July 14, 2011
PUKAR INTERNATIONAL INC., SULTAN MEHRA AND KARNI MEHRA, PLAINTIFFS-APPELLANTS,
HALLMARK RETAIL, INC., DEFENDANT-RESPONDENT, AND WOODBRIDGE CENTER PROPERTY, LLC, DEFENDANT.
On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-2087-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 11, 2011
Before Judges R. B. Coleman and Lihotz.
Plaintiff Pukar International, Inc. (Pukar), appeals from an April 30, 2010 Law Division order dismissing its complaint without prejudice, after concluding the Account Agreement with defendant Hallmark Retail, Inc. (Hallmark) required all disputes to be presented before an arbitral forum. On appeal, Pukar challenges the dismissal of the legal action accompanied by an order directing the dispute to arbitration. We have considered the arguments presented on appeal in light of the record and applicable law. We affirm.
To answer the question of where the parties' dispute must be resolved, we briefly outline the history between the parties leading up to this dispute, which includes separate but related litigation. We rely on the limited factual record of the Law Division together with the parties' submissions. Our opinion does not address the merits of either party's position on the disputed substantive issues.
Pukar, a New Jersey corporation, was incorporated in 1983 for the purposes of owning and operating a Hallmark Gold Crown card and gift store located in the Woodbridge Center Mall. Sultan Mehra and his wife, Karni Mehra, are the officers and shareholders of Pukar and were named as plaintiffs in the complaint. At the business's inception, Pukar executed an agreement licensing it to use Hallmark's name and products and leased the premises directly from defendant Woodbridge Center Property, LLC. (WCP). In 2007, the parties entered into multiple agreements modifying the initial arrangement. First, on October 10, 2007, Hallmark's parent company, Hallmark Marketing Corporation (HMC) and Pukar executed a Leadership Agreement, detailing the rights and responsibilities associated with operating a Gold Crown Hallmark Store. Second, on November 6, 2007, Hallmark directly leased new premises from WCP pursuant to the terms of a long-term lease (master lease), which described renovations and modifications to be made to the new physical space. Third, on November 15, 2007, Hallmark entered into a sublease agreement with Pukar for the same premises incorporating the same basic terms and conditions stated in the master lease. Fourth, on August 13, 2008, Pukar executed a Hallmark Account Agreement (Account Agreement) with HMC licensing the use of Hallmark's trademarks and setting forth the rights and responsibilities of the parties in selling Hallmark products in the Woodbridge Center Mall store. Fifth, on August 22, 2008, Pukar applied for credit with Gold Crown Manager's Acceptance Corp., seeking financing to renovate the newly assigned space, purchase inventory and operate the store. Personal guarantees were executed by Pukar's owners.
The renovated store in a new mall location opened on November 22, 2008. Gross sales and revenue in the new store did not meet the projections previously discussed by the parties. Beginning in October 2009, Pukar defaulted on its obligation under the sublease.
On January 10, 2010, Hallmark filed a summary dispossess action against Pukar (Docket No. LT-1635-10). On March 3, 2010, the court granted Pukar's motion to remove the matter from Landlord-Tenant court to the Law Division (Docket No. L-1979-10).
While this matter was pending, Pukar initiated a separate Law Division action (Docket No. L-2087-10), filing a six count complaint on March 19, 2010, alleging breach of the covenant of good faith and fair dealing, violation of the Franchise Practices Act, N.J.S.A. 56:10-1 to -15, misrepresentation, breach of contract, negligence, and unjust enrichment. It is not clear whether this Law Division action was consolidated with the transferred landlord-tenant action.*fn1
In lieu of an answer, Hallmark moved to dismiss the complaint, principally asserting the arbitration clause in the parties' Account Agreement precluded disposition by the court.
Pukar opposed Hallmark's motion, stating the Account Agreement did not govern the parties' disputes. Pukar also suggested damages resulting from claims in its complaint offset any outstanding rental obligation and the sublease did not contain an arbitration clause. Therefore, Pukar argues the arbitration clause in the Account Agreement was inapplicable.
By order dated April 30, 2010, Judge Diane Pincus adopted the reasoning expressed in Hallmark's submission and granted the motion stating, "Case is to be arbitrated as per [the] Account Agreement." This appeal followed.
In our review of the order granting Hallmark's motion to compel arbitration, we must determine whether a valid agreement requires the parties to arbitrate their disputes and what claims, if any, are subject to arbitration. This issue requires the interpretation of the interplay between the parties' contractual arrangements.
Before we examine the agreements, Pukar first questions the sufficiency of Hallmark's pleadings, arguing they do not support the trial court's findings. Specifically, Pukar attacks Hallmark's counsel's affidavit and brief, stating they have no factual underpinnings. Also, Pukar argues its factual assertions filed in opposition were undisputed requiring denial of the motion to dismiss. We are not persuaded Judge Pincus erred.
Pukar challenges the court's reliance on counsel's affidavit as "a statement of facts" and suggests counsel had no personal knowledge, making the motion unsupported. See R. 1:6-6 (requiring facts not appearing of record or judicially noticeable to be based on an affiant's personal knowledge); see also Gonzalez v. Ideal Title Imp. Co., 371 N.J. Super. 349, 358 (App. Div. 2004) (holding that an attorney's affidavit or certification that is not based on personal knowledge constitutes objectionable hearsay), aff'd, 184 N.J. 415 (2005), cert. denied, 546 U.S. 1092, 126 S. Ct. 1042, 163 L. Ed. 2d 857 (2006).
Pukar's argument, exalting form over substance, is rejected. Moreover, the issue of whether the provisions of the parties' agreements mandate arbitration is a legal one, making Pukar's fact-based challenges meritless.
A review of counsel's affidavit, filed in support of Hallmark's motion to dismiss, reveals it was nothing more than a vehicle to present before the court accurate, true copies of the parties' Account Agreement and sublease. See Higgins v. Thurber, 413 N.J. Super. 1, 21 n.19 (App. Div. 2010) (determining counsel's certification in support of summary judgment permissibly provided authentic copies of earlier pleadings and materials), aff'd, 205 N.J. 227 (2011). The affidavit does not interpret the agreements' terms or substantive issues; it merely attaches authenticated documents and discusses procedural events.
Pukar additionally suggests Hallmark's brief "argues a cocktail of unsupported and speculative facts, inferences and conclusions." The meritless assertion incorrectly equates advocacy with testimony. R. 2:11-3(e)(1)(E).
Pukar also contends the undisputed facts of its Vice President set forth in his certification were ignored in favor of adopting the facts in Hallmark's brief. Pukar urges this court to exercise original jurisdiction and make factual findings relying on the facts set forth in that certification. We decline the invitation as unnecessary. Our determination of whether arbitration was the agreed forum to determine disputes confines our review to combing the provisions of the parties' agreements.
Turning to that issue, our jurisprudence and public policy favor alternative dispute resolution and are consistent with our view that "[l]instigation ought to be a last resort, not a first one." Billig v. Buckingham Towers Condo. Ass'n, 287 N.J. Super. 551, 564 (App. Div. 1996). In this regard, courts adhere to the principle that "arbitration is . . . 'favored . . . as a means of resolving disputes[.]'" Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J. Super. 138, 148 (App. Div. 2008) (quoting Martindale v. Sandvik, Inc., 173 N.J. 76, 84 (2002)). The Legislature, in adopting the Arbitration Act, N.J.S.A. 2A:23B-1 to -32, has endorsed a similar policy.
The strong public policy favoring arbitration as a means of dispute resolution requires that "'[a]n agreement to arbitrate should be read liberally in favor of arbitration[.]'" Angrisani, supra, 402 N.J. Super. at 148 (quoting Marchak v. Claridge Commons, Inc., 134 N.J. 275, 282 (1993)). "An agreement relating to arbitration should thus be read liberally to find arbitrability if reasonably possible." Jansen v. Salomon Smith Barney, Inc., 342 N.J. Super. 254, 257 (App. Div.), certif. denied, 170 N.J. 205 (2001). Further, "doubts concerning the scope of arbitrable issues must be resolved in favor of arbitration, over litigation." Alfano v. BDO Seidman, LLP, 393 N.J. Super. 560, 576 (App. Div. 2007).
"Although arbitration is traditionally described as a favored remedy, it is, at its heart, a creature of contract." Kimm v. Blisset, LLC, 388 N.J. Super. 14, 25 (App. Div. 2006) (internal citations omitted), certif. denied, 189 N.J. 428 (2007). "[T]he duty to arbitrate . . . [is] dependent solely on the parties' agreement." Cohen v. Allstate Ins. Co., 231 N.J. Super. 97, 101 (App. Div.), certif. denied, 117 N.J. 87 (1989). "[A] party can be forced to arbitrate only those issues it specifically has agreed to submit to arbitration[.]" First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115 S. Ct. 1920, 1925, 131 L. Ed. 2d 985, 994 (1995). See also AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S. Ct. 1415, 1418, 89 L. Ed. 2d 648, 655 (1986). The determination as to whether such a duty exists "rests solely on the parties' intentions as set forth in the writing." Martindale, supra, 173 N.J. at 92. Accordingly, "[t]he court shall decide whether an agreement to arbitrate exists or [whether] a controversy is subject to an agreement to arbitrate." N.J.S.A. 2A:23B-6(b). See also Muhammad v. Cnty. Bank of Rehoboth Beach, Del., 189 N.J. 1, 12-13 (2006), cert. denied, 549 U.S. 1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007). In so doing, "a 'court may not rewrite a contract to broaden the scope of arbitration[.]'" Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001) (quoting Yale Materials Handling Corp. v. White Storage & Retrieval Sys., Inc., 240 N.J. Super. 370, 374 (App. Div. 1990)). Moreover, "an arbitration clause may be modified or superseded." Wein v. Morris, 194 N.J. 364, 376 (2008) (citing McKeeby v. Arthur, 7 N.J. 174, 181-82 (1951)).
As the proponent of arbitration, Hallmark had the burden to establish the existence of an agreement to arbitrate with Pukar. In our review, because the "[i]nterpretation and construction of a contract is a matter of law for the court subject to de novo review[,]" Kaur v. Assured Lending Corp., 405 N.J. Super. 468, 474 (App. Div. 2009), the "'trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Alfano, supra, 393 N.J. Super. at 573 (quoting Manalapan Realty, L.P. v. Twp. Comm., 140 N.J. 366, 378 (1995)).
In determining whether a particular dispute is encompassed by a contractual arbitration provision, as in construing any other contractual provision, a court's "goal is to discover the intention of the parties[,]" which requires consideration of the "contractual terms, the surrounding circumstances, and the purpose of the contract." Marchak, supra, 134 N.J. at 282; see also Lederman v. Prudential Life Ins. Co. of Am., Inc., 385 N.J. Super. 324, 337-38 (App. Div.), certif. denied, 188 N.J. 353 (2006). In making this determination, ordinary contract principles apply. Singer v. Commodities Corp., 292 N.J. Super. 391, 402 (App. Div. 1996). "[W]hen the terms of a contract are clear and unambiguous, there is no room for construction and the court must enforce those terms as written." Watson v. City of E. Orange, 175 N.J. 442, 447 (2003).
Here, Pukar argues the Account Agreement is with HMC, a separate and distinct legal entity than the party to the sublease, which is Hallmark. Also, it advances the position that the documents were separate and distinct agreements for different purposes and are not related. In response, Hallmark asserts the Account Agreement's binding arbitration clause mandates that all disputes between Hallmark, its affiliates and subsidiaries must be resolved by arbitration, excepting only real tenancy disputes initiated by Hallmark.
The pertinent clauses of the Account Agreement relating to arbitration are found in paragraph ten. In light of Pukar's arguments, we set forth the pertinent provision:
10. For purposes of this paragraph, all references to Hallmark shall be deemed to include its parent, subsidiaries and affiliated entities, and all references to [Pukar] shall be deemed to include all subsidiaries of [Pukar] or any entity under common control with [Pukar].
(a)(i) The parties irrevocably agree that any controversy or claim arising out of or related to this Agreement, or the breach thereof, or any aspect of the relationship between Hallmark and [Pukar], or the termination thereof, including disputes involving other stores owned by or under common control with [Pukar], shall be finally resolved by binding arbitration administered by the American Arbitration Association, (AAA) under the United States Arbitration Act and its commercial Arbitration Rules (AAA Rules), and judgment upon the award may be entered in any court having jurisdiction thereof.
(iv) Any Arbitration commencing by [Pukar] shall be conducted in Kansas City, Missouri. Any arbitration commenced by Hallmark shall be conducted in the state where [Pukar's] premises are located[.]
(viii) This Section 10a shall not apply to any claim of Hallmark (or any subsidiary or affiliated entity of Hallmark) asserting the right, under any lease, sublease, or other real property agreement, to possession of real property or to collect rent. The arbitrator shall have no power to make any award with respect to the possession of real property.
"[C]courts have generally read the terms 'arising out of' or 'relating to' [in] a contract as indicative of an 'extremely broad' agreement to arbitrate any dispute relating in any way to the contract." Curtis v. Cellco P'ship, 413 N.J. Super. 26, 37-38 (App. Div.) (quoting Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 518 (App. Div. 2010)), certif. denied, 203 N.J. 94 (2010). "Such broad clauses have been construed to require arbitration of any dispute between the contracting parties that is connected in any way with their contract." Ibid.
As applied here, we agree with Judge Pincus that the broad, unambiguous arbitration clause of the Account Agreement requires arbitration of "any controversy or claim" arising out of the agreement or "any aspect of the relationship between Hallmark and [Pukar]." The omission of the same or similar clause in the sublease would not defeat the broad scope of the clause. Examining the claims asserted in Pukar's complaint, we determine each of them "arises out" of or "is related to" "an aspect of the relationship" between Pukar and Hallmark, areas encompassed by the arbitration clause. We reject Pukar's assertion that it did not agree to arbitrate its claims.
Moreover, the conspicuous, plain language used in the agreement obviates any suggestion by Pukar that it was disadvantaged because Hallmark drafted the document. See E. Brunswick Sewerage Auth. v. E. Mill Assoc's., Inc., 365 N.J. Super. 120, 125 (App. Div. 2004) (holding that when the terms of a contract are clear, the court must enforce the terms as written). We discern no ambiguity or confusion in the direct, concise language which contains an arbitration requirement that is "'clear and unambiguous' in [its] intent and purpose to inform the reader that all disputes must be presented in an arbitral forum, not a court." Curtis, supra, 417 N.J. Super. at 38.
Further, Pukar claims it was not specifically advised of the arbitration requirement and there were no discussions regarding the incorporation of the requirement to arbitrate disputes under the previously executed sublease. In a related contention, Pukar argues its complaint refers to the sublease with Hallmark, which falls outside the scope of the arbitration clause of the Account Agreement, executed with a different entity, HMC. We reject these arguments.
Reading the plain language of the Account Agreement's arbitration clause, we reject as without merit Pukar's argument that it did not agree to an arbitral forum of disputes under the sublease. The language encompasses all disputes under the Account Agreement or arising out of the relationship between the parties. The reference to the parties' relationship integrates all aspects of this business transaction. The fact that the Account Agreement was executed at a different time than the sublease would not place it beyond the agreed scope of arbitration and does not mean its terms would not apply to the aspect of the parties' relationship discussed in the sublease. The language of the Account Agreement expressly applies to all dealings between the parties. See Cara's Notions v. Hallmark Cards, 140 F.3d 566, 570 (4th Cir. 1998) (interpreting the arbitration clause of the same Account Agreement finding the other agreements of the parties encompassed other aspects of their relationship).
Also, contrary to Pukar's protests, the arbitration clause's introductory provision defines who is bound, stating "[HMC] shall be deemed to include its parent, subsidiaries and affiliated entities[.]" HMC and Hallmark are affiliated entities despite their individual legal identities and Pukar's inference otherwise is disingenuous. In fact, in the provisions of its complaint, Pukar references the many agreements with Hallmark, revealing its understanding of the interrelationship between various entities.
We also find unpersuasive Pukar's assertion that absent a specific waiver of its right to court access, the provision is unenforceable. Pukar dealt with Hallmark at arm's length, its shareholders are business people and this is a commercial business arrangement, not a consumer transaction. By affixing their signatures, all parties to the contract are presumed to have read and accepted its terms. Peter W. Kero, Inc. v. Terminal Constr. Corp., 6 N.J. 361, 368 (1951). Pukar's acceptance of expressed terms mandating arbitration as the forum for dispute resolution effected its voluntary relinquishment of the right to initiate court action.
We conclude the agreement to arbitrate is valid and applicable to the claims identified in Pukar's complaint. Any additional arguments presented in Pukar's brief, including its claims regarding the validity and enforceability of the Account Agreement, are rejected as lacking sufficient merit to warrant additional discussion in our opinion. R. 2:11-3(e)(1)(E).