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Wilde v. O'Leary

February 4, 2005

FAITH A. WILDE, PLAINTIFF-APPELLANT,
v.
JOHN P. O'LEARY, JR., ADAM J. GURIEN AND ZACHARY JACKSON SECURITIES, L.P. DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Morris County, MRS-L-1534-03.

Before Judges Petrella, Lintner and Parker.

The opinion of the court was delivered by: Parker, J.A.D.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted November 29, 2004

In this case involving allegations of securities fraud, plaintiff Faith A. Wilde appeals from a grant of summary judgment confirming an arbitration award in favor of defendants. We reverse and remand.

In August 1996, plaintiff, then a thirty-five-year-old widow with two young children, sought advice from defendants, John O'Leary, Jr., and Adam J. Gurien, regarding the investment of settlement monies resulting from her husband's accidental death. Plaintiff had no investment experience and told defendants she wanted a no-risk investment. Defendants led plaintiff to invest $50,000 in Zachary Jackson Mortgage, Inc. (Zachary Jackson), a private company they owned and operated. Zachary Jackson filed for bankruptcy in 2001 and plaintiff lost her entire investment. On December 14, 2001, plaintiff filed an arbitration claim with the National Association of Securities Dealers (NASD) pursuant to the NASD Code of Arbitration Procedure. Plaintiff claimed that defendants fraudulently induced her to invest in Zachary Jackson. She identified Brian Greenman, Esq., as her expert witness in her initial statement of claim.

On January 30 and 31, 2003, the matter was heard before three arbitrators in New York City. The panel heard lengthy testimony from O'Leary and Gurien, who opined as "experts" in the mortgage business, that their private placement with Zachary Jackson was a suitable investment for a widow with small children. On the last day of the hearing, plaintiff presented Greenman as her suitability and due diligence expert.

Plaintiff had submitted her expert's curriculum vitae setting out his experience and expertise well before the arbitration hearing. Defendants did not move to preclude his testimony prior to the hearing. Rather, they waited until plaintiff's expert was scheduled to testify. After voir dire, the panel precluded the expert's testimony. The arbitrators apparently believed it was essential for the expert to have engaged in the actual business of mortgage brokering in order to render an expert opinion.*fn1 When plaintiff requested additional time to present a new expert, the panel indicated she would have to do so that afternoon. Needless to say, plaintiff was unable to obtain another expert in that short period of time. The panel then ruled in defendants' favor.

On June 2, 2003, plaintiff filed a verified petition pursuant to R. 4:67-1 and -2, seeking to vacate the arbitration award. The parties subsequently cross-moved for summary judgment -- plaintiff seeking to vacate the arbitration decision and defendants seeking to confirm it. The matter was argued on January 9, 2004, and on January 13, 2004, the court entered an order denying plaintiff's motion for summary judgment and granting defendants' motion to confirm the arbitration award. Attached to the order was a brief statement of reasons in which the court stated:

The Court does not find that the arbitrators' decision to disallow the proposed expert testimony was violative of N.J.S.A. 2A:24-8. While the proposed expert testimony by the plaintiff was precluded after a "voir dire" rather than after hearing the testimony of the proposed expert and then deciding that the expert was unqualified, the Court does not find that the panel engaged in "misconduct." In reaching this determination, the Court bases this finding upon a plenary review of the transcript of the proceedings. In this appeal, plaintiff argues that (1) the arbitration panel's refusal to allow plaintiff's expert to testify denied her a fundamentally fair hearing; and (2) this matter has the same factual background as Bordonaro v. Merrill Lynch, 805 N.E.2d 1138 (Ohio App.), appeal denied, 810 N.E.2d 968 (Ohio 2004), in which the Ohio Court of Appeals vacated the arbitration award.

Arbitration is clearly a favored means of dispute resolution. Habick v. Liberty Mut. Fire Ins. Co., 320 N.J. Super. 244, 248 (App. Div.), certif. denied, 161 N.J. 149 (1999). The Arbitration Act, N.J.S.A. 2A:24-1 to -11, provides narrow grounds for vacating an award:

The court shall vacate the award in any of the following cases:

a. Where the award was procured by corruption, fraud or undue means;

b. Where there was either evident partiality or corruption in the ...


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