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O'Rourke v. Kestler

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


June 6, 2008

DENNIS O'ROURKE, TIMOTHY G. BAISLEY, ROYAL PAK REALTY LLC AND ROYAL PAK SYSTEMS, INC., PLAINTIFFS-RESPONDENTS,
v.
KENNETH KESTLER, DEFENDANT-APPELLANT.

On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-142-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted: May 13, 2008

Before Judges Cuff and Simonelli.

Plaintiffs Dennis O'Rourke and Timothy G. Baisley and defendant Kenneth Kestler each hold a one-third interest in two corporations. Plaintiff Royal Pak Systems, Inc. (Royal Pak) is a manufacturing concern. Plaintiff Royal Pak Realty LLC (Realty) owns real property in Hackensack and leases it to Royal Pak. Defendant appeals from an order enjoining him from proceeding with arbitration of his claim of wrongful termination from Royal Pak. We affirm.

It is undisputed that a shareholder agreement for Royal Pak had been prepared but never executed. In 1995, O'Rourke, Baisley and Kestler acquired real property in Hackensack and Royal Pak moved its operation to the site. The parties formed a limited liability corporation to hold the real estate, and an operating agreement was prepared and executed by the parties. The Realty agreement contains an agreement to arbitrate "controversies or claims arising out of or related to this Agreement . . . ."

O'Rourke and Baisley terminated Kestler's employment with Royal Pak. Kestler filed a demand for arbitration with the American Arbitration Association (AAA) in which he asserted that he had been wrongfully terminated from his employment at Royal Pak. He sought reinstatement of his employment and back pay or a buyout of his interest in Royal Pak and Realty.

Plaintiffs O'Rourke, Baisley and Royal Pak filed an objection to arbitration with AAA. They contended that the AAA did not have jurisdiction of the dispute. When the panel determined that it had the power to decide jurisdictional issues, plaintiffs filed a verified complaint and obtained an order to show cause. On the return date of the order to show cause, Judge Contillo enjoined the arbitration proceeding. He found that the gravamen of defendant's claim was his termination from his employment with Royal Pak. Neither plaintiffs nor defendant ever agreed to arbitrate any dispute concerning the ownership, management and operation of Royal Pak. The parties had agreed to arbitrate disputes concerning the ownership and management of the realty company, but defendant's dispute was unrelated to the ownership or operation of that entity.

Judge Contillo also held that the submission of an objection to arbitration could not be considered a waiver of plaintiffs' right to a judicial determination of the appropriate forum to resolve the wrongful termination dispute or an implicit submission of the dispute to the arbitrator. He also held that the cases requiring a non-signatory to arbitrate a dispute, e.g., Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 333 N.J. Super. 291, 308-09 (App. Div. 2000), rev'd on other grounds, 168 N.J. 124 (2001) and Jansen v. Salomon Smith-Barney, Inc., 342 N.J. Super. 254, 260-61 (App. Div.), certif. denied, 170 N.J. 205 (2001), were inapplicable because plaintiffs were neither agents nor the beneficiaries of a signatory to an arbitration agreement.

We agree with this analysis and affirm substantially for the reasons expressed by Judge Contillo in his May 25, 2007 opinion.

Affirmed.

20080606

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