Opinion
DOCKET NO. A-0258-15T4
03-01-2016
ELAINE NEWMAN, Plaintiff-Appellant, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent
Rosenbaum & Associates, attorneys for appellant (John F. Hanahan, on the brief). Margolis Edelstein, attorneys for respondent (Robert M. Kaplan, of counsel; Scott A. Sheldon, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges St. John and Guadagno. On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-2138-15. Rosenbaum & Associates, attorneys for appellant (John F. Hanahan, on the brief). Margolis Edelstein, attorneys for respondent (Robert M. Kaplan, of counsel; Scott A. Sheldon, on the brief). PER CURIAM
We consider whether the inaction of plaintiff's counsel for almost three years can result in a waiver of his client's right to arbitration.
We glean these facts from the record. On September 21, 2008, plaintiff Elaine Newman was involved in a motor vehicle accident with Jesus Ruiz, who was driving a vehicle owned by Guillermo Perez. Ruiz and Perez were uninsured. At the time of the accident, plaintiff was insured under a policy issued by defendant New Jersey Manufacturers Insurance Company (NJM). In the spring of 2010, plaintiff filed an application for uninsured motorist (UM) benefits under her auto policy with defendant. Plaintiff's counsel advised defendant that plaintiff was appointing John Jehl as plaintiff's arbitrator.
Plaintiff's appendix includes a letter dated August 24, 2009, which purports to provide notice of her application for UM benefits to NJM. As the document was not part of record below, we will not consider it. Cipala v. Lincoln Tech. Inst., 179 N.J. 45, 52 (2004); R. 2:5-4(a).
In May 2010, defendant opened a file to defend plaintiff's claim. Discovery commenced, defendant obtained medical records from plaintiff's medical providers, plaintiff was scheduled for an independent medical examination, plaintiff was deposed, and plaintiff's counsel was advised that the matter was ready for arbitration.
The motion judge noted that there is no indication in the record that plaintiff received a medical examination. Plaintiff's appendix includes a report dated September 12, 2011, indicating she was examined by Dr. Ronald L. Gerson. This report was not provided to the motion judge and we will not consider it here.
In a letter dated June 3, 2010, counsel for NJM advised plaintiff's counsel that Bruce Gunther had been designated as defendant's arbitrator, and requested that Mr. Gunther contact Mr. Jehl to select a third, neutral arbitrator. Mr. Gunther contacted Mr. Jehl for that purpose, but Mr. Jehl advised that he had not received confirmation that he had been designated as plaintiff's arbitrator. Mr. Jehl attempted to contact plaintiff's counsel to inquire whether he had been retained, but plaintiff's counsel failed to respond to his inquiry.
On August 2, 2010, plaintiff filed a negligence complaint against Ruiz and Perez, alleging that she sustained serious and permanent injuries from the accident.
Plaintiff's counsel provides a Notice of Other Actions in which he indicates that this complaint was "dismissed without prejudice, pending the UM claim." In his brief, plaintiff's counsel has attached documents supporting his assertion that "Default Judgments were entered against both [Ruiz and Perez]." --------
On March 26, 2012, counsel for NJM sent a letter to plaintiff's counsel advising that Mr. Jehl "never received confirmation . . . that he had, in fact, been selected as an arbitrator." The letter informed plaintiff's counsel that Mr. Gunther attempted to call plaintiff's counsel the previous week, but that plaintiff's counsel did not return the phone call. The letter requested that plaintiff's counsel "[p]lease advise if this matter is ready to be arbitrated." On June 25, 2012, counsel for NJM sent a follow-up letter to plaintiff's counsel requesting a response to the March 26, 2012 letter.
Having received no reply to either of his letters, counsel for NJM sent a third letter to plaintiff's counsel on October 17, 2013. The letter noted that NJM had not received a response to either the March 26, 2012 or June 25, 2012 letters, and gave notice that "if you do not intend to prosecute this claim I will be closing my file." The letter further provided that "if I receive no response from you within 10 days I will advise [defendant] that the UM claim has been abandoned and that they should close their file[.]" NJM did not receive a response and closed its file.
Three years later, on June 5, 2015, plaintiff filed a complaint seeking to compel NJM to select a neutral arbitrator, to provide coverage to plaintiff for UM benefits, and to set a date for a UM arbitration hearing. Ignoring his own inattention to this matter, plaintiff's counsel also sought to compel NJM to pay counsel fees and costs. On June 12, 2015, an order to show cause (OSC) signed by Judge Deborah Silverman Katz was filed scheduling a hearing for August 14, 2015 at 8:30 a.m.
On August 14, 2015, at 9:00 a.m., Judge Silverman Katz called the matter and noted the appearance of counsel for NJM. Counsel for plaintiff failed to appear. While still on the record, Judge Silverman Katz noted that the "moving party [was] half an hour late" and directed her court clerk to call counsel's office. The judge was told that plaintiff's counsel left for vacation.
Judge Silverman Katz offered counsel for NJM an adjournment, but he requested that the judge decide the matter on the papers. The judge accepted the unopposed facts in defendant's brief and found that plaintiff waived her right to pursue arbitration because her counsel exhibited a "continuing indifference" to respond to "letter, after letter, after letter demanding action." The judge also noted that the doctrine of laches precluded plaintiff from proceeding with arbitration, reasoning that she could not say whether the delay was reasonable because plaintiff's counsel failed to appear for the hearing and did not provide any excuse or explanation for his delay.
The judge accepted defendant's claim that it would be prejudiced by the delay because plaintiff's deposition, which was taken more than four years earlier, was now "valueless" because "the condition of the plaintiff may have changed" since the time it was taken. The judge entered an order denying the relief sought by plaintiff.
On appeal, plaintiff claims the judge erred in barring her claims based on the doctrines of waiver and laches.
We begin with a review of the relevant principles that inform our analysis. "[O]rders compelling or denying arbitration are deemed final and appealable as of right as of the date entered." GMAC v. Pittella, 205 N.J. 572, 587 (2011); see also R. 2:2-3(a). "In reviewing such orders, we are mindful of the strong preference to enforce arbitration agreements, both at the state and federal level." Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013). However, "a waiver will preclude the enforcement of a contractual provision to arbitrate." Spaeth v. Srinivasan, 403 N.J. Super. 508, 514 (App. Div. 2008). "The issue of whether a party waived its arbitration right is a legal determination subject to de novo review." Cole v. Jersey City Med. Ctr., 215 N.J. 265, 275 (2013). "Nonetheless, the factual findings underlying the waiver determination are entitled to deference and are subject to review for clear error." Ibid.
Plaintiff argues that she did not knowingly abandon her right to arbitrate because she timely pursued her UM claim, she was deposed, she engaged in discovery, and the delay occurred because plaintiff's counsel "mistakenly believed that Mr. Jehl was aware that he was selected as plaintiff's arbitrator."
Waiver is the voluntary and intentional relinquishment of a known right. W. Jersey Title & Guar. Co. v. Indus. Tr. Co., 27 N.J. 144, 152 (1958). To be operative, a waiver "must be supported by an agreement founded on a valuable consideration, or the act relied on as a waiver must be such as to estop a party from insisting on performance of the contract . . . ." Id. at 153. Waiver under New Jersey law "involves the intentional relinquishment of a known right, and thus it must be shown that the party charged with the waiver knew of his or her legal rights and deliberately intended to relinquish them." Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 291 (1988). "In other words, for there to be a waiver of arbitration rights, a party must know of the right and affirmatively reveal the intent to waive the right." Spaeth, supra, 403 N.J. Super. at 514. "An effective waiver requires a party to have full knowledge of his legal rights and intent to surrender those rights." Knorr v. Smeal, 178 N.J. 169, 177 (2003).
Parties can either expressly waive their right to arbitration, or do so by implication. Spaeth, supra, 403 N.J. Super. at 514. "The intent to waive need not be stated expressly, provided the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference." Knorr, supra, 178 N.J. at 177. "The party waiving a known right must do so clearly, unequivocally, and decisively." Ibid. However, "mere silence" or inaction does not typically constitute "relinquishment of a known right." S.D.G. v. Inventory Control Co., 178 N.J. Super. 411, 417 (App. Div. 1981); see also Carter v. Exxon Co. USA, 177 F.3d 197, 204 (3d Cir. 1999) ("New Jersey law thus requires a decisive act, rather than mere inaction, as a basis for waiver[.]").
"There is a presumption against waiver of an arbitration agreement, which can only be overcome by clear and convincing evidence . . . ." Spaeth, supra, 403 N.J. Super. at 514. "Any assessment of whether a party to an arbitration agreement has waived that remedy must focus on the totality of the circumstances." Cole, supra, 215 N.J. at 280. "That assessment is, by necessity, a fact-sensitive analysis" requiring us to "concentrate on the party's litigation conduct to determine if it is consistent with its reserved right to arbitrate the dispute." Ibid. In Cole, the Supreme Court provided factors to consider in assessing whether a party to an arbitration has waived that remedy:
(1) the delay in making the arbitration request; (2) the filing of any motions, particularly dispositive motions, and their outcomes; (3) whether the delay in seeking arbitration was part of the party's litigation strategy; (4) the extent of discovery conducted; (5) whether the party raised the arbitration issue in its
pleadings, particularly as an affirmative defense, or provided other notification of its intent to seek arbitration; (6) the proximity of the date on which the party sought arbitration to the date of trial; and (7) the resulting prejudice suffered by the other party, if any.The Cole Court found a party to a lawsuit who waited twenty-one months before seeking to invoke the arbitration provision had "engaged in litigation conduct that was inconsistent with its right to arbitrate the dispute." Id. at 281.
[Id. at 280-81.]
In Duerlein v. New Jersey Automobile Full Insurance Underwriting Association, 261 N.J. Super. 634 (App. Div. 1993), the plaintiffs-insureds were involved in an auto accident in 1988 with an uninsured motorist and sought to recover a default judgment award from the defendant-insurer, whose auto policy provided for UM coverage. Id. at 636. In 1990, the plaintiffs made formal demand for arbitration and designated their arbitrator. Ibid. Four months later, the defendant selected its arbitrator. Ibid. A third arbitrator was not agreed on until 1991, during which time the plaintiffs failed to answer the defendant's interrogatories. Id. at 637. In the months following selection of the arbitration panel, the arbitration was cancelled twice due to illness and an administrative error. Ibid. Frustrated by the delay, the plaintiffs filed an OSC seeking to compel the defendant to arbitrate or, in the alternative, seeking summary judgment. Ibid.
The trial court granted summary judgment for plaintiff, finding that the defendant waived its contractual right to arbitrate "due to its bad faith in giving the [plaintiffs] the 'run around' and engaging in 'undue delay and unjustified avoidance of its responsibilities under its contract and pursuant to law.'" Id. at 638.
We reversed the trial court's findings, reasoning that both parties were at fault for the delay, and finding that the plaintiffs "participated fully in the delay." Id. at 642. We explained that "if an insurer engages in deliberate delay or inaction . . . it may be found to have acted in bad faith and to have impliedly waived its entitlement to arbitration." Id. at 640. However, we concluded that was not what happened and reasoned that "while [defendant's] behavior in this case may not have been a model, when coupled with the [plaintiffs'] own lassitude, it fell far short of the kind of wrongful action which we think is necessary to warrant depriving a party of the arbitration remedy it bargained for." Id. at 643.
Unlike Duerlein, the delay here was not mutual; it was caused entirely by plaintiff's counsel. Moreover, the three-year delay between March 26, 2012, when NJM sent the first of three letters attempting to further arbitration, and plaintiff's June 2015 demand, was plainly excessive.
As plaintiff's counsel failed to offer any explanation for his delay to the motion judge, we need not consider his inconsistent claims, presented for the first time on appeal, that his staff mistakenly closed the file and that he mistakenly believed that Mr. Jehl was aware that he was selected as plaintiff's arbitrator. See County of Essex v. First Union Nat'l Bank, 186 N.J. 46, 51 (2006); N.J. Div. of Youth & Family Servs. v. M.C. III, 201 N.J. 328, 339 (2010).
Even if counsel's file was mistakenly closed, that does not explain why letters addressed to him were not acknowledged and phone calls to him were not returned. The record is clear that plaintiff's counsel did not exercise a modicum of diligence, let alone due diligence, in proceeding with this matter. The totality of the circumstances demonstrate that plaintiff waived her right to arbitration through her counsel's prolonged inaction, which demonstrated an indifference to, and abandonment of, her right.
As we are affirming the motion judge's finding of waiver, we need not address plaintiff's challenge to the judge's alternative finding that the doctrine of laches applies beyond noting our agreement that NJM suffered prejudice by the delay.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION