Party That Drafted Arbitration Provision Moves To Have Provision Deemed Unenforceable. It Lost.

by: Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Arbitration (pd)Most cases involving commercial contracts and arbitration provisions follow a similar pattern. They generally involve consumers arguing that they cannot be bound by arbitration clauses found in the fine print of boilerplate contracts that they had no ability to negotiate. But Shah v. T & J Builders, LLC turns this scenario on its head. In Shah, plaintiffs, the consumers, drafted the contract that contained the arbitration clause but later argued that it was unenforceable. To make matters worse (or at least more unusual), plaintiffs took this position after participating in an arbitration proceeding with defendant for two years. Not surprisingly, plaintiffs efforts to have their own arbitration clause deemed unenforceable were unsuccessful.

In Shah, plaintiffs hired defendant to build an extension on their home. The contract, which was "heavily negotiated between the parties," albeit without counsel, was drafted by plaintiffs. It contained an arbitration clause that required the parties to arbitrate "any dispute [ ] relative to the performance of [the] contract that [they could not] satisfactorily resolve." After one such dispute arose, plaintiffs terminated the contract and defendant filed an arbitration demand. Plaintiffs answered the demand and filed a counterclaim, alleging breach of contract and violations of New Jersey Consumer Fraud Act. Nowhere in their answer or counterclaim did plaintiffs address, much less challenge, the arbitration clause.

The parties, through counsel, then pursued their claims in arbitration for almost two years, exchanging discovery and expert reports, participating in a site inspection, and participating in several conferences with the arbitrator. Two weeks before the scheduled arbitration date, the parties submitted their pre-arbitration briefs. This is where the fun began. 

Continue reading “Party That Drafted Arbitration Provision Moves To Have Provision Deemed Unenforceable. It Lost.”

Litigation Privilege Protects Client’s Statement That His Former Lawyer Was a Liar, Thief, and “No Good Drunk”

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Privilege (pd)Anyone who has practiced law for any period of time likely has a story about a misdirected email. You know, the one you meant to send to a client or a colleague, but it went to your adversary or your supervising partner instead. These situations often just result in mild to moderate awkwardness around the office, but they sometimes create bigger problems. MacNaughton v. Harmelech, a recent decision from the Appellate Division, involved the latter. But it also involved the litigation privilege, something I wrote about just a few weeks back. (What Do eBay, The "40 Year Old Virgin," And The Litigation Privilege Have In Common?). And, fortunately for defendant, the statements in his misdirected email were protected by that privilege.

In MacNaughton, plaintiff, a New Jersey lawyer, represented defendant in a lawsuit involving defendant's company. Defendant disputed plaintiff's bill and plaintiff eventually sued defendant over the bill. At some point during the litigation, the trial court asked the parties whether they were interested in mediation. Around the same time, however, plaintiff was "in contact with another of defendant's creditors about banding together to force defendant into involuntary bankruptcy." As you might expect, when defendant learned about plaintiff's efforts, it colored his decision about whether to agree to mediation. In fact, defendant sent the following email, reprinted exactly as it appeared in the Appellate Division's decision, to his lawyers on the subject:

Please I Am asking you to file a paper in the state court there WILL NOT BE AGREE NOT TO BE A MEDIATION MACNAUGHTON CALL TODAY AND ASK HIM TO TRY TO POT ME IN IN VALENTRY BANKRUPTCY AS YOU SEE HE IS A. LIAR THIEF AND NO GOOD DRUNK

NO TO BE TRUSTED THANKS

Unfortunately, defendant also copied plaintiff on this email. Upon receiving it, plaintiff filed a one-count complaint for defamation. The trial court held a hearing on whether the statements were protected under the litigation privilege. After taking testimony from defendant and his current counsel, the court applied the four-factor test from Hawkins v. Harris, and held that they were. As a result, plaintiff's claim was dismissed. Plaintiff appealed.  

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Court Approves Service Of Complaint Via Facebook, No Word On How Many “Likes” It Received

     by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Facebook (pd)Facebook is useful for a lot of things — humble bragging about your children, posting professionally taken candid photographs of your smiling family, announcing your engagement/marriage/pregnancy/baby's gender to several hundred of your closest friends, etc. In K.A. v. J.L., a New Jersey court added another item to this list. After observing that courts in other jurisdictions were almost evenly split on the issue, the court allowed plaintiffs in that case to serve defendant via Facebook. (When it researched the issue, I assume the court reviewed one of my prior posts about two New York courts that also allowed service via Facebook.)

K.A. involved very unusual facts. Plaintiffs sued defendant to "enjoin defendant from holding himself out as the father of their [adopted] son." Defendant, who was not the son's biological father of record, sent the son a friend request over Facebook. The son declined. Defendant then reached out to the son over Instagram, claiming that he was the son's biological father. Defendant allegedly informed the son that he knew where the son was born, and disclosed both the identity of the son's birth mother and that the son had "biological siblings at large." (Plaintiffs allege that defendant also sent a Facebook friend request to the son's sister, who, like the son, declined the invite.) Defendant also "incorporated a picture of [the son] into an image comprised of three separate photographs, each featuring a different person," and purportedly claimed that the collage was a picture of his children. Defendant shared this picture with the public on his Facebook account. Plaintiffs believe defendant obtained the image of the son from the son's Facebook account.

Plaintiffs claimed that defendant was a "complete stranger to them," and that they had no contact with him prior to the events that led to the litigation.  Plaintiffs' counsel attempted to serve cease and desist letters on defendant at his last known address via certified and regular mail. The certified letters were returned as unclaimed, but the letters sent by regular mail were never returned. Plaintiffs then sued, seeking an injunction preventing defendant from contacting their son or claiming to be his father. They sought permission from the court to serve the complaint on defendant via Facebook.

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“Knee Deep In The Water Somewhere . . .” Plaintiff Injured by flying coffee cup cannot invoke maritime jurisdiction

 by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Virgin islands (pd)
If you are like me, you have probably wondered: If I were standing on a boat in the Virgin Islands and was injured when someone tossed "an empty insulated coffee cup" at me, could I invoke a federal court's maritime jurisdiction? Well, we now have the answer in the form of the Third Circuit's opinion in Hargus v. Ferocious and Impetuous, LLC.

In Hargus, plaintiff was a passenger on a boat, the "One Love," which was owned by Ferocious and Impetuous, LLC. He rented the boat along with some friends to sail from St. Thomas to various points in the U.S. Virgin Islands. Hargus was standing on the deck of the boat while it was anchored in "knee deep" water, close to shore. Some of the other passengers, who were standing on shore, threw beer cans at Hargus (the opinion does not explain why they did this). Upon seeing this, the captain of the boat, who was standing nearby the passengers who threw the beer cans, threw "an empty insulated plastic coffee cup at Hargus" (the opinion does not explain this either). The coffee cup hit him in the temple. He did not lose consciousness or complain about any injury at the time, and the boat continued on its voyage without further incident.

Two days after the incident, plaintiff sought medical attention after experiencing pain and impaired vision, which he attributed to being hit by the coffee cup. He was diagnosed with a concussion and a mild contusion. (The opinion notes that he had a history of head trauma, having suffered 10-12 prior concussions.) He was not prescribed any medication and was allowed to return to work without restrictions. He did not seek additional treatment until one year later when he went back to the doctor, complaining of headaches, memory loss, mood swings, and neck pains.

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Married in 1967, Divorced in 1982, Sued for 47 Years of Alimony in 2014

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Divorce (pd)It seems like the plot of a Lifetime movie, but it is not (or, at least, not yet). Plaintiff and defendant marry in 1967 in Vietnam. In 1975, plaintiff flees Vietnam because of the "impending communist takeover." He ends up in New Jersey where, in 1981 he files for divorce. The judgment of divorce is entered in 1982, after which plaintiff re-marries. In 2004, defendant immigrates to the United States and ten years later seeks to vacate the divorce and collect alimony and equitable distribution "based on a 47 year marriage." These are the basic facts in a recent unpublished Appellate Division decision, Chau v. Khon.  

Here are the relevant missing details. After coming to America in 1975, plaintiff sent letters to defendant, "including a signed application for family reunification." Plaintiff's brother also sent letters to defendant. These letters were sent between 1975 and 1981, but defendant never responded. Plaintiff filed for divorce in 1981, asserting a separation of more than 18 consecutive months as the basis for the divorce. Because he had not heard from his wife in six years, and did not know here whereabouts, he sought permission to serve her by publication. The court agreed, and following publication, a judgment of divorce was entered.

Plaintiff remarried and the couple had a son. Plaintiff also had two daughters from his first marriage. In 1993, the daughters came to live with their father and his new wife. In 1996, plaintiff and his son even visited Vietnam and met with defendant. In 2004, defendant immigrated to the United States. She claims that she learned about the divorce in 2006 when she obtained copies of the original complaint and judgment of divorce. Nonetheless, she waited until 2014 to (1) move to vacate the original divorce and (2) file her own complaint for divorce, seeking alimony and equitable distribution going back to the original 1967 wedding date. She also filed lis pendens on three properties, only one of which was owned by plaintiff (the other two were owned by his son). Defendant claimed that she waited ten years to file the complaint because it took her that long to "obtain all of the papers they needed to prove that plaintiff knew where she was living in 1981 and 1982 so she could challenge his fraudulent divorce from her." This was important to her because, among other arguments, defendant claimed that plaintiff's assertion that he did not know her whereabouts when he filed the complaint for divorce was a fraud on the court.

Plaintiff opposed the motion to vacate the divorce and cross moved to discharge the lis pendens and for an award of attorney's fees. The trial court denied defendant's motion and granted plaintiff's motion (except the request for fees). The trial court explained that defendant "admitted that she knew of the divorce in 2006 , but failed to act diligently by waiting until 2014 to file her motion to vacate the divorce."  It also held that defendant failed to "address[] how her motion and proposed new divorce complaint would affect plaintiff's second wife, who had been married to plaintiff for over thirty years." Defendant appealed.

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New Jersey Supreme Court To Clarify Whether TCCWNA Claim Can Be Based On An Omission

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Contract(pd)In a recent post, I wrote about New Jersey's Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA). It has become exceedingly popular with the plaintiffs' bar and now appears frequently (usually along with another favorite, the New Jersey Consumer Fraud Act) in putative consumer class action complaints. The New Jersey Supreme Court is now going to weigh in on one of the unsettled portions of this newly-popular law — whether a TCCWNA claim can be based on an alleged omission in a contract as opposed to an affirmative misstatement.

The case discussed in my prior post — Matijakovich P.C. Richard & Son — involved the purchase and delivery of a washing machine. Although the washing machine was delivered on time, plaintiff sued because the contract with the seller did not contain language disclosing defendant's obligation in case of delay. TCCWNA provides that "[n]o seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract  .  .  .  which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller." Defendant moved to dismiss the complaint, arguing that a TCCWNA claim cannot be based on an omission. It argued that TCCWNA prohibits a seller from entering into a consumer contract that includes an illegal term, therefore it applies only to affirmative statements, not omissions of allegedly required language. The district court noted that the New Jersey Supreme Court had not yet ruled on this issue, but relied on federal case law to grant the motion and dismiss the complaint.

A similar scenario played out in another recent decision from the U.S. District Court for the District of New Jersey,Truglio v. Planet Fitness, Inc. In that case, plaintiff alleged that the contract she entered into with her health club violated TCCWNA by failing to (1) conspicuously set forth her total payment obligations and (2) set forth that a bond had been filed with the Director of the Division of Consumer Affairs. The district court dismissed this portion of the complaint. Like the Matijakovich court, the district court noted that the New Jersey Supreme Court had not yet ruled on the issue, but it relied on the same federal law as the Matijakovich court for the proposition that an alleged omission cannot serve as the basis for a TCCWNA claim.

Both of these courts looked for guidance from the New Jersey Supreme Court and found none. This may soon change. The New Jersey Supreme Court just granted certification in two cases — Bozzi v. OSI Restaurant Partners, LLC and Dugan v. TGI Friday’s, Inc. — that should resolve the question of whether a TCCWNA claim can be based on an alleged omission. I wrote about Dugan here, but both cases involved restaurants not including drink prices on their menus, and both appeals question whether class certification is appropriate under TCCWNA in light of this omission. (The Dugan case also has a second question about whether class certification is appropriate where a restaurant charges different prices for drinks depending on where they are purchased (i.e., at the bar vs. at a table).) It will be many months before we get an answer from the Supreme Court in these cases, but this case will be closely watched by both plaintiffs' and defense counsel so stay tuned.

Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Washer dryer (pd)New Jersey's Consumer Fraud Act (CFA) has long been a favorite of  plaintiff's attorneys, but there is another consumer protection statute that is rapidly gaining on the CFA in popularity — the Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) (or, as it is sometimes awkwardly pronounced, "ta-KWA-na"). Although it has been around for thirty years, case law interpreting the TCCWNA is still in its infancy because the act has only recently become a common claim in putative consumer class actions. In a new, unpublished decision, Matijakovich v. P.C. Richard & Son, the U.S. District Court for the District of New Jersey, addressed one unsettled aspect of the still developing body of case law surrounding the TCCWNA.

First, a brief primer on the TCCWNA, which provides, in part:

No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written  consumer contract  .  .  .  or display any written . . . notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer or responsibility of a seller . . . as established by State or Federal law at the time the offer is made . . . or the . . . notice or sign is given or displayed.

Its purpose is to prevent deceptive practices in consumer contracts by prohibiting the use of illegal terms or warranties. To state a claim under the TCCWNA, a plaintiff must prove four elements: (1) that it is a consumer; (2) that defendant is a seller; (3) that the seller offered a consumer contract; and (4) that the consumer contract contained a provision that violated a legal right of the consumer or a responsibility of the seller. Any party found to have violated the TCCWNA is liable for a civil penalty of not less than $100, actual damages, or both, in addition to reasonable attorneys' fees and court costs.

Continue reading “Alleged Omission In Consumer Contract Does Not Violate New Jersey Consumer Protection Statute”