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
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.
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