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.
When to Settle and When to Fight: A Litigator's Framework
Every lawsuit comes with a cost, and knowing when to settle a lawsuit is one of the most consequential decisions a business owner will face. Experienced litigators understand how to minimize cost and obtain certainty for their clients. For many business owners, the decision is viewed almost entirely through a financial lens: What will it cost […]
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
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!
