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GMAC v. Pittella


May 26, 2010


On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Indictment No. L-2934-08.

Per curiam.


Submitted March 2, 2010

Before Judges Wefing, Grall and Messano.

Defendant, third-party plaintiff Rosanna Pittella appeals from the grant of summary judgment in favor of third-party defendant Pine Belt Enterprises, Inc., and the subsequent dismissal of her class action claims.*fn1 We have considered the arguments raised by plaintiff in light of the record and applicable legal standards. We reverse.


On February 27, 2003, plaintiff entered into a "retail installment sale contract" (the contract) with defendant for the purchase of a 2003 Chevrolet Trailblazer.*fn2 On the same day, she also signed a separate form document bearing defendant's logo, address, and phone and fax numbers (the arbitration agreement). The arbitration agreement included pre-printed designations for the Date, "Vehicle Make," "Vehicle Model," and "Vehicle Vin," which were completed with the information regarding the Trailblazer. The form also had two signature lines for customers; plaintiff's name was inserted on the form, and it is undisputed that she signed the document. There was no signature line for defendant or its representative. We recite the arbitration agreement in its entirety, indicating those provisions that appeared in bold type:

Option to Arbitrate Disputes

By applying for financing with us, and by purchasing or leasing a motor vehicle from us, you agree that if any dispute of any kind arises out of your financing, leasing or acquisition of the vehicle, or any of the documents related thereto, either you or we or third parties involved can choose to have that dispute resolved by binding arbitration as set forth in the arbitration provision below. If arbitration is chosen, it will be conducted pursuant to the Code of Procedure of the American Arbitration Association (the "AAA"). If you have any questions concerning the AAA or wish to obtain a copy of their rules and forms, you may call them at 732-560-9560.


Unless inconsistent with applicable law, each party shall bear the expenses of their respective attorneys', experts' and witness fees, regardless of which party prevails in the arbitration. If any portion of this Arbitration Provision is deemed invalid or unenforceable under the Federal Arbitration Act, 9 U.S.C. sections 1-16 it should not invalidate the remaining portions of this arbitration provision.

The contract was later assigned to GMAC; when plaintiff failed to make her payments, GMAC repossessed the car and filed suit. Plaintiff filed her answer, along with a counterclaim and a third-party complaint against defendant. She claimed that the price she paid for an extended warranty when she purchased the vehicle, $3400, was "grossly excessive and . . . unconscionable," in violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (the CFA), and the Uniform Commercial Code, specifically, N.J.S.A. 12A:2-302. Plaintiff also brought the claim on behalf of a proposed class of individuals who had similarly purchased an extended warranty plan from defendant during the prior six years. In her counterclaim, plaintiff alleged that GMAC was subject to all of her claims against defendant pursuant to the contract and the "FTC Holder Rule and State Holder Rule."

In lieu of filing an answer, defendant moved for summary judgment seeking to compel arbitration and to dismiss the third-party complaint in its entirety. In her certification opposing the motion, plaintiff claimed that she did not recall signing the arbitration agreement. Instead, she alleged that the sales representative "fanned" the documents, and indicated where to sign. While acknowledging her signature on the arbitration agreement, plaintiff contended that the documents were not explained to her and the sales representative claimed that he was "going to expedite things for [her]." Plaintiff did not believe she was given the opportunity to review the documents properly, and that she was rushed through the entire process.

On July 31, 2008, after hearing oral argument, the motion judge entered an order granting summary judgment transferring plaintiff's individual claims to arbitration; he declined, however, to dismiss the putative class action claims. Defendant then moved for reconsideration, and, on August 29, after considering further oral argument, the judge granted defendant's motion and dismissed plaintiff's putative class action.

On March 5, 2009, GMAC and plaintiff amicably resolved their dispute and executed a stipulation of dismissal with prejudice. On April 14, plaintiff filed her notice of appeal seeking review of the July 31 and August 29, 2008 orders. On May 19, 2009, we denied defendant's motion to dismiss the appeal as untimely.


In pertinent part, plaintiff contends: 1) that the arbitration agreement "is unenforceable in its entirety since it does not contain a waiver of statutory rights"; 2) that the arbitration agreement is not contained in the sales contract and "does not alert consumers that they are losing their right to sue . . . ."; and 3) that defendant refused to provide her with a copy of "the Buyer's Order" form as required by statute, and, thus, it should be prohibited from seeking to enforce the arbitration agreement. As to the dismissal of the putative class action, plaintiff argues that "there was a complete lack of discovery as to the amount of [her] damages which is a necessary consideration when determining whether a class action waiver is unconscionable."

Defendant argues that the appeal is untimely and should be dismissed. Alternatively, it argues that the arbitration agreement was fully enforceable, and any challenge to its "validity . . . [wa]s for the arbitrator to decide, not the court[.]" Defendant further contends that discovery was unnecessary to determine that the class action waiver in the arbitration agreement was enforceable, and, alternatively, that plaintiff's class action claims were properly dismissed either because plaintiff lacked "standing," or because of the entire controversy doctrine.

In her reply brief, plaintiff contends that we have already decided the appeal was timely by denying defendant's motion to dismiss the appeal, and that defendant never sought reconsideration or review of that order.

Regarding the timeliness of the appeal, defendant has raised the issue without any substantive argument as to why we should not treat our prior order denying its motion to dismiss the appeal as the law of the case, as plaintiff suggests. See In re N.J. State Contract A71188, 412 N.J. Super. 443, 455 (App. Div. 2010) (treating prior order denying motion to dismiss an appeal as law of the case). We choose not to disturb our prior decision, therefore, and proceed to consider the merits of plaintiff's appeal.

We first recognize some basic principles that were succinctly expressed by the Supreme Court in Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132 (2001), as follows:

Because of the favored status afforded to arbitration, an agreement to arbitrate should be read liberally in favor of arbitration. That favored status, however, is not without limits. . . . [I]n the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be. In respect of specific contractual language, a clause depriving a citizen of access to the courts should clearly state its purpose. The point is to assure that the parties know that in electing arbitration as the exclusive remedy, they are waiving their time-honored right to sue. As we have stressed in other contexts, a party's waiver of statutory rights must be clearly and unmistakably established, and contractual language alleged to constitute a waiver will not be read expansively. [Quotations omitted.]

In Garfinkel, supra, given the important statutory rights "confer[red] on aggrieved employees" by the Law Against Discrimination, N.J.S.A. 10:5-1 to -49 (the LAD), that were "essential to eradicating discrimination in the workplace[,]

[t]he court w[ould] not assume that employees intend[ed] to waive those rights unless their agreements so provide[d] in unambiguous terms." 168 N.J. at 135. To be enforceable, the Garfinkel Court held that the agreement need not "refer specifically to the LAD or list every imaginable statute by name to effectuate a knowing and voluntary waiver of rights. To pass muster, however, [it] . . . should at least provide that the employee agrees to arbitrate all statutory claims arising out of the employment relationship or its termination." Ibid.

However, the court, seemingly retreated somewhat from that broad statement in Martindale v. Sandvik, Inc., 173 N.J. 76 (2002). There, the arbitration agreement was contained in an application for employment. Id. at 81-82. The plaintiff was terminated and brought suit under the LAD and the New Jersey Family Leave Act, N.J.S.A. 34:11B-1 to -16. Martindale, supra, 173 N.J. at 82-83. Distinguishing the agreement from the one reviewed in Garfinkel, and upholding its enforceability, the Court found that the arbitration agreement at issue was "clear and unambiguous, [and] . . . sufficiently broad to encompass reasonably plaintiff's statutory causes of action." Id. at 96. Despite the lack of any specific reference to the plaintiff's statutory claims, the court noted that the agreement specifically provided that the plaintiff was foregoing her right to a jury trial, and provided the "plaintiff with sufficient notice at the time she signed the agreement that all claims relating to employment with and termination from [the defendant company] would be resolved through arbitration." Ibid. The court held that "the wording . . . satisfied the spirit of [the Garfinkel] decision." Ibid.

We have considered the enforceability of an arbitration provision that purportedly waived a consumer's statutory rights under the CFA in a number of cases since Garfinkel was decided. In granting summary judgment, the motion judge relied extensively on two of those decisions, Gras v. Associates First Capital Corp., 346 N.J. Super. 42 (App. Div. 2001), certif. denied, 171 N.J. 445 (2002), and Rockel v. Cherry Hill Dodge, 368 N.J. Super. 577 (App. Div.), certif. denied, 181 N.J. 545 (2004).

In Gras, supra, we held that "[t]here [wa]s no inherent conflict between arbitration and the underlying purposes of the CFA[,]" that the statute's "objectives can be vindicated in the arbitration forum[,] and [that] a successful plaintiff can achieve all statutory remedies in the same forum." 346 N.J. Super. at 52, 53. However, any "[w]aiver of statutory rights . . . in arbitration agreements must be clear and explicit[,]" and "language . . . [that] simply made reference to a waiver of any claims[]" was inadequate. Id. at 54. (citations omitted).

In upholding the waiver provisions contained in the agreement to arbitrate, we found "[m]ost relevant, [that] the agreement addresse[d] disputes based on a federal or state statute . . . ." Id. at 57.*fn3

In Rockel, supra, 368 N.J. Super. at 580, we reiterated that "[a] consumer's claim that a contract was the product of unconscionable practices in violation of the CFA d[id] not necessarily prohibit the enforcement of an arbitration clause contained in the contract under attack." However, an arbitration agreement will not be enforceable if the language is not sufficiently "clear and unambiguous," and also "sufficiently broad to encompass reasonably plaintiff's statutory causes of action." Id. at 585. (citing Martindale, supra, 173 N.J. at 96). We ultimately concluded the agreement in Rockel was unenforceable because of "the uncertain content of the parties' agreement to arbitrate, the contracts' conflicting descriptions of the manner and procedure which would govern the arbitration proceedings, the absence of a definitive waiver of plaintiffs' statutory claims, and the obscure appearance and location of the arbitration provisions . . . ." Rockel, supra, 368 N.J. Super. at 580.

Most recently, in Curtis v. Cellco Partnership, ___ N.J. Super. ___ (App. Div. 2010), we considered "whether the contractual language 'clearly and unmistakably established' that [the] plaintiff's CFA claims f[e]ll within the scope of the arbitration clause . . . ." Id. slip op. at 7. We held that the "[a]rbitration of statutory claims is enforceable when the contract provisions (1) contain language reflecting a general understanding of the type of claims included in the waiver; or (2) provide that, by signing, the consumer agrees to arbitrate 'all statutory claims arising out of the relationship,' or any claim or dispute based on a federal or state statute." Id. slip op. at 10-11 (quoting Gras, supra, 346 N.J. Super. at 56-57). After examination of its specific provisions, we concluded that the agreement "reflect[ed] a willingness to arbitrate all disputes, contractual, as well as statutory . . . ." Id. slip op. at 15.

We distill from the cases cited the overarching principle that in order to prevail on summary judgment, defendant needed to "clearly and unmistakably establish[]" that by signing the arbitration agreement, plaintiff waived her statutory CFA claims and agreed to arbitrate same. Garfinkel, supra, 168 N.J. at 132 (quotations omitted). Mindful that our review "requires that arbitration provisions be examined on a case-by-case basis[,]" Rockel, supra, 368 N.J. Super. at 580, we turn to the language at issue in this case.

Before doing so, however, we address plaintiff's claim that the arbitration agreement is unenforceable because it was not part of the contract, but rather was contained on a separate page. We rejected a similar claim in Gras, supra, 346 N.J. Super. at 46, 57. We also reject plaintiff's implicit argument that the arbitration agreement is unenforceable because of the manner by which it was presented to and executed by her. See id., at 56-57 (absent fraud, the party's failure to read provisions of a contract, and/or presentation of the arbitration provisions amid other documents does not excuse performance).

We initially note that the arbitration agreement is entitled "Option to Arbitrate Disputes" and was executed only by plaintiff and not by any of defendant's representatives. In reality, however, the option to arbitrate was available to both plaintiff and defendant, and plaintiff could not resist defendant's unilateral request to arbitrate under its terms. In short, unlike the arbitration provisions in the cases cited above that clearly indicated the consumer was agreeing to arbitrate his claims ab initio, in this case, defendant possessed the ability to unilaterally invoke the provisions, effectively denying plaintiff any "option" at all, the document's title to the contrary.

The arbitration agreement by its terms was applicable to "any dispute of any kind [that] ar[ose] out of [plaintiff's] financing, leasing or acquisition of the vehicle, or any of the documents related thereto . . . ." Because we construe any agreement to arbitrate using substantive contract law, "only those issues may be arbitrated which the parties have agreed shall be." Garfinkel, supra, 168 N.J. at 132. "[W]hen phrases such as 'arising under' and 'arising out of' appear in arbitration provisions, they are normally given broad construction . . . ." Epix Holdings Corp. v. Marsh & McLennan Cos., 410 N.J. Super. 453, 472 (App. Div. 2009).

Here, plaintiff's CFA claim was that the extended warranty she purchased, nearly 10% of the balance of the vehicle's unpaid purchase price, was unconscionably high, and that defendant failed to disclose to her that a significant portion of that amount was payable not to the warranty company, but rather to defendant. It is questionable whether such a claim is related to the "financing, leasing or acquisition of" the Trailblazer itself. Nor, in our opinion, did that claim represent a dispute that necessarily arose out of a related document, i.e., the contract.*fn4

However, it is the language of the arbitration agreement, or more aptly, what it fails to say, that compels us to reverse in this case. It does not explicitly reference plaintiff's agreement to waive any of her statutory rights. See Garfinkel, supra, 168 N.J. at 135-36. Nor did it affirmatively advise plaintiff that her statutory rights, whatever they may be, will be preserved in the arbitral forum. In this regard, we contrast the language of the arbitration agreement with the language at issue in Curtis, supra.

Here, the arbitration agreement advised plaintiff that she was waiving her rights to "A Jury Trial" and "Pre-Arbitration Discovery." It also provided, without specificity, that "other rights that [she] would have if [she] went to court may also not be available in arbitration." It further provided that "[u]nless inconsistent with applicable law, each party shall bear the expenses of their respective attorneys' . . . fees, regardless of which party prevails in the arbitration."

In Curtis, we noted that the language of the agreement "mention[ed] statutory claims for attorney's fees related to any dispute, which c[ould] be awarded in an arbitration proceeding." Curtis v. Cellco Partnership, supra, slip op. at 14. In upholding the provision we concluded that the "[a]greement makes apparent that a party does not forgo any substantive rights in submitting resolution to an arbitrator, rather than a court." Id. slip op. at 15 (citations omitted); see Martindale, supra, 173 N.J. at 94 (noting that enforcement of the agreement to arbitrate presented "no identifiable impediments that would preclude vindication of plaintiff's statutory . . . claims").

Defendant acknowledged at oral argument below, and in its brief before us, that plaintiff is permitted to present a claim at arbitration for all statutory remedies available under the CFA. That, of course, is the law. Gras, supra, 346 N.J. Super. at 53. But recognition of that inevitable outcome provides no particular support for defendant's position because the issue presented, in the first instance, is whether the language of the arbitration agreement itself was sufficiently clear and unambiguous so as to evidence plaintiff's intention to waive any of her rights under the CFA. We think it clear that such is not the case. As a result, we are not convinced that "[c]ompelling arbitration under these circumstances is fair and equitable." Martindale, supra, 173 N.J. at 96.*fn5

Defendant's claim that "it was for the arbitrator to decide" the validity of the arbitration agreement is without sufficient merit to warrant any extensive discussion in this opinion. R. 2:11-3(e)(1)(E); see Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1, 12 (2006) ("[A] court must decide whether an agreement to arbitrate is valid." (quotations omitted)). Likewise, defendant's argument that plaintiff is not entitled to our declaration that the arbitration agreement is unenforceable because she did not cross-move for such relief before the motion judge is without sufficient merit to warrant any further discussion. R. 2:11-3(e)(1)(E).

Additionally, in light of our ruling, the motion judge's dismissal of plaintiff's putative class action must also be reversed. That decision was predicated upon the arbitration of plaintiff's individual claims. Defendant's arguments in this regard before the motion judge were premised on the validity of the arbitration agreement as it related to plaintiff's individual claims, and those arguments are reiterated before us.

However, under the arbitration agreement, plaintiff waived any "Right To Participate As A Representative Or Member Of Any Class Of Claimants Pertaining To Any Claims Subject To Arbitration." Having determined that plaintiff's individual claims were not subject to arbitration, it necessarily follows that her putative class action was improvidently dismissed. We only hasten to add that we express no opinion as to the merits of the class action and whether it is certifiable. R. 4:32.

Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.

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