A state appeals court gave its blessing Monday to a commercial contract’s two-stage alternative dispute resolution process designed to keep claims out of court — even those under the Consumer Fraud Act.
Reversing a trial judge who refused to dismiss the suit, Morgan v. Parra, A-1231-12, the Appellate Division enforced a provision that contemplated the parties would try mediation and, if that failed, go to mandatory arbitration.
The contract "makes plain that mediation and arbitration were but two parts of a single ADR process," the judges wrote.
The suit was brought by Carolyne Morgan, the former owner of a dressage horse, against Cesar Parra, a former Olympic equestrian she had hired to sell it. Morgan alleged that Parra, the owner of a Whitehouse Station stable, sold the horse for 185,000 euros to Mathias Krieg, of Germany, but told her that he sold the horse to Stephanie Trappe, also of Germany, for 100,000 euros. The suit alleged consumer and common-law fraud and breach of contract.
The contract between Morgan and Parra spelled out that the parties "agree and consent to engage in mediation in a good-faith effort to resolve the dispute amicably before either party resorts to court action." Further, "In the event that the parties are unable to resolve said dispute through mediation, then, in that event, the parties agree to submit the dispute to binding arbitration."
Parra moved to dismiss the suit and proceed with mediation and arbitration, while Morgan said the ADR clause did not apply because it did not extend to consumer fraud claims. She also claimed fraud in the inception of the contract.
Hunterdon County Superior Court Judge Peter Buchsbaum ordered the case to go through mediation but, after that was unsuccessful, refused to order arbitration because he was "not convinced that the contract language is unambiguous." He said the reference to "court action" after mediation was misleading and did not clearly mandate arbitration.
Appellate Division Judges Marie Simonelli and Allison Accurso could not conclude that the language was ambiguous. "Because a subsidiary provision of a contract should be interpreted so as not to conflict with its dominant purpose … we cannot read the deferral of court action as limited only to the first stage of what the parties clearly intended to be an integrated two-stage process ending in arbitration," they said.
They added that Morgan is "free to pursue in arbitration a claim for all statutory remedies available to her under the Consumer Fraud Act."
Parra’s lawyer, Samuel Feldman of Roseland’s Orloff, Lowenbach, Stifelman & Siegel, says "the ruling is clear that mediation and arbitration is the way to go."
Morgan’s lawyer, Anthony Seijas, of Weber Gallagher Simpson Stapleton Fires & Newby in Warren, did not return a reporter’s call.