs associated with the Arbitration
            Association shall be equally borne by the [p]arties
            hereto in a prompt and timely manner.

      After the completion of construction, plaintiffs found several alleged

defects in the home, including water penetration into the living quarters and

basement, and deterioration of outdoor decking, siding, and finishing. Plaintiffs

filed a complaint and jury demand claiming breach of contract, negligence,

interference with contractual relations, and consumer fraud, and seeking an

accounting. The amount in contention is an alleged overpayment of $35,000.

Plaintiffs also sought discovery from the settlement of prior litigation

concerning the ownership of defendant Ollie Slocum & Son, Inc.

      The motion judge denied the discovery motion without prejudice,

determining the settlement agreement was not relevant to plaintiffs' claim, but

might become relevant later in connection with an effort to collect a judgment.

Defendants' motion to compel arbitration was granted.

                                        I.

      We apply a de novo standard of review when reviewing a motion judge's

determination of the enforceability of a contract. Goffe v. Foulke Mgmt. Corp.,

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                                        3
238 N.J. 191, 207 (2019). When reviewing arbitration clauses within contracts,

"the enforceability of arbitration provisions is a question of law; therefore, it is

one to which we need not give deference to the analysis by the trial court." Ibid.

      The Federal and New Jersey Arbitration Acts express a general policy

favoring arbitration. Atalese, 219 N.J. at 440. "The public policy of this State

favors arbitration as a means of settling disputes that otherwise would be

litigated in a court." Badiali v. N.J. Mfrs. Ins. Grp., 220 N.J. 544, 556 (2015).

While enforcement is favored, it "does not mean that every arbitration clause,

however phrased, will be enforceable." Atalese, 219 N.J. at 441.

      A valid arbitration clause "must state its purpose clearly and

unambiguously."     Atalese, 219 N.J. at 435.      When agreeing to arbitration,

"consumers must have a basic understanding that they are giving up their right

to seek relief in a judicial forum." Ibid. Because arbitration necessarily involves

a waiver of the right to bring the case to court, courts should "'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

(quoting NAACP of Camden Cty. E. v. Foulke Mgmt. Corp., 421 N.J. Super.
404, 425 (App. Div. 2011)).

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                                         4
      Our Supreme Court has made clear that a "consumer cannot be required

to arbitrate when it cannot fairly be ascertained from the contract's language that

[he or] she knowingly assented to the provision's terms or knew that arbitration

was the exclusive forum for dispute resolution." Kernahan v. Home Warranty

Adm'r of Fla., Inc., 236 N.J. 301, 322 (2019). "[W]hen a contract contains a

waiver of rights — whether in an arbitration clause or other clause — the waiver

'must be clearly and unmistakably established.'"         Atalese, 219 N.J. at 444

(quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168
N.J. 124, 132 (2001)).

      The Court in Atalese set forth a test to determine the enforceability of an

arbitration clause.    An arbitration clause "must be sufficiently clear to a

reasonable consumer." Id. at 436. An arbitration provision will be deemed

unenforceable when there is "[t]he absence of any language in the arbitration

provision that plaintiff [is] waiving [his or] her statutory right to seek relief in a

court of law." Ibid. While no precise set of words must be included in the

arbitration provision, the words that make up the clause "must be clear and

unambiguous that a consumer is choosing to arbitrate disputes rather than have

them resolved in a court of law." Id. at 447.

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       In Atalese, our Supreme Court examined the language of an arbitration

provision that was deemed valid and enforceable by the trial and appellate

courts,   reversing   because   the provision      was   deficient,   rendering it

unenforceable. Id. at 448. The Court found the provision to be deficient because

it: 1) did not include any explanation that the plaintiff was waiving her right to

seek relief in court; 2) did not explain what arbitration is or how it differs from

seeking judicial relief; and 3) lacked the plain language necessary to convey to

the average consumer that he or she is waiving the right to sue in court. Id. at

446.

       The arbitration provision here presents the same deficiencies the Court

addressed in Atalese.     It does not include any language explaining what

arbitration is and how it serves as a replacement for judicial relief. It simply

states: "All claims and disputes relating to this contract shall be subject to

arbitration at the option of either the [o]wner or the [g]eneral [c]ontractor, in

accordance with the Arbitration Rules of the American Arbitration Association

for the construction industry in effect at the time of the arbitration." The

language of this provision does not convey to the average consumer that he or

she is waiving a constitutional right to seek relief in a court of law.

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      Defendants argue plaintiffs should not be viewed as "average consumers"

and should instead be viewed as "sophisticated owners of a multimillion dollar

home." The Agreement was not negotiated through attorneys and defendants

point only to the value of the home to suggest plaintiffs are sophisticated parties

with knowledge of arbitration provisions.        Wealth alone does not confer

expertise on non-lawyer unrepresented parties.

      Plaintiffs provide further support for their argument by contrasting the

arbitration provision contained in their contract with an enforceable arbitration

provision found in Roman v. Bergen Logistics, LLC, 456 N.J. Super. 157 (App.

Div. 2018). In Roman we found the arbitration clause to be enforceable because

it "informed plaintiff that the exclusive forum for resolution of her claims was

arbitration, she was prohibited from filing any other lawsuits or legal

proceedings and she waived her right to a trial by jury." Id. at 172. The

arbitration provision in Roman stated that plaintiff and defendant agreed not to

"file or maintain any lawsuit, action or legal proceeding of any nature with

respect to any dispute" and that "by signing this agreement you and [c]ompany

are waiving any right, statutory or otherwise, to a trial by jury." Id. at 162–63.

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       The Agreement's arbitration provision does not state that arbitration is the

exclusive forum for dispute resolution, nor that plaintiffs are waiving their right

to a jury trial.

                                        II.

       Plaintiffs also argue on appeal that the motion judge erred in denying

without prejudice plaintiffs' discovery request for the settlement documents

pertaining to defendants' previous February 2015 litigation. We "defer to the

trial judge's discovery rulings absent an abuse of discretion or a judge's

misunderstanding or misapplication of the law." Capital Health Sys., Inc. v.

Horizon Healthcare Servs., Inc., 230 N.J. 73, 79–80 (2017).

       The motion judge did not abuse his discretion when determining that the

settlement agreement from a prior dispute among the owners of the defendant

company is not currently relevant to plaintiffs' claim. As the judge stated, the

settlement documents may become relevant if plaintiffs' obtain a judgment in

their favor. We thus reverse the compelled arbitration and affirm the denial of

discovery.

       Reversed in part and affirmed in part and remanded to the trial court for

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

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