BMW FINANCIAL SERVICES NA, LLC v. JEFFREY P. DATTO, PH.D.

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-1924-08T11924-08T1

BMW FINANCIAL SERVICES NA, LLC,

Plaintiff-Appellant,

v.

JEFFREY P. DATTO, PH.D., and

GEORGE A. DATTO,

Defendants/Third-Party

Plaintiffs-Respondents,

v.

BMW OF TURNERSVILLE,

Third-Party Defendant.

_________________________________

 

Submitted October 21, 2009 - Decided

Before Judges Sabatino and Newman.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. DC-9397-08.

Helfand & Helfand, attorneys for appellant (Norman G. Kalina, on the briefs).

Jeffrey P. Datto and George A. Datto, respondents pro se.

PER CURIAM

Plaintiff BMW Financial Services NA, LLC, appeals the Special Civil Part's dismissal of its collection action against Jeffrey Datto and George Datto ("defendants"), and the transfer of plaintiff's claims to binding arbitration. For the reasons stated herein, we find that plaintiff was not obligated to arbitrate its claims, and therefore reinstate plaintiff's action in the trial court.

The pertinent facts of this case arise out of the purchase by defendants of a used 2 004 BMW 325ci automobile from a car dealer, BMW of Turnersville, on August 24, 2006. Defendants purchased the vehicle for $30,816.08 and decided to finance the purchase with a loan from plaintiff. In return for that loan, defendants provided plaintiff with a security interest in the car and a promise to pay finance charges of $4,691.32. The finance charges and principal were to be paid in sixty monthly installments. Defendants also received a $1,500 credit toward their purchase by trading in a 1993 Nissan Maxima.

To finance the car, defendants entered into a Motor Vehicle Retail Installment Contract (the "Installment Contract") with BMW of Turnersville on the same day. The Installment Contract recites that it "describes all of the agreements with respect to the retail installment sale of the Vehicle between Seller and [defendants] and all prior agreements, whether oral or in writing, are superseded." Additionally, the document states that defendants "accept the Vehicle in its present condition, including all the equipment, parts and accessories." As part of the Installment Contract, the dealership "or its assignee" received a security interest in the car, plus the right to repossess and resell the car in the event of default on the part of defendants.

The Installment Contract was then assigned by BMW of Turnersville to plaintiff, in return for payment in full for the amount due on the car.

Shortly after defendants took delivery of the car, they received a summons for driving with fictitious license plates, and the car was temporarily impounded. The car also did not have so-called "heavenly pinstripes" painted on it, a detailing feature that defendants allegedly had been promised by the dealership's sales manager. These negative experiences induced defendants to attempt to return the car to BMW of Turnersville. However, the dealership refused to take possession of it.

Defendants did not pay to plaintiff any of the installments due under the financing agreement. Consequently, plaintiff repossessed the car and had it sold at auction for $20,000, leaving a deficiency owed to plaintiff in excess of $13,000.

Plaintiff filed a complaint against defendants in the Special Civil Part, seeking a deficiency judgment under the financing agreement, plus interest and attorney's fees. Defendants, who are self-represented, answered the complaint, denying plaintiff's allegations. At the same time, defendants joined BMW of Turnersville as a third-party defendant, alleging breach of contract based upon the car's lack of pinstripes and the dealership's issuance of improper license plates.

Thereafter, BMW of Turnersville moved to have the third-party complaint dismissed and the case sent to binding arbitration. The motion was made returnable on September 22, 2008. BMW of Turnersville relied upon the original sales contract (denominated as a "Motor Vehicle Retail Order") between it and defendants, which contains a binding arbitration clause. Specifically, the clause stated:

The parties to this agreement agree to arbitrate any claim, dispute or controversy, including all statutory claims and any state or federal claims, that may arise out of or are related to the purchase or lease of the automobile identified in this Motor Vehicle Retail Order and the financing thereof, including the validity of this agreement. This Arbitration Agreement is made pursuant to a transaction involving interstate commerce and should be governed by the Federal Arbitration Act, 9 U.S.C. 1 [sic], and not by state law regarding arbitration. By agreeing to arbitration, the parties understand and agree that they are waiving their rights to maintain other available resolution processes, such as court action or administrative proceeding, to settle their disputes . . . . The parties also agree to waive any right to pursue any such claims including statutory, state or federal claims, as a class action, either in arbitration or through a court action. There are no limitations on the type of claims that must be arbitrated, except for new car lemon law claims, Magnusson-Moss Warranty Act claims, and small claims filed as a court action, unless such small claim is then removed, transferred or appealed to a different court . . . . The decision of the arbitrator shall be binding upon the parties. Any further relief sought by either party will be subject to the decision of the arbitrator.

[(Emphasis added).]

Defendants filed a timely response to the dealership's motion, objecting to the dismissal of their third-party complaint. They argued, in the alternative, that if the court decided to dismiss their third-party claims and refer them to arbitration, then the entire case, including the complaint filed by plaintiff, should be dismissed and sent to arbitration.

Plaintiff filed an opposing certification with the court, objecting to defendants' provisional request that the entire case be transferred to binding arbitration. Plaintiff noted that the Installment Contract contains no arbitration provision. Instead, plaintiff emphasized, the Installment Contract assures that the parties retain their "rights and remedies under the law."

Meanwhile, plaintiff filed its own motion, requesting leave to serve interrogatories upon defendants past the thirty-day time period allotted for discovery in this case. On September 19, 2008, plaintiff received back from the Special Civil Part a postcard stating that: "The motion filed on 09-11-2008 in case DC-009397-08 will be decided on 09-22-2008. Do not come to the courthouse because no oral argument has been requested. The courts [sic] decision will be sent to you." According to plaintiff's counsel, he called the motion judge's chambers on September 22, 2008, and was advised that the judge "had ruled in favor of the defendant[s]."

Other than the above-mentioned postcard, there is nothing in the appellate record that reflects the trial court scheduling or declining oral argument on either of the motions that were returnable on September 22, 2008. The record does reflect that, in the cover letter enclosing its motion, BMW of Turnersville stated that it "requests oral argument if timely opposition is filed."

On September 22, 2008, the motion judge called this case as part of his regular motion calendar. When only the pro se defendants stepped to the bar, the judge expressed surprise that no other party or its counsel was present. The judge suggested that perhaps counsel had been there earlier in the day and left, or that there might have been confusion as to whether oral argument had been requested. Even so, the judge proceeded to rule on the motions from the bench, and he signed an order dismissing the entire litigation and transferring it to binding arbitration.

In making his initial rulings on September 22, the judge was under the misapprehension that none of the parties objected to dismissing all claims and sending the case in its entirety to arbitration. For reasons that are unclear to us, it seems that plaintiff's opposing certification never got routed to the judge's attention before the motion was decided. However, the judge did state that he did not wish "to pull the rug out from underneath somebody" if the absence of the other parties from court or the apparent lack of filed opposition was caused by a mere oversight. The judge added that, "[i]f there's a party or a claim that's not governed by arbitration and they want their matter heard in litigation, as opposed to arbitration, I'll be glad to re-review this to determine whether or not the whole thing should be [sent] to arbitration."

At the same time, the motion judge denied plaintiff's motion to extend discovery, suggesting that the same information sought by plaintiff from the opposing parties in court-sanctioned discovery could be obtained through the arbitration process.

After learning of the initial outcome of the motions, plaintiff filed a motion for reconsideration. Plaintiff reiterated that it objected to the entire case, including its own affirmative claims under the Installment Contract, being dismissed and sent to arbitration. Oral argument on the reconsideration motion was conducted on October 27, 2008. This time all parties or their counsel were present.

At the end of the oral argument, the motion judge noted that he had three options: (1) denying the reconsideration motion and sending the entire case to arbitration, (2) granting reconsideration solely as to plaintiff's claims, thereby having plaintiff's complaint litigated in court while the third-party complaint would be disposed of in arbitration, or (3) granting reconsideration and reversing his previous ruling in all respects, thereby vacating the referral to arbitration and requiring the entire case to be litigated. The judge chose the first option.

The next day, the judge issued a written order denying reconsideration, thereby continuing to dismiss plaintiff's complaint and defendants' third-party claims, and sending the entire case to arbitration. The judge expressed his reasons for doing so in an oral opinion on the record. As part of his reasoning, the judge noted the strong public policy in this State in favor of arbitrating disputes in situations where such arbitration has been authorized. The judge added that the Installment Contract lacked a clear provision explicitly precluding arbitration. The judge further observed that plaintiff and the rest of the parties would not be prejudiced by going to arbitration, a process that he described as "very, very cost efficient." He did not see "anything inequitable or unfair in requiring the parties to proceed in arbitration."

Plaintiff then filed this appeal, essentially alleging that the trial court has inappropriately forced it to submit its claims to binding arbitration, in the absence of a contract provision requiring it to do so. Defendants oppose that argument, and renew their preference to have the entire case resolved in one forum. BMW of Turnersville, meanwhile, has chosen not to participate in the appeal, and simply indicates that it will abide whatever outcome this court directs.

Our Supreme Court has recognized that the Legislature and the judiciary in New Jersey, "have favored arbitration as a means of resolving disputes." Martindale v. Sandvik, 173 N.J. 76, 84 (2002) (citing N.J.S.A. 2A:24-1 to -11; Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 131 (2001)). However, we have also ruled that "[a]s a matter of both federal and state law, 'arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.'" Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J. Super. 138, 148-49 (App. Div. 2008) (quoting AT&T Techs., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S. Ct. 1415, 1418, 89 L. Ed. 2d 648, 655 (1986)).

Likewise, the Supreme Court has "recognized as settled law '[t]hat parties to an agreement may waive statutory remedies in favor of arbitration[.]'" Leodori v. Cigna Corp., 175 N.J. 293, 300 (2003) (quoting Garfinkel, supra, 168 N.J. at 131)). However, before enforcing such a claimed waiver, "the Court requires some concrete manifestation of [a party's] intent as reflected in the text of the agreement itself." Ibid.

The arbitration issues before us arise as matters of contract. Defendants argue that the Installment Contract is ambiguous as to whether disputes between the financing company and the borrowers could be referred to binding arbitration. They note that, by contrast, the sales contract does have an unambiguous arbitration clause. They assert that the interrelated nature of the two instruments justifies the court in applying the arbitration clause to any disputes arising under either one of them.

A provision of a contract is ambiguous if it is "'susceptible to at least two reasonable alternative interpretations.'" Nester v. O'Donnell, 301 N.J. Super. 198, 210 (App. Div. 1997) (quoting Kaufman v. Provident Life and Cas. Ins. Co., 828 F. Supp. 275, 283 (D.N.J. 1992), aff'd, 993 F.2d 877 (3d Cir. 1993)). See also Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006). Here, we agree with plaintiff that the Installment Contract is not "reasonably susceptible" to an interpretation allowing the court to divert to binding arbitration a lawsuit alleging a breach of that agreement.

The Installment Contract specifically states that "[i]f [defendants are] in default , [plaintiff] . . . may pursue any and all of its other rights and remedies available under the law." Nowhere in that contract is there any clause that binds either party to arbitrate a dispute between them.

Defendants seize upon language in the Installment Contract that makes the assignment of the contract from BMW of Turnersville to plaintiff "subject to the provisions of the Center Agreement between Seller and Assignee." Defendants maintain that the "Center Agreement" is actually the "Itemization of Amount Financed" clause in the center of the page of the Installment Contract. That clause sets forth many of the same pricing points for the used car as are recorded in the Retail Order.

The Installment Contract plainly states that the "Center Agreement" is between "Seller and Assignee." The Seller is identified in the contract as BMW of Turnersville. BMW Financial Services is specifically identified as "Assignee" in the very clause upon which defendants rely. Therefore, defendants are not a party to the "Center Agreement," and the cited language does not in any way change their relationship to plaintiff.

We are satisfied there is no ambiguity in the Installment Contract to justify the court's referral of plaintiff's affirmative claims against defendants to binding arbitration. Defendants confuse silence with ambiguity.

Our recent decision in Angrisani is illuminating in reviewing the appropriateness of the motion judge's ruling in this case. In Angrisani, an individual entered into two contracts with two different entities. Angrisani, supra, 402 N.J. Super. at 145. The first agreement was a stock purchase agreement between Angrisani and Financial Technology Ventures, L.P. ("FT Ventures"), and three other parties, including Nexxar, the corporation for which he was serving as President and CEO. Ibid. The stock purchase agreement made no mention of arbitration. Ibid.

The second agreement was an employment contract between Nexxar and Angrisani that established him as continuing president and CEO for Nexxar. FT Ventures was not a party to this agreement, although, after the stock purchase, it had representatives on Nexxar's board of directors. Unlike the stock purchase agreement, the employment contract in Angrisani contained a mandatory arbitration provision that bound both Nexxar and Angrisani.

After these agreements were signed, Angrisani discovered and then confronted FT Ventures representatives on the Nexxar board about what he perceived were illegal foreign trade practices by FT Ventures, improprieties that preceded and affected its purchase of Nexxar stock. Id. at 145-46. In response, the FT Ventures representatives on the Nexxar board had Angrisani suspended and then terminated as President and CEO of Nexxar. Id. at 146. Angrisani then brought an action against Nexxar for breach of the employment contract, and a separate action against FT Ventures for breach of the stock purchase agreement as well as tortious interference with his employment. Ibid.

The trial court in Angrisani granted motions by the respective defendants to dismiss both complaints without prejudice, and to compel the entire controversy to arbitration. Id. at 146-47. In overturning the trial court's decision to divert Angrisani's complaint against FT Ventures for breach of the stock purchase agreement to arbitration, Judge Skillman wrote:

regardless of the relationship between [Angrisani]'s claims and the employment agreement, we do not believe that agreement can be reasonably construed to impose an obligation upon [Angrisani] to arbitrate any claim against FT Ventures. On the same day [Angrisani] entered into the employment agreement with Nexxar, he also entered into the stock purchase agreement with FT Ventures. Thus [Angrisani]'s sole contractual relationship with FT Ventures was the one spelled out in the stock purchase agreement, and that agreement did not contain any provision for arbitration of disputes between the contracting parties. It seems clear, therefore, that [Angrisani] could not have forced FT Ventures to arbitrate any claim that FT Ventures may have asserted against him.

[Id. at 152 (emphasis added).]

Judge Skillman continued:

Similarly, we conclude that the employment agreement [Angrisani] entered into with Nexxar cannot be read to impose an obligation upon [him] to arbitrate any claim he might have against FT Ventures simply because that claim has some relationship to the employment agreement.

[Ibid. (emphasis added).]

The circumstances of this case substantially mirror the Angrisani scenario, and Judge Skillman's observations ring as true for the instant parties as it did for the Angrisani litigants. In this case, as in Angrisani, the contracts were both entered into on the same day and bind different pairings of parties. Here, as in Angrisani, only one of the two agreements in this case contained any mention of arbitration. Finally, as in Agrisani, the claims asserted here against the party that did not contractually agree to arbitration (i.e., plaintiff) are topically related to the claims against the party (i.e., BMW of Turnersville) whose contract does call for arbitration.

These key similarities are too extensive to ignore. They lead us to conclude, as in Angrisani, that the party that did not contract for binding arbitration plaintiff cannot be forced to surrender its right to litigate in court.

Consequently, we reverse the trial court's orders, insofar as they dismissed plaintiff's claims against defendants without prejudice and forced those claims to be included in defendant's binding arbitration with BMW of Turnersville. The litigation and the arbitration shall proceed, independently of one another. Lastly, we decline plaintiff's invitation to exercise original jurisdiction and adjudicate its monetary claims against defendants on appeal, without the benefit of testimony and a trial. Instead, the substantive issues should be decided on their merits in, respectively, the trial court and the arbitration.

 
Reversed and remanded to the trial court for the reinstatement of plaintiff's complaint, and for further proceedings consistent with this opinion.

Despite their similar names, BMW of Turnersville and BMW Financial Services NA, LLC ("BMW Financial Services") are two separate and distinct entities. BMW of Turnersville, named herein as a third-party defendant, is the dealer that sold defendants the used car that is the subject of this case. Plaintiff BMW Financial Services, on the other hand, is the parent corporation of BMW Bank of North America, d/b/a "BMW Financial Holdings." BMW Financial Holdings is the lender that financed defendants' purchase of the car on an installment basis, in return for a security interest. Although it is plaintiff's subsidiary, BMW Financial Holdings is not a party to the litigation.

Although the trial court's orders dismiss the parties' claims without prejudice, pending the arbitration, the orders are not interlocutory for purposes of appeal. See Wein v Morris, 194 N.J. 364, 380 (2008). Plaintiff has an appeal as of right, despite the without-prejudice nature of the dismissal. Ibid.

We note that no party has appealed the dismissal of defendants' claims against BMW of Turnersville and the referral of those discrete claims to arbitration.

(continued)

(continued)

16

A-1924-08T1

November 6, 2009