August 10, 2012
ROSANNA PITTELLA, DEFENDANT/THIRD-PARTY PLAINTIFF-RESPONDENT,
PINE BELT ENTERPRISES, INC., THIRD-PARTY DEFENDANT/ APPELLANT.
On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-2934-08.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued May 1, 2012 -
Before Judges Messano, Espinosa and Kennedy.
This matter is before us for a second time. Third-party defendant, Pine Belt Enterprises, Inc., appeals from the August 5, 2011 order of the Law Division that denied its motion for summary judgment seeking to compel arbitration of Rosanna Pittella's third-party complaint.*fn1 The facts and procedural history relevant to the issues on appeal are essentially undisputed and contained in our earlier opinion, GMAC v. Pittella, No. A-3876-08T3 (App. Div. May 26, 2010) ("Pittella I"), and the Supreme Court's opinion, GMAC v. Pittella, 205 N.J. 572 (2011)("Pittella II").
On February 27, 2003, plaintiff entered into an installment sales agreement with defendant to purchase a new car and an extended warranty for the vehicle. Pittella II, supra, 205 N.J. at 575. In furtherance of the sale, plaintiff signed various documents including a separate one-page "Option to Arbitrate Disputes" (the arbitration agreement). Ibid. It stated in relevant part:
IF ARBITRATION IS CHOSEN BY ANY PARTY WITH RESPECT TO A CLAIM, DISPUTE OR CONTROVERSY, NEITHER YOU NOR WE WILL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM, OR TO ENGAGE IN PRE-ARBITRATION DISCOVERY, EXCEPT AS PROVIDED IN THE ARBITRATION RULES. FURTHER, YOU WILL NOT HAVE THE RIGHT TO PARTICIPATE AS A REPRESENTATIVE OR MEMBER OF ANY CLASS OF CLAIMANTS PERTAINING TO ANY CLAIMS SUBJECT TO ARBITRATION. THE ARBITRATOR'S DECISION WILL GENERALLY BE FINAL AND BINDING. OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT TO COURT MAY ALSO NOT BE AVAILABLE IN ARBITRATION. IT IS IMPORTANT THAT YOU READ THE ENTIRE ARBITRATION PROVISION CAREFULLY BEFORE SIGNING THESE DOCUMENTS. [Id. at 575-76.]
Defendant assigned its rights to GMAC, and, when plaintiff defaulted on her payments, GMAC filed suit in the Special Civil Part. Ibid. Plaintiff answered and filed a third-party putative class action complaint against defendant, asserting claims for breach of contract, breach of the covenant of good faith and fair dealing, fraud, and violations of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (CFA). Ibid. After the action was transferred to the Law Division and in lieu of filing an answer, defendant moved for summary judgment dismissing plaintiff's third-party complaint and compelling arbitration. Ibid. The trial court granted defendant's motion, entered an order compelling arbitration and dismissed plaintiff's putative class action claim with prejudice. Id. at 576-77.
GMAC settled its claims against plaintiff, and she appealed the dismissal of her complaint against defendant. Ibid. We denied defendant's motion to dismiss the appeal as untimely, reversed the decision of the trial court and remanded the matter for further proceedings.*fn2 Ibid.; Pittella I, supra, slip op. at 7, 17. After reciting relevant precedent, we noted:
[T]he 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.
. . . Because we construe any agreement to arbitrate using substantive contract law, "only those issues may be arbitrated which the parties have agreed shall be." [Pittella I, supra, (slip op. at 13) (quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 132 (2001)).]
[I]t 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. . . . Nor did it affirmatively advise plaintiff that her statutory rights, whatever they may be, will be preserved in the arbitral forum.
. . . [T]he issue presented . . . 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." [Pittella I, supra, (slip op. at 14-16, (quoting Martindale v. Sandvik, Inc., 173 N.J. 76, 96 (2002)).]
On remand, defendant filed its answer and again moved for summary judgment seeking to compel arbitration. Specifically, defendant argued that the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion, 563 U.S. ___, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011), issued one week after defendant filed its pleading, now compelled plaintiff's claims be arbitrated. Plaintiff opposed the motion, arguing that the law of the case doctrine barred reconsideration of our prior judgment. Plaintiff also argued that AT&T Mobility was distinguishable and did not compel arbitration of her claim.
The motion judge heard argument and in her oral opinion concluded that, pursuant to the doctrine of law of the case, she was required to accept our holding that the arbitration agreement was unenforceable. The judge nevertheless noted that "the decision of the Appellate Division appeared to rely not on the principles . . . set forth in AT&T Mobility." The judge concluded that "even assuming . . . [she] did have . . . authority, based on AT&T Mobility[,] [she] would be denying the motion . . . ." The judge entered an appropriate order and this appeal followed.
Defendant contends that the Arbitration Agreement is enforceable and plaintiff's "unconscionability and public policy defenses to enforcement . . . are now pre-empted" by AT&T Mobility. It also argues that the motion judge erred in "declining to relax application of the law of the case doctrine."
Plaintiff argues that defendant is judicially estopped from arguing that our prior judgment was "interlocutory," not final, and as a result, the motion judge appropriately determined she was bound to follow our judgment as the law of the case. Plaintiff further contends that defendant is barred by collateral estoppel from re-litigating any claim regarding the enforceability of the Arbitration Agreement. Lastly, plaintiff argues that AT&T Mobility is inapplicable.
We have considered the arguments raised in light of the record and applicable legal standards. We affirm.
"The interpretation of an arbitration clause is a matter of contractual construction that [we] . . . address de novo." Coast Auto. Grp., Ltd. v. Withum Smith & Brown, 413 N.J. Super. 363, 369 (App. Div. 2010). Because the holding in AT&T Mobility does not affect the reasoning supporting our judgment in Pittella I, we need not consider the procedural arguments plaintiff has raised, or whether the law of the case barred consideration of defendant's motion in the first instance.
"[T]he primary substantive provision of the [Federal Arbitration Act (FAA)] provides . . . '[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.'" AT&T Mobility, supra, 563 U.S. at ___, 131 S. Ct. at 1745, 179 L. Ed. 2d at 750-51 (quoting 9 U.S.C.A. § 2). Under the FAA, "arbitration is a matter of contract . . . [and arbitration agreements] must [be] place[d] on an equal footing with other contracts, and enforce[d] . . . according to their terms." Id. at 563 U.S. ___, 131 S. Ct. at 1745, 179 L. Ed. 2d at 751 (citations and internal quotation marks omitted).
The final phrase of § 2, however, permits arbitration agreements to be declared unenforceable upon such grounds as exist at law or in equity for the revocation of any contract. This saving clause permits agreements to arbitrate to be invalidated by generally applicable contract defenses, such as fraud, duress, or unconscionability, but not by defenses that apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue. [Id. at 563 U.S. ___, 131 S. Ct. at 1746, 179 L. Ed. 2d at 751 (internal quotation marks omitted).]
The specific question addressed in AT&T Mobility was "whether § 2 [of the FAA] preempts California's [Discover Bank] rule classifying most collective-arbitration waivers in consumer contracts as unconscionable." Ibid. The Court ultimately held that California's Discover Bank rule was preempted by the FAA. Id. at ___, 131 S. Ct. at 1753, 179 L. Ed. 2d at 759.
AT&T Mobility, however, did not alter the basic tenet that arbitration under the FAA cannot be compelled unless there was an agreement to submit the dispute to arbitration in the first instance. See 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) (quoting United Steelworkers of Am. v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S. Ct. 1347, 1353, 4 L. Ed. 2d 1409, 1417 (1960)). The AT&T Mobility Court noted that "§ 4 [of the FAA] requires courts to compel arbitration 'in accordance with the terms of the agreement' upon the motion of either party to the agreement (assuming that the making of the arbitration agreement . . . is not at issue)." Id. at ___, 131 S. Ct. at 1748, 179 L. Ed. 2d at 754 (emphasis added) (second internal quotation mark omitted). Indeed, in his concurrence, although Justice Thomas took a more restrictive view of § 2's savings clause, he nevertheless agreed that § 4 "require[s] enforcement of an agreement to arbitrate unless a party successfully asserts a defense concerning the formation of the agreement to arbitrate . . . ." Id. at ___, 131 S. Ct. at 1755, 179 L. Ed. 2d at 760-61 (Thomas, J., concurring) (emphasis added).
We have already held that AT&T Mobility did not alter the basic premise that "an agreement to arbitrate must be the product of mutual assent, as determined under customary principles of contract law." NAACP of Camden Cnty. E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 424 (App. Div.), certif. granted, 209 N.J. 96 (2011). We have specifically held:
[I]n the aftermath of AT&T Mobility, state courts remain free to decline to enforce an arbitration provision by invoking traditional legal doctrines governing the formation of a contract and its interpretation. Applying such core principles of contract law here, we must decide whether there was mutual assent to the arbitration provisions in the [defendant car] dealership's contract documents. [Id. at 428.]
Defendant contends that, in this case, the arbitration agreement must be enforced because there is no dispute concerning its formation. Defendant further argues that, because our prior opinion found the arbitration agreement was unconscionable and violated public policy, we must now reverse course because the holding in AT&T Mobility stands for the proposition that such defenses are pre-empted by § 2 of the FAA. Defendant utterly misconstrues our holding in Pittella I.
We have long said that the waiver of statutory rights in agreements to arbitrate is grounded in "basic contract principles." Alamo Rent A Car, Inc. v. Galarza, 306 N.J. Super. 384, 390-91 (App. Div. 1997); see also Gras v. Assocs. First Capital Corp., 346 N.J. Super. 42, 47 (App. Div. 2001). We again affirmed that tenet in NAACP of Camden Cnty. E. supra, 421 N.J. Super. at 430, where we applied "basic principles of contract formation" to ultimately conclude that the various arbitration provisions were "unenforceable for lack of mutual assent." Id. at 438.
In Pittella I, our conclusion similarly rested upon "substantive contract law," i.e., "only those issues may be arbitrated which the parties have agreed shall be." Pittella I, supra, (slip op. at 13). We further held that "the language of the arbitration agreement itself was [not] sufficiently clear and unambiguous so as to evidence plaintiff's intention to waive any of her rights under the CFA." Id. (slip op. at 16). The opinion in AT&T Mobility in no way affects our reasoning or the result that followed.