Opinion
DOCKET NO. A-0756-12T1
05-06-2013
ANDREW R. WOLF, ESQ., Individually and as a Fifty-Percent Owner of Galex Wolf, L.L.C. and Galex Wolf Realty I, L.L.C., Plaintiff-Appellant, v. RICHARD S. GALEX, ESQ., Individually and as a Fifty-Percent Owner of Galex Wolf, L.L.C.; and Galex Wolf Realty I, L.L.C.; and LAW OFFICES OF RICHARD GALEX, P.A., a Florida Professional Corporation, Defendants-Respondents. RICHARD S. GALEX, ESQ., Plaintiff, v. ANDREW R. WOLF, ESQ.; GALEX WOLF, L.L.C.; and GALEX WOLF REALTY I, L.L.C., Defendants.
Bruce D. Greenberg argued the cause for appellant (Schwartz Simon Edelstein & Celso, L.L.C. and Lite DePalma Greenberg, L.L.C., attorneys; Mr. Greenberg and Aaron Mizrahi, of counsel and on the brief; Jeffrey A. Shooman, on the brief). Anthony B. Vignuolo argued the cause for respondents (Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., attorneys; Mr. Vignuolo and Steven L. Fox, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Reisner, Harris and Hayden.
On appeal from the Superior Court of New Jersey, Chancery Division, Middlesex County, Docket Nos. C-77-11 and C-68-11.
Bruce D. Greenberg argued the cause for appellant (Schwartz Simon Edelstein & Celso, L.L.C. and Lite DePalma Greenberg, L.L.C., attorneys; Mr. Greenberg and Aaron Mizrahi, of counsel and on the brief; Jeffrey A. Shooman, on the brief).
Anthony B. Vignuolo argued the cause for respondents (Borrus, Goldin, Foley, Vignuolo, Hyman & Stahl, P.C., attorneys; Mr. Vignuolo and Steven L. Fox, on the brief). PER CURIAM
This appeal arises from litigation between two attorneys, Andrew R. Wolf and Richard S. Galex, over the dissolution of their former law firm. Wolf appeals from a September 18, 2012 order, denying his motion to compel arbitration and denying his motion to reconsider a June 27, 2012 order setting aside the settlement agreement that contained the arbitration clause. We conclude that the parties reached a meeting of the minds on the essential terms and agreed to settle the underlying litigation. Among other things, that settlement required arbitration of any disputes arising under the settlement agreement. We therefore reverse the September 18, 2012 order, and remand this matter to the trial court for the purpose of entering an order enforcing the arbitration clause.
An order denying a motion to enforce an arbitration clause is appealable as of right. R. 2:2-3(a). An order setting aside a settlement agreement, on grounds unrelated to an arbitration clause, would ordinarily be interlocutory because it would not conclude the litigation. The June 27, 2012 order did not arise from a motion to compel arbitration, but rather from a motion to enforce other aspects of the settlement agreement. On December 11, 2012, Wolf filed a protective motion for leave to appeal. On January 11, 2013, Part H denied the motion without prejudice to reconsideration by the Part that would decide the merits of the appeal. In the interests of justice, and to avoid any possible issue as to our jurisdiction, we hereby reconsider the motion and grant leave to appeal nunc pro tunc.
I
For the purposes of this opinion, it is not necessary to recite in detail the parties' various grievances against each other. In April 2011, Galex filed a complaint and order to show cause against Wolf, the law firm, and a realty company in which the parties were partners. Wolf, likewise, filed a complaint and order to show cause against Galex and the other two named parties. On July 13, 2011, the trial court consolidated the two complaints and entered a lengthy order resolving, or at least preliminarily addressing, many of the disputes raised in the parties' respective complaints. Since the parties had apparently already begun the mediation process, the order also directed them "to continue mediation" with their chosen mediator, retired Judge Jack L. Lintner, "in an effort to resolve the outstanding disputes between them."
Thereafter, the parties filed motions and cross-motions, each alleging that the other was acting contrary to the July 13 order. One of the disputes concerned the firm's telephone number. After hearing oral argument on December 16, 2011, the trial court directed the parties to return to mediation to try to resolve all of their remaining outstanding disputes.
At the end of a lengthy mediation session on January 16, 2012, the parties each signed a handwritten document setting forth settlement terms. A day or two later, the mediator issued the parties a typed document entitled "TERM SHEET FOLLOWING MEDIATION BEFORE JUDGE LINTNER January 16, 2012." The term sheet essentially translated the handwritten terms contained on the signed document into a more legible form.
Like the handwritten document, paragraph 11 of the term sheet addressed the firm's telephone number and the forwarding of messages for each party. While the handwritten document simply stated, at the top, "ARBITRATION (DISCRETION OF ARB FOR COSTS)," paragraph 15 of the term sheet set forth the arbitration clause in more detail:
Any disputes arising under this agreement shall be subject to binding arbitration before Judge Lintner who will have sole discretion to award fees to the party that
prevails, should he determine in his sole discretion whether fees are justified.
At the end of its many paragraphs, the term sheet contained the following paragraph, which corresponded to a similar handwritten paragraph in the signed agreement:
This agreement is subject to the parties agreeing to the personal property that Galex shall be entitled to take from the partnership's former office; it being understood and agreed that Galex shall disseminate a list of the property he considers to be personal property that he intends to take, within a reasonable time prior to the date he is scheduled to take said property. Any disagreement with regard to such property shall be mediated before Judge Lintner prior to the time Galex is scheduled to take said property.
The next paragraph addressed the need to draft a formal agreement, and the need to exchange releases. The release provision was specifically included in the handwritten document. The typed version read as follows:
This agreement is also subject to agreement by the parties on the language of the formal settlement agreement and releases to be exchanged by the parties, incorporating the provisions of this term sheet.There is no dispute that the term sheet was provided to the parties. The record is devoid of any contemporaneous correspondence from either party to the mediator denying that they had reached a settlement or questioning the accuracy of the term sheet.
On January 20, 2012, Galex's attorney emailed Wolf's attorney a list of office furniture, equipment and personal items Galex intended to remove when he vacated the former firm's offices. In communications dated January 23 and 30, 2012, Wolf's attorney responded that the list was inconsistent with the prior settlement concerning which office furniture each party was entitled to take, and indicated that the dispute should be submitted to binding arbitration before Judge Lintner, per the agreement. On January 30, Galex's attorney faxed a reply, stating that "[m]y client advises that despite the agreement reached in this matter, as he attempted to remove property which was his, he was thwarted by your client . . . ." (emphasis added). The fax further advised that unless Wolf took certain remedial steps, Galex would "consider the agreement reached with Judge Lintner to have been violated and of no further legal effect." (emphasis added.)
However, the next day, Galex's attorney took a different position. This time, he asserted that because paragraph 17 of the agreement, as reflected on the term sheet, stated that it was "subject to" the parties agreeing on the personal property to which Galex was entitled, unless Wolf moderated his position Galex would "reject the agreement and request that the matter proceed on a litigated basis."
Galex's attorney sent a subsequent letter, concerning the telephones. On February 3, 2012, Wolf's attorney responded that the issue had been settled before the mediator and any further dispute over that topic should be resolved through "binding arbitration before Judge Lintner pursuant to Paragraph 15 of the Term Sheet." He also noted that the parties had agreed to mediate any disputes over the personal items from the office. There followed various unproductive correspondence over whether the parties would submit their disputes to arbitration.
On or about March 13, 2012, Galex filed a motion with the trial court to "compel turnover of the telephone number." In his certification in support of the motion, Galex asserted that an agreement over the use of the phone number "was part of a global settlement package which for various reasons was never finalized and to this day remains unsettled." In response, in April 2012, Wolf filed a "notice of cross-motion to enforce settlement." In his certification, Wolf asserted that the parties had settled the case at the January 16 mediation session, and asked the court to confirm that the case was settled. He also asserted that, with respect to the telephone issue, Galex was trying to obtain advantages that were not encompassed by the settlement and were inconsistent with prior orders of the trial court.
Galex's attorney responded by asserting that if Wolf truly believed that the agreement about the telephones was as his papers stated, "then there was no meeting of the minds between the parties" and "there is no agreement, no contract and no enforceable settlement." He also argued that an agreement about Galex's personal property from the office was a "condition precedent to the settlement" and since the parties could not agree on that point, there was no settlement. In an accompanying certification, Galex asserted that the alleged "personal property" included some expensive office equipment and was an important issue in the settlement negotiations.
On June 27, 2012, the trial court entered an order denying Wolf's motion to enforce "the purported settlement agreement." However, in the same order, for reasons explained on the record, the court also firmly and definitively resolved the dispute over the telephone numbers.
On the issue of the alleged settlement, the court issued an oral opinion, reasoning as follows:
On its face it appears that this was an agreement voluntarily entered into by the parties indicated by the initialing. However, while there is a strong public policy favoring settlement of litigation, and no particular writing is required to memorialize the same, as long as there is a meeting of the minds, the presence however of a condition precedent is a prerequisite to the undertaking of the underlying promise. By its very nature, a
conditional promise become absolute only upon performance of the prescribed condition.
In looking at the actual terms of the alleged agreement on [the mediator's] handwritten notes it states the following, quote, at 17:
"Agreement subject to further agreement on personal property to be taken by R.G. from W&G office." End of quote.
Here the terms are clear that the agreement initialed by both parties was subject to the aforementioned provision. Therefore, unless this condition was satisfied, there could be no agreement.
This Court finds that Judge Lintner's typed copy of the agreement indicated that any disagreement with regard to personal property shall be mediated by him.
On July 23, 2012, Wolf served Galex with a demand for arbitration. When Galex refused, Wolf filed a motion to dismiss the lawsuit and compel arbitration or in the alternative for reconsideration of the June 27, 2012 order. The motion focused on the parties' remaining dispute over the office furniture. In his August 20 certification opposing the motion, Galex once again attempted to revive the telephone dispute -- an issue Wolf claimed was resolved by the purported settlement agreement and which the trial court had thoroughly addressed on June 27, 2012.
In his certification, Galex also attempted to characterize as "personal property" items which, in the same sentence, he admitted had been "amassed" and "owned" by "Galex Wolf L.L.C." He insisted on this interpretation, although paragraph 1 of the Term Sheet stated that "Galex gets to keep his personal property and furniture," not "Galex gets to keep his fair share of the former partnership's property." Thus Galex sought to maximize the significance of the items which the parties had reserved for further discussion in paragraph 17 of the term sheet.
The trial court entered an order on September 18, 2012, further addressing the telephone issue, denying reconsideration of the June 27 order, denying the application for an order dismissing the litigation in favor of arbitration, and ordering discovery.
In an oral opinion issued September 4, 2012, the court reasoned that an arbitration clause is not enforceable if the parties never reached agreement on the underlying contract of which the clause is a part. The trial court acknowledged that in Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006), the Supreme Court held that where a contract contains an arbitration clause, the underlying validity of the contract is an issue to be decided by the arbitrator, not by a court. However, the trial court noted that the Court "qualified its decision" in the following footnote, which we quote below:
The issue of the contract's validity is different from the issue whether any agreement
between the alleged obligor and obligee was ever concluded. Our opinion today addresses only the former, and does not speak to the issue decided in cases . . . , which hold that it is for courts to decide whether the alleged obligor even signed the contract, whether the signor lacked authority to commit the alleged principal, and whether the signor lacked the mental capacity to assent.
[Id. at 444 n.1, 126 S. Ct. at 1208 n.1, 163 L. Ed. 2d at 1043 n.1.]
Thus, the trial court concluded that "the Court's holding that void ab initio and voidable contracts are for the arbitrator to decide does not bear on contracts and agreements that have not been concluded." The trial court determined that "there was no contract . . . formed" between the parties, and therefore the arbitration clause was not enforceable.
By order dated November 7, 2012, we stayed further trial court proceedings pending our decision of this appeal.
II
Because the trial court's decision interprets a contract and turns on legal issues, our review is de novo. Keiffer v. Best Buy, 205 N.J. 213, 222-23 (2011). Both federal and state policy favors arbitration. Frumer v. National Home Ins. Co., 420 N.J. Super. 7, 13 (App. Div. 2011). Once the parties agree on an arbitration clause, all remaining issues concerning the contract containing that clause must be submitted to the arbitrator. See Buckeye, supra, 546 U.S. at 445-46, 126 S. Ct. at 1208-09, 163 L. Ed. 2d at 1043-44.
We agree with the trial judge that the parties must "form" a contract before either of them can enforce an arbitration clause that is a component of the contract. Buckeye, supra, 546 U.S. at 444 n.1, 126 S. Ct. at 1208 n.1, 163 L. Ed. 2d at 1043 n.1. Thus, if they merely discuss the possibility of settling a case, and outline potential settlement terms one of which is an arbitration clause, they have not "formed" a contract because neither party intends, at that point, to be bound by the outline. Rather, they intend to have further discussions, toward the goal of agreeing on a settlement. See, e.g., Will-Drill Resources, Inc. v. Williams, 352 F.3d 211, 219 (5th Cir. 2003) (citing, as an example of an unformed contract, an exchange of drafts each having one different, essential term).
On the other hand, "parties may effectively bind themselves by an informal memorandum where they agree upon the essential terms of the contract and intend to be bound by the memorandum, even though they contemplate the execution of a more formal document." Berg Agency v. Sleepworld-Willingboro, Inc., 136 N.J. Super. 369, 373-74 (App. Div. 1975). "Moreover, the fact that parties who are in agreement upon all necessary terms may contemplate that a formal agreement yet to be prepared will contain such additional terms as are later agreed upon will not affect the subsistence of the contract as to those terms already unqualifiedly agreed to and intended to be binding." Comerata v. Chaumont, Inc., 52 N.J. Super. 299, 305 (App. Div. 1958) (citing 1 Corbin on Contracts (1950), § 30, p. 83). "[I]t is not necessary for a writing to contain every possible contractual provision to cover every contingency in order to qualify as a completed binding agreement. Some of these issues may be determined by the operation of law, or the parties may resolve such differences by a subsequent agreement." Berg Agency, supra, 136 N.J. Super. at 376.
The "'settlement of litigation ranks high in our public policy.'" Pascarella v. Bruck, 190 N.J. Super. 118, 125 (App. Div.), certif. denied, 94 N.J. 600 (1983) (quoting Jannarone v. W.T. Co., 65 N.J. Super. 472, 476 (App. Div.), certif. denied, 35 N.J. 61 (1961)). Our court system encourages settlements and "the court should strain to uphold" them. Dep't Pub. Advocate v. N.J. Bd. of Pub. Utilities, 206 N.J. Super. 523, 528 (App. Div. 1985). Moreover, as Judge Humphreys wisely observed in Bistricer v. Bistricer, 231 N.J. Super. 143 (Ch. Div. 1987):
[T]he proposition that a case is not settled until the last "i" is dotted and the last "t" is crossed on a written settlement agreement carries the germ of much mischief. A party could, in bad faith, waste the time of the court and the other litigant in
protracted settlement negotiations, and then, after a "framework" has been established, wiggle out of that framework by creating a flood of new issues and questions. Conceivably that could be the case here.
[Id. at 151-52.]
Based on our review of the record, we conclude that paragraph 17 did not set forth a condition precedent, without which there would be no settlement. Rather, it was an acknowledgement by both parties that Galex must give his former partner advance notice as to what personal property he intended to take, before he entered the office and took it. The parties also agreed on how they would resolve "[a]ny disagreement" that might arise about what Galex was entitled to take. They would engage in mediation. If they were unable to agree at mediation, the settlement itself contained an omnibus mechanism to resolve all disputes "arising from" the agreement — binding arbitration.
We do not read the language "this agreement is subject to the parties agreeing to the personal property that Galex shall be entitled to take" from the office, as implying that there was no binding settlement. The next paragraph recited that the "agreement is also subject to" the parties agreeing on the language of a formal settlement agreement "incorporating the provisions of this term sheet." Taken in context, the "subject to" language in both paragraphs reflected an agreement to dot i's and cross t's, and not an acknowledgement that the case was not yet settled because an essential term was missing. Moreover, the parties signed the handwritten agreement, not a step one would expect these experienced attorneys to take if they believed they had no settlement.
"Where the parties agree upon the essential terms of a settlement, so that the mechanics can be 'fleshed out' in a writing to be thereafter executed, the settlement will be enforced notwithstanding the fact the writing does not materialize because a party later reneges." Lahue v. Pio Costa, 263 N.J. Super. 575, 596 (App. Div.), certif. denied, 134 N.J. 477 (1993).
At the conclusion of the mediation session on January 16, 2011, a contract was formed. The contract included an arbitration clause. Any disputes concerning the contract's details, parameters, validity, or alleged violations of its conditions should have been submitted to the arbitrator. Buckeye, supra, 546 U.S. at 444, n.1, 126 S. Ct. at 1208 n.1, 163 L. Ed. 2d at 1043 n.1; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 406-07, 87 S. Ct. 1801, 1807, 18 L. Ed. 2d 1270, 1279 (1967).
We have not specifically addressed arguments raised by either party which we deem to be without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
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Reversed and remanded.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION