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Wilson v. Woodfields at Princeton Highlands

A-6277-08T1 (N.J. Super. App. Div. 2011) (Unpublished)

ARBITRATION; CONSUMER FRAUD ACT; LAW AGAINST DISCRIMINATION —If an arbitration provision in a contract does not even suggest there is a waiver of a right to bring suit in court on a statutory claim, the parties may bring Consumer Fraud Act and Law Against Discrimination claims in a court of law.

The buyer of a new home to be built on a lot within a homeowners association sued its contractor and the association for damages for misrepresentations in connection with the construction and sale of the home, construction defects, and overcharging of association fees. The lower court granted the developer’s motion to dismiss by reason of the arbitration clause in the sales contract, and granted counsel fees to the homeowners association in connection with a counterclaim.

First, the court rejected the builder’s claim that the court lacked jurisdiction to hear the appeal because it was not timely filed. The court observed that the Supreme Court prospectively amended its court rules to add orders compelling arbitration to the list of those that are deemed appealable as of right regardless of whether all claims as to all parties have been resolved. Because the rule was new, the Supreme Court gave it purely prospective application; thus, it applied only to cases whose operative facts arose after the new rule was announced. Because the entry of the order compelling arbitration occurred before, not after, the new rule was announced, the appeal was not subject to the new rule and therefore had been properly filed within forty-five days of the last order.

The lower court also observed that the buyer’s attorney had previously attempted to amend the contract by removing the arbitration clause and a clause addressing dispute resolution. The attorney was not successful, and the buyer signed the contract with the relevant clauses. On appeal, the buyer argued that the arbitration clause was unenforceable because it gave insufficient notice to her of her waiver of the statutory right to a jury trial as to her Law Against Discrimination (LAD) and Consumer Fraud Act (CFA) claims. The Appellate Division found that this arbitration clause, though covering any disputes arising in connection with the agreement and its amendments, did not even suggest there was a waiver of the right to bring a suit in court on a statutory claim. The contract did reference alternate dispute resolution for New Home Warranty Act claims, but in a way that was so confusing that it confounded any clear understanding of the parties’ undertaking and it did not articulate or explain the relationship between clauses. For those reasons, the Court reversed the order compelling arbitration as to the LAD and CFA claims.

The Court also disagreed with the lower court’s award of counsel fees to the association. The fee award, large in comparison to the settlement award, was partially in return for work done in defending the association against the buyer’s claim. However, the association’s bylaws only entitled the association to fees incurred in connection with collecting delinquent dues. Thus, the Court remanded the case to the lower court for an adjustment to the counsel fee award consistent with the bylaws. It also instructed the lower court, on remand, to consider whether the fee sought was reasonable in light of the amount in dispute and the results obtained.

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