Opinion
DOCKET NO. A-3358-11T1
01-31-2013
MARK C. MEADE, Plaintiff-Appellant, v. CARDINALE & JACKSON CROSSING ASSOCIATES, LLC, VITO CARDINALE, FRANK MOZINO, NICK PONZIO AND DANA POLCE, Defendants-Respondents.
Mark C. Meade, appellant, argued the cause pro se. Paul L. LaSalle argued the cause for respondents (Cleary Giacobbe Alfieri Jacobs, attorneys; Mr. LaSalle, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Lihotz and Kennedy.
On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L-1461-11.
Mark C. Meade, appellant, argued the cause pro se.
Paul L. LaSalle argued the cause for respondents (Cleary Giacobbe Alfieri Jacobs, attorneys; Mr. LaSalle, of counsel and on the brief). PER CURIAM
Plaintiff appeals from the Law Division's order of December 13, 2011, dismissing with prejudice certain claims, and allegations against some defendants, asserted in his amended complaint, and dismissing without prejudice other claims and parties, directing that the matter be referred to arbitration. Plaintiff also appeals from the court's order of January 26, 2012, denying reconsideration.
Plaintiff argues that the arbitration clause in the contract at issue is ambiguous and unconscionable, and does not require arbitration of statutory claims. He also argues that defendants invoked their right to arbitration outside the time limits provided by contract, and that the court erred in dismissing a party and some claims with prejudice. Having reviewed these arguments in light of the record and applicable law, we affirm.
I.
Although the record provided on appeal is muddled and incomplete, we discern the following facts from the parts of the record that have been provided to us. On November 15, 2006, Dasoda Corp. (Dasoda), an entity apparently owned by plaintiff and Lauren Meade, entered into a "Master Lease Agreement" with Cardinale & Jackson Crossings Associates LLC (C&JCA LLC). The agreement provided that Dasoda would lease for fifteen years "units 130-135" for use as a day-care center, within a commercial complex which C&JCA LLC was developing in Jackson Township. The agreement was personally guaranteed by plaintiff, and the lease was to commence "[u]pon substantial completion of [C&JCA LLC's] work" or upon the issuance of temporary or final certificates of occupancy by the municipality.
Plaintiff has not provided transcripts of all of the hearings before the motion court. See R. 2:5-3.
The "Master Lease Agreement" also contained an arbitration clause, which stated, in pertinent part:
Claims, disputes and other matters in question arising out of or relating to this Agreement shall be decided by arbitration in accordance with the rules of the American Arbitration Association and shall be venued within Ocean or Monmouth County, New Jersey. The demand for arbitration shall be filed in writing with the other party to this Agreement and shall be made within a reasonable time after the dispute has arisen, but in no event later than [30 days] thereafter.In addition, the agreement contained an integration clause which provided, in part, that, "[t]his [l]ease [a]greement constitutes the full and entire agreement between the parties, and there are no promises, representations, conditions, or inducements other than those contained herein."
According to plaintiff's complaint, C&JCA LLC also arranged for a bank loan of $575,000 to be paid by Dasoda, and guaranteed by plaintiff, to fund the necessary "build-out" of the leased premises for operation of a day-care facility. Plaintiff asserts that the build-out was completed, all required permits were secured and the day-care facility began operation.
When the day-care facility was opened, however, the commercial complex was seventy percent vacant and major construction was still being undertaken on the site. Plaintiff asserts that construction activities and equipment on the site constituted a "severe detriment" to the success of the day-care facility, and on September 24, 2010, Dasoda filed for chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of New Jersey.
In June 2011, C&JCA LLC filed a motion in the bankruptcy court for relief from the automatic stay provisions of the 1978 Bankruptcy Act, 11 U.S.C.A. § 362(a), in order to take possession of the leased premises and the day-care facility. At this point, the proceeding in bankruptcy court had been converted to chapter 7. Plaintiff, as president of Dasoda, filed a certification in opposition to the motion in which he averred that Dasoda executed the lease agreement "in reliance on numerous representations made by [C&JCA LLC]." He claimed that C&JCA LLC represented that the remainder of the commercial complex would be "occupied shortly" after the day-care facility opened; and that there would be residential apartments and a medical arts center at the site providing "traffic flow and an opportunity for growth" for the day-care facility. He further asserted that these representations were not fulfilled and that the construction activity on the site interfered with Dasoda's business. He added that C&JCA LLC "overcharged" for and "diverted funds" from common area maintenance charges under the lease. The motion was resolved by a consent order approved by the bankruptcy trustee and C&JCA LLC on June 24, 2011, whereby the lease was "deemed rejected" as of June 20, 2011; C&JCA LLC would take possession of the leased premises; and the trustee would notify "parents that the school [sic] will be closed." C&JCA LLC retained the right to "replace" the facility with a "new school [sic]."
On May 20, 2011, plaintiff filed a pro se complaint in the Law Division against "Cardinale & Assoc.," Vito Cardinale, Frank Mozino, Nick Ponzio and Dana Polce "as officers, managers and individuals." He asserted in count one that "[d]efendants diverted 'build out' money" for their "personal and business use" thereby violating "RICO STATUTES [sic]" and various federal statutes; that defendants breached their fiduciary duty by wrongfully diverting common area maintenance charges (count two); that "[d]efendants have fraudulently conveyed the [plaintiff's day-care facility]" to themselves (count three); that "defendants failed to complete promised construction of the plaintiff's leased space and the entire shopping plaza in a timely manner" (count four); and that defendants violated "good faith and fair dealing" by "misrepresent[ing] the cost of a water connection fee []" (count five). On June 17, 2011, plaintiff filed an amended complaint, which changed Count 5 to assert that "[d]efendants made numerous misrepresentations" to induce plaintiff to sign the lease. The alleged misrepresentations were the same as those identified in plaintiff's certification in the bankruptcy court.
The Federal Racketeering Influenced and Corrupt Organizations Act, 18 U.S.C.A. §§ 1961-1968 (federal RICO), and the New Jersey RICO Act, N.J.S.A. 2C:41-1 to -6.2.
On June 21, 2011, defendants filed a motion to dismiss the complaint and to transfer venue to Ocean County. Defendants asserted that the complaint failed to name Dasoda as an "indispensable party," that the "proper forum" for the claim was the bankruptcy court, that Cardinale & Assoc. was not a party to the lease, and that the individual defendants were improperly named as parties. In a later brief, defendants also asserted that the complaint failed to state a claim upon which relief could be granted. R. 4:6-2(e).
We are advised that on August 8, 2011, the motion judge permitted plaintiff to file an amended complaint by August 28, 2011. On August 24, 2011, plaintiff filed a second amended complaint which added C&JCA LLC as a party, added additional facts, as well as a claim under the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -20, and asserted plaintiff had standing to pursue the claims because it is "inconceivable that the corporation itself would pursue [the claims]."
On September 15, 2011, defendants filed a supplemental brief in support of dismissal of the amended complaint, or, in the alternative, to compel arbitration of the dispute. On October 21, 2011 the motion judge ruled on the motion, setting forth his findings and conclusions on the record. The judge invited the parties to submit supplemental briefs on the question of whether RICO claims are subject to arbitration and both parties did so.
We are advised that on August 8, 2011, the motion judge allowed defendants to file a supplemental brief in support of the original motion, if the amended complaint did not cure the deficiencies alleged earlier.
As noted earlier, we have not been provided with a transcript of the court's ruling. Prior to oral argument, we brought this deficiency to the attention of plaintiff and invited him to provide the missing transcript, albeit late. Thereafter, plaintiff provided the audio recording of the court's ruling from the bench. We have listened to the court's findings and conclusions, and to the extent that plaintiff challenges the court's determinations on issues other than those we address in this opinion, we find that plaintiff's arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(b)(1)(E).
On December 13, 2011, the judge entered an order dismissing with prejudice counts one, three and four; dismissing with prejudice "all claims in count [two], except for the RICO allegations[;]" dismissing with prejudice all claims in count five "except for the Consumer Fraud allegations against Vito Cardinale in subparagraph one;" and dismissing with prejudice all claims against Dana Polce. The order further stated that "the remaining claims are dismissed without prejudice and they shall be arbitrated per . . . the Master Lease Agreement."
On the bottom of the order, the judge wrote the following:
Reasons for this order were set forth on the record following oral argument on 10/21/11. All remaining claims are subject to [arbitration] per [the] Master Lease Agreement. RICO claims are subject to [arbitration]. Caruso v. Ravenswood Developers, Inc., 337 N.J. Super. 499, 508 (App. Div. 2001). The remaining individual [defendants], Cardinale, Ponzio & Mozino, are members of the Landlord LLC and so [plaintiff's] claims against them should also be resolved in [arbitration]. See, e.g., Pritzker v. Merrill Lynch, 7 F.3d, 1110, 1121 (3d Cir. 1993).On January 26, 2012, the judge denied plaintiff's motion for reconsideration and addressed plaintiff's argument that defendant "Cardinal & Associates" waived arbitration by filing a preliminary motion and by not demanding arbitration within the timeframe of the agreement. The judge held that defendants' "limited motion practice" did not give rise to a waiver of the right to claim arbitration, and that the assertion of a right to arbitration as part of a motion to dismiss "is sufficient to demonstrate that defendant fully intended to exercise its contractual arbitration right." This appeal followed.
II.
Initially, we observe that without a full stenographic record of the motion judge's findings, conclusions and reasons for entering the order under appeal, we cannot fulfill our essential appellate function to ascertain whether the determinations made by the motion judge were erroneous. See Cipala v. Lincoln Technical Inst., 179 N.J. 45, 55 (2004). A party on appeal has an obligation to provide the court with "such parts of the record . . . as are essential to the proper consideration of the issues." Society Hill Condo. Ass'n., Inc. v. Society Hill Assocs., 34 7 N.J. Super. 163, 177 (App. Div. 2002) (quoting R. 2:6-1(a)(1)(H)). The failure to provide essential parts of the record renders review impossible and, without such materials, "we have no alternative but to affirm." Id. at 177-78.
As amended in 2002, see R. 2:6-1(a)(1)(I).
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Despite this serious deficiency, we nonetheless address plaintiff's challenge to the motion judge's determination on the arbitration issue. It is well-established that parties may assent to arbitrate statutory claims through a contractual agreement. Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 131 (2001). New Jersey has a strong public policy in favor of arbitration, which requires that arbitration agreements be read liberally in favor of arbitration. Id. at 132; see also Alamo Rent A Car, Inc. v. Galarza, 306 N.J. Super. 384, 389 (App. Div. 1997). However,
in the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be. In respect of specific contractual language, 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.
[Garfinkel, supra, 168 N.J. at 132 (citations and internal quotation marks omitted).]
"Our standard of review of the applicability and scope of an arbitration agreement is plenary." EPIX Holdings Corp. v. Marsh & McLennan Cos., 410 N.J. Super. 453, 472 (App. Div. 2009). "Moreover, in determining the scope of an arbitration agreement, a court must 'focus on the factual allegations in the complaint rather than the legal causes of action asserted.'" Id. at 472-73 (quoting Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir. 1987)). "If these factual allegations '"touch matters" covered by the parties' contract, then those claims must be arbitrated, whatever the legal labels attached to them.'" Id. at 473 (quoting Genesco, supra, 815 F.2d at 846).
The United States Supreme Court has already held that federal RICO claims are arbitrable. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S. Ct. 2332, 96 L. Ed. 2d 185 (1987). Similarly, in Caruso, supra, 337 N.J. Super. at 501, we upheld the trial court's decision to refer to arbitration the plaintiff home purchaser's action against a home builder, which included statutory claims of consumer fraud and violations of the New Jersey RICO Act. Although the arbitration clause in the parties' contract did not expressly waive recourse to the courts concerning statutory causes of action, we explained that not all statutory remedies require an express waiver of the right to sue in order to be arbitrable. Id. at 507-08. Rather,
the focus remains on the facts underlying the claim rather than the actual legal terms in which the claim is couched . . . . [W]hether a particular claim is arbitrable depends not upon the characterization of the claim, but upon the relationship of the claim to the subject matter of the arbitration clause. To hold otherwise would permit a party to frame its complaint in language which frustrates or avoids the scope of the arbitration clause.Governed by this standard, we found in Caruso that:
[Ibid. (citations and internal quotation marks omitted).]
[T]he consumer fraud and RICO claims are founded on facts no different than the breach of contract claims submitted to the arbitrator. An examination of the facts recited in the original complaint, which was eventually submitted to the arbitrator in 1997, reveals that plaintiffs rely on the same facts to support the breach of contract, consumer fraud and RICO claims. Although plaintiffs couch the claims in the relevant statutory language, it is apparent that the claims are subsumed in the subject matter of the arbitration agreement between the parties.
[Id. at 508.]
Similarly, in EPIX, supra, we found an insured's statutory antitrust price-fixing claims against a workers' compensation insurer and its parent company to be arbitrable because it was inextricably bound up with the contract between the parties. 410 N.J. Super. at 468.
The central factual allegation here is that defendants participated in a bid rigging scheme "with the sole purpose of enhancing their respective pecuniary interests, "resulting in oppressive terms and inflated premiums charged for the workers' compensation program provided by the AIG defendants, to the detriment of plaintiff, who suffered damages and financial instability therefrom. In our view, the claims the AIG defendants seek to arbitrate not only "arise out of," but are undeniably intertwined with the contract between EPIX and National Union, since it is the fact of EPIX's entry into the contract containing the allegedly inflated price and other
oppressive terms that gives rise to the claimed injury.
[Id. at 474.]
Guided by these principles, we find no policy bar or ambiguity in the language of the arbitration clause before us. It requires arbitration of "[c]laims, disputes and other matters in question arising out of or relating to this Agreement [.]" The CFA claim, the RICO claim and the breach of contract claim each constitute such a dispute and must be arbitrated unless defendants waived their right to compel arbitration.
Generally speaking, "[w]aiver is the voluntary and intentional relinquishment of a known right." Knorr v. Smeal, 178 N.J. 169, 177 (2003) (citation omitted). A party may waive the contractual right to arbitrate by either expressed or implied acts or omissions. Duerlein v. N.J. Auto. Full Ins. Underwriting Ass'n, 261 N.J. Super. 634, 640 (App. Div. 1993). Arbitration is not waived merely by the institution of legal proceedings but remains revocable "until either a court proceeding goes to judgment or an arbitration proceeding [results] in an award." Wasserstein v. Kovatch, 261 N.J. Super. 277, 290 (App. Div.) (citations omitted), certif. denied, 133 N.J. 440 (1993). A court has the power to refer the dispute to arbitration at any time prior to judgment. Ibid. Until a lawsuit has reached a point at which it can be said that arbitration was abandoned, a court may refer the matter to arbitration. Id. at 291.
The contractual demand for arbitration at issue here was clearly timely. It was raised within thirty days after C&JCA LLC was made a proper party to the litigation and, indeed, even prior to the filing of an answer to the amended complaint. See Spaeth v. Srinivasan, 403 N.J. Super. 508, 516-17 (App. Div. 2008) (finding the defendant did not waive arbitration despite not raising arbitration as an affirmative defense); Wasserstein, supra, 333 N.J. Super. at 296 ("'[T]he mere filing of a complaint or an answer to the complaint is not a waiver of arbitration . . . .'")
The remainder of the arguments advanced on appeal, as noted, are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION