                                NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.




                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0279-19T1

TANSUKH SURATWALA,
NEHA SURATWALA, TRUPTI
T. SURATWALA FAMILY
TRUST, and SURATWALA
SPOUSAL ACCESS TRUST,

          Plaintiffs-Appellants,

v.

SAILESH GANDHI, SHASIN
GANDHI, AUM SIDHDHY VINAYAK
HOSPITALITY LLC, AUM SIDHDHY
VINAYAK LLC, EMMONS
HOSPITALITY MANAGEMENT
LLC, SAV LLC, and SHREE
BADRINATH LLC,

     Defendants-Respondents.
__________________________________

                   Argued telephonically March 24, 2020 –
                   Decided May 8, 2020

                   Before Judges Yannotti and Currier.

                   On appeal from the Superior Court of New Jersey,
                   Chancery Division, Bergen County, Docket No. C-
                   000093-19.
            Justin D. Santagata argued the cause for appellants
            (Kaufman Semeraro & Leibman LLP, attorneys; Justin
            D. Santagata, on the briefs).

            Andrew B. Zinman (Robinson Brog Leinwand Greene
            Genovese & Gluck, PC) of the New York Bar, admitted
            pro hac vice, argued the cause for respondents
            (Robinson Brog Leinwand Greene Genovese & Gluck,
            PC, attorneys; Matthew Cono Capozzoli and Andrew
            B. Zinman, on the brief).

PER CURIAM

      Plaintiffs appeal from an order of the Chancery Division dated August 26,

2019, which dismissed their complaint without prejudice and required that they

arbitrate their disputes with defendants Sailesh Gandhi (Sailesh), Aum Sidhdhy

Vinayak LLC (Vinayak), Aum Sidhdhy Vinayak Hospitality LLC (Vinayak

Hospitality), Emmons Hospitality LLC (Emmons Hospitality), and Emmons

Hospitality Management LLC (Emmons Hospitality Management).1 For the

reasons that follow, we reverse the trial court's order compelling arbitration and

remand for a plenary hearing.

                                        I.

      In April 2019, plaintiffs Tansukh Suratwala (Tansukh), Neha Suratwala

(Neha), Trupti Suratwala (Trupti), Tansukh Suratwala Spousal Access Trust


1
  For ease of reference, we refer to the individuals involved in this m atter by
their first names.
                                                                          A-0279-19T1
                                        2
(Access Trust), and Trupti T. Suratwala Family Trust (Family Trust) filed their

complaint in the Chancery Division. They named Sailesh, Shashin Gandhi

(Shashin), Vinayak, Vinayak Hospitality, Emmons Hospitality, Emmons

Hospitality Management, Sav LLC (Sav), and Shree Badrinath LLC (Shree) as

defendants.   In the complaint, plaintiffs also identify Stacy Gandhi as a

defendant, but her name does not appear in the caption.

      Plaintiffs allege Tansukh and Trupti established the Access Trust and the

Family Trust. Trupti is the administrator of the Family Trust. According to the

complaint, all of the defendant companies were formed under the New York

Limited Liability Company Law (New York's LLC Law), N.Y.L.L.C.L. §§ 101

to 1403. Sailesh is the manager of the defendant companies.

      Plaintiffs allege Neha and the Family Trust each have a ten percent

interest in Emmons Hospitality and Emmons Hospitality Management. Emmons

Hospitality and Emmons Hospitality Management own or manage a motel and

rental units in Brooklyn, New York.

      In addition, Neha has a 10.08 percent interest in Vinayak Hospitality, and

the Family Trust has a 10.09 percent interest in the company.          Vinayak

Hospitality and Vinayak Hospitality Management own and operate a motel in

South Ozone Park, New York.


                                                                        A-0279-19T1
                                       3
       Plaintiffs further allege Neha and the Access Trust both have a ten percent

interest in Sav, a company that owns and operates multi-family properties and

parking lots in Brooklyn. Plaintiffs also allege that the Access Trust actually

has a twenty percent interest in the company. Shree owns and operates a motel

in Brooklyn.

      Plaintiffs claim that in certain years Sailesh, Shashin or Stacy made

distributions to members of Vinayak Hospitality, Sav, Emmons Hospitality, and

Shree and that either Neha, the Family Trust, or the Access Trust received no

distributions or less than they should have received.

      Plaintiffs asserted claims for distributions allegedly due under New York's

LLC Law, conversion, unjust enrichment, and breach of fiduciary duties. They

also asserted claims under the federal Racketeer Influenced and Corrupt

Organizations Act (federal RICO), 18 U.S.C. §§ 1961 to 1968, and New

Jersey's Racketeer Influenced and Corrupt Organizations Act (NJRICO),

N.J.S.A. 2C:41-1 to -6.2. Plaintiffs sought, among other relief, dissolution of

the defendant companies, compensatory damages, treble damages, and

attorney's fees.

      In June 2019, defendants filed a motion to compel arbitration and to

consolidate the arbitrations. In support of their motion, defendants relied upon


                                                                          A-0279-19T1
                                        4
arbitration clauses in the operating agreements for Vinayak, Vinayak

Hospitality, Emmons Hospitality, and Emmons Hospitality Management. Each

operating agreement requires arbitration of "[a]ny dispute, claim or controversy

arising out of" the agreement.

      The operating agreements for Vinayak, Vinayak Hospitality, and Emmons

Hospitality also state that they "shall be governed by and construed in

accordance with the substantive and procedural laws of the State of New York ."

However, the operating agreement for Emmons Hospitality Management states

that it "shall be governed by and construed in accordance with the substantive

and procedural laws of the State of New Jersey."

      Plaintiffs opposed the motion. They argued defendants could not compel

arbitration of the claims regarding Sav and Shree because defendants did not

provide the court with the operating agreements for these entities. They also

argued the NJRICO claims are not subject to arbitration.

      In addition, plaintiffs argued that the court should not consider the

operating agreements for the other companies because they were provided as

exhibits to a certification by defendants' attorney.      Plaintiffs asserted that

defendants' counsel could not certify as to their authenticity.




                                                                          A-0279-19T1
                                        5
      Moreover, plaintiffs argued that a manager of a limited liability company

cannot bind the other members to an operating agreement, and the court must

conduct a plenary hearing to determine if they are bound by the agreements.

They claimed there is evidence of forgery on the signature pages of the Emmons

Hospitality and Emmons Hospitality Management operating agreements.

      Plaintiffs submitted a certification signed by Tansukh, Neha, and Trupti.

They state that defendant's counsel could not possibly have personal knowledge

of the signature pages on the operating agreements attached to his certification.

They state that:

            For over [forty] years, our family has been in business
            with four other families managing various motels and
            hotels. One of these four families is the family of
            Sailesh Gandhi. Over the past [forty] years, these five
            families have established no less than [twenty] entities
            to own and operate these various motels and hotels.
            These five families have signed many documents and
            operating agreements related to such entities. We have
            reviewed the "operating agreements" attached as
            Exhibits A through D to [d]efendants' counsel's
            certification.   We did not sign those "operating
            agreements." It is entirely possible that the signature
            pages from those "operating agreements" are borrowed
            from other documents and operating agreements that
            we did, in fact, sign. We did not sign the "operating
            agreements" submitted by [d]efendants for [Emmons
            Hospitality] or [Emmons Hospitality Management], but
            the signature pages on those "operating agreements"
            prove our point. The signature pages are identical,


                                                                         A-0279-19T1
                                       6
            despite that the "operating agreements"              were
            purportedly executed [ten] years apart.

      In response, Sailesh submitted a certification in which he states that, to

the best of his recollection, the four operating agreements provided to the court

"are true and correct operating agreement[s] for those entities." Sailesh states

that his family executed the amended operating agreement for Vinayak

Hospitality and other operating agreements.

      He states the agreements were then "dropped off" at the offices of

plaintiffs' attorney for signature by plaintiffs and other members. Sailesh asserts

that plaintiffs and other members executed the agreements. He added that the

operating agreement for Emmons Hospitality also had been executed by all

members, including plaintiffs. Sailesh attached to his certification a copy of the

First Amendment to the Amended and Restated Operating Agreement of

Vinayak Hospitality.

      The motion judge heard oral argument and thereafter entered an order

dated August 26, 2019, which denied the motion to compel arbitration of the

claims regarding Sav and Shree but granted the motion to compel arbitration of

the claims regarding Sailesh, Vinayak, Vinayak Hospitality, Emmons

Hospitality, and Emmons Hospitality Management. The judge also denied the

motion to consolidate the arbitration proceedings.

                                                                           A-0279-19T1
                                        7
      The judge provided a statement of reasons for his order. The judge stated

that the court could not compel arbitration of the claims regarding Sav and Shree

because defendants had not presented the court with the operating agreements

for these entities. The judge stated, however, that plaintiffs must arbitrate the

claims regarding Sailesh, Vinayak, Vinayak Hospitality, Emmons Hospitality,

and Emmons Hospitality Management.

      The judge noted that Sailesh had certified that the operating agreements

for Vinayak, Vinayak Hospitality, Emmons, and Emmons Hospitality were "true

and correct" and each agreement contains a provision requiring arbitration of

any claims arising out of the agreement. The judge also found that plaintiffs'

NJRICO claims are subject to arbitration.

      The judge determined that any further issues regarding arbitrability of the

claims, including the claims that the operating agreements were forged, should

be determined in the first instance by the arbitrator. The judge also determined

that consolidation of the arbitrations was a procedural matter that should be

decided by the arbitrator. This appeal followed.

      Plaintiffs appeal and argue: (1) the trial court erroneously applied New

Jersey law; (2) under New York law, forgery or lack of authority for an

arbitration clause must be determined by a court, not an arbitrator; and (3) the y


                                                                          A-0279-19T1
                                        8
proffered sufficient evidence for a plenary hearing on whether the operating

agreements are real and executed by a sufficient number of members.

                                      II.

      We turn first to plaintiffs' contention that the motion judge erred by

applying New Jersey law in determining whether they are required to arbitrate

their claims arising under the operating agreements for Vinayak, Vinayak

Hospitality, Emmons Hospitality, and Emmons Hospitality Management.

Plaintiffs argue that New York law governs the interpretation and application of

the operating agreements for these companies.

      "Choice-of-law determinations present legal questions, which are

subjected to de novo review." Fairfax Fin. Holdings Ltd. v. S.A.C. Capital

Mgmt., L.L.C., 450 N.J. Super. 1, 33 (App. Div. 2017) (citing Bondi v.

Citigroup, Inc., 423 N.J. Super. 377, 418 (App. Div. 2011); Arias v. Figueroa,

395 N.J. Super. 623, 627 (App. Div. 2007)). In addressing these issues on

appeal, we owe no special deference to the trial court's interpretation or

application of the law. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan,

140 N.J. 366, 378 (1995).

      "Ordinarily, when parties to a contract have agreed to be governed by the

laws of a particular state, New Jersey courts will uphold the contractual choice


                                                                        A-0279-19T1
                                       9
if it does not violate New Jersey's public policy." Instructional Sys., Inc. v.

Computer Curriculum Corp., 130 N.J. 324, 341 (1992) (citing Winer Motors,

Inc. v. Jaguar Rover Triumph, Inc., 208 N.J. Super. 666, 671-72 (App. Div.

1986); Kalman Floor Co. v. Jos. L. Muscarelle, Inc., 196 N.J. Super. 16, 21-22

(App. Div. 1984)). We will apply the law of the state that the parties have

chosen unless:

            (a) the chosen state has no substantial relationship to
            the parties to the transaction and there is no other
            reasonable basis for the parties' choice, or

            (b) application of the law of the chosen state would be
            contrary to a fundamental policy of a state which has a
            materially greater interest than the chosen state in the
            determination of the particular issue and which . . .
            would be the state of the applicable law in the absence
            of an effective choice of law by the parties.

            [Id. at 341-42 (quoting Restatement (Second) of
            Conflicts of Laws § 187 (1969)).]

      As we stated previously, the operating agreements for Vinayak, Vinayak

Hospitality, and Emmons Hospitality each state that they "shall be governed by

and construed in accordance with the substantive and procedural laws of the

State of New York."      The operating agreement for Emmons Hospitality

Management states, however, that the agreement "shall be governed and




                                                                       A-0279-19T1
                                      10
construed in accordance with the substantive and procedural laws of the State of

New Jersey."

      The record shows that all four entities were formed in New York, pursuant

to New York's LLC Law. Each company has a principal office in New York,

and apparently conducts business solely in New York. Although the operating

agreement for Emmons Hospitality Management states that seven of the eleven

members of the company have New Jersey addresses, there is no evidence

showing that the company has a substantial relationship to New Jersey or that

the parties' choice of New Jersey law was reasonable.

      We therefore conclude that the court must apply New York law in

addressing the question of whether plaintiffs are required to arbitrate claims

arising from the Vinayak, Vinayak Hospitality, Emmons Hospitality, and

Emmons Hospitality Management operating agreements.

                                       III.

      Plaintiffs argue that under New York law, the court, not an arbitrator, must

determine whether they are bound by the operating agreements for the four

subject companies. Plaintiffs recognized that the operating agreements for the

companies include arbitration clauses, but they contend they are not bound by




                                                                          A-0279-19T1
                                      11
the arbitration clauses. They claim they did not execute the agreements provided

to the trial court and the agreements are forged.

      New York's arbitration statute provides that "[a] party aggrieved by the

failure of another to arbitrate may apply" to the court "for an order compelling

arbitration." N.Y.C.P.L.R. 7503(a). Unless there is a "substantial question" as

to whether the parties made or failed to comply with "a valid agreement" and

arbitration of the claim is not otherwise barred, "the court shall direct the parties

to arbitrate." Ibid.

      Where "any such [substantial] question" has been raised, the court shall

try the matter "forthwith." Ibid. Here, plaintiffs contend they have raised a

"substantial question" as to the validity of the agreements, which must be

resolved by the court, not an arbitrator. We agree.

      In Weinrott v. Carp, 32 N.Y.2d 190, 192-93 (1973), the parties entered

into an agreement which included an arbitration clause. One of the parties

sought to stay the arbitration proceedings on the ground that the contract was

induced by fraud. Id. at 192. The Court of Appeals affirmed the denial of the

stay and the parties proceeded to arbitration. Id. at 192-93. The Court later

held, consistent with Prima Paint Corp. v. Flood & Conklin Manufacturing Co.,

388 U.S. 395 (1967), that "[a]s a general rule . . . under a broad arbitration


                                                                             A-0279-19T1
                                        12
provision the claim of fraud in the inducement should be determined by

arbitrators." Id. at 198-99.

      Weinrott does not, however, apply in this case because plaintiffs are not

alleging they were fraudulently induced to enter into the operating agreements .

They are alleging "fraud in the factum," which is "an attack upon the very

existence of a contract from its beginning, in effect alleging that there was no

legal contract" and that the instrument is "void ab initio." Mix v. Neff, 99

A.D.2d 180, 182 (N.Y. App. Div. 1984) (citations omitted). A claim of fraud in

the factum differs from fraud in the inducement because if the latter is proven,

the contract is voidable. Id. at 182-83.

      Such a claim is a "substantial issue" under N.Y.C.P.L.R. 7503(a), which

must be resolved by the court. See Housekeeper v. Lourie, 39 A.D.2d 280, 285

(N.Y. App. Div. 1972); DeSantis v. Empire State Coin-Op Distribs., Inc., 174

A.D.2d 1043, 1043 (N.Y. App. Div. 1991). Therefore, the court must conduct

a plenary hearing to determine if the parties entered into a valid agreement,

which includes an arbitration clause. See Housekeeper, 39 A.D.2d at 285;

DeSantis, 174 A.D.2d at 1043; Howe Assocs. v. Comstock, Inc., 199 A.D.2d 55,

55-56 (N.Y. App. Div. 1993).




                                                                        A-0279-19T1
                                       13
      Our conclusion is supported by O'Neill v. Krebs Communications Corp.,

16 A.D.3d 144, 144 (N.Y. App. Div. 2005). In that case, the plaintiff claimed

that a forgery took place and the agreement was altered after it was signed,

thereby voiding the entire agreement including the arbitration clause. Ibid. The

court noted that under New York and federal law, a court must "treat an

agreement containing an arbitration clause as if there were two separate

agreements – the substantive agreement between the parties, and the agreement

to arbitrate." Ibid. (citing Weinrott, 32 N.Y.2d at 198-99; Prima Paint Corp.,

388 U.S. at 409).

      New York's Appellate Division stated, however, that the plaintiff had

alleged fraud "but . . . not the type that permeates the entire agreement so as to

invalidate the arbitration clause as well." Id. at 144-45 (citation omitted). The

appellate court held that the trial court "properly found that the parties entered

into a valid agreement to arbitrate any disputes arising out of their agreement. "

Id. at 145. The trial court "properly ended its inquiry there, and referred all

issues concerning the alleged alteration of the contract after it was signed and

the authenticity of the submitted contract, upon which [the defendant] bases i ts

claim, to the arbitrator to resolve." Ibid. (citations omitted).




                                                                          A-0279-19T1
                                        14
      Here, plaintiffs claim they never executed the operating agreements for

Vinayak, Vinayak Hospitality, Emmons Hospitality, and Emmons Hospitality

Management that were presented to the trial court. They claim the agreements

are forged. Their allegation "permeates the entire agreement" and raises a

question as to whether they entered into a "valid agreement" to arbitrate. Id. at

144-45. Under New York law, that issue must be resolved by the court, not an

arbitrator.

      Our conclusion is also supported by decisions applying the Federal

Arbitration Act, 9 U.S.C. §§ 1 to 16. In Prima Paint, the Supreme Court held

that the federal courts may adjudicate a claim that a party was fraudulently

induced to enter into an arbitration agreement, but the courts should not consider

a claim of fraud in the inducement of the contract generally. 388 U.S. at 403-

04. Under Prima Paint, the arbitration clause is viewed as an agreement separate

and apart from the contract in which it is found.

      However, the Prima Paint principle does not apply where a party alleges

"fraud in the factum." Kyung In Lee v. Pacific Bullion, Inc., 788 F. Supp. 155,

157 (E.D.N.Y. 1992). The court explained:

              In raising a claim of fraudulent inducement of contract,
              a party must argue that its knowing assent to the terms
              of the contract followed from a false promise by the
              other side. Thus, unless the specific arbitration

                                                                          A-0279-19T1
                                        15
            provision itself was obtained via a false promise, the
            signatory has fairly agreed to submit disputes to
            arbitration. By contrast, where fraud in the factum of
            the entire contract is alleged, it makes no sense to apply
            Prima Paint's requirement of a specific attack on the
            making of the arbitration clause itself. If no agreement
            ever arose between the parties, there can be no
            severable agreement to arbitrate. Similarly, if a party's
            signature w[as] forged on a contract, it would be absurd
            to require arbitration if the party attacking the contact
            as void failed to allege that the arbitration clause itself
            was fraudulently obtained.

            [Ibid.]

      Other courts have similarly concluded that a bona fide claim of fraud in

the factum as to the entire contract renders the Prima Paint principle

inapplicable. See Cancanon v. Smith Barney, Harris, Upham & Co., 805 F.2d

998, 1000-01 (11th Cir. 1986) (holding that where plaintiffs made out a clear

case of fraud in the factum, the defendant was not entitled to entry of an order

referring the matter to arbitration); Solymar Invs., Ltd. v. Banco Santander,

S.A., 672 F.3d 981, 995-96 (11th Cir. 2012) (distinguishing claims of fraud in

the factum from fraud in the inducement and holding that a claim of fraud in the

inducement should be referred to arbitration); Nuclear Elec. Ins. v. Central

Power & Light Co., 926 F. Supp. 428, 434 (S.D.N.Y. 1996) (finding that where

a party claims it never assented to a contract containing an arbitration clause due



                                                                           A-0279-19T1
                                       16
to fraud, that party.s claim must first be evaluated by a court before the dispute

can referred to arbitration).

                                       IV.

      Plaintiffs further argue they presented sufficient facts to support their

claim that they did not execute the operating agreements provided to the trial

court and that the agreements are forged. Plaintiffs contend they presented

sufficient evidence to warrant a plenary hearing on this issue. Again, we agree.

      Here, defendants presented the subject operating agreements to the trial

court and claimed plaintiffs were bound by the arbitration clauses in those

agreements. The agreement for Vinayak states that the parties executed the

agreement. Appended to the agreement is a separate page, which includes

signatures of the members, including Trupti and Neha.

      The Vinayak Hospitality agreement is signed by Sailesh, as managing

member. It states that the parties, which include Trupti and Neha, have executed

the agreement. Defendants did not provide a copy of the signatures of the parties

who executed the agreement.

      Defendants also provided the trial court with the Amended and Restated

Operating Agreement for Emmons Hospitality. That document includes a page

with signatures of the company's members, which include Trupti and Neha.


                                                                          A-0279-19T1
                                       17
      However, in their certification, Tansukh, Neha, and Trupti state without

qualification that they did not sign the agreements defendants submitted to the

court. They suggest the signature pages appended to the agreements may have

been "borrowed" from other documents and operating agreements. Tansukh,

Neha, and Trupti also point out that the signature pages for the Emmons

Hospitality and Emmons Hospitality Management operating agreements are the

same, even though these agreements were executed ten years apart.

      As stated previously, in his certification, Sailesh asserts the agreements

provided to the court are "true and correct" operating agreements for the

companies. He states that in 2011, the members of "various entities" decided to

amend the operating agreements for companies that he or Tansukh managed.

He states his family members executed the amended operating agreement for

Vinayak and other amended operating agreements.

      Sailesh further states the agreements were "dropped off" at the offices of

plaintiffs' attorney and they were to be signed by plaintiffs and other members

of the companies. Sailesh also states that the operating agreement for Emmons

Hospitality was executed by all members, including plaintiffs.

      In addition, Sailesh provided the court with a copy of the First Amendment

to [the] Amended and Restated Operating Agreement for Vinayak Hospitality,


                                                                        A-0279-19T1
                                      18
which states that "[i]n all other respects, the [o]perating [a]greement shall

remain in full force and effect without change or modification." Signatures for

Trupti, Tansukh, and Neha appear on this document, as trustees for the Family

Trust.

         We are convinced that the documents at issue, and the competing

certifications, raise genuine issues of material fact as to whether plaintiffs

executed the operating agreements with the arbitration clauses that defendants

seek to enforce. Accordingly, we remand the matter to the trial court for a

plenary hearing to determine whether plaintiffs executed and are bound by the

subject agreements. The trial court may, in its discretion, allow the parties the

opportunity for discovery on the issues to be addressed at the hearing.

                                        V.

         Plaintiffs contend the trial court erred by finding that the claims they

asserted under NJRICO are subject to arbitration. We are convinced that, in the

event the trial court finds that plaintiffs are bound by the subject agreements and

are required to arbitrate their claims against Sailesh, Vinayak, Vinayak

Hospitality, Emmons Hospitality, and Emmons Hospitality Management, the

court may order plaintiffs to arbitrate their claims under NJRICO.




                                                                           A-0279-19T1
                                        19
      In Caruso v. Ravenswood Developers, Inc., 337 N.J. Super. 499, 501

(App. Div. 2001), we held that the trial court correctly found that NJRICO

claims were subject to arbitration. There, the parties entered into an agreement

for the construction of a home. Ibid. The contract provided that "[a]ny dispute

arising in connection" with the agreement, or any amendment to the agreement,

would be "heard and determined by arbitration . . . ." Id. at 502.

      We held that the plaintiffs' claims under the Consumer Fraud Act (CFA),

N.J.S.A. 56:8-1 to -210, and NJRICO were arbitrable. Id. at 505. We noted that

the plaintiffs relied upon the same facts in support for their breach of contract,

consumer fraud, and NJRICO claims. Id. at 508. We stated:

            Although plaintiffs couch the claims in the relevant
            statutory language, it is apparent that the claims are
            subsumed in the subject matter of the arbitration
            agreement between the parties. Furthermore, plaintiffs
            . . . exercise[d] their right to limit the scope of the
            arbitration agreement when they insisted upon the
            language that the arbitration would not preclude pursuit
            of specific performance in [s]uperior [c]ourt. This is
            highly suggestive that the parties understood that all
            disputes concerning the performance of the contract by
            both parties would be resolved through arbitration.

            [Ibid.]

      Plaintiffs argue, however, that under New York law, a party may not

waive access to the courts for a statutory claim unless the waiver is "clear,


                                                                          A-0279-19T1
                                       20
explicit, and unequivocal . . . ." Crespo v. 160 W. End Ave. Owners Corp., 253

A.D.2d 28, 32-33 (N.Y. App. Div. 1999) (quoting Waldron v. Goddess, 61

N.Y.2d 181, 183 (1984)). Plaintiffs contend a provision requiring arbitration of

claims "arising out of" an agreement is insufficient to encompass statutory

claims. However, Crespo does not support that contention.

      In Crespo, the plaintiff asserted a claim under New York law, alleging he

had been unlawfully terminated from his position on the basis of his age. Id. at

29. A collective bargaining agreement required arbitration of "all differences

arising between the parties . . . as to the interpretation, application or

performance of any part of th[e] agreement . . . ." Ibid.

      The court held that a statutory claim was not a "difference" between the

parties concerning the interpretation, application or performance of the

agreement. Id. at 32-33. The court found that because the arbitration clause's

application to statutory claims was not sufficiently clear, the plaintiff was not

required to arbitrate his age-discrimination claim. Id. at 33-34.

      The arbitration clauses at issue in this case are, however, sufficiently clear

to require arbitration of the NJRICO claims. As noted, the clauses require

arbitration of "[a]ny dispute, claim or controversy arising out of" the respective

agreements. Plaintiffs' NJRICO claims are based upon the same facts as the


                                                                            A-0279-19T1
                                       21
claims for distributions that were wrongfully withheld and conversion. The

arbitration clauses encompass plaintiffs' NJRICO claims.

      In support of their argument, plaintiffs also rely upon Conde v. Yeshiva

University, 16 A.D.3d 185 (N.Y. App. Div. 2005). However, in that case, the

relevant arbitration clause provided for arbitration of "[a]ny dispute, difference,

or controversy related to wages, hours and working conditions . . . ." Id. at 186

(emphasis added). The court thereafter held that the plaintiffs were not required

to arbitrate their employment discrimination claims because the arbitration

clause   "lacked    the    necessary    explicit    incorporation    of   statutory

antidiscrimination requirements to presume arbitrability . . . ." Ibid.

      In this case, however, the subject arbitration clauses are broader than those

at issue in Conde. The clauses each require arbitration of any "[a]ny dispute,

claim or controversy arising out of" the respective agreements. There is no

limitation, as there was in Conde, concerning matters "related to wages, hours

and working conditions . . . ." Ibid.

      Plaintiffs further argue that if New Jersey is deemed to have the dominant

interest regarding arbitrability of claims asserted under NJRICO, and New

Jersey law applies to this issue, the arbitration clause in the subject agreements

is insufficient because it does not state that statutory claims shall be arbitrated.


                                                                            A-0279-19T1
                                        22
In support of this contention, plaintiffs cite Garfinkel v. Morristown Obstetrics

& Gynecology Associates, P.A., 168 N.J. 124 (2001), and Atalese v. United

States Legal Services Group, L.P., 219 N.J. 430, 445 (2014). We disagree.

      In Garfinkel, the plaintiff physician alleged he was unlawfully discharged

in violation of the New Jersey Law Against Discrimination (LAD), N.J.S.A.

10:5-1 to -42. Garfinkel, 168 N.J. at 127. The plaintiff's employment agreement

required that, with the exception of post-employment restrictions and pension

benefits, arbitration of "any controversy or claim, arising out of, or relating to"

the agreement was required. Id. at 128.

      The Court held that parties to an agreement may waive statutory remedies

in favor of arbitration. Id. at 131 (citing Red Bank Reg'l Educ. Ass'n v. Red

Bank Reg'l High Sch. Bd. of Educ., 78 N.J. 122, 140 (1978)). However, the

waiver of statutory rights "must be clearly and unmistakably established, and

contractual language alleged to constitute a waiver will not be read

expansively." Id. at 132 (quoting Red Bank Reg'l Educ. Ass'n, 78 N.J. at 140).

      The Court found the arbitration clause at issue was insufficient to

constitute waiver of the plaintiff's remedies under the LAD. Id. at 134. The

Court stated that the clause "suggests that the parties intended to arbitrate only

those disputes involving a contract term, a condition of employment, or some


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other element of the contract itself." Ibid. In addition, the contract did not

mention "statutory claims redressable by the LAD." Ibid.

      Plaintiffs' reliance upon Garfinkel is misplaced. That case dealt with

statutory remedies under the LAD. The Court pointed out that "the rights [the

LAD] confers on aggrieved employees are essential to eradicating

discrimination in the workplace." Id. at 135.

      Thus, the Court refused "to assume that employees intended to waive

those rights unless their agreements so provide in unambiguous terms." Ibid.

Therefore, the agreement "should at least provide that the employee agrees to

arbitrate all statutory claims arising out of the employment relations hip or its

termination." Ibid. This case does not involve claims under the LAD or a

heightened concern regarding remedies designed to address and eradicate

unlawful discrimination.

      Plaintiffs' reliance upon Atalese also is misplaced.      In that case, the

plaintiff asserted claims under the CFA and the Truth-in-Consumer Contract,

Warranty and Notice Act (TCCWNA), N.J.S.A. 56:12-14 to -18. Atalese, 219

N.J. at 436. The plaintiff entered into a contract for debt-adjustment services,

which stated that "any claim or dispute . . . related to th[e a]greement or related




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to any performance of any services" shall be submitted to binding arbitration.

Id. at 436-37.

      "An effective waiver requires a party to have full knowledge of his legal

rights and intent to surrender those rights." Id. at 442 (quoting Knorr v. Smeal,

178 N.J. 169, 177 (2003)). The Court stated that "under New Jersey law, any

contractual 'waiver-of-rights provision must reflect that [the party] has agreed

clearly and unambiguously' to its terms." Id. at 443 (alteration in original)

(quoting Leodori v. Cigna Corp., 175 N.J. 293, 302 (2003)).

      In Atalese, the Court expressed the concern that "an average member of

the public may not know — without some explanatory comment — that

arbitration is a substitute for the right to have one's claim adjudicated in a court

of law." Id. at 442. The Court held that an arbitration clause, "in some general

and sufficiently broad way, must explain that the plaintiff is giving up her right

to bring her claims in court or have a jury resolve the dispute." Id. at 447. The

Court noted, however, that "[n]o particular form of words is necessary to

accomplish a clear and unambiguous waiver of rights." Id. at 444.

      The Atalese Court found the arbitration agreement at issue was

unenforceable because there was no "explanation that plaintiff [wa]s waiving

her right to seek relief in court for a breach of her statutory rights." Id. at 446.


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The Court noted that the clause stated the parties would submit their disputes to

arbitration, but "[t]he provision d[id] not explain what arbitration [wa]s, nor

d[id] it indicate how arbitration is different from a proceeding in a court of law."

Ibid. The Court added that the clause was not written in plain language. Ibid.

         Thus, under Atalese, there must be mutual assent by the parties to submit

their dispute to arbitration. Id. at 442. Since arbitration involves the waiver of

the right to pursue the claims in court, the arbitration clause must show that t he

party waiving the right did so clearly and unambiguously. Id. at 443.

         As previously stated, "[n]o particular form of words is necessary to

accomplish a clear and unambiguous waiver of rights." Id. at 444. However,

"the clause, at least in some general and sufficiently broad way, must explain

that the plaintiff is giving up her right to bring her claims in court or have a jury

resolve the dispute." Id. at 447.

         Unlike Atalese, this case does not involve claims by the average member

of the public, who may not understand that arbitration is a substitute for

proceedings in court.       Rather, this case involves claims by persons who

apparently have considerable involvement in business and would understand the

concept of arbitration and the waiver of the right to pursue statutory claims in

court.


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      As the record shows, the parties are engaged in the ownership and

operation of motels, hotels and other properties. In his certification, Sailesh

states the parties have engaged in business for over forty years and have

established no less than twenty companies to own and operate their properties.

      Moreover, the meaning of the subject arbitration clauses is readily

apparent from the plain language of the clauses, which encompasses all claims

that arise from or relate to the subject operating agreements. Here, as in Caruso,

the claims under NJRICO are based upon the same facts and arise from the

operating agreements.      The clauses clearly and unambiguously require

arbitration of all claims arising from and related to the subject agreements.

      We therefore conclude that if the trial court finds that plaintiffs executed

the operating agreements for Vinayak, Vinayak Hospitality, Emmons

Hospitality, and Emmons Hospitality Management and finds that the arbitration

clauses in these agreements are enforceable, the court should order plaintiffs to

arbitrate the claims in the complaint regarding these companies, including the

claims asserted under NJRICO.        The language of the subject arbitration

agreements is sufficiently clear to include all claims arising under the

agreements, including statutory claims like those under NJRICO.




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      Reversed and remanded to the trial court for further proceedings in

conformity with this opinion. We do not retain jurisdiction.




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