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Alliancebernstein Investments, Inc v. Jeffrey M. Eschert

April 11, 2011

ALLIANCEBERNSTEIN INVESTMENTS, INC., PLAINTIFF-APPELLANT,
v.
JEFFREY M. ESCHERT, DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. C-18-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 16, 2011

Before Judges R. B. Coleman, Lihotz andJ. N. Harris.

This is an appeal from a final judgment springing from a summary action pursuant to New Jersey's version of the Revised Uniform Arbitration Act of 2000 ("Uniform Arbitration Act"), N.J.S.A. 2A:23B-1 to -32. Plaintiff AllianceBernstein Investments, Inc. (AllianceBernstein) unsuccessfully sought to enjoin arbitration of claims brought by a former employee, defendant Jeffrey M. Eschert,*fn1 seeking remedies for alleged breach of contract and tortious conduct committed both during and after Eschert's employment with AllianceBernstein.*fn2 Because we conclude that at the time Eschert commenced the arbitration proceedings the parties were no longer contract partners to an agreement to arbitrate, we reverse and order a permanent stay of the arbitration proceedings. This result will not foreclose Eschert from pursuing remedies in an appropriate judicial forum, and we express no opinion about either the quality of Eschert's claims or the strength of AllianceBernstein's defenses.

I.

In order to understand how the parties found their way into arbitration and then into court, we must briefly outline the turbulent history of troubles between the parties. In so doing, we will rely upon the limited factual record presented in the Chancery Division, together with what we can cobble together from the joint appendix presented by the parties. Our goal is to set the stage to answer the question of where the parties' dispute will be resolved, and not to address the substantive merits of their respective cases. Specifically, the scope and effect of a release between the parties is not material to our threshold determination of the arbitrability of the parties' underlying dispute.

A.

Eschert commenced his employment with AllianceBernstein in 1998. His job ended on December 10, 2003, upon the execution of the parties' Separation Agreement and Release (Separation Agreement), which memorialized, among other things, that Eschert's last day of work was actually one month earlier, on November 14, 2003.

AllianceBernstein was a member of the National Association of Securities Dealers (NASD).*fn3 While Eschert was employed at AllianceBernstein, he was deemed a "person associated with a member" within the meaning of the applicable NASD rules and bylaws. When his employment began, Eschert executed a Form U-4, "Uniform Application for Securities Industry Registration or Transfer." The Form U-4 contained a mandatory arbitration clause, which provided:

I agree to arbitrate any dispute, claim or controversy that may arise between me and my firm . . . that is required to be arbitrated under the rules, constitutions, or by-laws of the [NASD] as may be amended from time to time.

The NASD's Code of Arbitration (the "Code") governed NASD arbitrations. Rule IM-10100(a) provided that when members of the NASD and persons associated with members "fail to submit a dispute for arbitration under the [Code] as required," they engage in "conduct inconsistent with just and equitable principles of trade" and violate the Code. Rule 10101 provided that the Code "is prescribed and adopted . . . for the arbitration of any dispute, claim, or controversy . . . arising out of the employment or termination of employment of associated person(s) with any member." Rule 10201(a) set forth the matters for which arbitration was required. It provided, in pertinent part:

Except as provided in paragraph (b) . . . a dispute, claim, or controversy eligible for submission under the Rule 10100 Series between or among members and/or associated persons . . . or arising out of the employment or termination of employment of such associated person(s) with such member, shall be arbitrated under this Code, at the instance of . . . a member against a person associated with a member or a person associated with a member against a member.

As noted, Eschert's employment with AllianceBernstein ended no later than December 10, 2003, upon the implementation of the parties' Separation Agreement. Pertinent to this appeal is Paragraph 14:

The Parties acknowledge and agree that this Agreement constitutes the complete agreement between them and that no oral modification of this Agreement is permissible. The parties further acknowledge and agree that this Agreement and the terms contained herein supersedes all previous contracts and agreements between or among the Company, Releasees, Releasees' Agents and Employee, and that all such contracts and ...


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