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Duren v. Rzasa-Ormes

June 29, 2007


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. BER-C-222-05.

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



Argued May 16, 2007

Before Judges Lefelt, Parrillo and Sapp-Peterson.

This case presents an issue of first impression concerning the enforceability of a non-appealability clause in an arbitration agreement that forecloses judicial review of an arbitration award. Defendant Leigh Rzasa-Ormes appeals from the November 23, 2005 order of the general equity part that, by way of summary action, Rule 4:67-5, confirmed an arbitration award that effected a division of business property jointly owned with plaintiff Raymond Van Duren. We hold that an arbitration agreement executed before January 1, 2003*fn1 between two sophisticated business parties, each represented by counsel, that clearly precludes judicial review of an arbitration award beyond the trial court level, is enforceable. We therefore dismiss the appeal because, despite the preclusive language of the agreement, defendant obtained meaningful review of her claims in the Chancery Division and waived any further review by way of appeal here.

By way of background, in 1998 a dispute arose between the parties who were then business partners in twelve automobile dealerships and related real estate holdings, operating under the trade name "Ramsey Auto Group" (Group). In order to resolve the dispute short of litigation, beginning in 1999 the parties discussed settlement options with the Group's corporate counsel, Joseph S. Aboyoun, Esq., who acted as a facilitator. Unable to reach agreement after several months of negotiations, and after each retained separate counsel at Aboyoun's insistence, the parties executed a "Binding Arbitration Agreement" on April 11, 2000, appointing Conrad Roncati, Sr., a person known to both, as the arbitrator, and submitting to him questions of valuation and division of their respective interests in the dealerships and realty.*fn2 The agreement outlined the procedure to be followed and expressly contemplated use of Aboyoun's services, for which compensation was provided. The parties further agreed that the arbitrator's determination was "final, binding and conclusive" and non-appealable. Specifically, the Finality section included this paragraph:

It is agreed by the parties that the arbitrator's determination of any and all issues arising within this arbitration (the "award") shall be final, binding and conclusive, and not subject to an appeal to any authority in any forum. The arbitration award shall dispose of any and all claims the parties may have against one another, from the beginning of time to the date of the award, whether known or unknown, existing or not existing, accrued or not accrued, asserted or which could have been asserted, all of which such claims shall be released under this arbitration award. [(emphasis added).]

In the other paragraph of the Finality section, the parties forswore any legal action other than one to confirm or enforce (but not to vacate) the arbitration award.

The ensuing arbitration spanned a period of five years, marked by a series of interim award orders culminating in a final arbitration award on June 21, 2005, which is the subject of this appeal. Although the process was extensive and protracted, there was substantial resolution of the dispute as early as May 26, 2000, when a "separation order" granted defendant exclusive ownership of the 50/50 dealerships and plaintiff exclusive ownership of the 80/20 dealerships. The order also divested defendant of her tenant-in-common interest in RFL Properties (RFL), an entity that owned property upon which several of the dealerships are located, with payment to be made from an upcoming financing based upon appraisals obtained in conjunction with that financing. In this regard, after valuations were completed, the appropriate party would be compensated for any loss sustained in conjunction with the disposition of the 50/50 and 80/20 dealerships. Valuation was established in the arbitrator's October 12, 2000 order and disposition of RAG Realty, LLC (RAG), which owned three real properties, was deferred along with one valuation issue.

A subsequent order of November 29, 2000, resolved issues of inter-company debt. It was undisputed that the 80/20 dealerships had advanced $1,316,462.22 to the 50/50 dealerships (Interco Debt). Consequently, defendant was ordered to execute a promissory note acknowledging the Interco Debt and to pledge her interest in both the 50/50 dealerships and RAG; and the 50/50 dealerships were ordered to execute joint and several guarantees.

On March 19, 2001, less than one year after commencement of arbitration, the arbitrator entered a decision which incorporated the interim awards, essentially vesting in each of the parties full ownership of the dealerships that each had individually operated since June 2000, and have since been operating over the five-year course of arbitration.*fn3 (2001 Award). Specifically, defendant was awarded ownership of the 50/50 dealerships, a $1,250,000.000 monetary award, and an assignment by RFL to Ramsey Chevrolet of all interest in the real estate occupied by that dealership. Plaintiff was awarded the 80/20 dealerships, the remainder of RFL, and a monetary award of $925,000.00. The 2001 Award also fixed the Interco Debt, with interest, at $1,384,979.98. After offsetting the parties' other debts to one another, defendant received a net award of $325,000.00, which was credited to the Interco Debt, leaving defendant with a debt of $1,059,979.98 to be paid to the 80/20 dealerships. The 2001 Award also established a sixty day period for the parties to discuss the disposition of RAG, addressed franchise and finance approvals and income tax issues, and ordered the parties to pay all applicable professional fees, among other things.

Shortly thereafter, on June 29, 2001, plaintiff sought to confirm the arbitrator's award and defendant cross-moved for vacatur, complaining about the involvement of the corporate attorney, despite raising no objection to Aboyoun's presence in the four days of hearings that preceded the interim award. No issue was raised concerning the validity of the arbitration agreement and defendant made no claim of fraud, duress, economic compulsion, unequal bargaining power or unconscionability associated with the execution of the contract.

The general equity judge dismissed both applications without prejudice, finding the relief premature because the disposition of RAG remained open, and directed the completion of arbitration with the continued involvement of the corporate attorney, who later withdrew on his own accord. Rather than proceed to conclusion, defendant filed suit in the Chancery Division seeking the removal of the arbitrator, alleging that Roncati had abused his position, made false or misleading statements, conspired to defraud defendant, and was irrevocably biased,*fn4 claims raised for the first time and not made in her earlier motions for vacatur and for reconsideration. Here again, defendant never questioned the validity of the underlying arbitration agreement. Defendant's ...

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