CLAREMONT CONSTRUCTION GROUP, INC v. KEYSTONE MOUNTAIN LAKES REGIONAL COUNCIL OF CARPENTERS

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SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5651-18T3

CLAREMONT CONSTRUCTION
GROUP, INC.,

Plaintiff-Appellant,

KEYSTONE MOUNTAIN LAKES
REGIONAL COUNCIL OF
CARPENTERS, f/k/a NORTHEAST
REGIONAL COUNCIL OF
CARPENTERS and THE NORTHEAST
CARPENTERS FUNDS,

Defendants-Respondents.
_________________________________

Submitted January 22, 2020 – Decided February 18, 2020

Before Judges Yannotti and Firko.

On appeal from the Superior Court of New Jersey, Law
Division, Somerset County, Docket No. L-0871-19.

Hedinger & Lawless, LLC, attorneys for appellant
(Robert T. Lawless, on the briefs).

Kroll Heineman Carton LLC, attorneys for respondents
(Bradley Mark Parsons, of counsel and on the brief).
PER CURIAM

Plaintiff Claremont Construction Group, Inc. (Claremont) appeals from an

order entered by the Law Division on August 19, 2019 compelling it to

participate in binding arbitration. We affirm the order insofar as it compels

binding arbitration, however, we reverse in part and remand to the trial court for

entry of an amended order dismissing the complaint without prejudice.

Claremont was the general contractor for a project in Jersey City. The

parties entered into a Project Labor Agreement (PLA) in which they agreed that

Claremont and its subcontractors would employ union workers. The PLA

incorporated the terms of the Collective Bargaining Agreements (CBA) of the

subcontractors and the union, defendant Keystone Mountain Lakes Regional

Council of Carpenters (Keystone). 1

The PLA further provided that the subcontractors would be required to

pay certain fringe benefits to the unions for the workers. The PLA stated that if

any subcontractor failed to make a required contribution, Claremont would

withhold monies due to the subcontractor and pay the unions the amounts

withheld.

1
We refer to defendants, unions, and the funds collectively as Keystone.
A-5651-18T3
2
Additionally, the PLA provided a three-Step grievance procedure

covering "[a]ny question, dispute or claim arising out of, or involving the

interpretation or application of [the PLA] . . . ." Further, the PLA provided that

all grievances "shall be resolved pursuant to the exclusive procedure" outlined

therein, culminating in binding arbitration before the designated arbitrator.

Article nine of the PLA sets forth the procedure for grievances and

arbitration:

If the grievance shall have been submitted but not
resolved in Step [two], any of the participating Step
[two] entities may, within [twenty-one] calendar days
after the initial Step [two] meeting, submit the
grievance in writing (copies to other participants) to J.J.
Pierson, Jr., Esq. who shall act as the Arbitrator under
this procedure. The Labor Arbitration Rules of the
American Arbitration Association (AAA) shall govern
the conduct of the arbitration hearing, at which all Step
[two] participants shall be parties. The decision of the
Arbitrator shall be final and binding on the involved
Contractor, Local Union and employees and the fees
and expenses of such arbitrations shall be borne equally
by the involved Contractor and Local Union.

The general contractor has the option to "participate in full in all

proceedings at these Steps, including Step [three] arbitration." The PLA also

provides that if the general contractor participates in the grievance, it "shall be

part[y]" to any following Step three arbitration. (Emphasis added). The PLA

states:

A-5651-18T3
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Should any Contractor or Subcontractor or the General
Contractor become delinquent in the payment of fringe
benefits as required by this agreement, it is agreed that
General Contractor and/or Owner will be notified in
writing by authorized representatives of the involved
union via certified mail of the specific documented
details of such delinquencies. Upon receipt of such
certified mail notice, if the delinquency has not been
paid, General Contractor and/or Owner agrees to
withhold from outstanding monies due an alleged
delinquent Contractor/Subcontract/General Contractor
the amount claimed, or less if the amount due is less
than the amount claimed by the union. The amount
withheld will be paid by the General Contractor and/or
Owner within fourteen . . . days after receipt of an
arbitration award or order of a court of competent
jurisdiction by the union, if not paid prior to said date
by the delinquent Contractor/Subcontractor/General
Contractor. With respect to the amounts owed by
Contractors or Subcontractors pursuant to the relevant
union agreements, the withholding of monies owed to
Contractors as provided in this paragraph shall be the
General Contractor’s sole responsibility.

Sky High Management, LLC (Sky High) was one of Claremont's

subcontractors. Between September 2017 and August 2018, Sky High became

delinquent in its payments of fringe benefits for its workers, and Keystone

notified Claremont. In response, Claremont withheld approximately $440,000

in monies due to Sky High's malfeasance and paid these monies over to

Keystone.

A-5651-18T3
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In August 2018, Sky High owed an additional $180,250.53 for the

workers' fringe benefits. Claremont was notified of Sky High's delinquencies

on August 24, 2018 and terminated Sky High's subcontract. The August 24,

2018 notice triggered Claremont's obligation to withhold outstanding monies

owed to Sky High as set forth in article eleven of the PLA. Citing a provision

of the contract, Claremont asserted that no additional monies were due to Sky

High. Keystone's communications with Sky High and Claremont satisfied Step

one of the grievance procedure.

In December 2018, following an unsuccessful resolution of the matter,

Keystone initiated a grievance proceeding with Sky High for the fringe benefits

due under the contract. Claremont participated in the Step two meeting and

asserted it had no obligation to pay Keystone because it had terminated Sky

High's contract and Sky High was not entitled to any additional payments under

the contract.

On June 11, 2019, Keystone demanded arbitration under Step three of the

PLA's grievance resolution process, which prompted Claremont to file this

lawsuit and to enjoin the arbitration process. After hearing oral argument on

August 19, 2019, the trial court entered an order dismissing Claremont's

complaint with prejudice and compelling the parties to proceed to binding

A-5651-18T3
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arbitration. On the record, the trial court reasoned that "the way that the contract

is written, the [c]ourt [must] favor the fact that the . . . binding arbitration is

really what has occurred here by use of the [S]tep two grievance procedure by

Claremont in reference to this matter."

On appeal, Claremont challenges the order compelling arbitration.

Claremont argues that the PLA does not obligate it to participate in binding

arbitration and there is no language in the PLA supporting the trial court's

conclusion. We are not persuaded by Claremont's arguments.

II.

We use a de novo standard of review when determining the enforceability

of arbitration agreements. Goffe v. Foulke Mgmt. Corp., 238 N.J. 191, 207

(2019) (citing Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013)).

The validity of an arbitration agreement is a question of law, and we conduct a

plenary review of such legal questions. Atalese v. U.S. Legal Servs. Grp., L.P.,

219 N.J. 430, 446 (2014) (citing Hirsch, 215 N.J. at 186); Barr v. Bishop Rosen

& Co., 442 N.J. Super. 599, 605 (App. Div. 2015) (citations omitted).

It is also well-established that this State has a strong public policy

"favoring arbitration as a means of dispute resolution and requiring a liberal

construction of contracts in favor of arbitration." Alamo Rent A Car, Inc. v.

A-5651-18T3
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Galarza, 306 N.J. Super. 384, 389 (App. Div. 1997) (citing Marchak v. Claridge

Commons, Inc., 134 N.J. 275, 281 (1993)). However, the scope of arbitration is

governed by the agreement of the parties. Young v. Prudential Ins. Co. of Am.,

Inc., 297 N.J. Super. 605, 617 (App. Div. 1997); Singer v. Commodities Corp.

(U.S.A.), 292 N.J. Super. 391, 402 (App. Div. 1996) (quoting Cohen v. Allstate

Ins., 231 N.J. Super. 97, 101 (App. Div. 1989)) ("[T]he scope of arbitration [is]

dependent solely upon the parties' agreement.").

Courts should review whether the arbitration clause explicitly states its

purpose "to assure that the parties know that in electing arbitration as the

exclusive remedy, they are waiving their time-honored right to sue." Marchak,

134 N.J. at 282. Thus, "only those issues may be arbitrated which the parties

have agreed [to arbitrate]." Singer, 292 N.J. Super. at 403 (quoting Grover v.

Universal Underwriters Ins., 80 N.J. 221, 229 (1979)).

Here, the CBA and PLA were negotiated and agreed to by Claremont. The

PLA provides that the general contractor may participate in all grievances and

Claremont voluntarily did so. In addition, the PLA states that any of the entities

who participate in the Step two process qualify to submit the dispute to binding

arbitration, to be conducted in accordance with the "Labor Arbitration Rules of

the [AAA]."

A-5651-18T3
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Saliently, under Article nine of the PLA, Claremont's decision to

participate in Step two of the process subjects Claremont to arbitration with the

AAA. In our view, the trial court correctly found that once Claremont chose to

participate in Step two, Claremont committed to arbitrate at Step three. In

rendering its decision, the trial court placed the issue in the proper context—that

arbitration has long been a favored method of dispute resolution particularly as

it relates to labor disputes. Cty. Coll. of Morris Staff Ass'n v. Cty. Coll. of

Morris, 100 N.J. 383 (1985).

Applying these principles, we reject Claremont's argument that since it

did not initiate the Step two meeting it cannot be compelled to arbitrate. It does

not matter whether Claremont or Keystone initiated that process. Since

Claremont participated in the Step two meeting and Keystone properly sought

arbitration of their dispute pursuant to the express terms of the PLA, the trial

court correctly compelled arbitration.

We conclude that Claremont's remaining arguments—to the extent we

have not addressed them—lack sufficient merit to warrant any further discussion

in a written opinion. R. 2:11-3(e)(1)(E).

While the trial court correctly ordered the parties to arbitrate their dispute,

the court erred by dismissing the complaint with prejudice. Since there was no

A-5651-18T3
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adjudication on the merits of the complaint, the trial court improperly exercised

its authority under Rule 4:37-1(b). We therefore remand to the trial court, with

directions to enter an amended order, dismissing the complaint without

prejudice.

Affirmed in part, reversed and remanded in part. We do not retain

jurisdiction.

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