NOT FOR PUBLICATION WITHOUT THE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-3913-17T1
MARK BARRY and
SANDRA BARRY,
Plaintiffs-Appellants,
v.
MELMED CONSTRUCTION
COMPANY, INC., a New Jersey
Corporation, and VICTOR MELMED,
Defendants-Respondents.
_________________________________
Argued February 13, 2019 - Decided July 22, 2019
Before Judges Fuentes, Accurso and Vernoia.
On appeal from the Superior Court of New Jersey,
Law Division, Monmouth County, Docket No.
L-2910-16.
Gil D. Messina argued the cause for appellants
(Messina Law Firm, attorneys; Gil D. Messina, on the
brief).
Thomas E. Wilson argued the cause for respondents.
PER CURIAM
Plaintiffs Mark and Sandra Barry appeal from an order entered two
weeks before the end of extended discovery granting defendants Melmed
Construction Company, Inc. and Victor Melmed's motion to compel
arbitration. Because assessing defendants' litigation conduct in light of the
factors identified by our Supreme Court in Cole v. Jersey City Medical Center,
215 N.J. 265, 280-81 (2013), makes clear defendants waived the agreement to
arbitrate, we reverse.
The essential facts are easily summarized. Plaintiffs hired defendant
Melmed Construction to complete renovations to their home in Middletown at
an estimated cost of $280,000. At plaintiffs' request, Melmed inserted an
arbitration clause drafted by plaintiffs' attorney into the contract. 1 At the end
1
The arbitration clause provided as follows:
Any issues that may arise during this repair
project will be submitted to the architect for his
determination. The decision of the architect will be
final unless either party submits a claim or objection
to the architect within 10 days. Any such issue or
dispute shall not result in a delay of the project and
shall be finally resolved after completion of
construction by submission to an arbitrator selected by
the parties or, if the parties cannot agree upon an
arbitrator, the matter shall be submitted to the
American Arbitration Association for selection of an
arbitrator and for arbitration in accordance with
(continued)
A-3913-17T1
2
of the project, relations between plaintiffs and Melmed broke down, with each
side suing the other in the Law Division.
Melmed filed first, demanding $85,000 on a book account complaint.
The complaint included a demand for jury trial and a Rule 4:5-1 certification
that no other action or arbitration was known or contemplated. Before being
served with Melmed's complaint, plaintiffs filed their own complaint against
Melmed alleging consumer fraud. Plaintiffs' complaint likewise included a
jury trial demand but omitted a Rule 4:5-1 certification.
Melmed filed an answer to plaintiffs' complaint, with a jury demand,
asserting its book account complaint was the only other action or arbitration
known or contemplated. Several months later, plaintiffs obtained leave to file
an amended complaint, adding Melmed's principal, Victor Melmed, as a
defendant. In response, Melmed, seven months after filing its original
complaint, moved to consolidate the actions and send them to arbitration.
Plaintiffs moved to dismiss Melmed's complaint and opposed the motion to
compel arbitration, arguing Melmed had waived arbitration by initiating suit in
(continued)
Association's commercial rules. The parties shall
share the costs of arbitration equally and the decision
of the arbitrator shall be final. Each party will bear its
own attorney's fees.
A-3913-17T1
3
the Law Division and engaging in discovery and motion practice. Melmed
countered that documents exchanged in discovery established the parties had
initiated the arbitration process by "going through the architect." The court,
concluding those "materials . . . concerning back and forth between an
architect," which had not been submitted on the motion, "might be relevant
information as to whether arbitration is appropriate or not," denied the motion
to compel arbitration without prejudice.
The court further granted plaintiffs' motion to dismiss Melmed's
complaint without prejudice for pleading deficiencies, denied the motion to
consolidate as moot and directed defendants to file an answer to plaintiff's
amended complaint with any counterclaim they deemed appropriate. The court
agreed the cases should proceed under one docket number, explaining that
once defendants filed their answer and counterclaim, the court would "expect a
motion to be filed . . . and we'll figure out under which docket number we're
proceeding and what the appropriate forum" should be. Defendants filed their
answer and counterclaim, again demanding a jury trial but also including a
count in their counterclaim demanding arbitration and noting in their Rule
4:5-1 certification that defendants "have hereby within demanded arbitration of
these within matters."
A-3913-17T1
4
Defendants did not, however, follow up that pleading with a motion to
permit the court to determine "what the appropriate forum" should be. Instead,
the parties intensively litigated the case for the next thirteen months, obtaining
two extensions of the discovery end date. Plaintiffs obtained leave to file a
second amended complaint, adding another Melmed principal, Eli Cohen, as a
defendant. The parties engaged in extensive motion practice over service of
the second amended complaint and defendants' failure to file a timely
responsive pleading. Those motions were resolved with the court reinstating
defendant Victor Melmed's appearance and directing defendants to file an
answer to the second amended complaint. Defendants answered that
complaint, filing a counterclaim and jury demand. Although the counterclaim
included a count to compel arbitration, defendants' Rule 4:5-1 certification
stated that no other action or arbitration was known or contemplated.
The parties also filed motions accusing one another of failing to comply
with discovery. The court denied defendants' motion and granted plaintiffs',
finding defendants' repeated failure to appear for depositions was not
"substantially justified" and had unduly delayed discovery. The court
sanctioned defendants, ordering them to pay plaintiffs' counsel fees "caused by
the delay and necessity to resort to motion practice" and ordered them to
A-3913-17T1
5
appear for their depositions. Defendants then failed to pay the sanction,
necessitating another motion and a court order awarding additional fees.
Approximately one year after the denial without prejudice of defendants'
motion to compel arbitration, defendants filed their second motion to compel
arbitration supported only by counsel's certification to which he attached the
contract and an email between the parties demonstrating that plaintiffs drafted
the arbitration clause. Defendants did not submit a brief. Defendants made
their motion a month after a case management conference setting dates for
their response to defendants' second request for production of documents,
which was delinquent, and extending discovery. No mention was made of a
second motion to compel arbitration.
Plaintiffs opposed the motion, contending the order denying defendants'
initial motion to compel arbitration was final and binding, the arbitration
agreement was not enforceable against plaintiffs, and defendants had waived
whatever right they had to arbitration by their litigation conduct. Plaintiffs
also filed their own motion to dismiss defendants' pleadings for their failure to
respond to defendants' second request for production of documents in
accordance with the case management order.
A-3913-17T1
6
After hearing argument, the judge put an opinion on the record granting
the motion to compel arbitration and denying as moot plaintiffs' motion to
dismiss defendants' pleadings for failure to comply with the case management
order. The judge noted he had reviewed the audio recording of the prior
motion to compel arbitration and found that judge had "concisely laid out . . .
his plan for these matters," which included the denial of defendants' motion
"without prejudice in anticipation that the motion would be refiled with the
proper documentary evidence." Determining defendants' motion was thus
"properly refiled," the court addressed it on the merits.
The court found a valid agreement to arbitrate and that the parties'
dispute fell within the scope of the agreement. Noting plaintiffs' counsel
drafted the clause, the court deemed it "extremely broad" and found the parties
had "freely agree[d] to the terms and conditions of the contractual agreement."
The court noted the presumption against waiver of an arbitration agreement,
Spaeth v. Srinivasan, 403 N.J. Super. 508, 514 (App. Div. 2008), and that the
determination of whether a party has waived its right to arbitration is a legal
one, Cole, 215 N.J. at 275, which the court noted "must be expressed 'clearly,
unequivocally, and decisively,'" id. at 276-77 (quoting Knorr v. Smeal, 178
N.J. 169, 177 (2003)).
A-3913-17T1
7
Instead, however, of evaluating the factors the Court identified in Cole
for determining whether a party's litigation conduct "is consistent with its
reserved right to arbitrate the dispute," id. at 280, the trial court simply
concluded "[f]or all the foregoing reasons," that "defendant's motion to enforce
the arbitration clause is hereby granted" without any analysis of waiver.
"[W]hether a party waived its arbitration right is a legal determination
subject to de novo review." Id. at 275. Although the factual findings
underpinning such a determination are ordinarily reviewed only for clear error,
ibid., no factual findings bind us here. Instead, we are left to apply the Cole
factors to the undisputed 2 procedural record of this case.
The Court in Cole identified seven factors a court should evaluate in
assessing "whether a party to an arbitration agreement has waived that
remedy." Id. at 280. The factors are:
(1) the delay in making the arbitration request; (2) the
filing of any motions, particularly dispositive motions,
and their outcomes; (3) whether the delay in seeking
arbitration was part of the party's litigation strategy;
2
The only procedural fact apparently disputed is whether a trial date had been
set when defendants made their second motion to compel arbitration. The
court's Automated Case Management System record reflects a trial date of July
2, 2018, approximately two months following the extended discovery end date
of May 10, 2018. Defendants contend they received no notice of a trial date.
Given the dispute, we do not consider the setting of a trial date in our analysis.
A-3913-17T1
8
(4) the extent of discovery conducted; (5) whether the
party raised the arbitration issue in its pleadings,
particularly as an affirmative defense, or provided
other notification of its intent to seek arbitration; (6)
the proximity of the date on which the party sought
arbitration to the date of trial; and (7) the resulting
prejudice suffered by the other party, if any.
[Cole, 215 N.J. at 280-81.]
Applying those factors here, we have no hesitation in concluding
defendants waived any right they had to arbitration. Besides the fact that
defendants initiated litigation in the Law Division in derogation of the ir right
to arbitrate, they waited seven months before even raising the arbitration
clause in the agreement they sued on. Moreover, when their motion to compel
arbitration was denied without prejudice to provide them the opportunity to
produce the documents they claimed established the parties had already
initiated arbitration, defendants did not take it. Instead, they continued in
litigation for another year before refiling their motion.
Although we do not agree with plaintiffs that the denial of defendants'
initial motion was a final and binding order, we also disagree with the trial
judge that defendants' motion could be considered "properly refiled" one year
later. Further, defendants did not even file with their second motion the
documents they claimed proved the parties had already begun the arbitration
A-3913-17T1
9
process by submitting their dispute to the architect. Defendants only
submitted those documents in their reply as an attachment to counsel's
certification. Aside from the fact that the documents appear to relate to normal
punch list items and do not appear to address either a dispute or arbitration,
they were improperly submitted on the motion. They are obviously not the
sort of documents that counsel can attest to under Rule 1:6-6, see Cafferata v.
Peyser, 251 N.J. Super. 256, 263-64 (App. Div. 1991) (addressing the
objectionable hearsay of attorneys certifying to facts not based on their
personal knowledge), and submitting them in reply deprived plaintiffs of any
opportunity to address them, see R. 1:6-3(a) (noting reply papers are only for
"responding to opposing affidavits or certifications"); Borough of Berlin v.
Remington & Vernick, Eng'rs, 337 N.J. Super. 590, 596 (App. Div. 2001)
("Raising an issue for the first time in a reply brief is improper.").
There is no question but that defendants were aware of their right to seek
arbitration during the thirteen months they engaged in discovery and motion
practice following the denial of their initial motion. The parties exchanged
paper discovery during that period, engaged in motion practice and defendants'
principals were deposed pursuant to court order after they failed to appear on
noticed dates without justification. Defendants were sanctioned for their
A-3913-17T1
10
conduct in delaying discovery and, indeed, it is difficult to conclude anything
other than the more than one-year delay in refiling the motion was as a result
of a deliberate strategy to use arbitration as a means of further delay. The
prejudice to plaintiffs in defendants' waiting to compel arbitration until the end
of extended discovery and multiple motions to compel defendants' compliance
with their discovery obligations is manifest. See Cole, 215 N.J. at 281-82.
Because defendants' litigation conduct was inconsistent with their right
to arbitrate their dispute with plaintiffs, resulting in a waiver of that right, we
need not reach the issue of whether the arbitration clause would otherwise
have been binding on the parties. 3
Reversed.
3
We acknowledge the anomaly of plaintiffs' assertion that they are not bound
by the arbitration clause their counsel drafted and they insisted be included in
the contract between the parties, particularly in light of counsel's apparent
admission that he drafted the clause to allow plaintiffs to argue it could not be
enforced against them. While not endorsing such conduct, we do not address it
in light of defendants' waiver of an arbitration remedy.
A-3913-17T1
11