On appeal from the Superior Court of New Jersey, Law Division, Camden County.
Before Judges Stern, Keefe and Humphreys.
The opinion of the court was delivered by KEEFE, J.A.D.
Plaintiffs Taylor Mills and Veronica Mills (collectively referred to herein as "the Mills") appeal from the entry of a judgment dismissing their claims against J. Daunoras Construction Inc. and Jack Daunoras (collectively referred to herein as Daunoras) with prejudice on the ground that the entire controversy doctrine required the Mills to pursue their claim against Daunoras in a pending arbitration proceeding in which the Mills are not named parties. We reverse the judgment under review and remand the matter for further proceedings for the reasons stated herein.
In the complaint filed by the Mills against Daunoras, they maintained that Daunoras and Venus Lounge, Inc. (Venus Lounge) entered into a contract wherein Daunoras was to perform certain work on property owned by Venus Lounge. The Mills contended that, in the course of Daunoras's work, it negligently, carelessly and/or recklessly cut down trees belonging to the Mills. The Mills further contended that as a result of Daunoras's tortious conduct the Mills were fined by the Department of Environmental
Protection and incurred expenses to mitigate the property damage in question. The suit filed by the Mills against Daunoras was in tort. They did not contend that any rights flowed to them under the contract between Venus Lounge and Daunoras.
Before filing an answer in the matter, Daunoras moved to dismiss the complaint on various grounds. One of the grounds alleged that the court lacked jurisdiction over the subject matter because there was a pending arbitration between Venus Lounge and Daunoras which had been instituted by Venus Lounge almost two years before the institution of the Law Division action. That arbitration was filed pursuant to Article XIV of the contract between Venus Lounge and Daunoras. It provided:
All claims or disputes arising out of this Contract or the breach thereof shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. Notice of the demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association and shall be made within a reasonable time after the dispute has arisen.
Daunoras maintained that Taylor Mills was a principal of Venus Lounge Inc., and that the damages sought by the Mills in their complaint were already presented as issues to be determined in the arbitration proceeding. Specifically, Daunoras' counsel argued:
The plaintiffs here apparently wish to divorce the arbitration proceeding from this lawsuit and claim that some different sort of relief is being sought in these two different proceedings. However, as a careful review of the arbitration documentation and plaintiffs' Complaint discloses, everything sought by the plaintiffs here can be and is subject to the existing arbitration proceeding. The plaintiffs in their Complaint seek recovery of fines levied by the New Jersey Department of Environmental Protection and Energy, as well as costs associated with the implementation of the N.J.D.E.P.E.'s plan of mitigation, which the plaintiffs have provided an estimate for (in the arbitration matter) in the amount of $38,000.00.
Daunoras was concerned that if both the Law Division proceeding and the arbitration proceeding were permitted to continue simultaneously there was a possibility of "double, multiple or other inconsistent results." The Mills, in their reply brief, did not deny Daunoras's contention that the issues ...