June 18, 2013
CHARLES F. WASKEVICH, JR., Plaintiff-Respondent,
HEROLD LAW, P.A., ANTHONY J. REITANO and HOWARD G. KATZ, Defendants-Appellants.
Argued March 13, 2013
On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-5854-11.
Gregory T. Alvarez argued the cause for appellants (Jackson Lewis, L.L.P., attorneys; Mr. Alvarez, James M. McDonnell and Leslie A. Saint, on the briefs).
Charles Z. Schalk argued the cause for respondent (Mauro, Savo, Camerino, Grant & Schalk, P.A., attorneys; Mr. Schalk, of counsel and on the brief).
Before Judges Grall, Simonelli and Koblitz.
In this case involving an employment dispute between attorneys, we enforce federal law requiring bifurcation when some claims between parties must be arbitrated and one statutory claim between the same parties must be tried. Defendants Herold Law, P.A., Anthony J. Reitano and Howard G. Katz, appeal from orders of January 6, 2012 and February 3, 2012, denying their motion to send all of the claims to arbitration pursuant to the arbitration clause in plaintiff Charles F. Waskevich, Jr.'s employment contract. We determine that the court erred only in refusing to bifurcate to compel binding arbitration of the non-Law Against Discrimination (LAD) claims.
Waskevich joined Herold Law at age fifty-three, after spending more than fourteen years at a large New Jersey law firm as a labor and employment attorney. After promotion to shareholder, Waskevich signed an employment agreement on January 14, 2010, effective October 12, 2009, which contained an arbitration clause stating that the parties agree to arbitrate "any controversy, claim, or dispute arising out of or relating to this Agreement, including the construction, interpretation, performance, breach, termination, enforceability, or validity thereof . . . ."
In his complaint, Waskevich asserts LAD violations, breach of contract, breach of implied duty of good faith, tortious interference with contract, and tortious interference with prospective economic advantage. He alleges that defendants breached several aspects of the employment agreement relating to benefits owed and his termination.
Additionally, Waskevich asserts a series of age-based discrimination practices by defendants in violation of the LAD. During the course of his employment at Herold Law, P.A., Waskevich alleges that he was subjected to age discrimination that resulted in his resignation as a shareholder on December 10, 2010, effective December 31, 2010. Thereafter, Waskevich claims that he sought to remain an employee, but the firm terminated him after he did not accept an unfair remuneration proposal.
Defendants responded to the complaint with a pre-answer motion to compel arbitration. The judge denied defendants' motion, holding that under Garfinkel v. Morristown Obstetrics & Gynecology Associates, 168 N.J. 124 (2001), the parties did not contractually agree to arbitrate LAD claims. Additionally, to promote judicial economy and avoid granting a benefit to the party with greater financial resources, the judge denied defendants' application to bifurcate the non-LAD claims and send those to arbitration.
Because "the issues involve contract interpretation and the application of case law to the facts of the case, the appellate court's standard of review is de novo." Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cantone Research, Inc., 427 N.J.Super. 45, 57 (App. Div.), certif. denied, 212 N.J. 460 (2012). Thus, the "'trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.'" Alfano v. BDO Seidman, LLP, 393 N.J.Super. 560, 573 (App. Div. 2007) (quoting Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).
"The substantive protection of the [Federal Arbitration Act (FAA)] applies irrespective of whether arbitrability is raised in federal or state court." Martindale v. Sandvik, Inc., 173 N.J. 76, 84 (2002). The FAA, 9 U.S.C.A. §§ 1-3, "declare[s] a national policy favoring arbitration[, ]" Southland Corp. v. Keating, 465 U.S. 1, 10, 104 S.Ct. 852, 858 79 L.Ed.2d 1, 12 (1984), and provides that a "written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C.A. § 2. That section "reflects both 'a liberal federal policy favoring arbitration, ' and 'the fundamental principle that arbitration is a matter of contract.'" NAACP of Camden Cnty. E. v. Foulke Mgmt. Corp., 421 N.J.Super. 404, 424 (App. Div. 2011) (citations omitted).
Similarly, New Jersey law favors arbitration agreements. "The 2003 [New Jersey] Arbitration Act, N.J.S.A. 23B-1 to -32, 'continues our State's long-standing policy to favor voluntary arbitration as a means of dispute resolution.'" EPIX Holdings Corp. v. Marsh & McLennan Cos., 410 N.J.Super. 453, 471 n.7 (App. Div. 2009) (quoting Block v. Plosia, 390 N.J.Super. 543, 551 (App. Div. 2007)).
When determining the scope of arbitration agreements, courts recognize "a 'presumption of arbitrability in the sense that an order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.'" Id. at 471 (quoting Caldwell v. KFC Corp., 958 F.Supp. 962, 973 (D.N.J. 1997)). In that sense, courts "place arbitration agreements on an equal footing with other contracts, and enforce them according to their terms[.]" AT&T Mobility LLC v. Concepcion, 563 U.S. ___, ___, 131 S.Ct. 1740, 1745-46, 179 L.Ed.2d 742, 751 (2011) (citations omitted). "Although the FAA applies to both state and federal judicial proceedings, state contract-law principles generally govern a determination whether a valid agreement to arbitrate exists." Hojnowski v. Vans Skate Park, 187 N.J. 323, 342 (2006); see also NAACP of Camden Cnty. E., supra, 421 N.J.Super. at 428.
"[B]ecause an agreement to arbitrate is a contract, 'only those issues may be arbitrated which the parties have agreed shall be.'" Curtis v. Cellco P'ship, 413 N.J.Super. 26, 35 (App. Div.) (quoting Garfinkel, supra, 168 N.J. at 132), certif. denied, 203 N.J. 94 (2010). Thus, courts examine arbitration provisions "on a case-by-case basis." Rockel v. Cherry Hill Dodge, 368 N.J.Super. 577, 580 (App. Div.), certif. denied, 181 N.J. 545 (2004).
When a party files a motion to compel arbitration, the court enforces the arbitration clause "when the contract provisions (1) contain language reflecting a general understanding of the type of claims included in the waiver; or (2) provide that, by signing, the [party] agrees to arbitrate 'all statutory claims arising out of the relationship, ' or any claim or dispute based on a federal or state statute." Curtis, supra, 413 N.J.Super. at 35-36 (quoting Gras v. Assocs. First Capital Corp., 346 N.J.Super. 42, 56-57 (App. Div. 2001), certif. denied, 171 N.J. 445 (2002)).
We agree with the judge that the arbitration agreement in question here does not apply to Waskevich's LAD claims as the language in the agreement is similar to the agreement in Garfinkel, supra, 168 N.J. at 134, where our Supreme Court found no meeting of the minds to waive a jury trial as to any LAD claim. The fact that Waskevich is an experienced employment lawyer who signed an agreement prepared by other lawyers does not change the legal analysis of the enforceability of the contract. See id. at 135-136. The judge also correctly distinguished this case from Martindale, in which our Supreme Court enforced an arbitration agreement even as to a LAD claim, because the language of the agreement in Martindale was much broader and did not limit arbitration to issues arising out of the employment agreement. 173 N.J. at 81, 96.
In Garfinkel, where our Supreme Court held that the LAD claims should not go to arbitration, the Court determined that all issues should be tried because "'[j]ust as we view piecemeal litigation as anathema, we also look with disfavor upon the unnecessary bifurcation of disputes between judicial resolution and arbitration.'" 168 N.J. at 137 (quoting Ohio Cas. Ins. Co. v. Benson, 87 N.J. 191, 199 (1981)). However, the Court did not consider the requirements of the FAA. Pursuant to the FAA, "federal law 'requires piecemeal resolution when necessary to give effect to an arbitration agreement.'" EPIX, supra, 410 N.J.Super. at 479 (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20, 103 S.Ct. 927, 939, 74 L.Ed.2d 765, 782 (1983)). In EPIX, we determined that bifurcation was required even though certain parties to the litigation were not parties to the arbitration agreement and thus the plaintiff would have to litigate in two forums. Id. at 479-80.
Although the trial judge not unreasonably determined that the arbitrable issues should remain in court in part to avoid increased counsel fees, we are bound by the FAA as interpreted by the United States Supreme Court. The United States Supreme Court has interpreted the FAA to require that in these circumstances the State court must bifurcate the issues. KPMG LLP v. Cocchi, 565 U.S. ___, ___, 132 S.Ct. 23, 24, 181 L.Ed.2d 323, 325 (2011). The Court stated that the FAA requires, "that if a dispute presents multiple claims, some arbitrable and some not, the former must be sent to arbitration even if this will lead to piecemeal litigation." Ibid. (citing Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217, 105 S.Ct. 1238, 1240-41, 84 L.Ed.2d 158, 163 (1985)).
We reverse the judge's decision not to bifurcate the claims. The LAD claim must be tried and the remaining claims sent to arbitration, as required under the parties' arbitration agreement.
Affirmed in part and reversed in part. We remand for entry of an order consistent with this opinion. We do not retain jurisdiction.