SAND CASTLE DEVELOPMENT, LLC, VS. AVALON DEVELOPMENTGROUP, LLC(L-0176-16, CAPE MAY 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NOT FOR PUBLICATION WITHOUT THE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-3325-16T1

SAND CASTLE DEVELOPMENT, LLC,

Plaintiff-Appellant,

v.

AVALON DEVELOPMENT GROUP, LLC,
CHRISTOPHER SMITH, SIGNATURE
BUILDING SYSTEMS OF PA, LLC,
and JUSTIN DEPHILLIPS,

Defendants-Respondents.
__________________________________________

Argued September 18, 2017 – Decided October 26, 2017

Before Judges Messano and Accurso.

On appeal from Superior Court of New Jersey,
Law Division, Cape May County, Docket No. L-
0176-16.

Michael E. Holzapfel argued the cause for
appellant (Becker, LLC, attorneys; Mr.
Holzapfel, on the briefs).

Katrina M. Register argued the cause for
respondents Signature Building Systems of PA,
LLC and Justin DePhillips (Trimble & Armano,
attorneys; John W. Trimble, Jr. and Ms.
Register, on the brief).
PER CURIAM

Plaintiff Sand Castle Development, LLC, entered into a

construction agreement (the Contract) with defendant Avalon

Development Group, LLC, to demolish an existing motel and construct

twenty-four condominium units utilizing modular construction.

Avalon, in turn, entered into a "Master Purchase Agreement" (MPA)

with defendant Signature Building Systems of PA, LLC, whereby

Signature agreed to manufacture and deliver the modular units.

Avalon's representative, defendant Christopher Smith, and

Signature's Director of Sales and Marketing, defendant Justin

DePhillips, executed the MPA and a separate purchase order for the

units. Apparently, to assure favorable tax-exempt status for the

project, the MPA and purchase order were modified to include

plaintiff. Its principal executed copies of both and forwarded

them to Signature with a deposit of $300,000.1

After the motel was demolished, disputes broke out between

the parties, leading ultimately to the filing of plaintiff's

complaint naming Avalon, Smith, Signature and DePhillips as

defendants and asserting breach of contract, fraud and other causes

of action.

1
The second MPA was identical to the original, except it added
plaintiff as the "owner."

2 A-3325-16T1
 The Contract between plaintiff and Avalon contained no

arbitration provision. However, the MPA contained two provisions

that are the crux of the present appeal. Section 15(e), entitled

"Mandatory Mediation," provided:

If at any time there is a claim or dispute
arising out of or relating to this Agreement,
including the alleged breach, termination or
validity thereof, the Parties shall within ten
(10) days following mailing by either party
of written notice of a dispute, engage in
face-to-face negotiations in an attempt to
resolve the dispute and shall, upon failing
to negotiate a resolution, choose a mutually
agreeable third party neutral, who shall
mediate the dispute between the Parties. . . .
If the Parties are unable to resolve the
dispute in good faith within six (6) months
of the date of the initial demand by either
party for such fact finding, the dispute shall
be finally determined by a court of competent
jurisdiction as set forth in Section 15(f).
Neither party may bring any court proceedings
until completion of the mediation process, the
Court shall dismiss such action with prejudice
and the party bringing such action shall
reimburse the other party for all its costs
and expenses in defending same.

[(Emphasis added).]

Section 15(f), entitled "Dispute Resolution Arbitration,"

provided:

Mindful of the high cost of litigation, not
only in dollars, but also in time and energy,
the parties intend to and do hereby establish
the following out-of-court alternative
dispute resolution procedure to be followed
in the event any controversy or dispute shall
arise out of, or relating to this contract or

3 A-3325-16T1
 relating to any change orders or other changes
or addendums to this contract. If a dispute
develops between the parties to this contract,
the parties will submit to binding arbitration
to address any controversy or claim arising
out of, or relating to this contract or
relating to any change orders or other changes
or addendums to this contract. The arbitration
shall be conducted by and according to the
rules and procedures of Construction Dispute
Resolution Services, LLC. The Arbitration
Award shall be binding upon the parties and
shall be enforceable in any court of competent
jurisdiction.

[(Emphasis added).]

Additionally, paragraph 15(g) entitled, "Jury Trial Waiver"

provided in capital letters, "EACH PARTY TO THIS AGREEMENT HEREBY

EXPRESSLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION,

PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE

OTHER ON ALL MATERS ARISING OUT OF THIS AGREEMENT." Finally,

paragraph 15(j) provided the agreement would be "governed . . .

in accordance with the laws . . . of Pennsylvania."

Avalon filed an answer before the parties consented to

mediation, which proved unsuccessful. Prior to filing its

responsive pleading, Signature moved to compel arbitration.

Plaintiff and Avalon both filed opposition.

In a thoughtful written opinion, Judge J. Christopher Gibson

first noted that while the parties failed to reference the choice

of law provision in the MPA, Pennsylvania law regarding the

4 A-3325-16T1
enforceability of contractual arbitration provisions "generally

mirror[ed]" New Jersey law. Judge Gibson rejected plaintiff's

argument that the MPA was a contract of adhesion. He also rejected

plaintiff's contention that Sections 15(e) and 15(f) were

ambiguous, or that plaintiff could not be compelled to arbitrate

its disputes with Avalon because the contract contained no

arbitration provision. Lastly, Judge Gibson rejected plaintiff's

claim that Signature's assertion of rights under the arbitration

provision was untimely.

He entered an order staying any further proceedings and

compelling plaintiff to arbitrate its claims against Avalon and

Signature. This appeal followed.

Plaintiff reiterates its arguments that the MPA's arbitration

provision is ambiguous because it does not clearly provide for

arbitration as the proper forum, and, as a contract of adhesion,

the doctrine of contra proferentem applies and the MPA must be

strictly construed against Signature and in favor of plaintiff.

Plaintiff also argues that it was error to compel arbitration of

its claims against Avalon because the Contract contained no
2
arbitration provision.

2
In Point III of its brief, plaintiff argues Judge Gibson made
factual findings unsupported by the record on issues not raised
(footnote continued next page)

5 A-3325-16T1
 We have considered these arguments in light of the record and

applicable legal standards. We affirm, substantially for the

reasons expressed by Judge Gibson. We add only the following.

We review de novo 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. We must

first determine whether the parties have entered into a valid and

enforceable agreement to arbitrate disputes. Id. at 187. Second,

we must determine whether the dispute falls within the scope of

the agreement. Id. at 188.

Agreements to arbitrate must "be the product of mutual assent,

as determined under customary principles of contract law."

Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 442 (2014),

cert. denied, __ U.S. __, 135 S. Ct. 2804, 192 L. Ed. 2d 847

(2015) (quoting NAACP of Camden Cty. E. v. Foulke Mgmt. Corp.,

(footnote continued)
by Signature's motion, citing the judge's reference to Smith as
plaintiff's agent in its dealings with Signature. We find any
reference was irrelevant to the legal conclusions reached by the
judge, which were firmly tethered to the provisions of the MPA and
applicable case law. In Point IV of its brief, plaintiff argues
it was error for Judge Gibson to apply Pennsylvania law, since
Signature argued New Jersey law was applicable. However, plaintiff
does not assert any meaningful difference exists between the two,
which, based upon our review of the record, was the only point
Judge Gibson intended to make in his opinion. These arguments
require no further discussion. R. 2:11-3(e)(1)(E).

6 A-3325-16T1
421 N.J. Super. 404, 424 (App. Div.), certif. granted, 209 N.J.

96 (2011), appeal dismissed, 213 N.J. 47 (2013)). "[B]ecause

arbitration involves a waiver of the right to pursue a case in a

judicial forum, courts take particular care in assuring the

knowing assent of both parties to arbitrate, and a clear mutual

understanding of the ramifications of that assent." Id. at 442-

43 (internal quotations omitted).

Plaintiff contends the MPA is inherently ambiguous as to

compelling arbitration as the proper forum for dispute resolution.

It cites Section 15(e)'s language that any "dispute shall be

finally determined by a court of competent jurisdiction as set

forth in Section 15(f)," and the latter section's provision

requiring binding arbitration.

Plaintiff relies upon our decision in Rockel v. Cherry Hill

Dodge, 368 N.J. Super. 577, 581 (App. Div. 2004), where we found

the plaintiff signed two "separate and somewhat disparate

arbitration clauses." We concluded "the presence of two

conflicting arbitration provisions, the expression of a waiver of

the right to trial by jury in small print, and the absence of any

other clear warning or caution of the waiver of statutory rights,

require[d] a rejection of [the] defendant's attempt to compel

arbitration." Id. at 587.

7 A-3325-16T1
 Unlike the provisions at issue in Rockel, the MPA's

alternative dispute resolution scheme was unambiguous. Under

paragraph 15(e), any party could compel mediation. If

unsuccessful, "the dispute shall be finally determined by a court

of competent jurisdiction as set forth in Section 15(f)." Section

15(f) clearly and unequivocally compelled the parties to submit

the dispute to "binding arbitration," after which any award "shall

be enforceable in any court of competent jurisdiction." Unlike

the provisions at issue in Rockel, Section 15(g) of the MPA

clearly advised the parties they were waiving their right to a

jury trial. We conclude the agreement was unambiguous —

arbitration was the appropriate forum for resolving any dispute

and the court's role was limited to enforcement of any award.

Plaintiff's contention that the MPA was a contract of adhesion

is equally unavailing. Whether a contract is an unconscionable

contract of adhesion, and therefore unenforceable, requires a

fact sensitive inquiry. Martindale v. Sandvik, Inc., 173 N.J.

76, 90 (2002). To determine unconscionability in this context,

we consider: "[(1)] the subject matter of the contract, [(2)] the

parties' relative bargaining positions, [(3)] the degree of

economic compulsion motivating the adhering party, and [(4)] the

public interests affected by the contract." Delta Funding Corp.

8 A-3325-16T1
 v. Harris, 189 N.J. 28, 40 (2006) (internal quotation marks and

citation omitted).

None of these factors weighs in favor of plaintiff. The

record demonstrates plaintiff was not an "average member of the

public," Atalese, supra, 219 N.J. at 442, thereby triggering the

level of increased scrutiny the Court has applied to consumer

contracts. Rather, plaintiff was engaged in a multi-million

dollar real estate development and entered into the MPA to obtain

favorable tax treatment. There was no evidence that plaintiff

was at an unfair disadvantage or that any public interest was

implicated.3

Lastly, plaintiff argues it cannot be compelled to arbitrate

its claims against Avalon because the Contract contained no

arbitration agreement. It cites our decision in Angrisani v.

Financial Technology Ventures, L.P., 402 N.J. Super. 138 (App.

Div. 2008), for support. It is true that Angrisani involved two

contracts, one that contained an arbitration provision and one

that did not. Id. at 145. However, that is where any similarity

to this case ends.

3
Plaintiff's argument that the doctrine of contra proferentem
applies lacks sufficient merit to warrant extensive discussion.
R. 2:11-3(e)(1)(E). "[C]ontra proferentem may be employed as a
doctrine of last resort[,]" and "is only available in situations
where the parties have unequal bargaining power." Pacifico v.
Pacifico, 190 N.J. 258, 268 (2007).

9 A-3325-16T1
 In Agrisani, the plaintiff executed an employment contract

with his employer that contained an arbitration provision and a

second stock purchase agreement with another defendant that

contained no arbitration provision. Ibid. He brought suit against

both defendants and the trial court dismissed both complaints and

compelled arbitration of all the plaintiff's claims under both

agreements. Id. at 146-47. We reversed and bifurcated the

plaintiff's actions because the plaintiff could not be compelled

to arbitrate claims against the non-employer defendant simply

because the employment agreement contained an arbitration

provision. Id. at 152.

Plaintiff conceded at oral argument that its claims against

Avalon were intertwined to some degree with its claims against

Signature, such that conducting both an arbitration and a trial

was impractical and unwarranted. The Court recently clarified

that factual "intertwinement" of claims "as a theory for compelling

arbitration" should be rejected "when its application is

untethered to any written arbitration clause between the parties,

evidence of detrimental reliance, or at a minimum an oral agreement

to submit to arbitration." Hirsch, supra, 215 N.J. 192-93. Here,

however, plaintiff sued Avalon, Signature and their

representatives, all of whom were signatories to the MPA, which

10 A-3325-16T1
contained a clear, unambiguous and enforceable arbitration

agreement.

Affirmed.

11 A-3325-16T1