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January 23, 1991


The opinion of the court was delivered by: Gerry, Chief Judge:


Presently before the court, in this action alleging breach of contract and oral agreements, fraud, and statutory violations, is a motion by defendants Nabil Y. Younan, M.D. and Seashore Anesthesia Associates, P.A. ("Seashore"), for a stay of proceedings pending arbitration. For the reasons stated below, the defendants' motion is granted in part and denied in part.


In early 1983, plaintiff, Talaat Labib, M.D., became employed as a doctor by the anesthesia practice of defendant Nabil Y. Younan, originally named Younan Anesthesia and later known as Seashore Anesthesia Associates, P.A. ("Seashore"), which serves Shore Memorial Hospital ("hospital") at Somers Point, New Jersey. The employment contract signed in November, 1982, and a subsequent employment contract signed in November, 1985, contained an identical arbitration clause, which provided:

  Arbitration: Any controversies or disagreements
  arising out of, or relating to this Agreement or
  breach thereof, shall be settled by arbitration in
  accordance with the rules then existing of the
  American Arbitration Association, and judgment upon
  the award rendered may be entered in any court
  having jurisdiction thereof.

Employment Contract, ¶ 13. Furthermore, the agreement was to be interpreted by applying New Jersey state law. Employment Contract, ¶ 16.

The plaintiff claims that defendant Younan orally represented that Labib would remain employed as long as his work was satisfactory and would eventually become a partner in the practice. However, in November, 1989, plaintiff purportedly told both defendant Younan and hospital officials that he was aware of allegedly improper Medicare and insurance reimbursement practices by Younan and refused to acquiesce in such practices. On January 8, 1990, plaintiff was discharged from his employment by defendant Younan. On September 11, 1990, Labib filed a complaint in this court alleging retaliatory termination of employment,*fn1 breach of the employment contract, fraudulent inducement, breach of oral agreements regarding employment security and partnership role, and a breach of good faith and fair dealing. Our jurisdiction is based upon diversity of citizenship, with the amount in controversy allegedly exceeding $50,000, pursuant to 28 U.S.C. § 1332. Defendants have moved to stay proceedings in this court under the contractual arbitration provision and the New Jersey Arbitration and Award Act, N.J.S.A. § 2A:24- 1 to 2A:24-11 (West 1987).


Defendants Younan and Seashore allege that the arbitration clause in the contract is very broad and covers all disputes arising out of or relating to the contract, and thus this entire action must be stayed pending arbitration. Plaintiff Labib counters that the defendants are not entitled to a stay of the entire action, because most of the issues are not encompassed within the contractual arbitration provision itself.

It is the duty of a court only to determine whether a dispute is arbitrable, and not to consider the merits of the action. See AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-49, 106 S.Ct. 1415, 1418-19, 89 L.Ed.2d 648 (1986); Laborers' Intern. Union v. Foster Wheeler Corp., 868 F.2d 573, 576 (3d Cir. 1989); Laborers' Local Union v. Interstate Curb and Sidewalk, 90 N.J. 456, 463, 448 A.2d 980 (1982); Aysseh v. Lawn, 180 N.J.Super. 391, 395, 434 A.2d 1146 (Ch.Div. 1981). But see Donaldson, Lufkin & Jenrette Futures, Inc. v. Barr, 124 Ill.2d 435, 125 Ill.Dec. 281, 530 N.E.2d 439 (1988). Because the contract, in the instant case, does not relate to maritime activities or interstate or foreign commerce,*fn2 we must apply state law in determining the enforceability of an arbitration clause. See Gavlik Const. Co. v. H.F. Campbell Co., 526 F.2d 777, 785 (3d Cir. 1975); Shearson Hayden Stone, Inc. v. Liang, 493 F. Supp. 104, 106, (N.D.Ill. 1980), aff'd, 653 F.2d 310 (7th Cir. 1981); Singer Co. v. Tappan Co., 403 F. Supp. 322, 323 n. 1 (D.N.J. 1975), aff'd without op., 544 F.2d 513 (3d Cir. 1976).

The New Jersey Arbitration and Award Act, N.J.S.A. § 2A:24-1 to 2A:24-11 (West 1987 & Supp. 1990) provides:

  In an action brought in any court upon an issue
  arising out of an agreement providing for the
  arbitration thereof, the court, upon being
  satisfied that the issue involved is referable to
  arbitration, shall stay the action, if the
  applicant for the stay is not in default in
  proceeding with the arbitration, until an
  arbitration has been had in accordance with the
  terms of the agreement.

N.J.S.A. § 2A:24-4.

Public policy in New Jersey favors arbitration so that contracts "should be read liberally to find arbitrability if reasonably possible." Brick Township Municipal Utilities Authority v. Diversified R.B. & T. Construction Co., 171 N.J. Super. 397, 402, 409 A.2d 806, 808 (App. Div. 1979); J. Baranello & Sons, Inc. v. City of Paterson, 168 N.J.Super. 502, 507, 403 A.2d 919 (App. Div.), certif. den., 81 N.J. 340, 407 A.2d 1214 (1979); Hudik-Ross, Inc. v. 1530 Palisade Ave. Corp., 131 N.J.Super. 159, 165, 329 A.2d 70 (App. Div. 1974). See also Ohio Cas. Ins. Co. v. Benson, 87 N.J. 191, 196, 432 A.2d 905 (1981); Harmuth Engineering Co. v. Franklin Universal Bldg. Corp., 178 N.J.Super. 380, 429 A.2d 378 (App. Div.), certif. den., 87 N.J. 390, 434 A.2d 1072 (1981). This state policy mirrors federal arbitration policy, as to which the United States Supreme Court has declared that "any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 941- 42, 74 L.Ed.2d 765 (1983). Thus, "an order to arbitrate . . . should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute. . . . In the absence of any express provision excluding ...

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