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David R. Edenbaum, D.M.D v. Teresa Addiego-Moore


January 9, 2012


On appeal from the Superior Court of New Jersey, Chancery Division, Burlington County, Docket Nos. C-106-10 and C-002-11.

Per curiam.


Argued December 6, 2011 - Before Judges Carchman and Fisher.

In these appeals, we examine arguments relating to the future disposition of the claims asserted in suits filed by two dentists, David R. Edenbaum and Teresa Addiego-Moore, who are currently the equal and sole owners of a dental practice, State of the Art Smiles, P.A. (SAS).*fn1 In his suit, Edenbaum claims he is an oppressed shareholder. At issue is whether his claims have been rendered arbitrable by a stipulation in the parties' shareholder agreement. Addiego-Moore's suit alleges Edenbaum's breach of a different agreement relating to a leased vehicle (the BMW agreement), which contains Edenbaum's promise, upon default, to transfer to Addiego-Moore a portion of his interest in SAS equal to the value of the vehicle; that agreement does not contain an arbitration clause.

As the result of motions filed in the trial court, the Chancery judge dismissed Edenbaum's complaint, as well as the counterclaim he filed in Addiego-Moore's separate suit,*fn2 determining that Edenbaum's oppressed-shareholder suit, and his other related claims, were arbitrable. The judge based his decision on the parties' shareholder agreement, which states in principal part:

Any dispute, difference, disagreement, or controversy between or among the parties hereto, arising out of or in connection with this Agreement or the interpretation of the meaning or construction of this Agreement, shall be referred to a single arbitrator agreed upon by the parties.

Edenbaum acknowledges this stipulation ranges wide but urges its inapplicability because his oppressed-shareholder claim is a creature of statute, N.J.S.A. 14A:12-7, and does not arise from the shareholder's agreement. He claims the Legislature intended that such actions would be litigated only in the Superior Court, citing those parts of the statute that direct that "[t]he Superior Court . . . may appoint a custodian, appoint a provisional director, order a sale of the corporation's stock . . ., or enter a judgment dissolving the corporation," N.J.S.A. 14A:12-7(1) (emphasis added), and that authorize "the court [to] order the sale of all shares of the corporation's stock held by any other shareholder," N.J.S.A. 14A:12-7(8) (emphasis added).

We find unpersuasive the argument that the Legislature's reference to "the superior court" or "the court" in N.J.S.A. 14A:12-7 implicitly mandated that only a court and not an arbitrator is empowered to resolve oppressed shareholder disputes and impose the authorized remedies. This State has a strong public policy favoring arbitration as a means of dispute resolution and, to that end, liberally construes agreements to arbitrate. Marchak v. Claridge Commons, Inc., 134 N.J. 275, 281-82 (1993). Consequently, our courts have compelled arbitration of a variety of statutory claims, including claims based on: the Law Against Discrimination, N.J.S.A. 10:5-1 to -49, see Garfinkel v. Morristown Obstetrics & Gynecology Assocs., P.A., 168 N.J. 124, 135-36 (2001); the Consumer Fraud Act, N.J.S.A. 56:8-1 to -106, see Gras v. Assocs. First Capital Corp., 346 N.J. Super. 42, 52 (App. Div. 2001), certif. denied, 171 N.J. 445 (2002); the Racketeer Influenced and Corrupt Organizations Act, N.J.S.A. 2C:41-1 to -6.2, see Caruso v. Ravenswood Developers, Inc., 337 N.J. Super. 499, 505 (App. Div. 2001); and the Antitrust Act, N.J.S.A. 56:9-1 to -19, see EPIX Holdings Corp. v. Marsh & McLennan Companies, Inc., 410 N.J. Super. 453, 478-79 (App. Div. 2009). We have enforced arbitration agreements notwithstanding that causes of action authorized by statute, like N.J.S.A. 14A:12-7, refer to "the court" as the forum empowered to grant relief. See, e.g., N.J.S.A. 56:8-19 (stating that, in a consumer fraud action, "the court shall, in addition to any other appropriate legal or equitable relief, award threefold the damages sustained by any person in interest"); N.J.S.A. 56:9-10a (stating that, in an antitrust action, "[t]he [s]uperior [c]court shall have jurisdiction to prevent and restrain violations"). We, thus, reject Edenbaum's argument that the Legislature's choice of language in N.J.S.A. 14A:12-7 manifests an intent to exclude arbitration and to require that only a court may impose the relief to which an oppressed shareholder might be entitled.

It bears mentioning that the rights provided by N.J.S.A. 14A:12-7 are not dampened by arbitration. "By agreeing to arbitrate a statutory claim, a party does not forgo the substantive rights afforded by the statute; it only submits to their resolution in an arbitral, rather than a judicial, forum." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 3354, 87 L. Ed. 2d 444, 456 (1985). See also Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 26, 111 S. Ct. 1647, 1652, 114 L. Ed. 2d 26, 37 (1991); Gras, supra, 346 N.J. Super. at 49. Indeed, the Arbitration Act has installed the Superior Court as an available forum for the issuance of provisional remedies, such as appointment of a custodian or provisional director, prior to arbitration, N.J.S.A. 2A:23B-8a, or, ultimately, for the confirmation, modification or vacation of any award or remedy imposed by the arbitrator upon the grounds provided by the Legislature, N.J.S.A. 2A:23B-22 to -24.*fn3 We, thus, reject Edenbaum's argument that his rights as an oppressed shareholder will be limited through the litigation of his claims in arbitration rather than in court.

Edenbaum further argues that the entire controversy doctrine precludes arbitration of his claims because one aspect of their disputes -- Addiego-Moore's complaint, which alleges a breach of the BMW agreement -- is not arbitrable.*fn4 That is, he asserts the entire controversy doctrine precludes a resolution of some disputes in arbitration and others in court. That is certainly the consequence of the orders under review, but it is not a reason for disregarding the parties' agreement to arbitrate. Prior decisions have shown no hostility to the possibility of multiple proceedings when an arbitration agreement does not blanket all related claims, leaving some to be adjudicated elsewhere. See, e.g., Konieczny v. Micciche, 305 N.J. Super. 375, 388 (App. Div. 1997); Jersey City Police Officers Benevolent Assoc. v. City of Jersey City, 257 N.J. Super. 6, 14-15 (App. Div. 1992). Edenbaum's argument that there should be no arbitration of any claims if there cannot be arbitration of all claims reveals a fundamental misunderstanding about the entire controversy doctrine.

To be sure, the entire controversy doctrine is an equitable preclusionary principle intended to discourage fragmentation of litigation and to encourage the joinder of related claims in a single suit. K-Land Corp. No. 28 v. Landis Sewerage Auth., 173 N.J. 59, 70 (2002). Its guiding principle is judicial fairness, id. at 74; see also Continental Ins. Co. v. Honeywell Int'l, Inc., 406 N.J. Super. 156, 184 n.19 (App. Div. 2009); Jersey City Police Officers, supra, 257 N.J. Super. at 13, thereby imposing an obligation on litigants to bring additional claims to the court's attention where they might be sensibly managed. The doctrine does not compel the litigation of all claims in the same action at the same time when judicial economy would not be served. Accordingly, we reject Edenbaum's argument that the entire controversy doctrine requires a rejection of Addiego-Moore's application for arbitration.

Notwithstanding our disposition of the issues, we recognize Edenbaum's legitimate concern about the potential for inconsistent rulings or the duplication of efforts generated by separate proceedings. We are confident these concerns may be addressed through proper management of both sets of claims. The Legislature has charged courts, in compelling arbitration, to "protect the effectiveness of the arbitration proceeding to the same extent and pursuant to the same conditions as if the controversy were the subject of a civil action." N.J.S.A. 2A:23B-8a; see also N.J.S.A. 2A:23B-7f, g. As a result, in order to eliminate needless or duplicative efforts and to ward off the potential for inconsistent rulings, the trial court may determine that it is better to stay Addiego-Moore's action pending disposition of the arbitrated claims, or the court may first adjudicate Addiego-Moore's action and then permit the arbitration to proceed, or any other combination that most expeditiously, efficiently and fairly sets in motion the adjudication of the arbitrable and non-arbitrable claims.*fn5

Because this matter has come before us during the infancy of these disputes and because the record reveals little about the merits of the parties' claims, we are in no position to offer guidance as to the most efficient way of managing these matters. We leave these questions to be considered by the Chancery judge following our remand.

Affirmed in part; remanded in part. We do not retain jurisdiction.

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