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Garfinkel v. Morristown Obstetrics & Gynecology Associates

June 13, 2001


On certification to the Superior Court, Appellate Division, whose opinion is reported at 333 N.J. Super. 291 (2000).

The opinion of the court was delivered by: Verniero, J.

Argued March 26, 2001

The principal issue in this appeal is whether plaintiff waived his right to sue his former employer in the Law Division for alleged violations of the Law Against Discrimination, N.J.S.A. 10:5-1 to -42 (LAD). Plaintiff is a physician formerly associated with an obstetrics and gynecology practice in Morris County. He claims that he was unlawfully discharged from that practice on account of his gender. He also asserts under the common law that his employer's conduct constituted defamation and tortious interference with his economic advantage.

The trial court determined that plaintiff's claims, including those asserted under the LAD, were subject to arbitration pursuant to the parties' written employment agreement. That agreement, which plaintiff signed prior to joining the practice, provides that "any controversy arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration[.]" The Appellate Division affirmed the trial court's determination.

We now reverse. We hold that because of its ambiguity the language contained in the arbitration clause does not constitute an enforceable waiver of plaintiff's statutory rights under the LAD. Therefore, plaintiff may proceed with his discrimination action in the Law Division. Consistent with principles of judicial economy, plaintiff's common-law claims should be tried in the same action as the LAD claim.


David Garfinkel, M.D. (plaintiff) and the Morristown Obstetrics & Gynecology Associates, P.A. (MOGA) entered into an employment agreement on August 9, 1996. The agreement sets forth plaintiff's work obligations, salary, eligibility for stock ownership in the association, and restrictions on subsequent employment. In respect of termination, the agreement enumerates the circumstances under which either party may terminate employment and the remuneration that would be due plaintiff in the event of termination.

Critical to the disposition of this appeal, paragraph eighteen of the agreement provides:

Except as otherwise expressly set forth in Paragraphs 14 or 15 hereof, any controversy or claim arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration in Morristown, New Jersey, in accordance with the rules then obtaining of the American Arbitration Association, and judgment [sic] upon any reward [sic] rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof.

By its express language, the arbitration clause does not apply to post-termination employment restrictions (paragraph fourteen) and pension benefits (paragraph fifteen). We note, however, that paragraph fifteen provides that plaintiff shall share in the employer's pension or profit sharing plan and does not, on its face, contemplate litigation. Instead, paragraph thirteen, which pertains to severance pay and is not expressly excluded from the arbitration clause, contemplates certain action by a "court of competent jurisdiction" in the event of plaintiff's discharge. We thus assume that the drafters of the arbitration provision inadvertently referred to paragraph fifteen when they actually intended to refer to paragraph thirteen.

In January 1998, MOGA allegedly informed plaintiff that he would not be permitted to exercise his option to become a shareholder because he was "born the wrong sex." Nonetheless, MOGA continued to employ plaintiff. On March 6, 1998, one of the shareholder-physicians of MOGA informed plaintiff that he was being terminated. Two days later, another MOGA shareholder informed plaintiff that he should not return to work. The following day that same shareholder allegedly stated to plaintiff that the reason for his termination was that he "did not attract patients well because he was male[.]"

In September 1998, plaintiff filed this action in the Law Division against MOGA and its two shareholders (defendants), as well as Lifeline Medical Associates, described by plaintiff as a successor in interest to MOGA. Plaintiff's complaint alleges that defendants breached the employment agreement, violated the covenant of good faith and fair dealing implicit in that agreement, violated the LAD, tortiously interfered with plaintiff's prospective economic advantage, and defamed him. In its answer and counterclaim, MOGA alleges that plaintiff misrepresented the extent of his practice prior to entering into the agreement, and wrongfully solicited patients away from MOGA for his exclusive economic benefit.

On the basis of the arbitration clause of the agreement (paragraph eighteen), defendants moved to dismiss plaintiff's complaint. Plaintiff responded that his consent to that clause was not voluntary because it was a non-negotiable provision, that the clause itself was unenforceable because it precluded access to the courts in respect of a discrimination claim, and that defendants waived operation of the clause by virtue of their answer and counterclaim. The trial court granted defendants' motion, ruling that the arbitration provision was binding in respect of all claims, including those asserted under the LAD. The court concluded that the parties had made a knowing and voluntary choice to arbitrate their disputes and that public policy favored arbitration in this setting.

In a reported opinion, the Appellate Division affirmed the trial court's determination. Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 333 N.J. Super. 291 (App. Div. 2000).

Noting the general rule that parties may agree to arbitrate statutory claims, the panel held that the broad language of paragraph eighteen constituted such an agreement. Id. at 300, 302. The court likewise concluded that plaintiff's common-law claims must be settled by arbitration. Id. at 303-04. We granted plaintiff's petition for certification. 166 N.J. 606 (2000).

We also granted the Attorney General's motion on behalf of the New Jersey Division on Civil Rights (the Division) for leave to appear as amicus curiae. The Division does not object to the use of arbitration to resolve discrimination complaints. It does, however, oppose "compulsory and binding arbitration in settings where it is based on a vaguely worded clause or where the waiver was not voluntary." The Division contends that the Court need not address the issue of voluntariness because the arbitration ...

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