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Maguire v. Freehold Subaru

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 22, 2008

ANGELA MAGUIRE, PLAINTIFF-APPELLANT,
v.
FREEHOLD SUBARU, L.L.C., DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-4190-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted July 8, 2008

Before Judges Parker and Gilroy.

Plaintiff Angela Maguire appeals from the September 28, 2007 order, which denied her motion seeking to vacate a private arbitration award entered on May 15, 2007. We affirm.

On July 23, 2005, plaintiff, in anticipation of entering into an agreement to lease a new 2005 Subaru automobile from defendant, signed a buyer's order form. The order form contained an arbitration provision that stated in pertinent part: 1) "[t]he parties to this agreement agree to arbitrate any claim, dispute or controversy, including all contractual statutory and common-law claims and any state or federal claims that may arise under this agreement"; 2) that "[w]ithout limitation, Consumer Fraud, Lemon Law, and Truth-in-Lending claims are just three examples of the various types of claims subject to arbitration under this agreement"; 3) "[t]he arbitration shall be conducted in accordance with the Rules of the American Arbitration Association before a single arbitrator"; 4) that "[e]ach party shall bear his or her own attorney's fees and costs associated with the arbitration"; and 5) "[t]he decision of the arbitrator shall be binding upon the parties."

On July 24, 2005, plaintiff entered into a written lease agreement with defendant, agreeing to lease the automobile for a term of forty-eight months. The lease also contained an arbitration provision, which provided in pertinent part: "[a]ny controversy or claim between or among you and me, including, but not limited to, those arising out of or relating [to] this lease or any related agreement or any claim based on or arising from an alleged tort, shall at the request of either party be determined by arbitration." The provision further provided: "[t]he arbitration shall be governed by the Federal Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law provision in this lease, and under the authority and the applicable consumer rules and procedures of the American Arbitration Association then in effect." Lastly, the provision also stated that the "[a]rbitrator(s) must be licensed attorneys with expertise in the substantive laws applicable to the subject matter of the dispute." The final invoice for the leased motor vehicle contained a description of the following optional services: an extended warranty service contract at the price of $2,000; and an "after sell" "ETCH 3000" insurance policy*fn1 for $6,250.

On September 14, 2006, plaintiff filed her complaint asserting various claims against defendant, including violations of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-12 to -20. On October 26, 2006, defendant filed a motion seeking to dismiss the complaint and compel arbitration, pursuant to the arbitration provision contained in the buyer's order form. On November 17, 2006, defendant's motion was granted.

On January 23, 2007, plaintiff initiated arbitration with the American Arbitration Association (AAA), contending that defendant had violated the CFA by, among other matters: 1) overcharging plaintiff for the lease of the motor vehicle; 2) charging plaintiff $6,250 for an "after sell" item, which plaintiff had not agreed to, in violation of the Automotive Pre-Delivery Services regulations;*fn2 and 3) unconscionably charging plaintiff $2,000 for an extended warranty service contract. Defendant responded, contesting each of plaintiff's claims.

On February 28, 2007, AAA sent the parties a letter informing them that John R. Holsinger was appointed as the arbitrator. The letter also provided Holsinger's biographical data and his required disclosures. Because Holsinger's résumé disclosed that he had previously represented "automobile rental companies" and "automobile manufacturers and dealers" among numerous private clients in his thirty-two years of experience as a general commercial litigator, plaintiff objected to his appointment as arbitrator. "I [plaintiff's attorney] feel that Mr. Holsinger's prior representation of auto dealerships may work to the disadvantage of my client." Accordingly, plaintiff requested that the AAA appoint another arbitrator who "has not previously represented automobile dealerships." On March 5, 2007, AAA denied plaintiff's request for the appointment of a new arbitrator.

The arbitration proceeding was conducted on April 20, 2007, with the parties submitting post-arbitration briefs. In addition to her brief, plaintiff also submitted a post-arbitration certification of counsel in support of her request for attorney fees under the CFA, N.J.S.A. 56:8-19. On May 15, 2007, Holsinger issued his final award, stating: 1) "Claimant's claims are dismissed with prejudice and Claimant shall take nothing from Respondent"; 2) "Claimant has not proven an ascertainable loss arising from any alleged violation of law"; and 3) "[t]he administrative fees of the [AAA] totaling $1,250.00 and the arbitrator compensation totaling $750.00 shall be borne as incurred." The award further provided: "[t]his award is in full settlement of all claims for relief and defenses submitted to this arbitration. All other claims and defenses, including attorney fees, not addressed in this award are hereby denied."

On August 15, 2007, plaintiff filed a notice of motion to vacate the arbitration award and to remand the matter back to arbitration before a different arbitrator. Plaintiff argued that the award should have been vacated because it was made in manifest disregard of the law, the arbitrator was not impartial, and the award was against public policy.

On September 28, 2007, Judge Terrence Flynn entered an order, supported by an oral decision, denying the motion. In rejecting plaintiff's argument that the arbitrator should have recused himself from hearing the matter because he had previously represented automobile manufacturers and dealerships in his private practice as a commercial litigator, the judge determined that the argument was based only on speculation, not "on evidence of interest or bias that [was] direct, definite, and capable of reasonable demonstration." The judge rejected plaintiff's contention that the award manifested a clear disregard of the law, determining that plaintiff had not proven that this was one of those "very rare circumstances where there's an egregious impropriety," warranting the court to vacate the arbitration award, even if he applied federal standards of review.

Lastly, the judge found that the heightened standard of review, permitting the vacation of an arbitration award for public policy reasons in public-sector arbitrations, was not applicable to this private arbitration proceeding award. On appeal, plaintiff presents the same issues as argued in the Law Division.

An arbitration award is presumed valid. Del Piano v. Merrill Lynch, 372 N.J. Super. 503, 510 (App. Div. 2004), certif. granted, 183 N.J. 218 (2005), certif. dismissed as improvidently granted, ___ N.J. ___ (2005). Accordingly, a party "seeking to vacate it bears a heavy burden." Ibid. On appeal from a trial court's decision denying a motion to vacate an arbitration award, our review is de novo, that is, "'[a] trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Id. at 507 (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

We have considered plaintiff's arguments in light of the record and applicable law. We conclude that the arguments are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E). We affirm substantially for the reasons expressed by Judge Flynn in his oral decision of September 28, 2007. R. 2:11-3(e)(1)(A). Nevertheless, we add the following comment.

Plaintiff argues that the arbitration proceeding was conducted pursuant to the provision contained in the lease agreement that required arbitration to "be governed by the Federal Arbitration Act [(FAA)]," 9 U.S.C.A. § 1 to -16. Plaintiff also contends that the trial judge erred in denying her motion to vacate the award because the arbitrator's decision evidenced "a manifest disregard for the law . . . ." Defendant counters that the arbitration proceeding was conducted pursuant to New Jersey's Arbitration Act, N.J.S.A. 2A:23B-1 to -32, not the FAA, and that in the alternative, even assuming the FAA applies, the judge correctly denied plaintiff's motion under the federal standards of review.

The grounds for vacating a private arbitration award under the New Jersey Arbitration Act is limited to the six reasons contained in N.J.S.A. 2A:23B-23a. That statute provides in pertinent part, on the filing of a summary action, the trial court may vacate an arbitration award if: "(1) the award was procured by corruption, fraud, or other undue means; (2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding; . . . [and] (4) an arbitrator exceeded the arbitrator's powers . . . ." N.J.S.A. 2A:23B-23a. Subsections (3), (5), and (6) of the statute are not applicable to the present matter.

The scope of review of a private arbitration award was further restricted by the Supreme Court in Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 135 N.J. 349 (1994). "'Basically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators. [They] can be corrected or modified only for very specifically defined mistakes as set forth in [N.J.S.A. 2A:24-9*fn3 ]. If the arbitrators decide a matter not even submitted to them, that matter can be excluded from the award.'" Tretina Printing, supra, 135 N.J. at 358 (quoting Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 548-49 (1992) (Wilentz, J., concurring)).*fn4

The Court in Tretina Printing also determined that "in rare circumstances a court may vacate an arbitration award for public policy reasons." Tretina Printing, supra, 135 N.J. at 364. Generally, this exception or "heightened judicial scrutiny may be required for certain arbitration awards that sufficiently implicate public policy concerns," Weiss v. Carpenter, 143 N.J. 420, 429 (1996); for example, when a court considers a motion to vacate an arbitration award rendered in a public-sector arbitration proceeding. Tretina Printing, supra, 135 N.J. at 364. We are satisfied that this matter does not fall within the public policy exception.

Like the State statute, the FAA provides a limited basis on which a court may vacate an arbitration proceeding: "(1) where the award was procured by corruption, fraud, or undue means"; "(2) where there was evident partiality or corruption in the arbitrators, or either of them"; "(3) where the arbitrators were guilty of . . . any other misbehavior by which the rights of any party have been prejudiced"; or "(4) where the arbitrator exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made." 9 U.S.C.A. §10(a).

However, under the FAA, a court may also vacate an arbitration award "where the arbitrator's decision 'evidence[s] a manifest disregard for the law rather than an erroneous interpretation of the law.'" Dluhos v. Strasberg, 321 F.3d 365, 370 (3rd Cir. 2003) (quoting Local 863 Int'l Bhd. of Teamsters v. Jersey Coast Egg Producers, Inc., 773 F.2d 530, 534 (3rd Cir. 1995)). Because we are satisfied that the trial judge's decision, denying the motion to vacate the arbitration award, was correct whether applying either the State or the federal standards of review, we need not decide under which act the parties agreed to submit the matter to arbitration.

Plaintiff argues "that the 'manifest disregard of the law' is patent upon the face of the documents." Plaintiff contends that defendant violated the CFA by not designating the $6,250 etching insurance policy charge as a pre-delivery service and itemizing it on the buyer's order form, contrary to N.J.A.C. 13:3A-26B.2(a)1. Plaintiff asserts that the arbitrator's decision implies that he found a regulatory violation, stating that plaintiff's claim failed because she had not proven an ascertainable loss. Plaintiff further argues that if she proved a regulatory violation under the CFA, she should have been entitled to reasonable attorney's fees. N.J.S.A. 56:8-19. We disagree.

We do not read the arbitrator's decision as broadly as plaintiff, that is, that the arbitrator found a violation of the Automotive Sale Practices Consumer Fraud regulation governing pre-delivery service fees. N.J.A.C. 13:45A-26B.2(a)1. The arbitrator's decision does not state that he found a violation of the regulation. Rather, the arbitrator's decision provides in part that "[p]laintiff has not proven an ascertainable loss arising from any alleged violation of law." (Emphasis added). A fair interpretation of the decision is that the arbitrator determined that plaintiff had not proven an actual violation of the administrative regulation; thus, plaintiff is not entitled to an award of reasonable attorney's fees under the CFA.

Each of plaintiff's allegations presented to the arbitrator was contested by defendant. Defendant denied that the etching program was a pre-delivery service and supported that contention by referencing the invoice which designated the service as an "after sell." Plaintiff does not cite to any authority in support of her contention that the etching program constituted a pre-delivery service under the regulations.

The administration regulations defines a "pre-delivery service fee" as meaning: "any monies . . . which an automotive dealer accepts from a consumer in exchange for performance of pre-delivery services upon a motor vehicle, and includes, but is not limited to, items which are often described or labeled as dealer preparation, vehicle preparation, fee delivery service, handling and delivery, or any other term of similar import." N.J.A.C. 13:45A-26B.1. Although we have previously held that such items as "[r]ust proofing, undercoating, paint sealer and fabric guard" fall within the umbrella of pre-delivery services as that term is defined in the regulations, Delaney v. Garden State Auto Park, 318 N.J. Super. 15, 20 (App. Div.), certif. denied, 160 N.J. 477 (1999), we cannot conclude on the limited record before us that the etching program falls under the umbrella of pre-delivery services. From what counsel had stated at oral argument, the program appears to act as an insurance policy if the motor vehicle is stolen and not recovered, or recovered and damaged, events which occur post-sale or lease, not prior to delivery.

Accordingly, we are satisfied that the trial judge correctly denied plaintiff's motion to vacate the arbitration award. The arbitrator's decision does not "evidence a manifest disregard for the law." Dluhos, supra, 321 F.3d at 370.

Affirmed.


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