Opinion
DOCKET NO. A-1490-13T2
04-16-2015
MICHAEL GREGORY, MARY GREGORY O'CONNOR, ELIZABETH GREGORY, and JAMES GREGORY, Plaintiffs-Appellants, v. ROBERT GREGORY, SAMUEL GREGORY, CHRISTOPHER GREGORY, NICHOLAS GALVANIZING CO., INC., a New Jersey corporation; FIVE ROSES COMPANY, LLC, a New Jersey limited liability company; and FIVE ROSES, LLC, Defendants-Respondents, and NEW JERSEY GALVANIZING AND TINNING WORKS, INC., a New Jersey corporation, Nominal Defendant-Respondent, and WILLIAM PATRIC GREGORY, III, Nominal Defendant.
Laurence B. Orloff argued the cause for appellants (Orloff, Lowenbach, Stifelman & Siegel, and LeClairRyan, attorneys; Mr. Orloff and Michael S. Haratz, of counsel and on the briefs). Robert Mahoney argued the cause for respondents (Norris McLaughlin & Marcus, P.A., attorneys; Mr. Mahoney, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Sabatino, Simonelli, and Guadagno. On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-00227-11. Laurence B. Orloff argued the cause for appellants (Orloff, Lowenbach, Stifelman & Siegel, and LeClairRyan, attorneys; Mr. Orloff and Michael S. Haratz, of counsel and on the briefs). Robert Mahoney argued the cause for respondents (Norris McLaughlin & Marcus, P.A., attorneys; Mr. Mahoney, on the brief). PER CURIAM
Plaintiffs and the individual defendants are siblings and parties to an option agreement, pursuant to which they were each given shares of stock in a closely-held family business, defendant New Jersey Galvanizing and Tinning Works, Inc. ("NJGTW"). At the instigation of a sibling in day-to-day control of the company, NJGTW issued a call notice to purchase plaintiffs' shares at a price specified by a formula in the option agreement. Plaintiffs thereafter filed a complaint, asserting that the proposal to purchase their shares was inadequate. The dispute was referred by the court to arbitration, pursuant to an arbitration clause in the option agreement.
After hearing the proofs, the arbitrator issued a decision, awarding each plaintiff $372,448.89 in exchange for their NJGTW shares. The award was calculated under the option agreement's formula, with adjustments made by the arbitrator to take into account a bonus that one sibling had paid himself from the company and for certain other transactions.
The trial court confirmed the arbitrator's award, finding it to be unambiguous. The court directed that the $372,448.89 be distributed to plaintiffs in installments at the rate of $5,000 for each plaintiff per calendar quarter, in accordance with a pay-out provision in the agreement.
Dissatisfied with the contractually-specified installment method of payment for their shares, plaintiffs now appeal. Plaintiffs argue that the arbitration award should be construed to require them to receive their payouts in a lump sum rather than in installments. Alternatively, they allege that the court erred in failing, at the very least, to remand the matter to the arbitrator to clarify his decision as to the timing of the payments for their shares. For the reasons that follow, we affirm.
I.
NJGTW is in the business of galvanizing structural steel, a process that hinders the steel's corrosion. Operating on property located in Newark, NJGTW was founded in 1902 by the individual parties' grandfather, William Gregory. The company has been owned and operated by members of the Gregory family ever since.
At some point, William transferred ownership of NJGTW to his son, William Gregory, Jr., ("William Jr.") who was married to Elizabeth Marie C. Gregory. William Jr. and Elizabeth Marie had ten children, nine of whom were still living when William Jr. addressed the issue of NJGTW's future ownership in December 1976.
For ease of discussion, we shall refer to the children by their first names, intending no disrespect.
The Option Agreement
On December 26, 1976, William Jr., and the nine children entered into an Option Agreement, which provided for the transfer of stock shares and thus the eventual ownership of NJGTW by the children. The children were each allotted two shares of the voting common stock of NJGTW, along with equal shares of non-voting common stock and preferred stock. William Jr. retained the remaining and controlling eighty-two shares of voting common stock of NJGTW, which he would later distribute through his will.
Under Section 2 of the Option Agreement, children in the family who were not "actively engaged" in the operations of NJGTW were given the option of declaring a "Put Notice," pursuant to which NJGTW would be required to purchase all of their shares at a price determined under Section 5 of the Option Agreement. Reciprocally, under Section 3 of the Option Agreement, NJGTW itself could declare a "Call Notice," pursuant to which it could require children who were not actively engaged in the operations of NJGTW to sell all of their shares to it at a price determined under Section 5. The formula in Section 5 was based on the book value of the company stock, as determined by independent accountants.
Section 1.9 of the Option Agreement defined an "actively engaged" shareholder as one who was employed by NJGTW at least 1000 hours per year.
In Section 6, the Option Agreement set out the terms governing the purchase, sale, and transfer of shares. Section 6.1 provided that the selling shareholder would produce all necessary documentation at the closing on the sale or purchase.
Section 6.2, the key provision for the present appeal, directed as follows:
The total purchase price shall be paid in equal successive quarterly installments of principal in the amount of $5,000. (except that the last such installment shall be
equal in amount to the remaining unpaid balance), on the first business day in January, April, July, and October, commencing on the first such business day immediately succeeding the closing, and continuing on each such business day until the total purchase price is paid in full; together with interest on the unpaid principal balance at the rate of ONE (1%) percent less than the prime lending rate of the First National State Bank of New Jersey, with respect to short term corporate loans, as of the first business day of the third month next preceeding the due date of said payment.Pursuant to Section 6.3, interest at a rate set under the Option Agreement was to be paid by NJGTW on the remaining principal balance during the period when the installment payments were being made.
[(Emphasis added).]
Section 6.7 of the Option Agreement acknowledged that it would be "detrimental to the stability and financial well being of [NJGTW] if it were required to make excessive payments of principal" to purchase shares in any one fiscal year. Accordingly, Section 6.7 provided that NJGTW would not be required to pay a total principal sum in excess of $40,000 in any fiscal year.
Further, Section 10 of the Option Agreement provided that any "controversy or claim arising out of, or relating to, this Agreement or the breach thereof, shall be settled by arbitration in Newark, New Jersey, in accordance with the rules" of the American Arbitration Association ("AAA") then in effect and "judgment upon any award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof."
Events After the 1976 Option Agreement
William Jr. operated NJGTW from 1976 until 1982, with managerial assistance by two of his sons: William Patric and Gerald. In 1980 or 1981, William Patric left his employment with NJGTW and became the owner of another business. At that time, NJGTW purchased William Patric's shares of stock in it, including his two shares of voting common stock, pursuant to the terms of the Option Agreement.
In 1982, Robert became an employee of NJGTW, assuming an active role in its management. Meanwhile, William Jr. became less actively involved.
In August 1983, William Jr. executed his last will and testament, in which he directed that his eighty-two shares of NJGTW's voting common stock be placed in a trust following his death and until Elizabeth Marie died. Thereafter, those shares were to be distributed equally among those children who were actively engaged in the operation of NJGTW. Thus, the instruments contemplated that none of the Gregory children would have controlling ownership of NJGTW until both William Jr. and Elizabeth Marie were deceased. Elizabeth Marie, along with Robert and Gerald (who were the only two children then actively involved with and employed by NJGTW), were named as trustees under the will.
In April 1987, William Jr. died. The effective control of NJGTW thereby passed at that time to the trust.
Gerald died in 1990. Pursuant to the Option Agreement, NJGTW purchased Gerald's shares of stock in 1991. At that point, William Jr.'s eighty-two shares of voting common stock were held by the trust, two shares each of such stock were held by the seven remaining Gregory children, and the four shares from William Patric and Gerald were held by NJGTW. Around this time, Robert became NJGTW's president and chief executive officer. Samuel thereafter became actively involved in the operations of NJGTW as its legal counsel.
In 1997, Robert formed defendant Five Roses Company, LLC ("FRC") in order to purchase defendant Nicholas Galvanizing Co., Inc. ("NGC"), which also was a galvanizing company like NJGTW. Following that purchase of NGC in 1997, Robert acted as NGC's owner and chief executive officer.
Many of the allegations in the complaint of lost corporate opportunity for NJGTW and the oppression of plaintiffs as minority shareholders in NJGTW arose out of Robert's dual role as chief operating officer of both NGC and NJGTW. However, the arbitrator found no fault with any of Robert's activities with NGC, save one, which we will address, infra.
Robert's 2008 Purchase Offer and Other Events
In August 2008, Robert contacted all of his siblings, except Samuel, and offered to purchase their interest in NJGTW for a lump-sum payment each of $150,000. Robert contended that he made this offer on behalf of NJGTW. He later withdrew that offer when the siblings failed to respond to it in a timely manner.
This offer by Robert on NJGTW's behalf is what resulted in the arbitrator's ultimate finding that NJGTW had waived the $40,000 annual payout maximum specified in Section 6.7 of the Option Agreement.
Elizabeth Marie died in February 2011, at which time the trust divided the eighty-two shares of voting common stock that it held and distributed them, pursuant to the will of William Jr., to the two children (Robert and Samuel) who were then actively engaged in and involved with operating NJGTW. Following that distribution, Robert and Samuel each held forty-three shares of NJGTW's voting common stock, while their five siblings continued to own two shares each.
The 2011 Call Notice and This Litigation
By July 2011, plaintiffs had obtained counsel, and they began to inquire about the business, financial, and operational relationships among NJGTW, FRC, and NGC. In response, on August 4, 2011, NJGTW issued a Call Notice to purchase plaintiffs' shares of stock in NJGTW pursuant to Section 3.2 of the Option Agreement, setting October 15, 2011 as the closing date for that purchase.
NJGTW's Call Notice precipitated this litigation. Anticipating the upcoming specified closing date, plaintiffs Michael, Elizabeth, James, and Mary filed a verified complaint and order to show cause in the Chancery Division on October 4, 2011. Plaintiffs sought to preclude the forced sale of their shares to NJGTW for what they argued was an unfair price. The lawsuit named as defendants Robert, Samuel, and Christopher, as well as NGC and FRC. NJGTW and William Patric were named as nominal defendants.
"Five Roses LLC" was named as an additional defendant, but it and FRC are evidently the same entity.
In their complaint, plaintiffs alleged that defendants were attempting to obtain their stock shares in NJGTW for an unfair price under the controlling Option Agreement. In their companion order to show cause, plaintiffs sought, among other things, injunctive relief to preclude defendants from acting on the Call Notice issued by NJGTW.
Defendant Robert, along with NJGTW's accountant, filed certifications in opposition to plaintiffs' order to show cause, chiefly noting that plaintiffs were contractually required to submit this dispute to binding arbitration.
The trial court entered an order to show cause in November 2011, temporarily restraining defendants from acting on the Call Notice and setting a hearing date for plaintiffs' application for injunctive relief. Defendants filed an answer, essentially denying the allegations of wrongdoing in the complaint and asserting affirmative defenses, including the defense that the court lacked jurisdiction due to the Option Agreement's arbitration provision.
The Arbitration
In February 2012, the trial court directed the parties to submit the dispute to arbitration pursuant to Section 10 of the Option Agreement. Plaintiffs accordingly filed a statement of claims with the AAA, repeating many of the allegations contained in their civil complaint. Among other things, plaintiffs asserted that they were oppressed minority shareholders in NJGTW; alleged wrongful conduct by Robert, Samuel, and Christopher; sought to invalidate the purchase price and payment provisions of the Option Agreement and requested, instead, that they be paid fair market value for their NJGTW shares.
Defendants denied any wrongful conduct. They further asserted to the arbitrator that the Option Agreement was valid, enforceable, and controlling, insofar as it concerned NJGTW's purchase of plaintiffs' shares.
The arbitration proceeding was conducted before a single arbitrator over four intermittent days in April 2013. On June 6, 2013, the arbitrator issued a one-page "Award of Arbitrator," which included an annexed five-page "Abbreviated Reasoned Decision."
We were advised at oral argument that the proceedings before the arbitrator were not transcribed.
Apparently, such an abbreviated form of decision is called for under the AAA Rules. See Commercial Arbitration Rules & Mediation Procedures, R. 42 (eff. June 1, 2009). Although the AAA Arbitration Rules were amended during the course of the proceeding below, the substance of Rule 42, now Rule 46, remained unchanged.
The arbitrator awarded each of the four plaintiffs $372,448.89, in exchange for the redemption of their preferred and common stock in NJGTW. The award also provided that NJGTW would reimburse plaintiffs in the amount of $22,002.50 for certain fees and expenses that they had incurred.
The record shows that this $22,002.50 sum was subsequently paid by NJGTW, and thus is not at issue on this appeal.
Additionally, the arbitrator determined in his decision that NJGTW, through Robert's conduct, had waived the annual $40,000 aggregate payout limitation set forth in Section 6.7 of the Option Agreement.
In reaching his valuation for plaintiffs' shares, the arbitrator noted that Robert had posited that the book value of NJGTW's common stock was nil and that NJGTW's proposed purchase price for plaintiffs' shares of stock was thus very low. Thus, according to Robert, the net book value for NJGTW was only $232,578.00.
Without finding any fault in how that value was computed, the arbitrator determined that certain additions to that book value were necessary. Specifically, the arbitrator added to the book value $1,500,000 to replace bonus monies that Robert had paid himself; $500,000 to replace sales revenues that had been shifted from NJGTW to FRC; and $5,417.25 to replace monies paid for unexplained landscaping charges. These recalculations by the arbitrator, in addition to another $385,432.00 accounting adjustment made by him, resulted in a substantial increase of NJGTW's computed book value from $232,578.00 to $2,623,427.25, with a corresponding increase in the arbitrator's award to each of the plaintiffs for their shares.
Plaintiffs filed a request with the arbitrator for clarification of the award. In particular, they sought to have the arbitrator specify in the award that Robert and FRC were both jointly and severally liable with NJGTW for the amounts payable to plaintiffs, and that the amounts so awarded were to be paid in lump sums. The arbitrator responded in writing on June 27, 2013, denying plaintiffs' request and stating that the AAA's rules permitted him only to correct clerical errors in an award but forbade him from the redetermination of the merits of an award once made. The arbitrator viewed plaintiffs' request for clarification as actually being a disallowed request for redetermination.
The Trial Court's Review of the Arbitrator's Decision
Plaintiffs then filed an order to show cause with the trial court, seeking the appointment of a fiscal agent for NJGTW, the imposition of a constructive trust and an equitable lien to safeguard their interests in NJGTW, and the confirmation of the arbitration award for the amounts awarded to plaintiffs but payable as lump sums to them.
The trial court entered the order to show cause in July 2013, imposing temporary restraints on NJGTW's ability to encumber or hypothecate its assets and setting a date for a hearing on whether to appoint a fiscal agent for NJGTW.
In August 2013, defendants moved to modify the temporary restraints imposed earlier in the order of July 2013, so as to allow NJGTW to obtain new lines of credit in order to meet new sales requirements. After oral argument before Judge Thomas Moore, the judge issued a bench decision that maintained many of the temporary restraints, but which permitted NJGTW to obtain new lines of credit.
In opposition to plaintiffs' still-pending order to show cause, defendants filed a cross-motion seeking to modify the arbitration award by removing the arbitrator's finding that NJGTW had waived the $40,000 annual stock purchase-payout provisions set out in Section 6.7 of the Option Agreement. Defendants also disputed plaintiffs' demand for a lump-sum payment of $372,448.89 for their redeemed shares. Defendants asserted that the required and applicable payment distribution methodology was set out in Section 6.2 of the Option Agreement, calling for installments at a rate of $5,000 per quarter. Plaintiffs opposed that request, again requesting confirmation of the arbitration award and the payment of each plaintiff's portion of that award as a lump sum.
Judge Moore heard argument on plaintiffs' show-cause order and defendants' cross-motion on September 25, 2013, immediately following which he issued another oral decision. The judge confirmed the arbitrator's award, reasoning that it was not the product of fraud, corruption, or misconduct. The judge further ruled that the arbitrator had not exceeded his powers in arriving at the award. Among other things, the judge stated that he was "satisfied that there was a very thorough and complete arbitration."
Addressing the payout issue that is now at the heart of this appeal, Judge Moore declined to order that each plaintiff's award be paid as a lump sum. The judge instead determined that the payment methodology would follow the installment terms set out in Section 6.2 of the Option Agreement, which the arbitrator had not deemed waived by NJGTW and which the arbitrator had not otherwise struck from the Option Agreement. The judge also found that the arbitrator had reasonably determined that NJGTW had waived Section 6.7 of the agreement and the annual $40,000 aggregate payment cap.
By nullifying Section 6.7 and implicitly leaving Section 6.2 intact, the judge essentially permitted each of the four plaintiffs to receive $20,000 in principal (four quarterly installments times $5,000) each year, which amounts to $80,000 in total to be paid out annually by the company.
Consequently, the judge denied defendants' cross-motion to modify the arbitrator's findings. Additionally, the judge denied plaintiffs' demand for the appointment of a fiscal agent for NJGTW and dissolved the temporary restraints that had been imposed on NJGTW, reasoning that plaintiffs had failed to establish their status as oppressed minority shareholders. On October 11, 2013, Judge Moore entered an order memorializing these determinations.
Plaintiffs moved for reconsideration. Specifically, plaintiffs asked the court to reconsider and vacate paragraph 2 of the October 11, 2013 order, which directed that each plaintiff is to be paid $372,448.89 in installments over time and not in a lump sum.
After hearing further oral argument, Judge Moore issued an oral decision on November 15, 2013, denying plaintiffs' motion for reconsideration. The judge again found that the arbitrator's decision was not ambiguous with respect to how the individual awards to plaintiffs should be distributed. The judge further determined that a remand to the arbitrator for clarification was unnecessary because the arbitration award was not incomplete, unclear, or ambiguous in any material respect. The judge noted that the arbitrator had duly recognized that the purchase of plaintiffs' shares was governed by the terms specified in the Option Agreement (except for the stricken Section 6.7), so that any payment distribution to plaintiffs logically was to be made pursuant to the installment terms set forth in Section 6.2.
Plaintiffs have appealed, specifically challenging paragraphs 1 and 3 of the October 11, 2013 order, and all parts of paragraph 2 of that order except for paragraph 2(f). They also have appealed the denial of their motion for reconsideration. Defendants have not cross-appealed.
II.
Plaintiffs essentially advance two main points on appeal, both of which relate to their fundamental argument that they are entitled to be paid in a lump sum for their respective shares in NJGTW. First, plaintiffs contend that the "Award of Arbitrator," which awards the sum of $372,448.89 to each plaintiff for his or her respective shares, without explicit reference to the payout terms of Section 6.2 of the Option Agreement, should have been construed by Judge Moore to require the company's immediate payment of those lump-sum amounts. Second, and alternatively, if this court is not persuaded that the Arbitration Award must be so construed, then, at a minimum, the matter should be remanded to the arbitrator to have him clarify whether such lump-sum payments are appropriate, given his findings and his overall analysis of the record. On the whole, plaintiffs urge that it is inequitable for them to be limited to the $5,000 per quarter cap on installment payments set forth in Section 6.2, noting that at that $20,000 annual rate it will take more than eighteen years for them to be paid in full for their shares.
Our review is guided by the terms of the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -32 ("the Arbitration Act"), a statute modeled after the Uniform Arbitration Act of 2000, L. 2003, c. 95, with certain modifications. Enacted in 2003, the Arbitration Act applies to, among other things, agreements to arbitrate that were made before January 1, 2003, in instances where the parties made such an agreement "in a record." N.J.S.A. 2A:23B-3(b). The parties here agree that the Arbitration Act applies to this case because of the mutual assent to arbitrate reflected in Section 10 of the 1976 Option Agreement.
The Arbitration Act reflects our State's general policy to favor the voluntary and consensual resolution of disputes through arbitration, provided that there is genuine mutual assent to submit to the arbitration process and that other laws or valid considerations do not nullify an apparent agreement to arbitrate. Atalese v. U.S. Legal Servs. Grp., L.P., 219 N.J. 430, 441 (2014) (noting arbitration's "favored status," but also cautioning that this preference for consensual arbitration is "not without limits") (quoting Garfinkel & Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124, 132 (2001)). This policy is consistent with the policies nationally expressed in the Federal Arbitration Act, 9 U.S.C.A. §§ 1 to -16; see also Atalese, supra, 219 N.J. at 440 (noting the "liberal federal policy favoring arbitration" and the similar facets of the federal statute and our State's Arbitration Act) (citation omitted).
Among other things, the Arbitration Act seeks to provide a faster and less expensive process for parties to resolve their disputes. This goal is consistent with long-standing case law. "The object of arbitration is the final disposition, in a speedy, inexpensive, expeditious and perhaps less formal manner, of the controversial differences between the parties." Garfinkel, supra, 168 N.J. at 131 (quoting Carpenter v. Bloomer, 54 N.J. Super. 157, 162 (App. Div. 1959) (quoting E. Eng'g Co. v. City of Ocean City, 11 N.J. Misc. 508, 510-11 (Sup. Ct. 1933))).
A key characteristic of arbitration under the statute is the limited scope of judicial review of an arbitrator's final award. Fawzy v. Fawzy, 199 N.J. 456, 470 (2009) (noting that "the scope of review of an arbitration award is narrow"). "Otherwise, the purpose of the arbitration contract, which is to provide an effective, expedient, and fair resolution of disputes, would be severely undermined." Ibid. (citing Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179, 187 (1981)).
Under the Arbitration Act, courts are explicitly directed to confirm an arbitration award, except in narrow enumerated circumstances. N.J.S.A. 2A:23B-22 provides in this regard that:
After a party to an arbitration proceeding receives notice of an award, the party may file a summary action with the court for an order confirming the award, at which time the court shall issue a confirming order unless the award is modified or corrected pursuant to section 20 [N. J.S.A. 2A:23B-20] or section 24 [N. J.S.A. 2A:23B-24] of this act or is vacated pursuant to section 23 [N. J.S.A. 2A:23B-23] of this act.
[N. J.S.A. 2A:23B-22 (emphasis added).]
Here, N.J.S.A. 2A:23B-24 is not applicable. Section 24 permits a court to modify an arbitration award on three grounds, but plaintiffs explicitly acknowledge on appeal that none of those grounds in Section 24 are present under the circumstances of this case.
Nor is N.J.S.A. 2A:23B-23 applicable. That provision addresses a party's application to the trial court to vacate an arbitration award. Here, plaintiffs asked the trial court to confirm the award, albeit with lump-sum payouts for their shares, not to vacate it.
Since N.J.S.A. 2A:23B-23 and -24 do not apply, we therefore focus on N.J.S.A. 2A:23B-20, which provides as follows:
a. On application to an arbitrator by a party to an arbitration proceeding, the arbitrator may modify or correct an award:
(1) upon a ground stated in paragraph (1) or (3) of subsection a. of section 24 of this act;
(2) if the arbitrator has not made a final and definite award upon a claim submitted by the parties to the arbitration proceeding; or
(3) to clarify the award.
b. An application pursuant to subsection a. of this section shall be made and notice given to all parties within 20 days after the aggrieved party receives notice of the award.
c. A party to the arbitration proceeding shall give notice of any objection to the application within 10 days after receipt of the notice.
d. If a summary action with the court is pending pursuant to section 22, 23, or 24 of this act, the court may submit the claim to the arbitrator to consider whether to modify or correct the award:
(1) upon a ground stated in paragraph (1) or (3) of subsection a. of section 24 of this act.
(2) if the arbitrator has not made a final and definite award upon a claim submitted by the parties to the arbitration proceeding; or
(3) to clarify the award.
e. An award modified or corrected pursuant to this section is subject to sections 19a., 22, 23, and 24 of this act.
Insofar as N.J.S.A. 2A:23B-20 is concerned, N.J.S.A. 2A:23B-20(a), (b), and (c) are all not applicable because they address the modification or correction of an arbitration award where an application for such modification or correction is made by a party to the arbitration. Plaintiffs made such an application to the arbitrator, but do not now assert on appeal that the arbitrator erred when he refused to "clarify" the award by setting out that it was payable as a lump sum. Instead, they argue that the trial court erred when it did not confirm the arbitration award as they deem the arbitrator to have written that award.
N.J.S.A. 2A:23B-20(a), (b), and (c) are therefore not germane under these circumstances. However, N.J.S.A. 2A:23B-20(d)(3) does apply here, insofar as it provides that a trial court in a pending action brought by a party to confirm an arbitration award may remand the matter back to the arbitrator in order "to clarify the award" where the court perceives an ambiguity in the award. Ibid.
Plaintiffs argue that the trial court was statutorily bound under N.J.S.A. 2A:23B-22 to confirm the arbitration award as they assert the award was written by the arbitrator. Because the trial court allegedly confirmed the award with payout terms different from those that they assert that the arbitrator allegedly called for by making awards of $372,448.89 to each plaintiff, plaintiffs contend that the court must have perceived some ambiguity in the award's payout terms. Plaintiffs further contend that Judge Moore must have resolved that perceived ambiguity in line with his view of what the arbitrator meant, rather than appropriately remanding the award back to the arbitrator for clarification pursuant to N.J.S.A. 2A:23B-20(d)(3). At its core is plaintiffs' argument that the trial court erred when it expressly concluded that the award's payout terms were not ambiguous.
In considering these contentions on the present appeal, we bear in mind our scope of appellate review of the trial court. Because a trial court's decision confirming, vacating, or modifying an arbitrator's award is a decision of law, an appellate court reviews that decision de novo, but with a recognition of the wide authority bestowed upon the arbitrator by statute. Minkowitz v. Israeli, 433 N.J. Super. 111, 136 (App. Div. 2013); Manger v. Manger, 417 N.J. Super. 370, 376 (App. Div. 2010). Essentially, appellate review entails a determination whether the arbitrator and the trial court have each adhered to the requirements of the controlling statute. Minkowitz, supra, 433 N.J. Super. at 136.
Having fully considered the arguments raised by plaintiffs in light of our scope of review and the applicable statutory and case law principles, we affirm the trial court's decision. We do so essentially for the sound reasons expressed by Judge Moore in his successive oral rulings, culminating with his ultimate denial of plaintiffs' motion for reconsideration. We add only the following comments.
We recognize, as did Judge Moore, that the brief, one-page Award of Arbitrator issued on June 6, 2013 granted each plaintiff the sum of $372,448.89 for his or her NJGTW stock without mentioning the method by which those sums were to be paid out. However, the five-page Abbreviated Reasoned Decision that the arbitrator attached to the Award specifically states on page three that plaintiffs "are bound to the distribution based upon the [O]ption [A]greement with some modification."
By way of such modification, the arbitrator specifically addressed the $40,000 annual payout limit in Section 6.7 of the Option Agreement, which the arbitrator concluded that the company waived as a result of Robert's previous offer "to make $150,000 distributions to his siblings in exchange for their stock within a year in 2008." The arbitrator also adjusted the book value formula for the stock price, as specified in Section 5 of the Option Agreement, by taking into account Robert's $1.5 million-dollar bonus (of which he had taken $924,000 as of the time of the arbitration), the $500,000 debit on repricing of galvanizing services provided by FRC, the $385,432.00 accounting adjustment, and the $5,417.25 for the unexplained landscaping charges.
Significantly, the arbitrator made no other adjustments to the stated terms of the Option Agreement. We agree with Judge Moore that there was no ambiguity in the arbitrator's decision that warranted a remand or clarification. The arbitrator obviously knew how to express a deviation from the stated terms of the Option Agreement where he found such a deviation was warranted. He chose to waive Section 6.7's $40,000 aggregate payout limit, in light of Robert's 2008 cash offers exceeding that sum, but said nothing about altering or relaxing the $5,000 per quarter per sibling cap separately set forth in Section 6.2.
We concur with Judge Moore that we should read the arbitrator's declaration that plaintiffs are "bound to the distribution based upon the [O]ption [A]greement," to mean that plaintiffs are bound by the installment terms specified in Section 6.2, except as expressly modified in the arbitrator's decision. (Emphasis added). We discern no error by the trial court in construing the arbitrator's decision in this sensible fashion.
Although plaintiffs are understandably dissatisfied that they each will have to accept only $20,000 each year in principal installments, and that it therefore will take about eighteen years for their shares to be fully bought out, the clear terms of Section 6.2 of the Option Agreement ought not be ignored or evaded. The family patriarch, William Jr., obviously designed the Option Agreement so that the company would not be forced to absorb too large a drain on its resources in any one year in order to fund buyouts of the shares of his children who were not active in the company. The trial court was simply carrying out the parties' manifest intent in Section 6.2, which is a polestar of contract interpretation. Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 269 (2006).
The arbitrator's waiver of the limitations in Section 6.7 does not logically compel the waiver of the aggregate annual cap in Section 6.2, which the arbitrator left unaltered. The effect of nullifying Section 6.7 while leaving Section 6.2 intact is to shorten the payout period by half, which is not a manifestly unfair or arbitrary result.
There is no reasonable basis to conclude that the arbitrator's waiver of a $40,000 annual payout cap requires the $5,000 cap in Section 6.2 to be set aside and thereby force the company to pay out over $1.5 million to plaintiffs immediately. To be sure, we are cognizant that Robert, who was running the company and presumably played a role in its success, authorized a $1.5 million bonus for himself, most of which he received. Even so, the arbitrator was well aware of that circumstance and decided that a fair resolution was to take that bonus into account when adjusting the buyout price. The arbitrator had the opportunity to go further than that and require immediate payouts to all four plaintiffs. He did not direct such an additional drain on the company's resources or diminish its borrowing capacity for business purposes, and we will not interfere with that decision.
Our conclusion is unaffected by the correspondence, e-mail, and related certifications supplied to us by plaintiffs' co-counsel on the eve of appellate oral argument reflecting that defendants' counsel had advised plaintiffs' counsel after the Arbitration Award was issued that the company "does not have the money at this point to pay the Award in a lump sum" and proposed to discuss "payment terms." We do not construe that communication by defense counsel to negotiate over payment terms, in response to a demand by plaintiffs' counsel for immediate payment and a threat to pursue immediate relief in court, as a waiver of defendants' right to rely on the $5,000 per quarter installment cap in Section 6.2 of the Option Agreement or as some form of estoppel. See N.J.R.E. 408 (noting that proposals to compromise or resolve disagreements are generally non-evidential).
By a separate order, we have granted plaintiffs' motion to supplement the record with these materials.
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There was no clear or unequivocal waiver by defendants of their rights, nor any acts that would comprise equitable estoppel. See Knorr v. Smeal, 178 N.J. 169, 177 (2003) (defining waiver as a "voluntary and intentional relinquishment of a known right"); see also Carlsen v. Masters, Mates & Pilots Pension Plan Trust, 80 N.J. 334, 339 (1979) (defining equitable estoppel to entail voluntary conduct that causes others to rely in good faith upon that conduct and change their positions for the worse). Indeed, plaintiffs' co-counsel acknowledged at oral argument on appeal that these post-award communications do not suffice as an estoppel or a waiver of defendants' rights. Plaintiffs' co-counsel instead asserts that these late-tendered exhibits suggest that counsel perceived an ambiguity in the arbitrator's decision concerning the payout method.
We ascribe little if any significance to these post-award communications. The question of ambiguity was actively litigated before Judge Moore, carefully adjudicated, and soundly decided. The arbitrator's two decisional documents are not ambiguous on their face. Therefore, the analysis ends there and does not require resort to any parol evidence.
Lastly, we have fully considered the balance of the arguments raised by plaintiffs in their briefs and at oral argument and conclude they lack sufficient merit to be discussed in this written opinion. R. 2:11-3(e)(1)(E).
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION