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Bruno v. Mark Magrann Associates

November 9, 2006

RONALD J. BRUNO AND FILOMENA BRUNO; NICHOLAS BONAMASSA AND BARBARA BONAMASSA, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
MARK MAGRANN ASSOCIATES, INC. D/B/A MAGRANN ASSOCIATES; THERMAL DESIGN, INC., DEFENDANTS-RESPONDENTS, THERMAL DESIGN, INC., THIRD-PARTY PLAINTIFF-RESPONDENT,
v.
U.S. HOME CORPORATION, THIRD PARTY DEFENDANT-INTERVENOR.



On appeal from the Superior Court of New Jersey, Law Division, Burlington County, L-2659-04.

The opinion of the court was delivered by: Winkelstein, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

APPROVED FOR PUBLICATION

Argued October 5, 2006

Before Judges Cuff, Winkelstein and Fuentes.

Plaintiffs purchased single family homes in an adult community in Waretown from U.S. Home Corporation (U.S. Home), the general contractor and developer. Claiming the heating units in their homes did not work properly, plaintiffs filed a class action lawsuit against U.S. Home. The trial court dismissed plaintiffs' complaint and ordered the parties to arbitration based on an arbitration clause in plaintiffs' contracts with U.S. Home. Plaintiffs then instituted this lawsuit, another class action, but this time named the heating subcontractors, rather than the general contractor, as defendants.

The subcontractors subsequently moved to have plaintiffs' complaint dismissed and the dispute sent to arbitration. Though plaintiffs and the subcontractors had no direct contractual relationship, the trial judge nevertheless granted the motion and dismissed the complaint. The court concluded that even in the absence of an express contractual relationship, plaintiffs were required to arbitrate disputes with the subcontractors under the terms of the arbitration clause in plaintiffs' contracts with U.S. Home.

Plaintiffs' argument on appeal is that because they had no contractual relationship with the subcontractors, they are not required to arbitrate their disputes with them, despite their agreement to arbitrate with the general contractor. We disagree. The expansive arbitration clause in plaintiffs' contracts with U.S. Home encompasses the dispute with the subcontractors over the heating systems in plaintiffs' homes. Consequently, plaintiffs are required to submit those disputes to arbitration, even in the absence of a direct contractual relationship with the subcontractors.

The record reflects the following facts and procedural history. Plaintiffs Ronald and Filomena Bruno, and Nicholas and Barbara Bonamassa, purchased homes in the Waretown development from U.S. Home in 2002. U.S. Home contracted with defendants Thermal Design, Inc. and Mark MaGrann Associates (MaGrann), respectively, to design and install the heating systems in the homes. Plaintiffs and other residents complained that the heating systems were defective in that they were incapable of maintaining a consistent temperature above sixty degrees.

In response to those complaints, U.S. Home retained Remington & Vernick Engineers (R & V) to investigate. R & V conducted a survey of homes in the development, including the Bruno home, where it found that the heating equipment was "adequately sized for the residence," and the Bonamassa home, in which it found that the heating equipment was "marginally sized for the residence." U.S. Home then offered to replace the "marginally-sized" 100,000 BTU heaters with 115,000 BTU heaters. Homeowners interested in replacement were asked to sign releases and to keep their terms confidential.

Plaintiffs remained unsatisfied, and in August 2004 they filed a class action complaint in Ocean County against U.S. Home. They alleged in their complaint that their homes were defective in that they were incapable of maintaining a consistent temperature above sixty degrees in the living areas.

In that lawsuit, plaintiffs sought an order directing U.S. Home to arbitration. Plaintiffs relied on their contracts with U.S. Home, which contained a provision captioned "Arbitration of Disputes." That clause says, in pertinent part,

The parties to this Agreement specifically agree that this transaction involves interstate commerce and that any dispute (whether contract, warranty, tort, statutory or otherwise), including, but not limited to, (a) any and all controversies, disputes or claims arising under, or related to, this Agreement, the property, or any dealings between the Buyer and Seller . . . ; (b) any controversy, dispute or claim arising by virtue of any representations, promises or warranties alleged to have been made by Seller or Seller's representative; . . . shall first be submitted to mediation and, if not settled during mediation, shall thereafter be submitted to binding arbitration as provided by the Federal Arbitration Act (9 U.S.C. §§1 et seq.) or, if inapplicable, by similar state statute, and not by or in a court of law. All decisions respecting the arbitrability of any dispute shall be decided by the arbitrator.

. . . Buyer and Seller further agree (1) that any dispute involving Seller's directors, officers, employees and agents shall be resolved as set forth in this agreement and not in a court of law; (2) that Seller shall have the option to include its subcontractors and suppliers as parties in the mediation and arbitration; and (3) that the mediation and arbitration will be limited to the ...


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