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Philip Barretti v. Solucorp Industries Ltd.


January 12, 2011


On appeal from the Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-7956-08.

Per curiam.


Submitted: December 8, 2010

Before Judges Cuff and Fasciale.

Defendants Solucorp Industries Ltd. (Solucorp), London Venture Capital Corp. (London), and Joseph Kemprowski appeal from an order confirming an arbitration award and entering default judgment against them. The order also implicitly denied defendants' motion to restore the matter to the arbitration list. We affirm.

On October 17, 2008, plaintiff Philip Barretti filed a complaint against defendants Solucorp and London. An amended complaint adding Kemprowski as a defendant was filed on July 17, 2009. In his complaint and amended complaint, plaintiff alleged Solucorp executed and delivered a promissory note in the amount of $330,000 on September 27, 2006. The note was payable by February 15, 2007. Solucorp also promised to deliver to plaintiff 100,000 shares of Solucorp 144 stock.

Plaintiff also alleged that Solucorp assigned responsibility for the balance due on the note, $230,000 plus interest, to London on August 4, 2008. In return, London promised to deliver 200,000 shares of restricted Solucorp common stock to plaintiff. Plaintiff further alleged that London and Kemprowski, a founder of Solucorp, failed to pay the balance due or to deliver the 200,000 shares of restricted common stock, and Solucorp and Kemprowski failed to deliver the 100,000 shares of Solucorp 144 stock. Plaintiff sought compensatory damages, transfer of the promised shares, attorneys' fees and costs.

Defendant Kemprowski did not file an answer and the court entered a default. The court scheduled an arbitration pursuant to Rule 4:21A-1(a)(3) for November 10, 2009. On the morning of November 10, 2009, defendants' attorney contacted plaintiff's attorney to advise him that he would not be able to attend the scheduled arbitration due to a medical emergency of a staff member. Although defendants assert in their brief that their attorney called court arbitration staff to inform them of his inability to attend and to request an adjournment, the letter sent by defendants' attorney simply informs the court that "Mr. Condon, attorney for Defendant, Solucorp Industries, Ltd., will not be appearing at Arbitration."

The arbitration proceeded, an award was entered in the amount of $245,687 "plus 100,000 shares of Solucorp Rule 144 common stock & 200,000 shares of Rule 144 restricted Solucorp common stock." Plaintiff moved to confirm the award and to enter default judgment against Kemprowski on December 22, 2009.

Defendants responded and filed a cross-motion to restore the matter to the arbitration list. As to Kemprowski, defendants' attorney asserted he did not receive the motion for leave to file the amended complaint until July 30, 2009, and never received a copy of the order granting the motion. Defendants' attorney also asserted he received the motion to confirm the arbitration award in early January 2010.

Defendants' attorney attributes the delays to plaintiff's use of an old address.

In a statement of reasons appended to his February 11, 2010 order, Judge Joseph Conte correctly noted that Rule 4:21A-4(f) requires an appearance on behalf of each party at an arbitration hearing. Furthermore, the pleadings of a party who does not appear must be stricken, the hearing will proceed, and the non-appearing party waives the right to demand a trial de novo. Ibid.

Judge Conte found that defendants Solucorp and London were aware of the November 10 arbitration hearing. He also noted that defendants' motion to restore the matter to the arbitration calendar was premised on a scheduling conflict due to a medical emergency and calls to counsel and the court to inform them of defendants' attorney's non-appearance.

Judge Conte held that any relief from any order entered pursuant to Rule 4:21A may be granted only on motion showing good cause and may be conditioned on appropriate terms fashioned by the court. R. 4:21A-4(f). Judge Conte also held that defendants must advance a meritorious defense. He construed defendants' motion as a motion to vacate the waiver of the ability to request a trial de novo. As such, the extraordinary circumstances standard applied because defendants filed a cross- motion only in response to plaintiff's December 22, 2009 motion to confirm the arbitration award. Measured by this heightened standard, the judge held defendants simply satisfied the good cause, but not the extraordinary circumstances, standard. He, therefore, confirmed the arbitration award and entered default judgment against Kemprowski.

Plaintiff's December 22, 2009 motion and defendants' cross-motion were in two parts. First, plaintiff sought to confirm the arbitration award, and defendants sought to restore the matter to the arbitration list. Second, plaintiff sought to enter a default judgment against Kemprowski, but defendants sought to vacate the default. Having stricken their pleadings, Solucorp and London were in default. Kemprowski, having failed to file an answer to the amended complaint, was also in default. Each defendant was required to advance a meritorious defense; none did so.

To be sure, a party seeking to vacate a default as opposed to a default judgment faces a lower threshold of proof. N.J. Mfr's Ins. Co. v. Prestige Health Grp., 406 N.J. Super. 354, 360 (App. Div.), certif. denied, 199 N.J. 543 (2009). Kemprowski needed only to demonstrate good cause. Ibid. Here, however, Kemprowski fails to advance any reason for not seeking relief earlier. Assuming his attorney received the motion to file an amended complaint on July 30, 2009, his attorney provided no explanation of the efforts he or anyone in his firm made to ascertain the status of the motion. Coupled with the failure to assert a meritorious defense, denial of his motion to vacate the default and confirmation of the arbitration award is appropriate.

As to Solucorp and London, we consider their circumstances and efforts on the day of the November 10, 2009 arbitration and thereafter as falling considerably short of the circumstances and efforts that satisfy the extraordinary circumstances standard. Whether defendants should have moved to waive the trial de novo bar or to simply restore the matter to the arbitration calendar, the motion should have been made within thirty days of the arbitration hearing. Defendants did not request an adjournment. We presume counsel was aware of the consequences of a failure to appear. We also presume he was aware of the strict time limits associated with the arbitration process. The arbitration award must be filed within ten days of the hearing. R. 4:21A-5. A dissatisfied party must request a trial de novo within thirty days after filing of the arbitration award. R. 4:21A-6(b)(1). An application to confirm an arbitration award is expected to be filed within fifty days of the filing of the award. R. 4:21A-6(b)(2). Yet defendants' motion papers are silent about their actions following the November 10 arbitration hearing. Even if we assume defendants requested an adjournment, in light of the strict timetable associated with arbitration, we would expect further inquiries, but defendants' motion papers are silent on this issue.

Medical emergencies in staff occur, as do scheduling conflicts. The rules are designed to address these occurrences but relief is afforded only to the diligent. Defendants have not demonstrated the circumstances or the diligence that satisfies the extraordinary circumstances standard.



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