539GATES, LLC, EFRAIM ALTER and RAFI MAMAN v. HMC HOLDING CORP., a/k/a HMC HOLDING, INC., and MESHULAM HAAS and EYAL KALFA, individually

NOT FOR PUBLICATION WITHOUT THE
                      APPROVAL OF THE APPELLATE DIVISION
     This opinion shall not "constitute precedent or be binding upon any court."
      Although it is posted on the internet, this opinion is binding only on the
        parties in the case and its use in other cases is limited. R. 1:36-3.




                                       SUPERIOR COURT OF NEW JERSEY
                                       APPELLATE DIVISION
                                       DOCKET NO. A-0221-16T3

539 GATES, LLC, EFRAIM
ALTER and RAFI MAMAN,

        Plaintiffs-Respondents,

v.

HMC HOLDING CORP., a/k/a
HMC HOLDING, INC., and
MESHULAM HAAS,

        Defendants-Appellants,

and

EYAL KALFA, individually,

     Defendant.
__________________________________

              Submitted January 29, 2018 – Decided February 26, 2018

              Before Judges Sabatino and Ostrer.

              On appeal from Superior Court of New Jersey,
              Chancery Division, General Equity, Bergen
              County, Docket No. C-000117-14.

              Allan R. Freedman, attorney for appellants.

              William Goldberg, attorney for respondents.

PER CURIAM
     This matter involves two successive arbitrations concerning

disputes among the members of a New York limited liability company,

539 Gates, LLC ("539 Gates" or "the LLC").       Defendants HMC Holding

Corp. ("HMC") and Meshulam Haas appeal from Judge Robert P.

Contillo's amended order dated August 11, 2016 confirming and

enforcing the second arbitration award.

     The factual and procedural background is substantially set

forth in Judge Contillo's written opinion, and we need not repeat

it in detail here.     HMC is a fifty percent owner and shareholder

of 539 Gates.    Haas is the sole owner of HMC.         Haas formed 539

Gates with plaintiffs Efraim Alter and Rafi Maman.               539 Gates

bought three buildings in Brooklyn, renovated them, and then sold

them as eighteen condominium units.       The LLC's Operating Agreement

specified that the consent of the general manager, defined to be

jointly   Haas   and   Alter,   was   required   for   certain    business

decisions.

     The record reflects that Alter took charge of the company

without much or any involvement from Haas.         HMS and Haas allege

Alter diverted funds, including entering into a contract on behalf

of 539 Gates with an electrical contractor, LEA, which Alter owned

or controlled.

     Disputes among the business owners were initially presented

before the first arbitrator, Peter M. Collins. That arbitration

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concerned Haas' demand for access to the books and records of 539

Gates, and a claim for the restitution of funds allegedly siphoned

from the LLC to Alter and Maman.

     On January 9, 2014, Arbitrator Collins issued a three-page

decision ruling in favor of HMC and Haas.          Among other things, the

arbitrator found that Alter and Maman violated the Operating

Agreement by writing checks from the LLC's account without a co-

signature by Haas.    The arbitrator directed that monies paid and

disbursed from 539 Gates to Alter and Maman, each in the amount

of $2,192,787, be paid into an account in the name of 539 Gates,

plus twelve percent interest, or about $3.5 million each.                 The

arbitrator also determined that because Alter had caused invoices

of LEA to be paid from the LLC without Haas's approval, those sums

likewise must be repaid to the LLC.

     HMC sought enforcement of the first arbitration award by the

Supreme Court of the State of New York in New York County.                  On

September 5, 2014, Judge Eileen Rakower of that Court issued an

order confirming Arbitrator Collins' award without opposition,

specifically requiring both Alter and Maman to return about $3.5

million each to the LLC and granting Haas/HMC access to the LLC's

books and records.

     A   second   arbitration   was       then   conducted   concerning   the

disposition of profits from the sale of the eighteen condo units.

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That arbitration was heard by a different arbitrator, Norman H.

Rosen.   As part of the calculation of net profits, the arbitrator

needed to consider the legitimacy and reasonableness of the LEA

invoices.

     On March 15, 2016, Arbitrator Rosen issued an award and

written decision, determining that the LLC's net profits from the

condo sales were $207,279.      The second arbitrator found it was

proper to include the amounts invoiced by LEA in the course of

construction, because that work was performed at arm's length on

commercially   reasonable    terms.    He   found   credible   Alter's

testimony that LEA was able to do the electrical work cheaper than

other contractors who had submitted bids.     He further noted that

Haas' approval was not required for the LEA contract, because at

the time "Haas was not actively participating in the business, and

that decisions had to be made without his approval for the benefit

of all of the members.      By not performing as a General Manager,

Haas waived his right to give consent."

     539 Gates, Alter, and Maman moved in the Superior Court before

Judge Contillo to confirm the second arbitration award.        Haas and

HMC interposed an exception to the award, asserting that the

findings made by Arbitrator Rosen with respect to the LEA contract

and Haas's "waiver" were inconsistent with the first arbitration

award.

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     According to Haas and HMC, the first arbitrator heard and at

least impliedly rejected the claim of Alter and Maman that Haas

had acted like a "phantom" and that he had voluntarily absented

himself from the business.       Haas and HMC argue it is unjust to

make them as co-members of the LLC share in the costs of payment

to LEA, and that the LEA costs should not have been subtracted by

the second arbitrator in calculating the LLC's net profits.

     Judge Contillo affirmed the second arbitrator's award, and

did not grant any modification to Haas and HMC. The judge reasoned

that under the revised New Jersey Arbitration Act, 
N.J.S.A. 2A:23B-

1 to -32, the grounds for our courts to set aside an arbitration

award are very limited.      The judge rejected the argument of Haas

and HMC that principles of preclusion (i.e., res judicata and

collateral estoppel) required the second arbitrator to find no

waiver by Haas of his right to object to payment of the LEA

invoices.     The judge determined that the issues presented in the

two arbitrations, although similar, were not identical.        The judge

also noted that the first arbitrator had never ruled specifically

on the waiver issue, and thus the two awards are not necessarily

in conflict.

     On appeal, Haas and HMC argue that the first arbitration

award   and   the   second   arbitration   award   are   inherently   and

fundamentally inconsistent with respect to the phantom/waiver

                                    5                            A-0221-16T3
question, as well as with respect to the charges made by LEA. They

invite us to remand the matter to have the trial court examine a

transcript of the first arbitration, which they contend will show

that the "phantom" argument was specifically made to the first

arbitrator and was not successful.     Hence, appellants contend that

principles of res judicata and collateral estoppel prevent the

second arbitrator from having the ability to find that Haas and

HMC waived their right to object to the LEA invoices.

     Having fully considered appellants' contentions, we affirm

the trial court's decision, substantially for the sound reasons

expressed by Judge Contillo.     As the judge correctly recognized,

the judiciary's role in reviewing arbitration awards under the

statute is a very limited one. See 
N.J.S.A. 2A:23B-23 (delineating

various limited grounds); see also Malik v. Ruttenberg, 
398 N.J.

Super. 489, 495 (App. Div. 2008) (noting the statute "precludes

judicial   interference   with   an   arbitrator's    award   except    in

extremely limited circumstances").      The grounds for modification

of an arbitration award are likewise very restricted. See 
N.J.S.A.

2A:23B-24 (authorizing modification by the court for such things

as   mathematical   miscalculations,    mistaken     descriptions,     and

imperfections as to form that do not affect the merits of the

award).    We agree with Judge Contillo that none of the points



                                  6                              A-0221-16T3
asserted by appellants suffice to meet those stringent standards

to set aside or modify an arbitration award.

     The judge did not misapply principles of res judicata, see

Wadeer   v.   N.J.     Mfrs.    Ins.   Co.,   
220 N.J.    591,    606-07    (2015)

(articulating purposes behind res judicata and factors to be

considered by a court when determining its applicability), or

collateral estoppel, see First Union Nat'l Bank v. Penn Salem

Marina, Inc., 
190 N.J. 342, 352 (2007) (listing the requirements

for collateral estoppel's application), in his analysis.                 We agree

with the judge that the precise issues presented and decided in

the two arbitrations were not identical.              The question of Haas's

alleged "phantom" role in the company was never decided in the

award    issued   in    the    first   arbitration    and    thus    there    is    no

inconsistency with the express findings made on that subject in

the second arbitration.

     Appellants failed to demonstrate that the second arbitrator's

decision "exceeded his powers," see 
N.J.S.A. 2A:23B-23(a)(4), or

otherwise must be set aside or modified under any of the other

statutory criteria.           We decline their request that the matter be

remanded in order to present a transcript of the first arbitration

award to the trial court as a basis for reconsideration of its

ruling. If such a transcript would have been informative it should

have been presented to the trial court in the first instance.

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Affirmed.




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