Cohen v. Workshop/APD Architecture, D.P.C.

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ABE COHEN, Plaintiff-Appellant, v. WORKSHOP/APD ARCHITECTURE, D.P.C., Defendant-Respondent.

No. A-0566-23

Superior Court of New Jersey, Appellate Division

July 24, 2024

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.

Argued April 16, 2024

On appeal from the Superior Court of New Jersey, Law Division Monmouth County, Docket No. L-3464-22.

Anthony Sango argued the cause for appellant (Ansell Grimm & Aaron, PC, attorneys; Anthony Sango and Anthony J D'Artiglio, on the briefs).

Alexander C. Banzhaf (Tuttle Yick, LLC) argued the cause for respondent (Alexander C. Banzhaf, attorney; Alexander C. Banzhaf, on the brief).

Before Judges Gooden Brown and Puglisi.

PER CURIAM.

Plaintiff Abe Cohen appeals from the September 11, 2023, Law Division order granting defendant Workshop/APD Architecture D.P.C.'s motion to compel arbitration, and dismissing without prejudice plaintiff's complaint and defendant's counterclaim. We affirm.

I.

We glean these facts from the motion record. In October 2018, plaintiff hired defendant, a New York architectural firm "specializing in luxury homes, high-end commercial development, and hospitality design," to perform professional services in connection with the construction of his multi-million-dollar home in Long Branch, New Jersey. Pursuant to the fourteen-page contract entered into and executed by both parties on October 22, 2018, defendant "would be involved in the architectural design, on-site construction supervision, and interior design and decoration . . . from design through construction and installation."

The contract was comprised of eight phases with the first seven phases to be invoiced based on a percentage of estimated construction costs, and the eighth phase to be performed on an hourly basis. Two addenda followed the signature page. Addendum two, labelled "Terms and Conditions," included a section titled "Disputes," which provided in small font:

(18) DISPUTES [I]n the event of any dispute arising out of the services in this [a]greement, the parties agree to arbitration, before one . . . arbitrator in the [c]ounty, [c]ity, and State of New York, to resolve the dispute. This [a]greement shall be governed by the laws of New York. To the extent the dispute involves a payment dispute, the prevailing party shall be entitled to recover all associated costs, expenses, and fees, including attorneys' fees from the other party. The arbitration procedure shall be as follows:

a. The party bringing the [c]laim shall, in writing, set forth the details of its [c]laim and its desire to resolve the dispute in accordance with this [s]ection.

b. The other party shall, within ten . . . days of receipt of the written demand, accept arbitration and set forth at its option, in detail, any counterclaim of its own.

c. [Plaintiff] and Workshop agree to the joinder of any other parties separately retained by [plaintiff] and Workshop (collectively, the "[p]arties"), as a party to any arbitration called for in this [a]greement. [Plaintiff] shall provide for the joinder of these [p]arties in the applicable and respective agreements with other such [p]arties[.]

d. Within twenty . . . days after joinder of all parties, the parties shall agree upon a sole arbiter . . . who shall hear any disputes arising under this [a]rticle. If the parties cannot agree on an [a]rbiter, they agree to use American Arbitration Association ("AAA") rules to appoint an [a]rbiter. The AAA shall make such appointment within ten . . . days of receipt of a written request by either party. The parties agree to share equally the costs of the [a]rbiter associated with the resolution of any dispute.

e. Within ten . . . days of his/her appointment, the [a]rbiter shall hold a hearing, limited to no more than two . . . days per party, which limit shall not be exceeded except for unusual reasons and/or by agreement of the [a]rbiter and the parties.

f. The [a]rbiter shall render his/her written decision within forty-eight . . . hours after the close of the hearing. The decision shall be in writing and may, at the [a]rbiter's option, provide an explanation for such decision.

g. The [a]rbiter's decision shall be final and binding upon all parties and judgment may be entered upon it in the appropriate court in the Supreme Court of the State of New York. If a challenge to the [a]rbiter's decision is made by a party in the applicable court and such challenge is thereafter rejected by appeal or otherwise, the prevailing party shall be entitled to its reasonable attorney's fees and expenses for such proceeding(s).

A separate provision immediately preceding the "Disputes" provision read: "(17) APPLICABLE LAW This [a]greement shall be governed by and construed in accordance with the laws of the State of New York without reference to its conflicts of laws principles."

Plaintiff hired a contractor in February 2020 to build the home using defendant's designs. However, disputes arose between plaintiff and defendant during the performance of the contract, largely related to billing and workmanship. As a result, the contract was terminated in February 2021 while the construction of the home was still in its infancy. In March 2021, after plaintiff refused to pay defendant's outstanding fees, defendant filed a notice of unpaid balance and a demand for arbitration for a New Jersey Construction Lien on the new home. N.J.S.A. 2A:44A-20 "provides for the filing of a notice of unpaid balance (NUB) or potential construction lien claim to provide notice to persons claiming title to . . . real property of the anticipated filing of a lien claim, as well as an anticipatory priority." Sovereign Bank v. Silverline Holdings Corp., 368 N.J.Super. 1, 3 (App. Div. 2004).

On April 19, 2021, defendant obtained confirmation that it satisfied all procedural requirements under the Construction Lien Law and had the right to a lien for its unpaid services, which lien defendant promptly filed. On November 17, 2022, defendant filed an order to show cause in the Supreme Court of New York under N.Y. C.P.L.R. § 3102(c), seeking an order compelling plaintiff to produce pre-action discovery to aid arbitration in connection with the construction lien claim. Defendant sought to compel plaintiff to disclose construction costs to allow defendant to calculate its claim amount for outstanding fees. Plaintiff opposed the order to show cause, arguing, among other things, that the arbitration provision in the contract was unenforceable because of the small typeface, see N.Y. C.P.L.R. § 4544.^[1]

While the New York action was pending,^[2] on December 16, 2022, plaintiff filed a complaint against defendant in New Jersey asserting the following causes of action: (1) lien discharge pursuant to N.J.S.A. 2A:44A-33 or N.J.S.A. 2A:44A-21(b)(10); (2) breach of contract; (3) breach of the implied covenant of good faith and fair dealing; (4) unjust enrichment; (5) professional negligence; and (6) violation of the New Jersey Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to -229. The contract and the two addenda were attached to the complaint. Prior to filing an answer, on February 24, 2023, defendant moved to dismiss plaintiff's complaint and compel arbitration. In support, defendant relied on the arbitration provision in the contract. Plaintiff opposed the motion, arguing that the arbitration provision was unenforceable under both New York and New Jersey law.

As to New York law, according to plaintiff's counsel, because the contract fit the definition of a consumer transaction and the font size was smaller than the allowable size to be admitted into evidence under N.Y. C.P.L.R. § 4544, the arbitration provision was unenforceable. As to New Jersey law, counsel asserted the provision was unenforceable based on the font size, legibility, and location.

On June 9, 2023, following oral argument, the judge entered an order denying defendant's motion. In an oral decision, the judge applied the standards articulated in Rockel v. Cherry Hill Dodge, 368 N.J.Super. 577 (App. Div. 2004), and Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430 (2014), and concluded the arbitration provision "should not be enforced." Initially, the judge pointed out that he was adjudicating "a motion to dismiss" that was "limited to the pleadings" and "the contract itself," and heard before any discovery was conducted by the parties.

The judge also posited:

At the heart of all of it, despite a lot of the repartee back and forth about the sophistication or relative sophistication of [plaintiff], the nature of this transaction, the size of the font, [and] which law should apply, the underlying legal theory here really concerns whether or not either of those provisions were accepted as part of a contract knowingly.

In describing the contract, the judge commented that "[n]one of the things contained within the written portion of what [he] would consider the binding contract reference anything about arbitration, about alternate means of resolving disputes outside of trial, [or] about waiving a statutory right." In addition, according to the judge, the addendum containing the arbitration provision followed the signature page, and was not labeled "arbitration provision" for clarity, but was "ambiguous[ly]" labelled "[t]erms and conditions."

The judge expounded:

Regardless of the size of the font, . . . . [i]t does not anywhere specifically say that [plaintiff's] right to a trial is waived, that there's any statutory restrictions on [plaintiff's] right to recover, nor does it specifically set forth in a straightforward way the nature and extent

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