BRIAN GRIFFOUL v. NRG RESIDENTIAL SOLAR SOLUTIONS
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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5535-16T1
BRIAN GRIFFOUL and ANANIS
GRIFFOUL,
Plaintiffs-Respondents,
v.
NRG RESIDENTIAL SOLAR SOLUTIONS, LLC
d/b/a NRG HOME SOLAR and NRG ENERGY, INC.,
Defendants-Appellants.
_______________________________________________
Argued April 24, 2018 – Decided May 4, 2018
Before Judges Yannotti and Mawla.
On appeal from Superior Court of New Jersey,
Law Division, Bergen County, Docket No.
L-1503-17.
Thomas J. O'Leary argued the cause for
appellants (Connell Foley, LLP, attorneys;
Thomas J. O'Leary, of counsel and on the
briefs; Patricia A. Lee, on the briefs).
Arthur M. Owens argued the cause for
respondents (Lum, Drasco & Positan, LLC,
attorneys; Arthur M. Owens, on the brief).
PER CURIAM
Defendants NRG Residential Solar Solutions d/b/a NRG Home
Solar and NRG Energy, Inc. appeal from a July 14, 2017 order,
which denied their motion to compel arbitration. We reverse.
Plaintiffs, residents of Elmwood Park and class
representatives Brian and Ananis Griffoul, and NRG Residential
entered into solar power system leases. The lease agreements
required NRG Residential to install solar systems on plaintiffs'
respective properties, which would provide electricity to their
homes, and also be interconnected with the utility's electrical
transmission grid. In consideration, plaintiffs each made a down
payment of $51.55 followed by 239 monthly lease payments for a
total of $16,453.96.
Plaintiffs filed a class action complaint against defendants
alleging violations of the New Jersey Consumer Fraud Act (CFA),
N.J.S.A. 56:8-1 to -20, and the Truth-in-Consumer Contract
Warranty and Notice Act (TCCWNA),
N.J.S.A. 56:12-14 to -18.
Plaintiffs allege the lease agreement contained six provisions
that violated consumer rights: "¶ 4.2 Access Rights;" "¶ 10.2
Remedies;" "¶ 11.3 Indemnity;" "¶ 11.5 No Consequential Damages;"
"¶ 11.4 Limitation of Liability;" and "¶ 12.4 Statute of
Limitations." They also alleged "[d]efendants . . . made specific
and direct representations . . . that customers . . . could expect
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decreased monthly energy bills and would obtain certain benefits
by way of their receipt of solar renewable energy credits."
Defendants moved to compel arbitration pursuant to a
provision in the parties' lease agreement, which stated:
Unless prohibited by State law, any dispute,
disagreement or claim between you and NRG RSS
arising out of or in connection with this
Lease, or the Solar System, which cannot be
amicably resolved by the parties shall be
submitted to final and binding arbitration in
a location that is a convenient distance from
the Property for you, in accordance with
Commercial Arbitration Rules of the American
Arbitration Association including the
Supplementary Procedures for Consumer-Related
Disputes, if applicable (the "AAA Commercial
Rules"), except as provided in Section 12.7.
This agreement to arbitrate is governed by the
Federal Arbitration Act. While a dispute,
disagreement or claim is being resolved under
this Section . . . both parties shall continue
to perform their obligations under this Lease.
The arbitration shall be conducted by one
arbitrator appointed in accordance with the
AAA Commercial Rules. YOU AND NRG RSS AGREE
THAT BY ENTERING INTO THIS LEASE, YOU AND WE
ARE WAIVING THE RIGHT TO A JURY TRIAL. IN
ADDITION, EACH PARTY MAY BRING CLAIMS AGAINST
THE OTHER PARTY ONLY IN ITS INDIVIDUAL
CAPACITY AND NOT AS A PLAINTIFF OR CLASS
MEMBER IN ANY PURPORTED CLASS OR
REPRESENTATIVE PROCEEDING. OTHER RIGHTS THAT
YOU OR NRG RSS WOULD HAVE IN COURT MAY ALSO
NOT BE AVAILABLE TO YOU.
The agreement also provided:
Unless prohibited by State law, the parties
agree that the award of the arbitrator (the
"ARBITRARION AWARD"): (i) shall be conclusive,
final, and binding upon all parties; and (ii)
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shall be the sole and exclusive remedy between
the parties regarding any and all claims and
counterclaims presented to the arbitrator.
The judgment on the Arbitration Award may be
entered in any appropriate court as necessary
to pursue judgment.
NRG Energy also moved to dismiss count one of the complaint
without prejudice for failure to plead a CFA claim with
particularity as required by Rule 4:5-8(a). NRG Energy moved to
dismiss count two of the complaint with prejudice arguing a TCCWNA
claim could not be asserted against it because it was not a party
to the lease agreement.
The motion judge denied defendants' motions. The judge found
the arbitration clause in the lease agreement invalid, and denied
the motion to compel arbitration. The judge ruled the arbitration
clause failed to state plaintiff's statutory claims were subject
to arbitration. The judge found the class action waiver unclear
and contradicted the arbitration clause. The judge also denied
NRG Energy's motion to dismiss, and its subsequent motion for
reconsideration of the denial of the motion to dismiss. This
appeal followed.
I.
We begin by reciting our standard of review. The validity
of an arbitration agreement is a question of law; therefore, we
review the trial court's order denying NRG Residential's motion
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to compel arbitration de novo. Barr v. Bishop Rosen & Co., Inc.,
442 N.J. Super. 599, 605 (App. Div. 2015) (citing Hirsch v. Amper
Fin. Servs., LLC,
215 N.J. 174, 186 (2013)); see Atalese v. U.S.
Legal Servs. Grp., L.P.,
219 N.J. 430, 445-46 (2014) ("Our review
of a contract, generally, is de novo, and therefore we owe no
special deference to the trial court's . . . interpretation. Our
approach in construing an arbitration provision of a contract is
governed by the same de novo standard of review." (citations
omitted)).
Defendants argue the Federal Arbitration Act (FAA), 9 U.S.C.
§§ 1-14, preempted the motion judge's invalidation of the
arbitration clause and required the arbitration agreement to be
enforced according to its terms. Defendants argue there is no
requirement for an agreement to reference a specific statute in
order to encompass statutory claims. Defendants argue the
arbitration agreement is enforceable pursuant to Atalese and
Martindale v. Sandvik, Inc.,
173 N.J. 76 (2002). They assert both
cases required the court to consider the parties' intent in
interpreting an arbitration agreement, which the motion judge
failed to do here. Defendants also argue NRG Energy should have
been dismissed because it is not a party to the contract, and the
motion judge should have stayed the proceedings pending appeal.
We address these arguments in turn.
5 A-5535-16T1
II.
The parties dispute whether the FAA applies. Although
defendants contend it does, plaintiffs argue the New Jersey
Arbitration Act (NJAA),
N.J.S.A. 2A:23B-1 to -32, controls.
An arbitration agreement reflects the parties' intention to
adhere to an orderly process of alternative dispute resolution.
Ortho Pharm. Corp. v. Amgen, Inc.,
882 F.2d 806, 812 (3d Cir.
1989). The FAA is implicated when
[a] written provision in . . . a contract
evidencing a transaction involving commerce to
settle by arbitration a controversy thereafter
arising out of such contract or transaction
. . . shall be valid, irrevocable, and
enforceable, save upon such grounds as exist
at law or in equity for the revocation of any
contract.
[9 U.S.C. § 2.]
In order for the FAA to apply, the contract containing the
arbitration provision must "evidence[] a transaction involving
commerce . . . ." Ibid.; see also Goodwin v. Elkins & Co.,
730 F.2d 99, 108-09 (3d Cir. 1984); Gras v. Assocs. First Capital
Corp.,
346 N.J. Super. 42, 47 (App. Div. 2001). The United States
Supreme Court has held the FAA's definition of contracts "involving
commerce" should be construed broadly to "extend[] the Act's reach
to the limits of the Congress' Commerce Clause power[.]" Allied-
Bruce Terminix Cos. v. Dobson,
513 U.S. 265, 268 (1995); see also
6 A-5535-16T1
Allen v. World Inspection Network Int'l, Inc.,
389 N.J. Super.
115, 126 (App. Div. 2006).
A nexus to interstate commerce is found when citizens of
different states engage in the performance of contractual
obligations in one of those states because such a contract
necessitates interstate travel of both personnel and payments.
See Roadway Package Sys., Inc. v. Kayser,
257 F.3d 287, 292 (3d
Cir. 2001); see also Crawford v. W. Jersey Health Sys.,
847 F. Supp. 1232, 1240 (D.N.J. 1994).
Here, plaintiffs are New Jersey residents and NRG Residential
is a Delaware limited liability company, with headquarters located
in Houston, Texas. The lease agreement required plaintiffs to:
(1) mail their down payments to NRG Residential's Houston address;
(2) set up monthly payments by submitting a voided check to NRG
Residential's accounts in Houston; (3) direct their claims to the
Houston office; and (4) maintain a persistent internet connection
through which NRG Residential could monitor the solar system and
provide plaintiffs with a performance guarantee. Furthermore, the
agreement provided "the [s]olar system [would be] interconnected
with the utility's electrical transmission grid."
In New York v. FERC, the United States Supreme Court stated:
[U]nlike the local power networks of the past,
electricity is now delivered over three major
networks, or "grids" in the continental United
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States. Two of these grids - the "Eastern
Interconnect" and the "Western Interconnect"
- are connected to each other. It is only in
Hawaii and Alaska and on the "Texas
Interconnect" - which covers most of that
State - that electricity is distributed
entirely within a single State. In the rest
of the country, any electricity that enters
the grid immediately becomes a part of a vast
pool of energy that is constantly moving in
interstate commerce.
[
535 U.S. 1, 17 (2002) (emphasis added).]
Here, the lease agreement clearly manifested a form of
interstate commerce. Therefore, it was governed by the FAA,
notwithstanding the filing of the action in state court. Alfano
v. BDO Seidman, LLP,
393 N.J. Super. 560, 574 (App. Div. 2007);
see also Hojnowski v. Vans Skate Park,
187 N.J. 323, 341-42 (2006);
Liberty Mut. Ins. Co. v. Open MRI of Morris & Essex, L.P.,
356 N.J. Super. 567, 581-82 (Law Div. 2002).
Regardless, we need not further address whether the FAA
preempts the NJAA because the policies animating each statute
share the same aims. Indeed, the Atalese Court stated "[t]he
[FAA] and the nearly identical [NJAA] enunciate federal and state
policies favoring arbitration" as a mechanism of resolving
disputes that otherwise would be litigated. Atalese,
219 N.J. at
440 (citations omitted).
Arbitration is fundamentally a matter of contract. NAACP of
Camden Cty. E. v. Foulke Mgmt. Corp.,
421 N.J. Super. 404, 424
8 A-5535-16T1
(App. Div. 2011). However, "[a]rbitration's favored status does
not mean that every arbitration clause, however phrased, will be
enforceable." Atalese,
219 N.J. at 441. "An agreement to
arbitrate 'must be the product of mutual assent, as determined
under customary principles of contract law.'" Barr,
442 N.J.
Super. at 605-06 (quoting Atalese,
219 N.J. at 442).
"Mutual assent requires that the parties understand the terms
of their agreement," and where the "agreement includes a waiver
of a party's right to pursue a case in a judicial forum, 'clarity
is required.'" Id. at 606 (quoting Moore v. Woman to Woman
Obstetrics & Gynecology, L.L.C.,
416 N.J. Super. 30, 37 (App. Div.
2010)). "[T]he waiver 'must be clearly and unmistakably
established,' and 'should clearly state its purpose,' . . . [a]nd
the parties must have full knowledge of the legal rights they
intend to surrender." Ibid. (citations omitted).
The FAA permits states to invalidate arbitration clauses
"upon such grounds as exist at law or in equity for the revocation
of any contract." Atalese,
219 N.J. at 441 (quoting 9 U.S.C. §
2). An arbitration agreement that fails to clearly and
unambiguously signal to parties that they are surrendering their
right to pursue a judicial remedy renders such an agreement
unenforceable. Ibid. "An arbitration provision - like any
comparable contractual provision that provides for the
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surrendering of a constitutional or statutory right - must be
sufficiently clear to a reasonable consumer." Id. at 436.
Here, the motion judge concluded "[l]ike the arbitration
provision in Atalese, the [l]ease [a]greement lack[ed] an
explanation that [plaintiffs were waiving their] right to seek
relief in court for breach of [their] statutory rights,
specifically violations of the CFA and TCCWNA." The judge
explained the "[l]ease [a]greement does not encompass
[plaintiffs'] statutory consumer claims under the CFA and TCCWNA,
as the [l]ease [a]greement fails to mention that [plaintiffs were]
agreeing to submit [their] statutory causes of action to binding
arbitration."
We disagree the arbitration clause here can be likened to the
one in Atalese. The arbitration clause in Atalese read as follows:
Arbitration: In the event of any claim or
dispute between Client and the USLSG related
to this Agreement or related to any
performance of any services related to this
Agreement, the claim or dispute shall be
submitted to binding arbitration upon the
request of either party upon the service of
that request on the other party. The parties
shall agree on a single arbitrator to resolve
the dispute. The matter may be arbitrated
either by the Judicial Arbitration Mediation
Service or American Arbitration Association,
as mutually agreed upon by the parties or
selected by the party filing the claim. The
arbitration shall be conducted in either the
county in which Client resides, or the closest
metropolitan county. Any decision of the
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arbitrator shall be final and may be entered
into any judgment in any court of competent
jurisdiction. The conduct of the arbitration
shall be subject to the then current rules of
the arbitration service. The costs of
arbitration, excluding legal fees, will be
split equally or be born[e] by the losing
party, as determined by the arbitrator. The
parties shall bear their own legal fees.
[
219 N.J. at 437.]
In Atalese the Court held:
Consumers can choose to pursue arbitration and
waive their right to sue in court, but should
know that they are making that choice. An
arbitration clause, like any contractual
clause providing for the waiver of a
constitutional or statutory right, must state
its purpose clearly and unambiguously. In
choosing arbitration, consumers must have a
basic understanding that they are giving up
their right to seek relief in a judicial
forum.
. . . .
The absence of any language in the arbitration
provision that plaintiff was waiving her
statutory right to seek relief in a court of
law renders the provision unenforceable.
[Id. at 435-36.]
Here, the arbitration clause announced "any dispute,
disagreement or claim between you and NRG [Residential] arising
out of or in connection with this [l]ease or [s]olar system" would
be subject to arbitration. The agreement also clearly stated the
parties were "WAIVING THE RIGHT TO A JURY TRIAL." The lease
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agreement further provided arbitration would be the "sole and
exclusive remedy between the parties regarding any and all claims
and counterclaims presented to the arbitrator." We are satisfied
this wording clearly and unambiguously signaled plaintiffs could
not pursue their claims in court.
Indeed, the arbitration clause language here is similar to
language the Supreme Court upheld in Martindale v. Sandvik, Inc.,
173 N.J. 76 (2002). In Martindale a plaintiff challenged
arbitration language contained in her employment agreement, which
stated:
AS A CONDITION OF MY EMPLOYMENT, I AGREE TO
WAIVE MY RIGHT TO A JURY TRIAL IN ANY ACTION
OR PROCEEDING RELATED TO MY EMPLOYMENT WITH
SANDVIK.
I UNDERSTAND THAT I AM WAIVING MY RIGHT TO A
JURY TRIAL VOLUNTARILY AND KNOWINGLY, AND FREE
FROM DURESS OR COERCION.
I UNDERSTAND THAT I HAVE A RIGHT TO CONSULT
WITH A PERSON OF MY CHOOSING, INCLUDING AN
ATTORNEY, BEFORE SIGNING THIS DOCUMENT.
I AGREE THAT ALL DISPUTES RELATING TO MY
EMPLOYMENT WITH SANDVIK OR TERMINATION THEREOF
SHALL BE DECIDED BY AN ARBITRATOR THROUGH THE
LABOR RELATIONS SECTION OF THE AMERICAN
ARBITRATION ASSOCIATION.
[Id. at 81-82.]
The Martindale court concluded:
In the circumstances of this case, the
language in the arbitration agreement not only
12 A-5535-16T1
was clear and unambiguous, it was also
sufficiently broad to encompass reasonably
plaintiff's statutory causes of action. The
arbitration agreement provides that plaintiff
agreed to waive her right to a jury trial "in
any action or proceeding relating to my
employment with Sandvik" and that "all
disputes relating to my employment with
Sandvik or termination thereof" shall be
subject to arbitration. . . . [T]he
arbitration provision here does not contain
any limiting references. Its wording provided
plaintiff with sufficient notice at the time
she signed the agreement that all claims
relating to employment with and termination
from Sandvik would be resolved through
arbitration. It also addressed specifically
a waiver of the right to a jury trial,
augmenting the notice to all parties to the
agreement that claims involving jury trials
would be resolved instead through
arbitration. . . . Compelling arbitration
under these circumstances is fair and
equitable.
[Id. at 96.]
The arbitration clause here bears the same characteristics
as the agreement in Martindale. It clearly and unambiguously
waived plaintiffs' rights to a jury trial. It clearly and
unambiguously required arbitration of all disputes between the
parties. As in Martindale, we hold compelling arbitration under
these circumstances is fair and equitable.
NRG residential also challenges the motion judge's finding
the class action waiver of the arbitration clause of the lease
agreement was invalid. NRG residential argues the class action
13 A-5535-16T1
waiver is clear, and the FAA mandates plaintiffs to arbitrate
their claims on an individual basis. We agree.
The motion judge found the class action waiver provision in
the lease agreement was "invalid due to its lack of consistency
and clarity, which is required in these provisions." The judge
also found the class action waiver contradictory to the arbitration
provision because it allowed plaintiffs to bring actions
individually. The judge also explained:
given that 'purported' is used to modify the
allegedly waived right to a class action, it
is unclear whether [plaintiffs are] being
instructed that class action claims can only
be brought through the courts, or that the
preclusive effect of this provision only
applies to reputed class claims and not
meritorious class claims.
As we noted, the arbitration clause of the lease agreement
clearly and unambiguously waived plaintiff's right to a proceeding
in court. Having done so, the clause then defined the capacity
in which claims could be brought in arbitration and clearly limited
those claims to individual claims, thereby barring a class action
in arbitration.
Furthermore, the arbitration clause's usage of the word
"purported" preceding the class action waiver did not signal an
invitation to assert only meritorious class action claims in
arbitration. Indeed, "[t]he 'purport' of an instrument means the
14 A-5535-16T1
substance of it as it appears on the face of the instrument[.]"
What is PURPORT?, Black's Law Dictionary, https://thelawdictiona
ry.org/purport/ (last visited Apr. 6, 2018). Therefore, that the
arbitration clause identified "purported" class actions as having
been waived was not a qualitative assessment of the merits of the
class action claim, but rather language crafted broadly enough to
exclude from arbitration those claims that appeared to be class
action based.
For these reasons, we uphold the arbitration clause
provisions of the lease agreement. The motion judge's order
denying the motion to compel arbitration is reversed.
III.
Finally, we decline to address NRG Energy's argument relating
to the denial of its motion to dismiss it as a party from the
case. We also do not address defendants' request for a stay.
Pursuant to Rule 2:2-3(a)(1), an appeal as of right may be
taken only from a final order. A final order must "dispose of all
claims against all parties." S.N. Golden Estates, Inc. v. Cont'l
Cas. Co.,
317 N.J. Super. 82, 87 (App. Div. 1998). Rule 2:2-
3(a)(3) treats limited categories of orders, which do not dispose
of all claims against all parties as final, including orders
denying arbitration. Ibid. However,
15 A-5535-16T1
[a]lthough the Rule [2:2-3(a)(3)] permits an
appeal as of right of "any order either
compelling . . . or denying arbitration," it
does not follow that other aspects of the
order unrelated to the arbitrability
determination, or other interlocutory orders
entered in the action, are also appealable as
of right. To the contrary, even when an
interlocutory order is appealable as of right
or is before [this court] by leave, some other
interlocutory order in the case does not
become appealable as of right and is
reviewable only in the exercise of [this
court's] sole discretion.
[Barr,
442 N.J. Super. at 605.]
Accordingly, the only issue before us is whether plaintiffs
were required to arbitrate their claims against defendant. NRG
Energy's motion to dismiss is not reviewable as of right in this
appeal and should be addressed in arbitration.
We also do not address defendants' request for a stay. The
record lacks evidence defendants sought a stay from the motion
judge. Rule 2:9-5(b) mandates the stay application first be made
to the trial court before such relief is sought from us.
Furthermore, "[w]e consider an issue moot when 'the decision sought
in a matter, when rendered, can have no practical effect on the
existing controversy.'" State v. Davila,
443 N.J. Super. 577, 584
(App. Div. 2016) (quoting Greenfield v. N.J. Dep't of Corr.,
382 N.J. Super. 254, 258 (App. Div. 2006)). As the claim will now be
16 A-5535-16T1
handled through arbitration, defendant's request for a stay is
moot.
Reversed.
17 A-5535-16T1
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