MERWYN FERNANDES, et al. v. RAMSEY NISSAN, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3085-04T23085-04T2

MERWYN FERNANDES and DOLLY

FERNANDES,

Plaintiffs-Appellants,

v.

RAMSEY NISSAN, RAMSEY CHRYSLER/

PLYMOUTH/JEEP, and CHASE MANHATTAN

AUTOMOTIVE FINANCE CORPORATION,

Defendants-Respondents.

_________________________________

 

Submitted November 14, 2005 - Decided

Before Judges Cuff, Lintner and Holston, Jr.

On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Bergen County, DC-13539-04.

Michael A. Mark, attorney for appellants.

Hartmann, Doherty & Rosa, attorneys for respondents Ramsey Nissan and Ramsey Chrysler/Plymouth/Jeep (Richard M. Rosa, on the brief).

Olshan Grundman Frome Rosenzweig & Wolosky, attorneys for respondent Chase Manhattan Automotive Finance Corporation (Jerome F. Gallagher, Jr., and Kerry A. Duffy, on the brief).

PER CURIAM

Plaintiffs, Merwyn and Dolly Fernandes, entered into a four-year lease of a 1999 Nissan Quest with defendant Ramsey Nissan (Ramsey) on September 27, 1999. Ramsey assigned the lease to Chase Manhattan Automotive Finance Company (Chase). Plaintiffs began to experience mechanical difficulties with the 1999 Nissan. According to plaintiffs, Ramsey agreed to take possession of the vehicle and hold it on its lot while plaintiffs continued to make the monthly lease payments and return it to Chase at the end of the lease period. In return, plaintiffs agreed to lease a new vehicle from Ramsey. Plaintiffs entered into the new lease on January 23, 2003, and left the Nissan with Ramsey. Claiming that plaintiffs abandoned the Nissan by leaving it with the dealer without paying for the liability insurance, Chase repossessed the vehicle, sold it at auction, and sought net deficiency fees of $4489.06.

Plaintiffs filed suit in Special Civil Part naming Ramsey and Chase as defendants, alleging that Ramsey breached its agreement by returning the 1999 Nissan early, thus subjecting them to early termination penalties of $4489.06. Plaintiffs also sought return of their security deposit, treble damages, attorney fees, and costs under the Consumer Fraud Act, N.J.S.A. 56:8-1 to 8-116. Defendants answered and discovery was initiated. Neither defendants' answer asserted binding arbitration or lack of subject matter jurisdiction as a separate defense. The matter was initially scheduled for trial on December 15, 2004. On December 9, 2004, plaintiffs moved to strike both defendants' answers for failure to respond to discovery. Defendants responded with cross-motions to strike plaintiffs' complaint, asserting that the court lacked subject matter jurisdiction under R. 4:6-7 because the lease agreement contained a binding arbitration provision. The judge granted defendants' motion and dismissed plaintiffs' complaint, finding that plaintiffs should have "gone to arbitration." He then denied plaintiffs' discovery motion as moot.

Plaintiffs appeal, asserting that the arbitration clause is unenforceable because it is ambiguous and does not contain a definitive waiver of their statutory right to a consumer fraud claim. Plaintiffs also assert that the arbitration clause does not mandate arbitration and thus the judge erred in dismissing their complaint and failing to rule on their discovery motion. Defendants counter, arguing that the judge correctly dismissed the case claiming that the arbitration clause was binding and that they essentially elected arbitration by moving to dismiss plaintiffs' complaint. We disagree with defendants' contentions and reverse.

The arbitration provision provided in pertinent part:

A "Dispute" means any controversy or claim . . . arising from or relating to this Lease. The term Dispute includes, but is not limited to, the negotiation or breach of this Lease, or the lease of the vehicle involving any Lessee, Co-Lessee, Co-Signer, Guarantor, Lessor, or any assignee, agent, employee, surety bonding company or insurer of any of these persons. The term Dispute also includes all tort claims arising from the transaction to which this Lease relates or arising from our enforcement of the Lease and any question regarding whether

a matter is subject to arbitration under this Agreement to Arbitrate Disputes . . . . If any Dispute arises, either you or we may choose to have the Dispute resolved by binding arbitration under the rules then in effect of the National Arbitration Forum . . . . The election to arbitrate may be made even if an action has been filed in court, so long as no judgment has been rendered . . . . If either party chooses to have a Dispute resolved by binding arbitration, you and we understand and agree that: both you and us are giving up the rights to seek remedies in court, including the right to a jury trial . . . . (emphasis added)

Rule 5 established by The National Arbitration Forum (NAF) provides the following for initiating arbitration:

RULE 5. Summary of Procedures.

A. Claim. A Party begins an arbitration by filing with the Forum a properly completed copy of the Initial Claim described in Rule 12, accompanied by the appropriate filing fee which appears in the Fee Schedule. The Forum reviews the Claim, opens a file, assigns a file number, and notifies the Claimant, who then serves the Respondent in accord with Rule 6.

We need not address the substantive merits raised by plaintiffs on appeal respecting the enforceability of the arbitration provision. We do note, however, that the definition of "Dispute" is broad and does not exclude statutory claims such as those arising from the Consumer Fraud Act.

By its express terms, the arbitration provision neither compels arbitration nor provides that a party waive all rights to prosecute a claim arising out of a lease in a court of law. Rather, the provision gives either party the option to elect or choose to resolve the dispute in arbitration under the rules of NAF. Thus, so long as neither party has initiated a claim by filing with NAF, the court retains jurisdiction.

Here, neither defendant initiated arbitration proceedings with NAF in accordance with its rules. The judge incorrectly concluded that the Special Civil Part did not have subject matter jurisdiction and should have ruled on plaintiffs' motion to strike defendants' answers for failure to participate in discovery. We will not speculate on this record whether defendants would have either attempted or, for that matter, been permitted, under the circumstances, to file for arbitration given the impending trial date.

 
Reversed and remanded for further proceedings. We do not retain jurisdiction.

That date was adjourned to January 27, 2005.

The rule quoted was obtained from NAF's web site at www.arb-forum.com.

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A-3085-04T2

November 28, 2005