STATE OF NEW JERSEY VS. WILSON MORALES(05-04-1576, CAMDEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court."
Although it is posted on the internet, this opinion is binding only on the
parties in the case and its use in other cases is limited. R.1:36-3.

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5215-15T3

REGINA M. FOTI,
Individually and
On Behalf of All
Others Similarly
Situated,

Plaintiff-Appellant,

v.

TOYOTA MOTOR SALES,
U.S.A., INC.,

Defendant-Respondent.
______________________________________________

Argued January 24, 2017 – Decided April 24, 2017

Before Judges Messano and Espinosa.

On appeal from the Superior Court of New
Jersey, Law Division, Gloucester County,
Docket No. L-0981-15.

Lewis G. Adler argued the cause for appellant
(Mr. Adler and Law Office of Paul DePetris,
attorneys; Mr. Adler, on the briefs).

J. Gordon Cooney, Jr. (Morgan, Lewis &
Bockius) of the Pennsylvania bar, admitted pro
hac vice, and Franco A. Corrado argued the
cause for respondent (Morgan, Lewis & Bockius,
attorneys; Mr. Corrado and Sean J. Radomski,
on the brief).

PER CURIAM
 Plaintiff Regina M. Foti leased a 2014 Toyota Corolla from

Classic Imports, Inc. (Classic).1 She executed a written lease

agreement (the lease) that bore the insignia and name of Toyota

Financial Services, and specifically defined the term "lessor" as

including Classic, its anticipated assignee, Toyota Lease Trust

(TLT), and any future assignee. The lease also stated that Toyota

Motor Credit Corporation (TMCC) would be "servicing the [l]ease."

The final page was an assignment of the lease from Classic to TLT.

The lease contained a broad arbitration provision (the

arbitration agreement) that provided in part:

You agree that any claims arising from or
relating to this Lease or related agreements
or relationships, including the validity,
enforceability, arbitrability or scope of this
Provision, at your or our election, are
subject to arbitration. This includes,
without limitation, claims in contract, tort,
pursuant to statute, regulation, ordinance or
in equity or otherwise, and claims asserted
by you against us, and the following Covered
Parties: [TLT], TMCC, and/or any of our or its
affiliates and/or any of our or their
employees, officers, successors, assigns or
against any third party providing any product
or service in connection with the Lease that
you name as a co-defendant in any action
against any of the foregoing.2

1 Classic apparently did business as Toyota of Turnersville.

2 When we quote the language of the lease, we continue to use its
defined terms: "you," "your," or "yours" refer to plaintiff; and
"we," "us," and "our" refer to Classic, TLT and any future
assignee.

2 A-5215-15T3
 [(Emphasis added).]

The arbitration agreement also included in bold print a class

action waiver:

We, the Covered Parties and you are prohibited
from participating in a class action or
private attorney general action in court or
class-wide arbitration with respect to any
claims we, the Covered Parties or you have
asserted against one another or other
beneficiaries of this Provision. There should
also be no joinder or consolidation of
parties, except for multiple parties to this
Lease.

The arbitration agreement further provided in capitalized text:

IF ANY PARTY ELECTS ARBITRATION WITH RESPECT
TO A CLAIM, NEITHER YOU NOR WE NOR ANY COVERED
PARTY WILL HAVE THE RIGHT TO LITIGATE THAT
CLAIM IN COURT; TO HAVE A JURY TRIAL ON THAT
CLAIM; TO ENGAGE IN PREARBITRATION DISCOVERY
EXCEPT AS PROVIDED FOR IN THE RULES OF THE
ADMINISTRATOR; OR TO PARTICIPATE AS A
REPRESENTATIVE OR MEMBER OF ANY CLASS OF
CLAIMANTS PERTAINING TO SUCH CLAIM. . . .
OTHER RIGHTS THAT YOU WOULD HAVE IF YOU WENT
TO COURT MAY NOT BE AVAILABLE IN ARBITRATION.

The following appeared at the end of the arbitration agreement in

bold print: "By signing below, you agree that at the request of

either you or us any controversy or claim between you and us shall

be determined by neutral binding arbitration in accordance with

the terms of this Arbitration Provision." Plaintiff executed the

lease in two places — immediately below this bold-print provision

and again at the end of the lease.

3 A-5215-15T3
 In July 2015, plaintiff filed a complaint on behalf of herself

and other similarly situated consumers against defendant Toyota

Motor Sales, U.S.A., Inc., alleging two violations of the Truth-

in-Consumer Contract, Warranty and Notice Act (TCCWNA), N.J.S.A.

56:12-14 to -18. She claimed the vehicle's warranty notice (1)

contradicted and misstated consumers' rights under New Jersey's

Lemon Law (Lemon Law), N.J.S.A. 56:12-29 to -49, requiring notice

by certified mail return receipt requested to the manufacturer

prior to making a Lemon Law complaint; and (2) in doing so, failed

to include the verbatim language required by the Lemon Law and its

regulations.

Before filing an answer, defendant moved to compel

arbitration, and plaintiff cross-moved for partial summary

judgment. After considering oral argument, the motion judge

granted defendant's motion, entering an order compelling

arbitration, requiring plaintiff to "pursue the claims . . . on

an individualized basis" and dismissing the complaint without

prejudice.3

Before us, plaintiff argues the judge erred, because there

was "no meeting of the minds" and therefore no "enforceable

agreement"; as non-signatory to the lease, defendant was not

3 A second order denied plaintiff's cross-motion.

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entitled to enforce the arbitration agreement; the arbitration

agreement does not apply to plaintiff's claim because issues

concerning the manufacturer's warranty are exempted from its

terms; because plaintiff's complaint is brought as a "private

attorney general" action, it is beyond the scope of the arbitration

agreement; and, the arbitration agreement is "unenforceable as to

the putative class." Having considered these arguments in light

of the record and applicable legal standards, we affirm.

We conduct a de novo review of the trial court's order

compelling arbitration. Hirsch v. Amper Fin. Servs., LLC, 215

N.J. 174, 186 (2013). "In reviewing such orders, we are mindful

of the strong preference to enforce arbitration agreements

. . . ." Ibid. When evaluating a motion to dismiss a complaint

and compel arbitration, a court must undertake a two-pronged

analysis. First, the court must determine whether the parties

have entered into a valid and enforceable agreement to arbitrate

disputes. Id. at 188. Second, the court must determine whether

the dispute falls within the scope of the agreement. Ibid.

"[S]tate contract-law principles generally . . . determin[e]

whether a valid agreement to arbitrate exists." Hojnowski v.

Vans Skate Park, 187 N.J. 323, 342 (2006). "In evaluating the

existence of an agreement to arbitrate, a court 'consider[s] the

contractual terms, the surrounding circumstances, and the purpose

5 A-5215-15T3
of the contract.'" Hirsch, supra, 215 N.J. at 188 (alteration in

original) (quoting Marchak v. Claridge Commons, Inc., 134 N.J.

275, 282 (1993)). Plaintiff argues that, while she may have

agreed to arbitrate certain disputes, she never agreed to

arbitrate any disputes with defendant, who was a non-signatory to

the lease.

"The United States Supreme Court has recognized that, in the

context of arbitration, 'traditional principles of state law allow

a contract to be enforced by or against nonparties to the contract

through assumption, piercing the corporate veil, alter ego,

incorporation by reference, third party beneficiary theories,

waiver and estoppel.'" Ibid. (emphasis added) (quoting Arthur

Andersen LLP v. Carlisle, 556 U.S. 624, 631, 129 S. Ct. 1896,

1902, 173 L. Ed. 2d 832, 840 (2009)). The arbitration agreement

in this case specifically included TLT, TMCC, "and/or any of our

or its affiliates." We reject plaintiff's assertion that she did

not know defendant was affiliated with TLT or TMCC because the

language of the arbitration agreement was confusing.4

4 Plaintiff's brief cites a number of California decisions and
argues the federal Ninth Circuit Court of Appeals has specifically
rejected defendant's asserted grounds for compelling arbitration
as an affiliate of the signatory. Close examination reveals none
of those decisions are particularly persuasive, because the
arbitration agreement at issue in those decisions did not include
the "affiliate" language contained in this lease. See Kramer v.

6 A-5215-15T3
 Plaintiff further argues that her claims fall outside the

scope of the arbitration agreement. She contends the TCCWNA

claims involve inadequacies and inaccuracies of the Lemon Law

statement provided by defendant and "in no way implicate the

lease, which expressly leaves plaintiffs to pursue such remedies

against the manufacturer alone via its warranty." We again

disagree.

Clearly, "a court may not rewrite a contract to broaden the

scope of arbitration." Hirsch, supra, 215 N.J. at 188 (quoting

Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A.,

168 N.J. 124, 132 (2001)). However, the arbitration agreement in

this case covered

any claims arising from or relating to th[e]
Lease or related agreements or relationships,
including the validity, enforceability,
arbitrability or scope of this Provision, at
your or our election, are subject to
arbitration. This includes, without
limitation, claims in contract, tort, pursuant
to statute, regulation . . . or otherwise
. . . .

Toyota Motor Corp., 705 F.3d 1122, 1124, 1127 n.3 (9th Cir. 2013)
(arbitration provisions did not include "covered party" language
and Toyota did not contend it was "a transferee, employee or agent
of the dealership" such that it could compel arbitration); In re
Toyota Motor Corp., 838 F. Supp. 2d 967, 988-90 (C.D. Cal. 2012)
(no express "covered party" language in the arbitration
provisions); Soto v. Am. Honda Motor Co., 946 F. Supp. 2d 949,
955 (N.D. Cal. 2012) (reasoning the term "third parties" in the
arbitration provision did not include the defendant
manufacturer).

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 [(Emphasis added).]

Plaintiff acknowledges that the Lemon Law requires defendant to

provide the notice, see N.J.S.A. 56:12-34(a), and TCCWNA required

Classic, as lessor, to deliver the notice. N.J.S.A. 56:12-15.

Moreover, the lease expressly advised plaintiff that the car was

"subject to the standard new warranty from the manufacturer." In

short, the Lemon Law notice was clearly a related agreement that

arose from the lease itself, and we reject any contention that the

terms and conditions in the Lemon Law notice rendered the

provisions of the arbitration agreement sufficiently ambiguous so

as to foreclose its enforceability.

Plaintiff argues that, even if the class-action waiver

provision applies, claims on behalf of the putative class must be

stayed pending her individual arbitration. We again disagree.

Plaintiff misconstrues AT&T Mobility LLC v. Concepcion, 563

U.S. 333, 131 S. Ct. 1740, 179 L. Ed. 2d 742 (2011), to support

her claim. In Concepcion, the Supreme Court upheld the validity

of class action waiver provisions, stating businesses may require

consumers to bring claims only in individual arbitrations, rather

than in court as part of a class. Concepcion, supra, 563 U.S. at

346-52, 131 S. Ct. at 1749-53, 179 L. Ed. 2d at 755-59. Plaintiff

cites to our Court's decision in Muhammad v. County Bank of

8 A-5215-15T3
Rehoboth Beach, Delaware, 189 N.J. 1, 22 (2006), cert. denied, 549

U.S. 1338, 127 S. Ct. 2032, 167 L. Ed. 2d 763 (2007), as support

for the proposition that a class-arbitration waiver in a consumer

contract was unconscionable. However, the Third Circuit Court of

Appeals held the Federal Arbitration Act (the FAA), 9 U.S.C.A. §

1 to § 16, pre-empted that holding.

[A] state law that seeks to impose class
arbitration despite a contractual agreement
for individualized arbitration is
inconsistent with, and therefore preempted by,
the FAA, irrespective of whether class
arbitration is desirable for unrelated
reasons. Therefore, . . . the rule
established by the New Jersey Supreme Court
in Muhammad is preempted by the FAA.

[Litman v. Cellco P'ship, 655 F.3d 225, 231
(3d Cir. 2011) (emphasis added) (internal
quotations and citation omitted).]

Lastly, plaintiff contends she filed her complaint as a

"private attorney general action," which is expressly excluded by

the arbitration agreement. We find no support for this proposition

either in plaintiff's brief or elsewhere. By the express terms

of the arbitration agreement, plaintiff waived her right to

"participat[e] in a class action or private attorney general action

in court or class-wide arbitration." There is nothing in the

arbitration agreement that exempts plaintiff's individual claims,

however characterized, from arbitration.

Affirmed.

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