To schedule a confidential consultation, call (732) 572-0500
Kenneth Vercammen & Associates, P.C. 2053 Woodbridge Avenue - Edison, NJ 08817

Tuesday, June 21, 2011

Error to Compel Arbitration of the Contractual and Negligence Claims: Wilson v Woodfields at Princeton Highlands

Error to Compel Arbitration of the Contractual and Negligence Claims

Wilson v Woodfields at Princeton Highlands



DOCKET NO. A-6277-08T1

Submitted January 10, 2011 - Decided

Before Judges Grall, C.L. Miniman and LeWinn.

On appeal from Superior Court of New

Jersey, Law Division, Middlesex County,

Docket No. L-6262-07.


Plaintiff Stevonne Wilson entered into a contract to purchase from a developer-builder a new home to be built on a lot subject to the bylaws of the Woodfield Estates Homeowners Association (the Association). The contract was executed in July 2000 and the transaction closed on July 18, 2001. On July 17, 2007, Wilson filed a complaint seeking damages for misrepresentations in connection with the construction and sale of the home, construction defects and overcharging of Association fees. She alleged breach of contract, negligence, common law fraud and violations of the Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and the Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42. Wilson named several defendants: the developer-builder defendants — Woodfield Developers, L.L.C., its agents Jonathan Frieder and Roy Lomassaro, Woodfields at Princeton Highlands and Garden Homes; the Association and its property managers; the municipality and its inspectors; and an employee of the Department of Community Affairs. The Association filed a counterclaim seeking payment of dues owed. As of June 30, 2009, all claims as to all parties were resolved, and Wilson filed a notice of appeal on August 11, 2009.

On appeal, Wilson argues that the judge erred in granting the developer-builder defendants' motion to dismiss her claims in accordance with an arbitration clause in the sales contract. She also contends that the judge erred in awarding the Association $9450.96 in counsel fees because the Association accepted $365.63 to settle its counterclaim. Wilson does not raise any issue involving another party. As the issues are distinct, we address the judge's determinations regarding arbitration and counsel fees separately.



We first consider the builder-developer defendants' (hereinafter defendants) claim that we lack jurisdiction to hear Wilson's appeal from the order compelling arbitration because it was not timely filed. We reject the argument.

The order compelling arbitration of Wilson's claims against defendants was entered on October 19, 2007. On April 14, 2008, through its decision in Wein v. Morris, 194 N.J. 364 (2008), the Supreme Court prospectively amended Rule 2:2-3 to add orders compelling arbitration to the list of those that are deemed appealable as of right regardless of whether all claims as to all parties have been resolved. Id. at 380.

Because the rule established was "new," the Court gave it purely prospective application and did not apply the new rule in that case. Ibid. When a rule is purely prospective, it applies "'only to cases whose operative facts arise after the new rule is announced.'" State v. Feal, 194 N.J. 293, 308 (2008) (quoting State v. Burstein, 85 N.J. 394, 403 (1981)). Here, the "operative" fact is the entry of the order compelling arbitration and that occurred before, not after, the new rule in Wein was announced. See GMAC v. Pittella, ___ N.J. ___, ___ (2011) (slip op. at 30) (holding that orders denying arbitration are also appealable as of right and that from the date of the decision in GMAC forward, the time for appeal from an order denying arbitration starts on the date the order is entered). Thus, Wilson's appeal was not subject to Wein's new rule and was properly filed within forty-five days of the last order that resolved an outstanding claim. R. 2:4-1(a); N.J. Schs. Constr. Corp. v. Lopez, 412 N.J. Super. 298, 308 (App. Div. 2010). We have jurisdiction to review the order compelling arbitration.


Wilson's complaint included these allegations relevant to her claims against defendants and we must accept them as true. Printing Mart-Morristown v. Sharp Elecs., 116 N.J. 739, 746 (1989). Defendants made and she relied on affirmative misrepresentations in connection with the sale of her home — misrepresentations about the quality of construction and materials, square footage of the residence, and amenities to be made available to members of the Association such as recreational facilities. Additionally, defendants withheld information material to her decision to purchase the lot and home — wetlands and groundwater conditions on- and off-site that led to regular flooding. She was dissatisfied with conditions she observed during the final walkthrough, but due to her race and gender she was pressured and coerced to close with a threat of per diem charges. After closing, she suffered from problems such as water gushing onto the sidewalks and ponding in the side and rear lawns. Her basement flooded twice, and she learned that essential support beams were not installed and the foundation was cracked and unstable.

The arbitration clause at issue on this appeal was included in the contract of sale. The terms of that contract were negotiated by Wilson's attorney. On Wilson's behalf, her lawyer sought, among other amendments not relevant here, removal of the arbitration clause and of a clause addressing dispute resolution under the New Home Warranty and Builders' Registration Act, N.J.S.A. 46:3B-1 to -20. Although defendants refused to delete those clauses, on July 15, 2000, Wilson agreed to the contract without those changes. The transaction closed on July 18, 2001.

The contract includes a section entitled "12. HOMEOWNERS WARRANTY." It requires defendants to provide insurance-backed warranty coverage under the New Home Warranty Act. Subsection (f) of Section 12 addresses dispute resolution as follows:

Buyer and Seller acknowledge and agree that the warranty and insurance remedies contained in the homeowner warranty provided by Seller to Buyer constitute Buyer's remedy of first recourse. The parties agree that the conciliation and arbitration procedures outlined in the Homeowners Warranty Act are better suited to the determination of outstanding issues, if any, between the parties than any remedy which may be secured by resort to legal process. Buyer represents that he has read the act to which reference is made and that he has secured the advice of counsel in making this election of remedies. This election of remedies shall survive closing of title.

Arbitration is addressed in subsection e of Section 15, "DEFAULTS OF BUYER AND SELLER":


According to Wilson's complaint, she pursued remedies for "some of the defects through the New Home Warranty Act" but was dissatisfied with the outcome, which she alleged was attributable to the arbitrator's relationship with defendants. The parties' disagreement on appeal centers on the enforceability of the arbitration clause.

Wilson, acting pro se in the trial court and on appeal, argues the arbitration clause is unenforceable because it gives insufficient notice of her waiver of the statutory right to a jury trial on her LAD and CFA claims. Because we agree and reverse the order compelling arbitration on that ground, we do not address Wilson's other claims of error related to the dismissal of her claims against defendants.

There is no question that arbitration is a favored and encouraged means of resolving disputes. Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179, 186 (1981). Federal law "'requires courts to enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with their terms.'" Curtis v. Cellco P'ship, 413 N.J. Super. 26, 33-34 (App. Div.) (quoting Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 478, 109 S. Ct. 1248, 1255, 103 L. Ed. 2d 488, 500 (1989)), certif. denied, 203 N.J. 94 (2010); see Martindale v. Sandvik, Inc., 173 N.J. 76, 84 (2002). Moreover, "[a]n agreement to arbitrate should be read liberally in favor of arbitration." Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001) (internal quotations omitted); accord Curtis, supra, 413 N.J. Super. at 34; Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 518 (App. Div. 2010). Nevertheless, because an agreement to arbitrate is a contract, a party cannot be compelled to arbitrate claims not encompassed by the agreement. Garfinkel, supra, 168 N.J. at 132.

With respect to consumer agreements, "a clause depriving a citizen of access to the courts should clearly state its purpose. The 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." Marchak v. Claridge Commons, 134 N.J. 275, 282 (1993). In this context, an agreement to arbitrate statutory claims is enforceable when the contract provisions "(1) contain language reflecting a general understanding of the type of claims included in the waiver; or (2) provide that, by signing, the consumer agrees to arbitrate 'all statutory claims arising out of the relationship,' or any claim or dispute based on a federal or state statute." Curtis, supra, 413 N.J. Super. at 35-36 (quoting Gras v. Assocs. First Capital Corp., 346 N.J. Super. 42, 56-57 (App. Div. 2001), certif. denied, 171 N.J. 445 (2002)).

This agreement to arbitrate "any disputes arising in connection with this agreement and/or any amendments to this agreement" does not suggest waiver of the right to bring a suit in court on a statutory claim. In that regard, this arbitration clause is distinguishable from those addressed in Curtis and Griffin. In Curtis, the language unmistakably specified that plaintiff waived his right to a judicial forum and jury trial. 413 N.J. Super. at 37-38. In Griffin, the clause included language referencing statutory claims. 411 N.J. Super. at 518.

We also conclude that the agreement to arbitrate contractual claims, while sufficiently clear when read alone, is not at all clear when the agreement is read as a whole. The contract does not articulate or explain the relationship between the clause addressing alternate dispute resolution under the New Home Warranty Act and the arbitration clause. Read together, these provisions are so confusing that they "confound[] any clear understanding of the parties' undertaking" with respect to resolution of disputes. See Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577, 583 (App. Div.), certif. denied, 181 N.J. 545 (2004). Accordingly, we conclude that it was error to compel arbitration of the contractual and negligence claims as well.

We recognize that Wilson was represented by an attorney who unsuccessfully attempted to negotiate removal of both the dispute resolution and the arbitration clauses. While that fact weighs heavily against Wilson's claim of unconscionablity, it is irrelevant to the adequacy of the contractual language.


Wilson's objections to the order awarding counsel fees to the Association also have merit. The trial court awarded fees for services rendered prior to the date that the Association filed its counterclaim for assessments owed, but the Association is not entitled to fees unrelated to its collection effort. Moreover, the trial judge failed to consider the reasonableness of $9450.96 in counsel fees in light of the small recovery obtained by the Association.

As noted above, Wilson and the Association reached an agreement that resolved the Association's counterclaim against Wilson for past-due fees. Wilson agreed to pay $365.63 and that agreement was memorialized in a consent order. In the consent order, the Association reserved its right to file an application for counsel fees and Wilson reserved her right to oppose it.

The Association's claim for fees is dependent upon Section 4.02 of the Declarations and Covenants in Wilson's chain of title. Section 4.02 provides that assessments by the Association "together with any charges, interest, and costs of collection, including reasonable attorney's fees, shall be a charge and shall constitute a continuing lien" against the property.

A "prevailing party can recover . . . fees if they are expressly provided for by statute, court rule, or contract." Litton Indus. Inc. v. IMO Indus. Inc., 200 N.J. 372, 385 (2009) (internal quotations omitted); N. Bergen Rex Transp. v. Trailer Leasing Co., 158 N.J. 561, 569-70 (1999). Although Section 4.02 entitles the Association to fees connected with collecting Wilson's delinquent dues, neither the consent order nor Section 4.02 entitles the Association to fees for costs incurred in defending against Wilson's complaint. Nevertheless, the certification of services submitted by the Association's attorneys includes fees charged for work done in defending the Association against Wilson's claim. Because it appears that the award includes fees to which the Association is not entitled, a remand is required.

In addition, counsel fees must be reasonable. N. Bergen Rex Transp., supra, 158 N.J. at 570. Pursuant to Furst v. Einstein Moomjy, 182 N.J. 1, 23 (2004), and Rule of Professional Conduct 1.5(a)(4), the amount in dispute and the results obtained are relevant to the reasonableness of the fee sought. We direct the judge to consider that factor along with other pertinent factors when fixing the fee on remand. We also note that if the Association's counsel wishes to be paid for time billed by its paralegal, it must comply fully with Rule 4:42-9(b), including disclosure of the firm's billing rate for paralegal services to clients generally.

Reversed and remanded. We do not retain jurisdiction.

[1] Improperly pled as Woodfield Developers.

No comments: