Opinion
DOCKET NO. A-2521-11T4
01-25-2013
TRI-TECH ENVIRONMENTAL ENGINEERING, INC., Plaintiff-Appellant, v. NUTLEY BOARD OF EDUCATION, STATE OF NEW JERSEY DEPARTMENT OF EDUCATION, DCM ARCHITECTURE, GACCIONE, POMACO AND MALANGA, P.C. AND ANTHONY MALANGA, JR., ESQUIRE, ROBERT GREEN, JOSEPH ZARRA, GERARD DEL TUFO, SALVATORE OLIVO, MICHAEL DE VITA, MARIA ALAMO, KENNETH RILEY, STEVEN ROGERS, WALTER SAUTTER, PATRICIA WILLIAMS, JAMES KUCHTA, and DR. PHILIP CASALE, Defendants-Respondents.
John J. Agostini argued the cause for appellant. Thomas S. Cosma argued the cause for respondent Nutley Board of Education (Mr. Cosma and Mitchell W. Taraschi, of counsel and on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Parrillo, Sabatino and Fasciale.
On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-009675-08.
John J. Agostini argued the cause for appellant.
Thomas S. Cosma argued the cause for respondent Nutley Board of Education (Mr. Cosma and Mitchell W. Taraschi, of counsel and on the brief). PER CURIAM
This case returns to this court a second time, following a remand directed in our prior opinion in August 2010. See Tri-Tech Envtl. Eng'g v. Nutley Bd. of Educ., No. A-4601-08 (App. Div. Aug. 30, 2010) ("Tri-Tech"). In the present appeal, plaintiff Tri-Tech Environmental Engineering, Inc., argues that the trial court's order dated August 19, 2011 referring counts 3, 4, 9, 11, 12, 13, and 14 of plaintiff's second amended complaint to arbitration is underinclusive, contending that the trial court should have referred all fourteen counts of its lawsuit to arbitration pursuant to the parties' original agreement that contained a mandatory arbitration clause. Plaintiff also argues that the entire controversy doctrine does not allow a portion of its claims to be litigated in the Law Division and the other portion to be decided in arbitration.
For the reasons amplified in this opinion, we affirm the trial court's order. The trial court properly retained jurisdiction over counts in the second amended complaint that grew out of a 2008 Settlement Agreement and Rider, which specifically preserved for litigation in court plaintiff's claims for non-payment and any other claims that arose relating to that Settlement Agreement and Rider. Given the explicit terms of those instruments, the trial court correctly declined to refer such specified claims to arbitration without the mutual consent of the parties. In addition, the court properly maintained jurisdiction over those counts containing claims against co-defendants who were not parties to an arbitration agreement. Given these distinctive, bargained-for arrangements, the jurisdictional division of plaintiff's claims into the two tribunals, although it is inefficient, does not violate the entire controversy doctrine.
I.
The underlying factual and procedural history of this matter is woefully lengthy and complicated. The pertinent background through August 2010 is detailed at length in our prior opinion, see Tri-Tech, supra, slip op. at 1-10, and need not be repeated here. We offer the following summary, which includes developments that occurred in the wake of our August 2010 opinion.
On January 20, 2001, plaintiff and defendant Nutley Board of Education ("the Board") entered into a contract under which plaintiff agreed to provide construction management services for the remodeling and renovation of the Board's seven school facilities. Id. at 3. Article 8.1 of the contract contained an arbitration clause, as follows:
Claims, disputes or other matters in question between the parties to this Agreement arising out of or relating to this Agreement or breach thereof shall be subject to and decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect unless the parties mutually agree otherwise.
[Emphasis added.]
At the time of contracting, the parties anticipated that a single voter-approved referendum would fund the remodeling and renovation project's $40 million budget, and that the project would be completed within twenty-four months. Ibid. Payment to plaintiff under this agreement was to be a percentage of the project's total cost, and payment was contingent upon the Board's securing funding through a referendum. Ibid. In 2002, Nutley voters twice rejected the proposed project in referenda. Ibid.
The Board then modified the project and began seeking new referenda on funding the renovation of specific school buildings, as opposed to the entire district. Ibid. As a result of this revised approach, voters sequentially approved a nearly $5 million referendum for renovation of the high school in April 2003, a nearly $24 million referendum to fund renovations in the middle school in 2004, and a $38.5 million referendum to fund the modernization of the district's five elementary schools and to finish work on the high school in 2006. Id. at 3-4. The 2006 referendum budgeted $1.3 million for construction management costs. Id. at 4. Plaintiff provided, and the Board paid for, services associated with the project until 2007. Ibid.
Although the Board modified the project after the 2002 referendum was unsuccessful, the parties did not amend their original agreement until May 24, 2004. Ibid. That amendment did not mention any significant alterations to the project, but it did contain an anti-assignment provision and clarified the conditions of debarment, suspension, or disqualification of the construction manager. Id. at 4-5.
In July 2007, the Board informed plaintiff that the project's reduced scope "obviated the need for construction management services[.]" Id. at 5. Plaintiff filed a demand for arbitration on July 19, 2007, pursuant to the parties' initial contract, contesting the termination of its services. Ibid. Plaintiff sought damages in excess of $3.6 million. Ibid. However, before arbitration began, the parties settled their dispute, subject to certain conditions. Ibid. The terms of this settlement were reflected in a Rider amending the initial contract, and in a related Settlement Agreement, dated May 2, 2008 and May 5, 2008, respectively. Ibid.
The Rider outlined the terms of payment for plaintiff's continued services. Id. at 6. The Rider also set forth a schedule of fixed payments to be paid by defendant to plaintiff on specified dates. Section III(B) of the Rider provided:
In the event payments remain unpaid and overdue beyond sixty days, the Nutley Board of Education waives its right to arbitration and consents to the entry of judgment without hearing upon application made for the full amount of all unpaid amounts [under the fixed payment schedule]. Said judgment shall include an amount reflecting the reasonable value of costs and counsel fees incurred by Tri-Tech Engineering to enforce the terms of this agreement.The Settlement Agreement provided similarly:
[Emphasis added.]
The payments set forth in paragraphs 2(a) through 2(i) [i.e., the fixed installment payments identically set forth in the Rider] are all unconditional, absolute and guaranteed and shall be made on the dates set forth therein, irrespective of any future suspension or termination of the AMENDED CM AGREEMENT for any reason and at any time. In addition to all rights specified in the AMENDED CM AGREEMENT, in the event that any payment set forth in paragraphs 2(a) through 2(i) is not made within sixty (60) days of the due date set forth therein, then and in that event, [plaintiff] shall apply to the Superior Court of New Jersey, for entry of judgment for the total amounts set forth in paragraphs 2(a) through 2(i), plus theIn addition, the Settlement Agreement contained the following language in paragraph 10, which also preserved the Superior Court's jurisdiction respecting disputes that might crop up concerning that agreement:
amount of costs and counsel fees incurred to enforce this [Settlement Agreement], less credit for payments made by [the Board] to the date of said application.
[Emphasis added.]
10. New Jersey law shall govern this SETTLEMENT AGREEMENT and any action under or relating to the terms of this SETTLEMENT AGREEMENT shall be filed in the Superior Court of New Jersey.
[Emphasis added.]
The Board adopted a resolution approving the Settlement Agreement on May 5, 2008, authorizing payment to plaintiff of $2,725,000, of which $750,000 was to be paid immediately and the balance to be paid in installments until June 1, 2012. Id. at 5. The Board stated in the resolution that approval of the settlement was conditioned upon bond counsel's opinion that the settlement obligation could be funded from the 2006 referendum. Id. at 5-6.
On May 6, 2008, bond counsel sent a letter to the Board's attorney, conditionally authorizing the payment to plaintiff for its services from the bond proceeds authorized by the 2006 referendum. Ibid. Such authorization was conditioned on the completion of all work included in the 2006 referendum and the provision that the total cost of work related to the 2006 referendum not exceed $39,760,000. Id. at 6-7.
The total referendum funding was only $38,500,000. Bond counsel's letter misstated the amount. Id. at 7.
The Board's attorney then informed plaintiff of bond counsel's opinion, stating that the Settlement Agreement and Rider satisfied the resolution's condition regarding funding of the Settlement Agreement from the 2006 resolution. Id. at 7. The Board did not, however, provide plaintiff with a copy of bond counsel's letter. Ibid.
Thereafter in May 2008, plaintiff resumed its services under the Settlement Agreement and Rider, and the Board remitted to plaintiff the initial $750,000 payment. Ibid. However, the Board did not make the subsequent payment due on June 1, 2008. Ibid. Meanwhile, plaintiff delayed in submitting an invoice for the accruing installment payments until October 1, 2008, apparently for tax purposes. Ibid.
Before the Board received the October 2008 invoice, the New Jersey Department of Education's Office of Fiscal Accountability and Compliance ("OFAC") began investigating a complaint regarding the Settlement Agreement. Id. at 7-8. In the summer of 2008, OFAC advised the Board to discontinue its payments to plaintiff until the investigation was complete. Id. at 8. The Board informed plaintiff of its decision to comply with OFAC's directive. Ibid. Plaintiff thereafter sent a notice of default to the Board on October 21, 2008, demanding the acceleration of all payments due under the Settlement Agreement and Rider. Ibid.
In a December 2, 2008 letter, OFAC stated that it was not restricting payment to plaintiff for its services. Ibid. Nevertheless, the Board adopted a resolution repudiating the Settlement Agreement and another resolution terminating the Rider. Ibid. OFAC ultimately conveyed in a February 2009 letter its lingering concerns as to whether the initial agreement between plaintiff and the Board was "compatible with state law," noting additional concerns regarding plaintiff's qualifications, the bidding process, and a particular board member's actions. Ibid. OFAC also concluded in the letter that "[s]ervices were provided using bond referendum funds that had not been previously approved by the State of New Jersey, Department of Education, Office of School Facilities." Ibid. The Board consequently returned $326,004.47 in state aid it had received after January 21, 2003. Id. at 9.
Plaintiff then brought a two-count summary action in the Law Division, seeking a judgment against the Board for $1,975,000. Ibid. This sum represented the outstanding amount due under the Settlement Agreement, plus attorney's fees and interest. Ibid. Plaintiff also sought a writ of mandamuscompelling the Board to satisfy the judgment. Ibid. The Board filed an answer and counterclaim seeking to void the Settlement Agreement on various grounds, including fraud, unconscionability, violation of public policy, and unilateral mistake. Ibid.
Plaintiff should have termed its action as one "in lieu of" mandamus. See R. 4:69-1.
The Law Division then denied plaintiff's request for enforcement, based solely upon the Board's defense of unilateral mistake. Ibid. The court noted first that the Board had "clearly and explicitly conditioned its approval of the settlement" upon bond counsel's opinion that the settlement could be funded from the 2006 referendum. Ibid. The court found that bond counsel's opinion did not meet that requirement, and that bond counsel's letter had misstated the terms of the Settlement Agreement. Ibid. Additionally, the court concluded that the Settlement Agreement and Rider contained "provisions for future services that are contrary to law." Ibid. The court found that enforcing the Settlement Agreement would be unconscionable, and ordered it and the Rider rescinded. Id. at 10.
Plaintiff then filed a motion for reconsideration, which the Law Division denied. Ibid. Plaintiff thereafter filed its first appeal with this court.
On August 30, 2010 we reversed the trial court's order rescinding the Settlement Agreement and Rider. We determined that there were sufficient questions of material fact that precluded deciding the issues of enforceability on a summary basis. Id. at 23. Consequently, we remanded that issue to the trial court for its plenary consideration.
On January 16, 2011, plaintiff filed an amended complaint in the Law Division, adding as co-defendants with the Board on certain counts the State of New Jersey Department of Education; DCM Architecture; Gaccione Pomaco and Malanga, P.C.; and Anthony Malanga. This amended complaint inserted claims of breach of contract, breach of the covenant of good faith, interference, deceit and fraudulent concealment, negligent misrepresentation and attorney misrepresentation, and conspiracy to interfere with a contract and to interfere with prospective economic advantage as new claims for relief. Plaintiff also filed an amended answer to the Board's counterclaim.
This appears to be in response to the Board's original counterclaim that had been filed before the first appeal to this court, although the Board had filed an amended answer and counterclaim also prior to the first appeal, on January 23, 2009.
Plaintiff then filed a second amended complaint on February 22, 2011, modifying many of the counts in its first amended complaint to add new individual defendants. The second amended complaint also added four new counts: deceit and fraudulent concealment, negligence, promissory estoppel, and unjust enrichment. All told, the second amended complaint consisted of fourteen pleaded counts.
Plaintiff's claims against the State of New Jersey Board of Education and the individual defendants have apparently been dismissed, although there is no clear indication of this in the record. The record suggests that the court and the remaining parties agreed that the claims between plaintiff and the Board would be resolved first, and then plaintiff's claims against the other defendants would proceed afterward. We have received correspondence from counsel for defendants Dr. Philip Casale, DCM Architecture, and Gaccione, Pomaco & Malanga, P.C., declining to take part in the present appeal.
In April 2011, the Board filed an answer to plaintiff's amended complaint and second amended complaint including affirmative defenses, counterclaims, and cross-claims for contribution and indemnification. The Board's eighteenth separate defense was that plaintiff's "claims are barred by the arbitration provision contained in the [c]ontract."
In May 2011, the Board moved to dismiss all arbitrable claims. Specifically, the Board moved to dismiss and refer to arbitration count 3 (breach of contract), count 4 (breach of covenant of good faith), count 6 (deceit and fraudulent concealment), count 7 (deceit and fraudulent concealment), count 9 (negligence), count 11 (interference), count 12 (conspiracy to interfere with contract and to interfere with prospective economic advantage), count 13 (promissory estoppel), and count 14 (unjust enrichment). Plaintiff filed its opposition to the Board's motion to dismiss. Plaintiff also sent a letter to the Law Division judge on August 15, 2011 requesting that if the court were to submit any claims to arbitration, it also should submit the remaining claims to arbitration.
The Board also moved to dismiss certain claims as duplicative and the interference claims because it "cannot be held liable for interfering with its own contract." These aspects of the Board's motion to dismiss have not been raised before this court.
Plaintiff argued at first that none of its claims should be referred to arbitration, but thereafter changed its position.
On August 19, 2011, the parties orally argued the motion before Judge John Kennedy, J.S.C. Counsel for the Board first clarified that he had mistakenly included counts 6 and 7 in his motion to dismiss, and that he only intended to move to dismiss and refer to arbitration counts 3, 4, 9, 11, 12, 13, and 14. The Board's attorney argued that some of plaintiff's claims fell within the "broad scope of the . . . arbitration clause [of their initial contract] and should be treated no differently than when [plaintiff] asserted the original [arbitration] claims" against the Board in July 2007. Plaintiff's counsel did not make an argument before Judge Kennedy, but rather relied on his prior submissions to the court.
This list consists of every claim asserted against the Board, except the initial claim for judgment under the Settlement Agreement and the claim seeking mandamus to compel the Board to pay the judgment.
At the same hearing, the other defendants in the case noted that they wished to reserve the right to move at a later time to disqualify plaintiff's counsel as a necessary witness, pending the judge's decision on whether to dismiss claims for arbitration. Judge Kennedy then granted the Board's motion, dismissing the requested claims for referral to arbitration but retaining jurisdiction on the remaining seven counts (1, 2, 5, 6, 7, 8, and 10).
In Judge Kennedy's written opinion, issued on the same day as the hearing, he concluded that the Rider "modified the Original Agreement," waiving the right to arbitration only as to the schedule of fixed payments provided for under the Settlement Agreement and Rider. Accordingly, Judge Kennedy reasoned that the "broad arbitration provision" in the original contract controlled with respect to all other potential claims.
Plaintiff moved for reconsideration of the August 19, 2011 order, and also filed an alternative motion to refer the remainder of its claims to arbitration. Judge Rachel Davidson, J.S.C., heard oral argument and denied the motion on December 15, 2011. In her written statement of reasons, Judge Davidson noted that she discerned no basis to grant plaintiff's motion for reconsideration. She emphasized that the Board had not waived its right to seek arbitration on the claims that Judge Kennedy had referred to that forum.
By that point, Judge Kennedy was no longer assigned to the trial court.
Plaintiff then filed the present appeal. Its principal contention is that the entire controversy doctrine compels all counts of its amended complaint to be referred to arbitration, and not just the seven counts specified by the Board in its successful motion. Plaintiff opposes the case being handled in "dual" forums, part in litigation and part in arbitration.
The Board opposes plaintiff's jurisdictional argument, contending that the parties' disputes concerning the Settlement Agreement and Rider were specifically carved out and preserved for litigation in the Superior Court. In particular, the Board maintains that its legal argument to have the Settlement Agreement and Rider declared invalid belongs in the trial court and must not be decided by an arbitrator who is not bound by the same rigorous principles of law as a judge. The Board acknowledges, however, that if the trial court hypothetically rejects its efforts to set aside the Settlement Agreement and Rider, the parties' remaining claims should be referred to arbitration. In addition, the Board concedes that any claims that plaintiff may assert in the future concerning non-payment for work it performed after the Settlement Agreement and Rider were executed also may be resolved in arbitration.
II.
Section 2 of the Federal Arbitration Act, 9 U.S.C. § 2, expresses a "'liberal federal policy favoring arbitration[.]'" CompuCredit Corp. v. Greenwood, 565 U.S. _____, ______, 132 S. Ct. 665, 669, 181 L. Ed. 2d 586, 593 (2012) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 103 S. Ct. 927, 941, 74 L. Ed. 2d 765, 785 (1983)). In New Jersey, our Legislature reinforced those policies with its 2003 enactment of a modified version of the Uniform Arbitration Act, N.J.S.A. 2A:23B-1 to -32 ("the Arbitration Act"). See L. 2003, c. 95. Our state's case law also has expressed those same policies generally favoring the use of arbitration as a dispute resolution tool, subject to certain exceptions. See, e.g., Martindale v. Sandvik, Inc., 173 N.J. 76, 84-85 (2002); Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 131 (2001).
That said, the law also recognizes that parties who have a right to litigate their disputes in court should not be forced to undergo arbitration unless they have agreed to submit their claims to that alternative forum. Agreements to arbitrate are generally subject to the "'legal rules governing the construction of contracts.'" Wein v. Morris, 194 N.J. 364, 376 (2008) (quoting McKeeby v. Arthur, 7 N.J. 174, 181 (1951)). Therefore, despite the policies favoring arbitration, "the scope of arbitration is determined exclusively by the underlying contract[.]" United Servs. Auto. Ass'n v. Turck, 156 N.J. 480, 486 (1998); accord Hojnowski ex rel. Hojnowski v. Vans Skate Park, 375 N.J. Super. 568, 581 (App. Div. 2005), aff'd, 187 N.J. 323 (2006). Our courts customarily look to the language of the agreement to determine whether a claim is to be decided by the court or by the arbitrator. Hansen v. Hansen, 339 N.J. Super. 128, 141 (App. Div. 2001). Moreover, "[i]n accordance with the law of contracts, an arbitration clause may be modified or superseded." Wein, supra, 194 N.J. at 376.
A.
Here, the parties' original agreement provided that all claims and disputes arising out of the agreement would be "decided by arbitration[.]" Standing alone, this provision would require all of plaintiffs' claims to be referred to arbitration. This arbitration clause was modified, however, in the subsequent Settlement Agreement and Rider that the parties agreed to in 2008. Those documents both specified that if the Board failed to make payments in accordance with a schedule set forth in those two documents, plaintiff's remedy was to bring an action in the Law Division for judgment as to those payments. The Settlement Agreement specifically identified the Superior Court as the proper forum for bringing such action, and the Rider provided that the Board "waives its right to arbitration and consents to the entry of judgment without hearing upon application made for the full amount of all unpaid amounts" under the payment schedule.
Paragraph 10 of the Settlement Agreement further demonstrates that disputes by either party concerning the Settlement Agreement are to be litigated in court, and not referred to arbitration. As we have already noted, that paragraph broadly instructs that "any action under or relating to the terms of [the Settlement Agreement] shall be filed in the Superior Court of New Jersey." (Emphasis added). It would make no sense to construe this provision as merely a temporary routing measure, forcing the parties to bring disputes concerning the Settlement Agreement to the courthouse, but only to have a judge then promptly dispatch them to arbitration. Although plaintiff contends that the phrase "relating to the terms" of the Settlement Agreement should be construed to exclude the Board's contention that the Settlement Agreement is invalid, plaintiff has offered no parol evidence reflecting that the parties wished the phrase to have such a narrow meaning.
In the absence of an "explicit indication of a special meaning," the words of a provision must be given their "ordinary" meaning. In re Barnert Mem'l Hosp. Rates, 92 N.J. 31, 40 (1983); Homann v. Torchinsky, 296 N.J. Super. 326, 336 (App. Div.), certif. denied, 149 N.J. 141 (1997). As the United States Supreme Court has recognized, the ordinary meaning of the phrase "relative to" is broad, having a dictionary definition of "to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with[.]" See Morales v. Trans World Airlines, 504 U.S. 374, 383, 112 S. Ct. 2031, 2037, 119 L. Ed. 2d 157, 167 (1992). Applying that ordinary meaning to paragraph 10 of the Settlement Agreement, it is clear that the Board's contention that the Settlement Agreement should not be enforced "relates to" and has "a connection with" that agreement itself. We shall not re-write paragraph 10 to provide for a special, more narrow meaning. Both parties presumably had the opportunity to seek the advice of counsel before agreeing to this jurisdictional provision, and it is not the court's role to write a better or wiser agreement than the one that the parties themselves created. Kampf v. Franklin Ins. Co., 33 N.J. 36, 43 (1960).
The language of the Settlement Agreement and Rider is therefore clear and explicit in providing that, with respect to an action for overdue payments under the payment schedule, arbitration is not the appropriate forum for handling the dispute. Because counts 1 and 2 of plaintiff's second amended complaint concern an action for payment under the schedule provided in the Settlement Agreement and Rider, those claims plainly are not subject to arbitration under the terms of those agreements. In addition, count 7 (which alleged deceit and fraudulent concealment), count 8 (which alleges negligent misrepresentation and attorney misrepresentation), and count 10 (which alleges negligence and tortious interference) all make allegations concerning the creation, and the Board's ultimate repudiation, of the Settlement Agreement. The text of each of those counts specifically refers to the Settlement Agreement. Because these counts likewise "relate to" that instrument, they should be litigated in the Superior Court in accordance with paragraph 10.
Counts 5, 6, 7, 8, and 10 of the second amended complaint are not appropriate for arbitration for an additional reason. Each of those counts includes, as co-defendants with the Board, additional parties who plaintiff contends also acted improperly and in derogation of its rights. To the extent that plaintiff has not resolved its claims against those additional parties, they cannot be forced to defend themselves in arbitration because, unlike the Board, they did not enter into an agreement to waive their right to a judicial forum.
B.
Plaintiff contends that, regardless of how we construe the wording of the operative agreements, the entire controversy doctrine compels having all of the parties' disputes decided in one forum. We disagree.
The entire controversy doctrine promotes litigants in a civil action to raise all claims arising from a single controversy that each party might have against another party. R. 4:30A. It is a preclusionary device, intended to discourage fractionalized litigation by generally mandating the assertion of all claims arising from a single controversy in a single action. Prevratil v. Mohr, 145 N.J. 180, 190 (1996). The institutional reasons underlying the doctrine are threefold: "(1) the need for complete and final disposition through the avoidance of piecemeal decisions; (2) fairness to parties to the action and those with a material interest in the action; and (3) efficiency and the avoidance of waste and the reduction of delay." DiTrolio v. Antiles, 142 N.J. 253, 267 (1995) (citing Cogdell v. Hosp. Ctr. at Orange, 116 N.J. 7, 15 (1989)).
In the context of arbitrability, however, the entire controversy doctrine is not an overriding principle. See Gelber v. Zito P'ship, 147 N.J. 561, 565 (1997) ("[T]he entire controversy doctrine is not part of arbitral practice. (The powers of an arbitrator are strictly limited by the terms of the arbitration agreement.)"). In fact, when only limited aspects of a dispute are subject to arbitration, our courts have sometimes addressed the problems associated with fragmented litigation by staying the non-arbitrable claims in court pending the completion of arbitration.
For example, in Elizabethtown Water Co. v. Watchung Square Associates, 376 N.J. Super. 571, 573 (App. Div. 2005), multiple contracts between four parties provided that some claims were subject to arbitration but others were not. When the parties engaged in litigation, this court ordered that the non-arbitrable claims be stayed in the trial court until the arbitrable claims were resolved. Id. at 579. This court recognized that such an approach was "obviously" inconsistent with the entire controversy doctrine, but nonetheless concluded that "such fragmentation is often unavoidable when arbitration and litigation rights conflict." Id. at 577; see also Blatterfein v. Larken Assocs., 32 3 N.J. Super. 167, 171 (App. Div. 1999) (noting without disapproval that the trial court had stayed non-arbitrable portions of a litigation pending the resolution of the arbitrable claims); Rosenthal v. Berman, 14 N.J. Super. 348, 352 (App. Div. 1951) (stating that undue costs and hardship should be considered in determining whether to grant such a stay).
Here, the parties agreed in advance that certain claims would be decided in arbitration, but a claim for payment under the schedule set forth in the Settlement Agreement and Rider would be brought as a summary action in the Law Division. The parties also agreed that disputes "relating to" the Settlement Agreement would need to be litigated in the Superior Court. Because the parties are now litigating the question of arbitrability, the entire controversy doctrine is not controlling in this distinctive context. See Gelber, supra, 147 N.J. at 565.
In light of our analysis, we need not address the Board's separate argument that plaintiff has waived its ability to invoke the entire controversy doctrine by virtue of bringing its revisited complaint in court and then by greatly expanding those claims in a first and second amended complaint.
--------
To be sure, Judge Kennedy rightly observed in footnote four of his opinion that "it may make practical sense to refer all claims between plaintiff and [the Board] to arbitration[.]" The judge declined to do so, particularly in light of the procedural deficiency that plaintiff never filed a motion seeking such comprehensive relief. But even if plaintiff had filed such a motion, it would have been legally improper to send all claims to arbitration because, for the reasons we have already noted, (1) the terms of the Settlement Agreement specifically reserve disputes under or relating to the Settlement Agreement for disposition in court and (2) the co-defendants have not agreed to waive their rights to defend themselves in court and to submit to arbitration.
C.
The balance of plaintiff's arguments lack sufficient merit to be discussed in this opinion. R. 2:11-3(e)(1)(E).
This matter is consequently remanded to the trial court for disposition of counts 1, 2, 5, 6, 7, 8, and 10 of the second amended complaint, consistent with this opinion, and to adjudicate the Board's related contention that the Settlement Agreement is invalid and unenforceable. We take no position as to whether the arbitration should be stayed pending the trial court's disposition of those particular issues or, alternatively, whether the arbitration should proceed first while the trial court proceeding is stayed. We instead leave that sequencing question to be resolved by the parties and, absent their agreement, the trial judge.
Affirmed and remanded. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION