by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
In recent months I have written several times about the difficulty of enforcing arbitration agreements in New Jersey (e.g., here, here, and here). While the U.S. Supreme Court's decision in Kindred Nursing Centers v. Clark has some people confident that this will change, it hasn't yet. Instead, New Jersey courts continue to issue opinions demonstrating the uphill battle faced by parties trying to enforce contractual arbitration provisions. A recent unpublished Law Division opinion, Griffoul v. NRG Residential Solar Solutions, LLC, is the latest example.
In Griffoul, plaintiffs entered into a lease for a residential solar system. The lease contained a "broad form arbitration clause" in which plaintiffs agreed to arbitrate "any" claim "arising out of" or "in connection with" the lease, and agreed that, by entering into the lease, plaintiffs were waiving their right to a jury trial. The lease also contained a class action waiver provision, declaring that "each party may bring claims against the other only in its individual capacity and not as a plaintiff or a class member in any purported class or representative proceeding."
Nonetheless, just over three years after entering into the lease, plaintiffs filed a putative class action in state court. The complaint asserted the now-common one-two punch of claims under the Consumer Fraud Act ("CFA") and the Truth in Consumer Contract, Warranty and Notice Act ("TCCWNA"). The CFA claims were based on alleged misrepresentations made by defendants in connection with the marketing of the solar energy system, and the TCCWNA claims were based on six provisions of the lease that plaintiffs claimed violated clearly established rights under New Jersey law.
Continue reading “NJ Court: Agreement To Arbitrate “Any Claims” Does Not Include Agreement To Arbitrate Statutory Claims”
by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
"We anticipate that the court will engage counsel with more patience on remand."
I assume this is not something a trial court wants to see at the end of an opinion from an appellate court. But, this was precisely how the Appellate Division ended its decision in Midland Funding v. Bordeaux. The case, which involved the enforceability of an arbitration provision, is notable as much for the manner in which it was decided by the trial court as the legal issues at play in the decision.
In Midland Funding, plaintiff sued defendant over $1,018.04 in consumer debt that plaintiff purchased from the original creditor. In response, defendant denied liability and asserted a counterclaim alleging plaintiff violated the Fair Debt Collections Practices Act. During discovery, defendant moved to compel plaintiff to answer interrogatories. Plaintiff responded with a motion to compel arbitration. On the eve of the return date of that motion, defendant moved for summary judgment. Oral argument on these motion was adjourned for approximately 30 days.
When oral argument was eventually held, it did not last long. The Appellate Division noted that the transcript "show[ed] that the oral argument hearing began at 9:10 a.m. and concluded at 9:11 a.m." In the span of a minute, the trial court concluded that defendant's credit card agreement "contain[ed] an arbitration agreement," therefore "[i]t's going to arbitration." The trial court also denied defendant's summary judgment motion without explanation and declared that defendant's motion to compel answers to interrogatories was moot.
Continue reading “One Minute for Oral Argument? Motion Decided in 60 Seconds Doesn’t Survive Appeal.”
by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)
It is not often that a case that starts in the Special Civil Part — New Jersey's small-claims court — ends up before the New Jersey Supreme Court. But this is exactly what happened in Williams v. American Auto Logistics. It could not have been cost effective for the plaintiff to see this case through two separate bench trials, two separate appeals to the Appellate Division, and finally an appeal to the Supreme Court. But the issue in the case was so important that, notwithstanding the costs, the effort was likely worthwhile.
In Williams, plaintiff had his car shipped from Alaska to New Jersey by defendant. After he picked up the car, he discovered water damage in the trunk. Plaintiff sued in the Special Civil Part after efforts to amicably resolve the dispute failed. Plaintiff did not demand a jury trial in his complaint, but defendant did in its answer. At the pretrial conference, the trial court referred the parties to mediation, which was unsuccessful. Upon returning from mediation, defendant waived its jury demand. Plaintiff objected, but the trial court granted defendant's request. In support of its decision, the trial court noted that plaintiff had violated Rule 4:25-7 by failing to make the requisite pretrial submissions. (Among other things, Rule 4:25-7 requires parties to submit proposed voir dire questions, jury instructions, and jury verdict forms.) The trial court held that it could deny plaintiff's request for a jury trial as a sanction for this failure. Therefore, the case proceeded to a bench trial, where the trial court found no merit to plaintiff's claims.
Plaintiff appealed and the Appellate Division reversed and remanded. It held that a jury demand can only be withdrawn by consent, even when only one party demanded a jury trial and that party seeks to withdraw the demand. It further explained that "a trial judge may impose sanctions, including striking the jury demand, on a party that fails to submit the requisite pretrial information," but that the trial court in Williams erred by "allowing a single party to unilaterally waive the jury demand."
Continue reading “Party Cannot Lose Its Right To Jury Trial For Violating Procedural Rules”
by: Steve P. Gouin
In the recently decided Seavey Construction Inc. v. St. Peter, the Appellate Division reversed the Law Division and its construction of the New Jersey Construction Lien Law, N.J.S.A. 2A:44A-1, et. seq. (the Lien Law”).
Under the Lien Law, before a contractor may file a construction lien stemming from a residential project, he must file a Notice of Unpaid Balance and Right to File Lien (“NUB”) and Demand for Arbitration of the NUB with the AAA. This added step is intended to prevent contractors from filing meritless lien claims against unsuspecting homeowners. An arbitrator will be assigned to make certain determinations regarding the NUB, such as whether it was filed correctly and states a valid lien claim and whether the homeowner has any valid setoffs or counterclaims. Once the arbitrator renders his decision, the contractor may file his lien, but may be required to post a bond, to the extent the arbitrator determines that the homeowner’s claims have merit.
In Seavey, the arbitrator ruled in favor of the contractor on the NUB arbitration. In doing so, it found the homeowner’s counterclaims to be invalid. Subsequently, the contractor filed a complaint in the Law Division seeking to foreclose on its lien. The homeowner’s answered and asserted the same counterclaims that the arbitrator had found to be invalid. The trial court dismissed these counterclaims, on the grounds that the arbitrator had already found them to be invalid.
On appeal, the Appellate Division held that the arbitrator’s determination merely established a “prejudgment lien” which still need to be confirmed in litigation brought pursuant to the lien law. The arbitrator’s decision does not, as the trial division held, absolve the contractor of the burden of proving the validity of its lien claims at trial. Moreover, it does not prevent the homeowner’s from raising the same counterclaims as were asserted during arbitration of the NUB. The Court noted that, to do so, would require the parties “to have completed discovery for all non-lien causes of action within” the thirty day period provided by the Lien Law for the arbitrator to render a decision.
The Appellate Division also reversed the trial court’s grant of summary judgment on the contractor’s breach of contract and unjust enrichment claims, which the trial court had granted based on the arbitrator’s decision. The Appellate Court noted that the trial court improperly treated the arbitrator’s decision as one entitling the contractor to a money judgment. Rather, pursuant to the Lien Law, the Appellate Division held that the arbitrator’s decision, while confirming the validity of the NUB and the underlying lien claim, is not to be used for res judicata or law of the case purposes.
by: Peter J. Gallagher
Just in time for Memorial Day, Bank of America agreed to pay millions of dollars to settle claims that it wrongfully foreclosed on the homes of scores of active-duty service members. As the Charlotte Observer reported in the article entitled, "Bank of America Unit To Pay $20 Million Over Military Foreclosures , Countrywide Financial, which BOA acquired in 2008, foreclosed upon approximately 160 service members while they were serving overseas. A lawsuit filed by the Department of Justice in federal court in California alleged that BOA violated the Civil Relief Act by failing to consistently check on the military status of borrowers before initiating foreclosure proceedings. The DOJ began investigating BOA after U.S. Marine Corps referred a case involving a service member facing foreclosure by Countrywide.
Under the terms of the settlement, BOA agreed to: (1) establish a $20 million fund to compensate service members; (2) pay all costs associated with any homes that were foreclosed upon without court orders between June 1, 2009, and Dec. 31, 2010; and (3) undertake corrective actions, including starting a dedicated customer service unit for service members and a loan balance reduction program for military members who are behind on their payments.
As the article notes, this settlement is only the latest Countrywide-related problem for BOA. The bank is also one of the many banks considering a settlement with various states attorneys general related to various mortgage servicing errors. Most of BOA’s issues arise out of loans originated by Countrywide before BOA purchased the California-based lender as it teetered on the brink of collapse.
Prior to the BOA settlement, the Justice Department settled with both Morgan Stanley and JPMorgan Chase % Co. over similar allegations. Morgan Stanley, which agreed to pay $2.36 million as part of its settlement, allegedly foreclosed on approximately 18 service members without court orders. JPMorgan, which agreed to pay $27 million, acknowledged that it overcharged approximately 6,000 service men and women who were overcharged on their mortgages. JPMorgan also agreed to cut interest rates on soldiers' home loans and return homes that were wrongfully foreclosed upon. Finally, both banks issued statements apologizing to the U.S. military personnel for their actions.