FORREST ANTHONY v. ELEISON PHARMACEUTICALS, LLC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

FORREST ANTHONY,

Plaintiff-Appellant,

v.

ELEISON PHARMACEUTICALS, LLC,

ELEISON PHARMACEUTICAL HOLDINGS,

INC., ELEISON INVESTORS, L.P.,

ELEISON INVESTORS, II, L.P.,

ELEISON INVESTORS GENERAL, L.P.,

ELEISON GENERAL, LLC, CAPITAL

SOLUTIONS, INC., EDWIN J. THOMAS,

FRANK SEIDMAN, BRYAN WOOD, and

LANE WIGGERS,

Defendants-Respondents,

and

ELEISON PHARMACEUTICALS INC.,

Defendant.

______________________________________

July 18, 2016

Submitted February 29, 2016 Decided

Before Judges Fasciale, Nugent and Higbee.

On appeal from Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-0867-15.

Swartz Swidler, LLC, attorneys for appellant (Kurt David Raatzs, on the brief).

Kang Haggerty & Fetbroyt, LLC, attorneys for respondents (Edward T. Kang, Jacklyn Fetbroyt and Jason E. Powell, on the brief).

PER CURIAM

This appeal involves a dispute over the applicability of an arbitration clause in an employment contract. Plaintiff Forrest Anthony appeals from a September 21, 2015 order that granted defendants' motion to compel arbitration and dismissed the five counts of his complaint and amended complaint. We vacate the September 21, 2015 order and remand for further proceedings.

Central to the parties' dispute is a February 24, 2012 employment agreement (Agreement). According to the Agreement, Eleison Pharmaceuticals, LLC (Eleison or employer), a Delaware limited liability company, was "issuing $2,000,000 of Class A Units to [an investor] and the execution and delivery of this Agreement is a condition precedent to the purchase of such Units by the Investor." The employer hired plaintiff to serve as its Vice President and Chief Medical Officer for three years. The Agreement, among other terms, established plaintiff's base salary as $250,000 and provided for bonuses; included terms under which the employer could discharge plaintiff and plaintiff could terminate the agreement; stated the "Agreement . . . shall be governed by, and all questions relating to its validity, interpretation, enforcement, and performance . . . shall be construed in accordance with, the laws of the State of Delaware"; and included this dispute resolution clause: "The parties agree that should any dispute arise out of this Agreement, a phased dispute resolution process shall resolve the dispute." The dispute resolution clause detailed the "phased" process for resolving disputes, culminating in binding arbitration.

On April 10, 2015, plaintiff, a Pennsylvania resident, filed a five-count complaint in Superior Court against the employer and other entities.1 In addition to setting forth some terms of the Agreement, plaintiff alleged he was owed $740,384.62 in salary as of February 10, 2015, but had been paid only $476,789.37. He further alleged during the course of his employment he worked in New Jersey, and "[b]etween September 1, 2014 and February 10, 2015, [he] worked for [d]efendants, on average, forty-eight . . . hours per week," but was paid no salary.

Based on these factual allegations, he pled four causes of action under the New Jersey Wage Payment Act ("Wage Act"), N.J.S.A. 34:11-2 to -68: failing to pay him at least once per month; failing to pay him minimum wages; failing to pay him overtime compensation; and failing to pay him all wages due and owing upon separation of employment. He also pled a fifth cause of action for breach of contract.

Defendants, with one exception, filed a motion to dismiss the complaint for failure to state a cause of action upon which relief could be granted.2 Defendants argued: "Plaintiff, former officer of Eleison, agreed to submit all disputes arising from his employment agreement with Eleison to dispute resolution." Relying on Garfinkel v. Morristown Obstetrics & Gynecology Assoc., P.A., 168 N.J. 124 (2001), defendants argued "it is well-established that employees can agree to arbitrate statutory remedies, including [Law Against Discrimination] claims."3

Plaintiff opposed defendants' motion and filed a motion to correct a mistake in the original complaint. Plaintiff argued his statutory claims arose under the statutes and therefore did not "arise out of [the] Agreement," the latter being a condition precedent to binding arbitration. Defendants opposed the motion to amend the complaint and maintained "[p]laintiff's claims unquestionably arise from the Agreement."4

During oral argument on the motions, defendants made yet another argument. Defendants cited N.J.S.A. 34:11-4.7, "Agreements by employer with employee," which states

It shall be unlawful for any employer to enter into or make any agreement with any employee for the payment of wages of any such employee otherwise than as provided in this act, except to pay wages at shorter intervals than as herein provided, or to pay wages in advance. Every agreement made in violation of this section shall be deemed to be null and void, and the penalties in this act provided may be enforced notwithstanding such agreement; and each and every employee with whom any agreement in violation of this section shall be made by any such employer, or the agent or agents thereof, shall have a right of civil action against any such employer for the full amount of his wages in any court of competent jurisdiction in this State.

[(emphasis added).]

Defendants argued, "[u]nder [s]ection 4.7 there is only a private right of action if you allege the existence of an employment agreement that violates the law." They noted plaintiff was not alleging the Agreement violated the Wage Act. Consequently, plaintiff had no statutory right to waive. Defendants asserted the existence of a statutory cause of action was central to case law concerning the validity of alternate dispute provisions waiving an employee's statutory remedy. Defendants also argued strict enforcement of plaintiff's Wage Act claims would lead to absurd results.

The court granted defendants' motion, based in part on their new argument. The court determined the language in N.J.S.A. 34:11-4.7 was "clear." The court explained the statute created a right of action only if the terms of an employment agreement violated the Wage Act, and that was not what plaintiff was claiming. Rather, plaintiff was asserting a cause of action based on defendants' failure to make payments required under a valid employment agreement. "So, certainly, there is no private right of action on the part of [plaintiff] to proceed when you read 34:11-4.7." The court also determined the Agreement's dispute resolution clause was clear, and "[t]he real dispute in this case is arising out of this agreement."

The court granted plaintiff's motion to amend the complaint. The court stated it would sign the order permitting the complaint's amendment, permit plaintiff to file the amended complaint, and following filing of the amended complaint, enter the order dismissing the amended complaint and compelling dispute resolution.5 After those events occurred, plaintiff appealed from the final order.

On appeal, plaintiff first argues the trial court erred by concluding the Wage Act provides no right of civil action other than the right of civil action expressly provided in N.J.S.A. 34:11-4.7. We agree. We disapproved such a restrictive interpretation of the Wage Act in Winslow v. Corp. Exp., Inc., 364 N.J. Super. 128, 136 (App. Div. 2003). We noted, "even in the absence of a statutory provision such as N.J.S.A. 34:11-4.7 which expressly authorizes a private cause of action, our courts have readily found an implied private right of action in statutes enacted to protect employees from wrongful conduct by employers." Id. at 137

Defendants argue, implausibly, "[t]he trial court did not hold nor have [d]efendants contended upon motion to dismiss that [p]laintiff does not have a private cause of action with regard to his [Wage Act] claims." The transcript of oral argument on the motion belies this assertion. Defendants' argument is without sufficient merit to warrant further discussion in a written opinion. R. 2:11-3(e)(1)(E).

Further, the trial court erred in determining the arbitration clause constituted a clear waiver by plaintiff of his right to pursue his claims in a judicial forum.

Our review of orders compelling arbitration is de novo. Hirsch, supra, 215 N.J. at 186. Arbitration is, fundamentally, a matter of contract. NAACP of Camden Cnty. East v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 424 (App. Div.), certif. granted, 209 N.J. 96 (2011), appeal dismissed, 213 N.J. 47 (2013). Our Supreme Court "has stressed that '[i]n the absence of a consensual understanding, neither party is entitled to force the other to arbitrate their dispute. Subsumed in this principle is the proposition that only those issues may be arbitrated which the parties have agreed shall be.'" Garfinkel, supra, 168 N.J. at 132 (quoting In re Arbitration Between Grover & Universal Underwriters Ins. Co., 80 N.J. 221, 228 (1979)).

The validity of an arbitration clause is generally an issue to be decided under relevant state law principles that apply to the formation of contracts. Martindale v. Sandvik, Inc., 173 N.J. 76, 85-86 (2002). The New Jersey Supreme Court has addressed arbitration clauses in the context of employment and consumer contracts, stating

In the employment setting, we have stated that we would "not assume that employees intend to waive [their rights under the Law Against Discrimination] unless their agreements so provide in unambiguous terms." Garfinkel, supra, 168 N.J. at 135. We indicated that although a waiver-of-rights provision need not "list every imaginable statute by name to effectuate a knowing and voluntary waiver of rights," employees should at least know that they have "agree[d] to arbitrate all statutory claims arising out of the employment relationship or its termination." Ibid.

We emphasize that no prescribed set of words must be included in an arbitration clause to accomplish a waiver of rights. Whatever words compose an arbitration agreement, they must be clear and unambiguous that a consumer is choosing to arbitrate disputes rather than have them resolved in a court of law. In this way, the agreement will assure reasonable notice to the consumer. To be clear, under our state contract law, we impose no greater burden on an arbitration agreement than on any other agreement waiving constitutional or statutory rights.

[Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 447 (2014), cert. denied, ___ U.S. ___, 135 S. Ct. 2804, 192 L. Ed. 2d 847 (2015) (alterations in original).]

We have applied the principles announced in Atalese to an employment contract between a stockbroker and a brokerage firm. In Barr v. Bishop Rosen & Co., Inc., 442 N.J. Super. 599, 606-07, (App. Div. 2015), certif. denied, 224 N.J. 244 (2016), we stated

Although an arbitration clause need not identify "the specific constitutional or statutory right guaranteeing a citizen access to the courts" that are being waived, it must "at least in some general and sufficiently broad way" convey that parties are giving up their right to bring their claims in court or have a jury resolve their dispute. Atalese, supra, 219 N.J. at 447. An arbitration agreement that fails to "clearly and unambiguously signal" to parties that they are surrendering their right to pursue a judicial remedy renders such an agreement unenforceable. Atalese, supra, 219 N.J. at 444, 448.

In Atalese, the Court provided several examples of language sufficient to meet these expectations. For example, the Court referred to Martindale, where the Court had previously "upheld an arbitration clause because it explained that the plaintiff agreed 'to waive [her] right to a jury trial' and that 'all disputes relating to [her] employment . . . shall be decided by an arbitrator.'" Id. at 444. The Court also approved a clause we considered in Griffin v. Burlington Volkswagen, Inc., 411 N.J. Super. 515, 518 (App. Div. 2010), where the parties, in "agreeing to arbitration," expressed their "understand[ing] and agree[ment] that they are waiving their rights to maintain other available resolution processes, such as a court action or administrative proceeding, to settle their disputes." Atalese, supra, 219 N.J. at 445. And the Court endorsed a clause considered in Curtis v. Cellco P'ship, 413 N.J. Super. 26, 31 (App. Div.), certif. denied, 203 N.J. 94 (2010), where the parties agreed that "[i]nstead of suing in court, we each agree to settle disputes (except certain small claims) only by arbitration." Atalese, supra, 219 N.J. at 445.

[(alterations in original).]

In the case before us, the arbitration clause included no reference to a waiver of plaintiff's statutory rights or a jury trial. Consequently, it did not constitute a valid waiver of plaintiff's right to have his claims decided in a judicial forum. For that reason, we vacate the September 21, 2015 order and remand for further proceedings.6

1 It is difficult to discern from the complaint plaintiff's good faith basis for naming as a defendant any entity other than the employer. As will be discussed, it is also difficult to discern how plaintiff's claims against the other entities, if they do in fact exist, are subject to the dispute resolution clause in plaintiff's Agreement with the employer.

2 Defendant Eleison Pharmaceuticals, Inc., filed neither a motion nor an answer.

3 Notwithstanding their choice of Delaware law as controlling the validity of the Agreement's terms, and despite the "well settled . . . [principle that the law] of the state chosen by the parties will be honored so long as that choice does not contravene a fundamental policy of New Jersey," Turner v. Aldens, Inc., 179 N.J. Super. 596, 601 (App. Div. 1981), the parties have relied upon New Jersey law in the Law Division and on appeal in arguing the validity and applicability of the arbitration clause.

4 Neither party raised the issue of whether those defendants who were non-signatories to the Agreement could compel plaintiff to arbitrate his claims against them. Although non-signatories can compel a signatory to arbitrate on the basis of an agency relationship, Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 192-93 (2013), our Supreme Court has rejected "intertwinement as a theory for compelling arbitration when its application is untethered to any written arbitration clause between the parties, evidence of detrimental reliance, or at a minimum an oral agreement to submit to arbitration."

5 The order granting plaintiff leave to amend the complaint also dismissed the initial complaint's fifth count alleging breach of contract.

6 Defendants note plaintiff did not appeal from the dismissal of his breach of contract claim. Plaintiff appeared to have agreed at oral argument the law required arbitration of his breach of contract claim. Although plaintiff did not argue this issue on appeal, his notice of appeal was from the September 2015 order in its entirety. The order dismissed each count of the amended complaint, including the breach of contract count. Moreover, "[j]ust as we view piecemeal litigation as an anathema, we also look with disfavor upon the unnecessary bifurcation of disputes between judicial resolution and arbitration." Zirger v. Gen. Accident Ins. Co., 144 N.J. 327, 343 (1996) (quoting Ohio Casualty Ins. Co. v. Benson, 87 N.J. 191, 199 (1981)). Having said that, the parties may have commenced arbitration of plaintiff's breach of contract claim. If so, and if either party seeks to withdraw from arbitration based on this opinion, the court on remand can determine if arbitration has proceeded to the point that prejudice to one party should estop the other party from withdrawing from arbitration. Estoppel shall not apply if the parties have not commenced arbitration.