Court Opinion

ID: 9906927
Source: CourtListenerOpinion
Date Created: 2023-12-05 16:07:30.530931+00
Date Added: 2024-06-11T09:54:31.558039
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NOT FOR PUBLICATION WITHOUT THE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-2120-22

THE REINVESTMENT
FUND, INC.,

          Plaintiff-Respondent,

v.

JOSEPH RAUH, SR., JOSEPH
RAUH, JR., COLLEEN RAUH, 360
GREENTREE RD., LLC, JRMT,
INC., and JR MARKETS, INC.,

          Defendants/Third-Party
          Plaintiffs-Appellants,

v.

MORAN FOODS, INC., d/b/a
SAVE-A-LOT STORES, LTD,
formerly known as MORAN
FOODS, INC., d/b/a SAVE-A-
LOT FOOD STORES, LTD,

     Third-Party Defendant/
     Respondent.
______________________________

                   Argued October 24, 2023 – Decided December 5, 2023
            Before Judges Natali and Puglisi.

            On appeal from the Superior Court of New Jersey, Law
            Division, Gloucester County, Docket No. L-0844-20.

            Thomas A. Hagner argued the cause for appellants
            Joseph Rauh, Sr. and 360 Greentree Rd., LLC (Hagner
            & Zohlman, LLC, attorneys; Thomas J. Hagner and
            Thomas A. Hagner, on the briefs).

            Thomas Wallace argued the cause for respondent The
            Reinvestment Fund, Inc. (Whiteford, Taylor & Preston,
            LLC, attorneys; Richard Alan Barkasy, on the brief).

            Erica H. Dressler (Troutman Pepper Hamilton Sanders
            LLP) of the Pennsylvania bar, admitted pro hac vice,
            argued the cause for respondent Moran Foods, Inc.
            (Troutman Pepper Hamilton Sanders LLP, attorneys;
            Erica H. Dressler and A. Christopher Young, of counsel
            and on the brief).

PER CURIAM

      Defendants Joseph Rauh, Sr. and his company 360 Greentree Rd., LLC

appeal from the trial court's March 14, 2023 order denying reconsideration of its

March 16, 2022 order, as clarified on December 14, 2022, staying his third-party

complaint against Save-A-Lot pending arbitration of claims involving Save-A-

Lot, Joseph Rauh, Jr., Colleen Rauh, JRMT and JR Markets. Because we do not

discern an abuse of discretion in the court's decision, we affirm.

      The underlying facts and procedural history were set forth in our previous

decision, Reinvestment Fund v. Rauh, No. A-3184-21 (App. Div. Dec. 13,

                                                                           A-2120-22
                                        2
2022), which we incorporate by reference. In sum, Joseph Rauh, Jr., who is the

president of JR Markets, Inc. and JRMT, Inc., and his spouse Colleen Rauh,

entered into licensing agreements with Save-A-Lot for the acquisition of grocery

stores in Millville and Rio Grande. Reinvestment funded the project with two

loans. The first loan of $1,395,000 was to JR Markets, the repayment of which

was personally guaranteed by Rauh, Jr., Rauh, Sr., and Greentree; the second

loan of $650,000 was to JRMT, guaranteed by Rauh, Jr., and Rauh, Sr. Id., slip

op. at 3.

      The licensing agreements, to which neither Rauh, Sr. nor Greentree was a

party, contained mediation and arbitration provisions that obligated the parties

to mediate "[a]ny controversy, claim, or dispute of whatever nature" and, if

unsuccessful, to submit their claims to "binding arbitration" in St. Louis,

Missouri, where Save-A-Lot was incorporated. Ibid.

       A few years later, Reinvestment filed a complaint against Rauh, Jr., Rauh,

Sr., Colleen Rauh, Greentree, JRMT, and JR Markets, alleging they defaulted

repaying the loans and seeking the unpaid accelerated amount due on the two

loans. In response to the complaint, these defendants asserted counterclaims

against Reinvestment and filed a third-party complaint against Save-A-Lot

alleging fraudulent inducement of the loan agreements, common law fraud, and

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                                       3
violations of the New Jersey Franchise Practices Act; they also alleged that

Reinvestment and Save-A-Lot engaged in a civil conspiracy. Id. at 4.

        Relying on the arbitration provision in the licensing agreements, Save -A-

Lot moved to compel arbitration of the claims asserted against it. The motion

judge found the arbitration provisions enforceable and ordered the parties to the

licensing agreements—Rauh, Jr., Colleen Rauh, JRMT and JR Markets—into

arbitration. Rauh, Sr., did not consent to join in the arbitration. The remaining

claims involving Rauh, Sr. and Greentree against Save-A-Lot were severed from

the arbitrable claims and stayed pending the completion of arbitration , but

Reinvestment's claims against the Rauhs and their companies were not stayed.

Ibid.

        On appeal as of right pursuant to Rule 2:2-3(a)(3), we affirmed the trial

court's order compelling arbitration but reversed and remanded the stay order

because the judge did not provide a clear rationale for staying some claims while

allowing others to proceed. Id. at 6.

        On December 14, 2022, the trial court issued a written memorandum of

clarification on remand. While this appeal was pending, the trial court granted

summary judgment to Reinvestment on its claims concerning the defaulted loans

and dismissed defendants' counterclaims, thus leaving only defendants' third-

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                                         4
party claims against Save-A-Lot including the civil conspiracy claims involving

Reinvestment. The court explained its reasons for the stay:

            [A]ll defendants are represented in this action by the
            same counsel. That lawyer, and whatever lawyer is
            going to represent them in the arbitration will have
            access to all discovery that is produced in that forum.
            Moreover, even though Rauh, Sr.[,] and Greentree are
            not a party to the arbitration, their interests are perfectly
            aligned with the other Rauh defendants' interests. Since
            the Reinvestment Fund's claim[s] are now adjudicated,
            it makes little to no sense to permit concurrent actions
            here in [New Jersey] state court and also arbitration in
            St. Louis. The matters are compelled to be arbitrated
            and there is no prejudice to Rauh, Sr.[,] and Greentree
            to stay this case. Save-[A]-Lot should not be compelled
            to litigate in two separate venues regarding the same
            issues.

      In denying Rauh, Sr.'s motion for reconsideration that followed, the trial

court further opined:

            The moving defendants argue that there may be issues
            that get resolved in the arbitration that result in
            preclusions of some of their claims here. It is difficult
            for the court to envision such a circumstance where an
            arbitrator could bind non-participating defendants to
            the detriment of their claims in this matter, that is what
            they bargained for. As it has been acknowledged, all
            exchanges of discovery that are relevant in the
            arbitration are available to the moving defendants here
            as the parties are father/son and represented by the same
            attorney, so in at least the pre-trial stage, this
            litigation[] is proceeding as the discovery is completed
            in Missouri. Therefore, in reality, the only thing that is
            being stayed is a possible trial here. Given the

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                                         5
            moratorium in this vicinage in doing civil trials and the
            backlog in civil trials that has resulted from the
            significant shortage of judges,1 even if the cases were
            to proceed concurrently, it is very likely the arbitration
            would long be completed before this trial in any event.
            The issues of res judicata are going to be present
            anyway.

      On appeal, defendants raise the following issues for our consideration:

            POINT I

            THE TRIAL COURT'S DECISIONS SHOULD BE
            VACATED BECAUSE THERE IS NO LEGAL
            PRECEDENT OR AUTHORITY FOR SEVERING
            AND STAYING CLAIMS OF A THIRD-PARTY
            PLAINTIFF     NOT    SUBJECT   TO    ANY
            ARBITRATION AGREEMENT PENDING THE
            OUTCOME OF AN ARBITRATION INVOLVING
            SIMILAR,    BUT   DISTINCT,  THIRD-PARTY
            PLAINTIFFS.
            POINT II

            THE TRIAL COURT'S DECISIONS SHOULD BE
            VACATED BECAUSE THE COURT FAILED TO
            IDENTIFY JUST TERMS AND SUFFICIENT
            CONSIDERATIONS OF JUDICIAL ECONOMY,
            FAIRNESS TO ALL PARTIES, AND THE
            INTERESTS OF JUSTICE TO SUPPORT ITS
            DECISION TO STAY SOME, BUT NOT ALL OF
            THE ARBITRABLE CLAIMS OF SOME, BUT NOT
            ALL, PARTIES.

1
  See "Statement of Chief Justice on Suspension of Civil and Matrimonial Trials
in Two Vicinages Due to Vacancy Crisis" (February 21, 2023).
(https://www.njcourts.gov/press-releases/2023/02/statement-of-chief-justice-
suspension-of-civil-and-matrimonial-trials-two).
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                                        6
      As a threshold matter, we first address whether this appeal is properly

before the court absent a motion for leave to appeal. The orders on appeal do

not compel arbitration but rather stay the litigation and as such, they are not

appealable as of right pursuant to Rule 2:2-3(a)(3). Defendants argue the stay

is "inextricably intertwined" with the order compelling arbitration and therefore

leave to appeal was not mandated.        While we disagree that this matter is

appealable as of right, we will treat the notice of appeal as a motion for leave to

appeal, which we grant as within time in the interest of prompt disposition of

the matter. See R. 2:4-4(b)(2).

      We review a decision to grant a stay for abuse of discretion. Granata v.

Broderick, 446 N.J. Super. 449, 469 (App. Div. 2016); Wacker-Ciocco v. Gov't

Emps. Ins. Co., 439 N.J. Super. 603, 610-11 (App. Div. 2015); Avila v. Retailers

& Mfrs. Distrib., 355 N.J. Super. 350, 354 (App. Div. 2002). We do not

"second-guess a trial judge's sound exercise of discretion because we recognize

'[j]udicial discretion connotes conscientious judgment, not arbitrary action; it

takes into account the law and the particular circumstances of the case before

the court.'" Reese v. Weis, 430 N.J. Super. 552, 572 (App. Div. 2013) (quoting

Higgins v. Polk, 14 N.J. 490, 493 (1954)).

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                                        7
      A trial court abuses its discretion when a decision is "made without a

rational explanation, inexplicably departed from established policies, or res ted

on an impermissible basis." Lipsky v. N.J. Ass’n of Health Plans, Inc., 474 N.J.

Super. 447, 463-64 (App. Div. 2023) (quoting Wear v. Selective Ins. Co., 455

N.J. Super. 440, 459 (App. Div. 2018)).       "When examining a trial court's

exercise of discretionary authority, [a reviewing court] reverse[s] only when the

exercise of discretion was 'manifestly unjust' under the circumstances." Newark

Morning Ledger Co. v. N.J. Sports & Exposition Auth., 423 N.J. Super. 140,

174 (App. Div. 2011) (quoting Union Cnty. Improvement Auth. v. Artaki, LLC,

392 N.J. Super. 141, 149 (App. Div. 2007)).

      Applying these principles, we discern no reason to disturb the court's

decision and affirm substantially for the reasons set forth in its memorandum of

clarification and decision denying reconsideration. Although not mandatory, a

court should stay non-arbitrable claims pending arbitration when "significant

overlap exists between parties and issues." Perez v. Sky Zone LLC, 472 N.J.

Super. 240, 251 (App. Div. 2022) (citations omitted). We agree that staying

Rauh, Sr.'s third-party claims avoids fragmented litigation and furthers judicial

economy, fairness and justice.

      Affirmed.

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