To the surprise of many New York and New Jersey businesses, the answer may be yes.
Based on the theory of “intertwinement,” at least one New Jersey court has held that parties who did not sign the underlying arbitration agreement can be forced to arbitrate their claims.
In an April 23, 2011, unreported Opinion, the Appellate Division held that Michael and Robyn Hirsch were required to submit their claims against Amper Financial Services (“Amper”) to a Financial Industry Regulatory Agency (“FINRA”) arbitration panel even though the Hirsches had no agreement to arbitrate disputes between themselves and Amper. The ruling appeared to be contrary to the generally accepted principle that arbitration is a creature of contract and parties may be required to arbitrate only with persons with whom they have contracted to arbitrate their disputes.
The Honorable Anthony Parillo, writing for a two judge appellate panel, held that intertwinement is an exception to that general rule. While the Hirsches didn’t have an agreement to arbitrate with Amper, they did have an agreement to arbitrate disputes with Securities America, Inc. (“SAI”). SAI was the brokerage firm through which securities recommended to the Hirsches by Amper were purchased.
When the Hirsches, who lost their entire investment to a Ponzi scheme, sought to arbitrate their claims against SAI and to litigate against Amper, first the Trial Court and then the Appellate Division held that the claims were so intertwined that the arbitration agreement with SAI required the Hirsches to submit their claims against Amper to FINRA as well.
A different appellate panel had rejected “intertwinement” as an exception to the arbitration is strictly a creature of contract rule. In that case, Agrisani v. Financial Technology Ventures, 402 N.J. Super. 138 (App. Div. 2008) the Honorable Stephen Skillman wrote:
If the cases relied upon by FT Ventures actually held that a party to a contract containing an arbitration clause could be forced to arbitrate a claim against a nonsignatory to the contract simply because his claim was “inextricably intertwined” with that contract, those cases could not be reconciled with the fundamental principle that a party can be forced to arbitrate only those issues it has specifically agreed to submit to arbitration.
The Supreme Court has now accepted the Hirsches’ petition for certification. It is expected to decide in 2013 whether to support Judge Skillman’s strict construction of the rule that only parties to an arbitration agreement may be forced to arbitrate, or whether intertwinement is a legitimate exception to that long established rule.
Navigating Director and Officer Liability in Times of Financial Distress
Director and officer liability increases sharply when a company is in financial distress. Decisions that would draw little attention in a healthy business can later be challenged by creditors, shareholders, bankruptcy trustees, and regulators as breaches of fiduciary duty, fraudulent transfers, or oversight failures. Understanding where that exposure comes from, and how to manage it, […]
Before You Buy: Managing Real Estate and Permitting Risk for BESS Projects in New York and New Jersey
For developers pursuing battery energy storage system (BESS) projects, finding the right property is only the beginning. BESS site selection is as much a legal and transactional exercise as a real estate decision, with risk analysis central to the project’s ultimate success. Key Takeaways The core questions for BESS site selection in New York and […]
What Business Owners Get Wrong Before Meeting a Litigation Attorney
What should you expect when meeting a litigation attorney about a business dispute? You should expect to describe the dispute in your own words, hand over the most important documents, flag any deadlines or immediate threats, and leave with a clearer picture of the problem, what information is still needed, and the likely next steps. […]
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
Crisis-Proofing Your New Jersey Business: Building a Crisis Response Plan Before You Need One
For New Jersey businesses, crisis preparedness should be viewed as a legal and operational function, not simply an emergency-management exercise. A well-designed crisis response plan can help preserve evidence, protect confidential communications, meet reporting obligations, limit unnecessary exposure, and prevent an already difficult situation from becoming a larger legal problem. Key Takeaways A serious crisis […]
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.
Let`s get in touch!
Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!
