Christopher Regan v. Brad Conway

• Court: New Jersey Superior Court Appellate Division
• Decided: April 7, 2025
• Docket: A-1962-22
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ."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-1962-22

CHRISTOPHER REGAN, DAVID BONDY, TODD CONWAY, FRED FARKOUH, CHARLES FABRIKANT, EDWARD MATTHEWS and ROBERT BAILEY,

Plaintiffs-Respondents/ Cross-Appellants,

v.

BRAD CONWAY,

Defendant-Appellant/ Cross-Respondent,

and

HAZIM AUDALLA,

Defendant,

CONTROL SCREENING LLC, d/b/a AUTOCLEAR, LLC, Intervenor-Respondent/ Cross-Appellant. __________________________

Argued February 25, 2025 – Decided April 7, 2025

Before Judges Sumners and Perez Friscia.

On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C- 000123-11.

Anthony X. Arturi (Anthony X. Arturi, LLC) argued the cause for appellant/cross respondent.

Nicholas A. Duston argued the cause for respondents/cross appellants (Norris McLaughlin, P.A., attorneys; Nicholas A. Duston and Matthew C. Wells, on the briefs).

PER CURIAM

Defendant Brad Conway appeals from the Chancery Division's: (1) May

23, 2018, December 7, 2018, and June 3, 2019 orders confirming the arbitrator's

corresponding January 5, 2018, July 18, 2018, and December 13, 2018

arbitration awards in favor of plaintiffs Christopher Regan, David Bondy, Todd

Conway, Fred Farkouh, Charles Fabrikant, Edward Matthews, Robert Bailey ,1

1 Throughout the opinion we reference individual plaintiffs collectively as member plaintiffs.

A-1962-22 2 and Intervenor Autoclear, LLC f/k/a Control Screening, LLC (CS)2 (collectively

plaintiffs) and April 10, 2019 order denying reconsideration of the court's

December 7, 2018 order; (2) November 18, 2022 order determining the fair

value of Brad's3 membership interest in Autoclear and January 24, 2023 order

denying reconsideration; and (3) July 13, 2018 and May 23, 2018 orders granting

plaintiffs' motion to enforce litigants' rights and awarding attorneys' fees and

costs respectively. Plaintiffs cross-appeal from the Chancery Division's: (1)

June 3, 2019 order partially vacating the arbitrator's final award, which had

granted Autoclear reimbursement from Brad of 40% of its legal fees incurred

during phase I of the litigation; and (2) November 18, 2022 order valuing Brad's

membership interest in Autoclear using fair value rather than the tax book value.

After reviewing the record, parties' arguments, and applicable legal principles,

we affirm.

2 Throughout the opinion, we refer to Intervenor as Autoclear, as identified in the parties' briefs, rather than Control Screening, as identified in the caption. 3 As parties and their referenced family members share the same surnames, we use first names to avoid confusion. We intend no disrespect by this informality.

A-1962-22 3 I.

Litigation History

Autoclear is a closely held S-corporation formerly known as CS.

Autoclear designs, manufactures, and services security screening equipment for

the detection of weapons and explosives. It operates facilities in the Philippines,

Canada, and New Jersey. Autoclear has operated with up to 300 employees. On

April 1, 1995, CS members Granville Conway, Todd, and Brad entered an

operating agreement. The operating agreement memorialized the merger of two

predecessor companies and dissolved the members' interest in those companies.

The operating agreement designated Granville, Todd's and Brad's father, as

chairman, a capacity in which he served in until his passing in 2004, and Brad

as the president. It is undisputed that Brad, an attorney, acted as Autoclear's

chief executive officer (CEO). On December 12, 1996, Autoclear members

elected Charles Fabrikant as a manager.

On October 30, 2010, Autoclear members voted to appoint a new Board

of Managers, which included Brad and Todd. Brad disputed the validity of this

vote. The new Board of Managers reconvened on May 9, 2011, and voted to

limit Brad's decision-making abilities. Although invited, Brad did not attend.

Thereafter, member plaintiffs filed an order to show case and verified complaint

A-1962-22 4 in the Chancery Division seeking to enforce their votes and to enjoin Brad's

management interference. On August 11, after Autoclear moved to intervene

and compel arbitration, which Brad joined, the judge ordered the parties to

proceed to arbitration under the operating agreement. Autoclear's operating

agreement required that "[a]ny material dispute hereunder shall be decided in

accordance with the rules of the American Arbitration Association [(AAA) ,]

which award shall be final." 4 The judge denied member plaintiffs' requested

injunction, which resulted in Brad remaining as the CEO. The arbitrator

thereafter bifurcated the arbitration into two phases: phase I—Autoclear's

control and management; and phase II—member plaintiffs' claims regarding

Brad's breach of fiduciary duty, dissociation, and damages. Member plaintiffs'

original claims in arbitration included: breach of fiduciary duty; breach of the

operating agreement; member expulsion; and declaratory judgment.

On October 30, 2013, Brad entered a consent order settling a dispute

between himself and Phyllis Conway, Todd's and Brad's mother, regarding the

various trusts of which Brad was co-trustee. Brad was a co-trustee of the trusts,

which held an interest in Cosmopolitan Shipping Company. Brad averred "the

4 The parties do not dispute that the AAA rules, effective as of June 1, 2009, and applied by the arbitrator, governed the parties' arbitration proceedings.

A-1962-22 5 trusts at issue . . . owned Cosmopolitan, and therefore had the power and

authority to vote Cosmopolitan's [m]embership interest in any [m]ember vote in

[Autoclear]," and as co-trustee, any vote by the trusts required his approval. As

part of the settlement, Brad resigned as a co-trustee, and Todd and Leslie Regan,

Brad's and Todd's sister, were appointed co-trustees. Therefore, Brad lost

control over Cosmopolitan's voting interest in Autoclear.

In November 2013, members of Autoclear elected a new Board of

Managers, removing Brad from the Board. In January 2014, the Board of

Managers removed Brad as CEO, prohibited him from entering Autoclear's

property, eliminated him as a signatory on Autoclear's bank accounts, and

appointed Todd as the interim CEO. At the time, Brad and Todd were the two

largest membership interest holders in Autoclear with Todd holding

approximately an 11.4% membership interest, and Brad holding approximately

a 37% membership interest.

On January 2, 2014, the arbitrator issued a partial final award, finding

Autoclear's members could "elect or remove [m]anagers by a majority vote of

the [m]ember interests." He further determined that Autoclear's operating

agreement provided managers the right to amend the operating agreement

"without the consent of the [m]embers" only so long as "in [the managers'] . . .

A-1962-22 6 opinion, such amendment d[id] not materially affect the [m]embers" and was

"limited to . . . ministerial matters" as provided in Section 12B.

On April 1, 2014, the arbitrator permitted member plaintiffs to amend

their statement of claims against Brad to assert new breach of fiduciary duty

claims stemming from Brad's actions in 2013, including claims for attempting

to cancel Hazim Audalla's membership and improperly attempting to move the

company to Belize.

On December 10, 2014, the arbitrator issued an order addressing member

plaintiffs' and Audalla's order to show cause requested relief. The arbitrator

determined that the following actions were "ultra vires, illegal, [and] void in

their entirety": any "purported amendments" to Autoclear's operating agreement

that were "enacted during 2013[ and] 2014 at . . . Brad['s] . . . [m]anagers'

meeting"; and any actions taken to move Autoclear's "registration from New

Jersey to Belize," expel Autoclear's members, and file a "[c]omplaint in the

Supreme Court of Belize."

On May 18, 2015, the arbitrator addressed member plaintiffs' application

to declare Autoclear's loans to Brad void and to require his immediate

repayment. Two promissory notes, both dated May 30, 2014, evidenced the

A-1962-22 7 loans. The arbitrator decided member plaintiffs' claims against Brad for

unauthorized loans would be resolved in phase II of the arbitration.

On October 6, 2015, the arbitrator issued a partial final award, finding the

1995 operating agreement remained in full force and effect. "[I]n accordance

with [his] [d]ecision of January 2, 201[4]," he found Autoclear's Board of

Managers was "to be appointed or removed by a majority vote of the [m]ember[]

interests." The arbitrator found the "Board of Managers appointed by the

[m]embers at the November 16, 2013 meeting[] w[as] approved by a majority

of the [m]ember [i]nterests and [wa]s validly constituted and empowered to act"

pursuant to the operating agreement. He further determined that all other alleged

amendments to the 1995 operating agreement were "null and void."

On January 28, 2016, a second judge confirmed the arbitrator's October 6,

2015 partial final award. The second judge stayed the award until February 8,

2016, permitting member plaintiffs to effectuate an orderly management

transition with Brad. The second judge ordered the parties to develop a

transition plan, which included the necessary legal changes for banks,

customers, and employees. Additionally, he ordered Autoclear to continue

operating in the ordinary course of business but prohibited any transfers, sales,

or hypothecation of its assets.

A-1962-22 8 On February 8, 2016, the second judge lifted the stay and enforced the

arbitrator's October 6, 2015 partial final award. The same evening, police were

dispatched to Autoclear's Fairfield facility because an employee had removed

computers and essential equipment at Brad's behest. The second judge ordered

Brad and Autoclear affiliated individuals Jossette Caruso, Dr. Yawkuen Lin, and

Te-Feng Fan to immediately return Autoclear's servers, hard drives, and

equipment. On February 23, 2016, the second judge granted plaintiffs' order to

show cause application for temporary restraints against Brad, Caruso, Lin, and

Fan.

On June 7, 2016, the second judge granted plaintiffs' request for

permanent restraints. He entered an order barring Brad, Caruso, Lin, and Fan

from: interfering with Autoclear; entering its premises; contacting anyone

affiliated with Autoclear; hypothecating Autoclear assets; taking any further

steps to re-establish Autoclear's registration in Belize; utilizing Autoclear's

backscatter imaging kit patent; and other various relief. He also ordered Brad

to "immediately return all . . . computers, documents, cell phones, and any other

devices or property." He specifically reserved on Autoclear's incurred attorneys'

fees and costs due to Brad's theft, including the costs for the computer forensic

analysis and repair of servers.

A-1962-22 9 On June 15, 2016, plaintiffs filed an amended complaint asserting phase

II arbitration claims against Brad for: member expulsion pursuant to N.J.S.A.

42:2B-24; breach of fiduciary duty; breach of the operating agreement; and

declaratory judgment.

In June 2016, after over four years of litigation before the same arbitrator,

Brad requested the AAA convert the arbitration and apply its large, complex

commercial dispute rules. Brad specifically argued plaintiffs' amended claims

triggered the use of the AAA's large, complex commercial dispute rules and

required three qualified arbitrators because plaintiffs demanded damages in

excess of $1,000,000. Plaintiffs objected to Brad's request, arguing the amended

claims mirrored their original claims, which included their "claim to enforce a

vote, . . . a claim for breach of fiduciary duty, as well as [a claim] to disassociate"

Brad. Plaintiffs argued the amended pleading was intended to memorialize that

member plaintiffs and Autoclear were prosecuting the action together after the

arbitrator's decision in phase I. Further, plaintiffs argued the AAA should not

apply its large, complex commercial dispute rules and appoint three arbitrators

because: Brad knew the value of plaintiffs' alleged damages from the filing of

the original complaint; plaintiffs alleged no new claims but instead asserted

additional damages based on Brad's malfeasance discovered during phase I;

A-1962-22 10 plaintiffs would suffer prejudice from any delay and increased costs; Brad

waived the use of the AAA's large, complex commercial dispute rules and three

arbitrators; and the AAA should not award Brad's tactical gamesmanship.

On June 28, 2016, after reviewing the parties' submissions, the AAA

concluded that "[i]n accordance with Rule [R-]37 of the [AAA r]ules[,] which

govern this matter," the assigned arbitrator would continue handling the matter.

AAA Rule R-37 addressed waiver and stated that "[a]ny party who proceeds

with the arbitration after knowledge that any provision or requirement of these

rules has not been complied with and who fails to state an objection in writing

shall be deemed to have waived the right to object." Thereafter, the AAA

declined Brad's request for reconsideration.

On January 5, 2018, the arbitrator entered a partial final award in favor of

plaintiffs, voiding Autoclear's loans to Brad for $970,000 and requiring

repayment. Two promissory notes dated May 30, 2014, for $830,000 and

$140,000, memorialized the loans. The loans were unsecured and provided a

five-year repayment term with a 2% interest rate. Autoclear had issued the loans

after Brad held a telephonic meeting with Lin and Gil Zweig, who Brad alleged

were on Autoclear's Board of Managers. Brad allegedly obtained the loans to

fund his divorce. The arbitrator found the loans violated prior orders, and "[t]he

A-1962-22 11 undisputed facts clearly support[ed] a determination that [Brad] breached his

fiduciary duty to" Autoclear. The arbitrator imposed a constructive trust on

Brad's membership interest in Autoclear until he repaid his $700,000 loan

balance.

On May 23, 2018, the second judge granted plaintiffs' motion in aid of

litigants' rights under Rule 1:10-3 and denied Brad's cross-motion. In a

comprehensive, sixty-eight-page oral decision, the second judge found Brad

violated the arbitrator's and second judge's prior orders. He noted that after the

arbitrator had awarded control of Autoclear to member plaintiffs, Brad held an

emergency meeting and attempted to claim that Autoclear's members approved

a resolution transferring authority back to him. The second judge found Brad's

actions intentionally frustrated Todd's and other member plaintiffs' ability to

manage Autoclear. The second judge recounted ordering temporary restraints

on February 23, 2016, prohibiting Brad's from interfering with Autoclear, and

permanent restraints on June 7, 2016. He found it relevant that Brad's wrongful

conduct required police intervention.

A-1962-22 12 Further, Brad had filed multiple federal lawsuits 5 after June 7, 2016,

including an action filed in the United States District Court for the Southern

District of New York, which evidenced his contumacious behavior. The second

judge ordered Brad to withdraw the New York federal action, except for

permissible amended claims, and found Brad "patently . . . violat[ed]" the second

judge's June 7, 2016 order. After copiously recounting Brad's violations, the

second judge ordered Brad to pay plaintiffs' incurred attorneys' fees and

computer forensic professional expenses as a coercive sanction. Lastly, the

second judge confirmed the arbitrator's January 5, 2018 partial final award.

On July 13, 2018, after plaintiffs submitted certifications of service, the

second judge found it appropriate to award plaintiffs $503,571.88 in attorneys'

fees and costs. He reduced Autoclear's requested $554,157.82 sanction amount

by: "the Canadian firm's fees" of $3,103.64; attorneys' fees and costs of $4,607

related to the motion to confirm the January 2018 award; $41,651.30 for the

attorneys' fees and costs for the deposition of Caruso and Lin; and Nicholas

Duston, Esq.'s duplicative fees totaling $1,224.

5 On March 22, 2019, a Second Circuit Court of Appeals judge sitting by designation issued an order granting the "motions to dismiss [Brad's and Caruso's New York federal action] filed by AAA" and Autoclear. The Second Circuit Judge also sanctioned Brad in the amount of $20,898.34. A-1962-22 13 On July 18, 2018, the arbitrator issued a partial final award to plaintiffs,

stripping Brad of his claimed newly-increased membership interest in Autoclear

based on his approximately $1,000,000 in acquisition management fees (AMFs).

Plaintiffs argued Brad "attempt[ed] to retroactively award himself 13 years[,]

from 2001 to 2014[,] of AMFs totaling . . . approximately 8%" membership

interest in Autoclear. The arbitrator found that while paragraph seven of the

1995 operating agreement stated that "managers shall receive an annual

management fee" when certain conditions are met, "the actions of . . .

[Autoclear] disclose[d] that the award of such fees was discretionary with the

[Board of] [M]anagers." The arbitrator reasoned "the Board [of Managers]

possessed the discretionary power to award management fees," but "[t]he

[o]perating [a]greement d[id] not authorize the grant of membership interests in

lieu of cash." He found that "[a]lthough the Board of Managers had the power

to issue management fees, it had no authority to: a. [a]ward . . . [AMF]s; b.

[a]ward membership interests in lieu of cash; or c. [a]ward any such fees

retroactively from 2001 to 2014." The arbitrator held: Brad's claimed

membership interests acquired in lieu of AMFs were "void and of no force"; the

award of AMFs was to be expunged from Autoclear's records; and Brad's

"membership interest in . . . [Autoclear] shall be adjusted accordingly." The

A-1962-22 14 arbitrator's phase II partial final award voiding Brad's AMF membership

interests therefore reduced Brad's 35.09163% membership interest in Autoclear

that the arbitrator previously determined Brad possessed in phase I.

On December 7, 2018, a third judge was assigned to this case, and she

confirmed the arbitrator's July 18, 2018 partial final award. The third judge

confirmed Brad was not entitled to the AMFs, and his AMFs "totaling

[approximately] $1,000,000[] from 2001 through 2014 [we]re . . . voided in their

entirety." She also denied Brad's cross-motion to vacate the order, affording

deference to the arbitrator's decision not to provide three arbitrators. She

recognized AAA Rule R-37 provided for a party's waiver of its rules and found

Brad waived any objection to not having three arbitrators because he had notice

of plaintiffs' "claim for over . . . [$1,000,000] since 2015." She reasoned Brad

failed to raise the issue before the second judge in January 2016, when the

second judge confirmed the partial final award including claims valued "in

excess of [$1,000,000]." Brad thereafter moved for reconsideration, which she

denied on April 10, 2019.

After an August 9, 2018 telephonic scheduling conference, wherein Brad

represented himself, the arbitrator ordered that the parties were to file all

motions by September 10, and opposition by October 3. The arbitrator later

A-1962-22 15 extended Brad's time to submit opposition to plaintiffs' summary judgment until

October 15. In denying Brad a further extension, the arbitrator's October 23

order noted he previously afforded Brad "some leeway," but "[a]t some point,

[the litigation] must stop."

On December 13, the arbitrator issued his final award after considering

plaintiffs' summary judgment motion and Brad's cross-motion. In the

arbitrator's written final award decision, he noted consideration of Brad's notice

of application and brief. The arbitrator found: Brad "engaged in conduct" that

made it unreasonable "to carry on [Autoclear's] activities . . . with him as a

member"; Brad was to be dissociated and expelled as a member of Autoclear

under N.J.S.A. 42:2C-46; Brad's membership interest in Autoclear was to "be

sold as provided in N.J.S.A. 42:2C-47(c)"; Autoclear was to be reimbursed for

Brad's $504,058.35 in personal attorneys' fees; Autoclear was to be reimbursed

for Brad's personal legal fees of $70,975.36 related to the estate litigation;

Autoclear was to be reimbursed for $314,730.14, constituting 40% of

Autoclear's legal fees incurred in phase I; the membership interests of Katy

Conway, Zweig, Bob Madden, Lin, Caruso, Jessica Conway, Ken Voigtland,

and Tang were voided; Brad was required to pay 75% of the parties' AAA costs

in the amount of $104,604.44; Brad's membership interests of $100,000 and

A-1962-22 16 $136,000, which he caused Autoclear to issue, were voided; the membership

interests of Brad's minor children, James C.B. Conway for $70,000, Granville

K. Conway for $25,000, and Kathryn T. Conway for $100,000, were voided, and

Autoclear was required to return his children's respective investments within

ninety days; Autoclear's remaining claims were denied; and Brad's remaining

claims were dismissed.

Regarding Brad's breach of fiduciary duty, the arbitrator stated Brad's

conduct was "egregious in the blatant exercise of his power to greatly enhance

his personal situation with utter lack of concern for the impact on . . .

[Autoclear]." In awarding plaintiffs' attorneys' fees from phase I, the arbitrator

relied on In Re Niles, 176 N.J. 294 (2003), and found the award was appropriate

because Brad's "conduct was egregious." The arbitrator noted plaintiffs

requested attorneys' fees of $786,825.25, and "it [wa]s difficult to allocate total

responsibility for the various twists and turns of this arbitration." He determined

that ordering Brad to "pay $314,730.1[0] (40%) . . . of [Autoclear's] legal fees"

was appropriate. Regarding the AAA costs, the arbitrator cited AAA "Rule [R-

]43" as providing the "authority to allocate fees and costs" and ordered Brad to

pay "[75%] . . . of [Autoclear's] AAA fees and costs."

A-1962-22 17 On June 3, 2019, the third judge ordered a partial confirmation of the

arbitrator's December 13, 2018 final award. The third judge issued a

comprehensive, twenty-one-page written decision, which confirmed the award

"except for the provision requiring [Brad] to pay . . . [40%] . . . of [Autoclear's]

legal fees incurred in Phase I in the amount of $314,730.14." She reasoned the

arbitrator's award of attorneys' fees plaintiffs incurred in phase I was against the

"American Rule" and legally precluded, as "there was no agreement in this case

that attorneys' fees [we]re to be awarded to the prevailing party, [and] the award

of counsel fees [wa]s sustainable only if authorized by law in a similar civil

action." She explained that under N.J.S.A. 2A:23B-23(a)(4), "an arbitral award

must be vacated if 'an arbitrator exceeded [his] powers'" and determined "[t]he

circumstances here require[d] . . . [her] to exercise [her] duty and intervene to

prevent an award for attorney fees, as it would clearly violate New Jersey's long-

standing public policy of disfavoring the shifting of attorney fees." The third

judge's order confirmed the arbitrator's final award finding that: Brad was to be

disassociated and expelled as a member of Autoclear under N.J.S.A. 42:2C-46;

Brad's membership interest in Autoclear was to be sold; and Brad was to be

afforded a buy-out. She also specifically found the arbitrator's denial of Brad's

A-1962-22 18 further extension request to file opposition to plaintiffs' summary judgment

motion was not an abuse of his discretion.

On August 9, 2019, after hearing Brad's motion to alter or amend her June

3, 2019 order, which confirmed the arbitrator's December 13, 2018 award, the

third judge remanded the matter to the arbitrator for clarification. She ordered

the arbitrator to clarify the "intended buy[-]out process," the methodology for

valuation, and the date to be used for the valuation. On August 26, 2019, the

arbitrator clarified that: "the valuation date [w]as the date of the [f]inal

[a]ward"; the methodology "shall be determined by the [third judge]"; and he

left to the third judge's "ability to determine the terms of the sale."

On January 21, 2020, the third judge appointed an independent expert to

conduct a valuation of Brad's membership interest in Autoclear as of December

13, 2018, and thereafter modified the order to appoint Robert Bonavito, CPA,

as the expert. On February 26, 2021, she entered a scheduling order for the

parties' expert reports.

After a four-day trial, on November 18, 2022, the third judge issued an

order accompanied by a cogent twenty-three-page decision finding that Brad's

membership interest in Autoclear was 29.5% and had a discounted fair value of

$1,250,153.95.

A-1962-22 19 During the trial, the court's appointed expert, Bonavito, plaintiffs' expert,

Hubert Klein, CPA, and Brad's expert, Gerard Giannetti, CPA, testified. The

third judge admitted the experts' reports into evidence with the parties' consent.

All three experts agreed that under the Internal Revenue Service Revenue Ruling

59-60, fair market value is defined as the "price at which the property would

change hands between a willing buyer and a willing seller when the former is

not under any compulsion to buy[,] and the latter is not under any compulsion

to sell, both parties having reasonable knowledge of relevant facts." Further, all

three experts noted Autoclear's cash balance in 2018 was higher compared to

previous years because it had sold its building in Fairfield for $4,250,000 and

moved its New Jersey facility to Pine Brook. The experts all agreed the

arbitrator's voiding of Brad's $236,000 interest in Autoclear reduced Brad's

membership percentage interest. It was further undisputed that the Board of

Managers voted to include $3,389,533 as a "long[-]term liability" of Autoclear,

representing "legal fees, a settlement agreement, and other expenses the

company agreed to reimburse members." As of the valuation date, the long-

term liabilities had been reduced to $2,829,472.

Bonavito's expert report provided that as of December 13, 2018,

Autoclear's "fair value" was $7,200,000. Brad's membership interest was

A-1962-22 20 35.333960% and valued at $2,544,045. Bonavito later adjusted Brad's

membership interest to 29.532844% based on the phase II arbitration decision.

Bonavito found "the appropriate methodology for valuing . . . [Autoclear] [wa]s

a combination of [the] capitalization earnings method, the transaction multiple

method[,] and [the] adjusted book value method." Bonavito determined that the

fair value of Brad's 29.5% membership interest in Autoclear was $2,124,000.

Bonavito determined that Autoclear's discounted fair value was $4,635,868 after

applying a 19.5% minority discount and a 20% marketability discount.

Brad's expert Giannetti opined in his report that as of December 13, 2018,

Autoclear's fair value was $8,430,930. Brad's membership interest was 35.33%

and valued at $2,978,981. Giannetti also used a combination of the

capitalization of earnings method, company transactions method, and the

adjusted book value method. At trial, Giannetti testified he had failed to

consider Autoclear's Philippines and Ottawa properties at their market value,

which would have added $2,200,000 to Autoclear's adjusted book value.

Accordingly, he testified that Autoclear's revised fair value as of December 13,

2018 was approximately $8,700,000. Giannetti also testified about another

expert report he authored to "account[] for all adjustments confirmed in the

arbitration award," which recalculated Brad's membership interest to 33.04%.

A-1962-22 21 "Giannetti was the only expert to withhold . . . previous legal liabilities [that

Autoclear assumed] from his calculations." Further, he found a 19.5% minority

discount and 10% marketability discount were appropriate.

The third judge discounted Giannetti's opinion regarding Brad's

membership interest in Autoclear because he did not properly account for the

$236,000 voidance of Brad's membership interests, which reduced Brad's

membership interest in Autoclear. Further, the third judge specifically found

Giannetti's opinions did "not meet a standard of reasonableness upon which" she

could rely. She also reasoned his opinion was flawed because he based the

"valuation conclusion . . . upon a single [OSI Systems, Inc. (OSI)] form letter"

regarding the potential purchase of Autoclear, which was not "reliable enough

to be . . . reasonably construe[d] . . . [as] a serious offer."

Plaintiffs' expert Klein opined in his report that as of December 13, 2018,

Autoclear's fair value was $6,232,073. Klein used a 29.76% membership

interest for Brad based on the arbitrator's phase II share determination. He noted

that at the time of valuation, Autoclear had 36 partners and approximately 210

employees. He reviewed financial records from 2014 through 2018 and

determined Autoclear's gross receipts, gross profits, and the "resulting net

income/(loss)."

A-1962-22 22 In reaching his conclusion regarding Autoclear's fair value, Klein opined

the most appropriate approaches for valuing Autoclear were the income

approach and the asset approach. Klein explained that he did not utilize the

market approach because "neither the guideline public company method nor the

guideline transaction method were appropriate methods to value . . . [Autoclear]

due to the limited number of transactions observed, as well as the comparability

of the companies transacted to." He found Bonavito's market approach using

the "merger and acquisition method (also known as the transaction method)" for

Autoclear's valuation, which used "an [in]appropriate comparison" to American

Science and Engineering, was "unusual," as it "rel[ied] upon one guideline

transaction when applying the transaction approach." He opined that

"Bonavito's conclusion of [Autoclear's] value based upon the transaction method

should be disregarded." Klein further disagreed with Giannetti's market

approach valuation of Autoclear, which relied on a "July 2, 2020 letter from

OSI . . . to Autoclear," because it was not "a finalized sale offer" and not based

on a review by OSI of "Autoclear's financials."

While Klein ultimately found the income approach inapplicable for

Autoclear, he fully considered it using the capitalization of earnings method. He

recognized the capitalization of earnings "method is utilized when . . . [a]

A-1962-22 23 [c]ompany's historical earnings provide a reasonable proxy for future

expectations." He explained that "the discounted future earnings method is

employed when reliable projections are available," which did not exist for

Autoclear. Therefore, he applied capitalization because "historical operating

results were the best measure of . . . [Autoclear's] expected future earnings." In

calculating Autoclear's fair value under the capitalization of earnings method,

he "started with the pre-tax operating income" after deducting expenses and

costs from Autoclear's gross profits. Klein thereafter found Autoclear's

"resulting operating income/(loss) totaled ($1,693,844) in 2014, ($3,338,330) in

2015, ($1,075,343) in 2016, ($120,762) in 2017, and ($816,995) in 2018." After

making "normalization adjustments," he calculated Autoclear's "adjusted pre-

tax earnings to be ($607,142), ($1,963,432), $743,545, $315,308 and ($240,440)

for the years 2014 through 2018." He excluded 2014 and 2015 unrepresentative

significant losses. Ultimately, Klein "calculated the average adjusted pre-tax

earnings to be $108,807."

Klein noted Autoclear "elected for 'S' Corporation status, . . . meaning that

the individual [members] are responsible to pay income taxes on their applicable

share of . . . [Autoclear's] taxable income." But, as "the rates of return utilized

in the development of the capitalization rate, . . . utilize[] primarily Subchapter

A-1962-22 24 C corporations' . . . after-tax data," he "appl[ied] a comparable tax rate to the

pre-tax earnings stream," although "taxes are not paid on the [c]ompany level

by Autoclear." He used the highest combined tax rate of 32%, resulting "in a

projected after-tax income of $73,989." After concluding "the 'built-up' cost of

equity" was 21.41%, and subtracting "[t]he long-term growth rate of 2[]%,"

Klein found a 19.41% capitalization rate. He used the "projected estimated cash

flow of $73,989" "divided by the [19.41%] capitalization rate," which yielded a

fair value for Autoclear of $381,189.

Under the asset approach, Klein "determined the net asset value . . . [was]

the most appropriate method in which to value" Autoclear, "largely in part to

the asset balance on . . . [Autoclear's] balance sheet as of December 31, 2018[,]

which far exceeded the balance of . . . [Autoclear's] liabilities." In calculating

the net asset value, Klein applied a 10% accounts receivable adjustment "to

account for estimated uncollectible receivables." Klein also "adjusted the book

value of fixed assets to account for the fair market value of real estate held by"

Autoclear. After making the adjustments, he found the "net asset value of . . .

[Autoclear] was $6,232,073."

After undertaking valuations under the income approach, using the

capitalization of earnings method, and under the asset approach, using the net

A-1962-22 25 asset value method, Klein concluded "the net asset value is more indicative of

the value." He testified that "a company should be valued at no less than the

book value of the company" because "if the operations are only worth $300,000,

they would be better off selling the assets of the company[,] and they would

realize $6[,200,000] million less the cost of selling the assets." He therefore

afforded no weight to the capitalization of earnings method. Klein concluded

Autoclear's fair value "as of December [13], 2018 was $6,232,073." He also

found the application of a 20% minority discount and a 15% marketability

discount were warranted. Ultimately, Klein found that as of December 13, 2018,

the discounted fair value of Brad's 29.76% membership interest was $1,261,000.

Regarding Brad's membership interest, the third judge accepted

Bonavito's "'straight math of taking $236,000 off of the value as of 2018'"

reducing Brad's "interest . . . from 35.09163% to 29.532844%." She noted that

Klein confirmed this analysis. After a detailed review of Klein's opinion

regarding the income approach and the asset approach, the third judge found

Klein's testimony was credible, and his opinion was "the most complete in both

substance and proof." She found Bonavito's and Klein's "asset approach, [which

they] agreed . . . [w]as the 'most appropriate approach,'" provided the most

accurate valuation. She also determined Autoclear's decision "to place . . .

A-1962-22 26 outstanding legal liabilities 'on the books'" because it "had agreed to take on any

debt resulting from various litigations" was fully supported. She determined

Autoclear's acceptance of legal liabilities was "an example of business

judgment . . . not [to] be second-guess[ed]."

Finally, the third judge found the facts established that Brad was "an

oppressor [member]," and member plaintiffs were oppressed after considering

Brad's actions and the surrounding circumstances. She specifically found Brad's

wrongdoings: were detrimental to Autoclear's members; had prolonged this

litigation; purposely caused increased legal expenses to Autoclear's balance

sheet; and devalued Autoclear under accepted appraisal methods. Accordingly,

she found the "Oppressed Shareholder Statute," N.J.S.A. 14A:12-7(1)(c), (8)(a),

A-1962-22 27 was "relevant to [her] decision."6 She found that under N.J.S.A. 14A:12-7(1)(c),

8(a), a discount to fair value was appropriate. She determined that "in the

interest of equity and upon consideration of the nature of Brad['s] . . .

[membership] interest in Autoclear, . . . it [was] fit to apply both a marketability

discount and minority discount to Brad['s]" membership interest. She relied on

Klein's discount conclusions because his report had "the soundest analysis and

most recent data" compared to Bonavito's report. Specifically, she found Klein

credibly established, through his utilization of the Mandelbaum Factors,7 a

6 The parties do not contest the application of N.J.S.A. 14A:12-7. Effective March 1, 2014, the Revised Uniform Limited Liability Company Act (RULLCA), N.J.S.A. 42:2C-1 to -94, replaced the Limited Liability Company Act (LLCA), N.J.S.A. 42:2B-1 to -70. The RULLCCA provides for judicial dissolution of an LLC when "managers or those members in control of the company: (a) have acted, are acting, or will act in a manner that is illegal or fraudulent; or (b) have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant." N.J.S.A. 42:2C-48(a)(5). The court has the authority to "order the sale of all interests held by a member . . . if the court determines . . . that such an order would be fair and equitable to all parties under all of the circumstances of the case." N.J.S.A. 42:2C-48(b). As RULLCA affords analogous relief as provided under N.J.S.A. 14A:12-7(1)(c), (8)(a), the judge properly looked to existing shareholder oppression statutes regarding the buyout of a member's interests. 7 The Mandelbaum factors are "[a] nonexclusive list of . . . factors" used to "[a]scertain[] the appropriate discount for limited marketability," which "appreciate[] the fundamental elements of value that are used by an investor in making his or her investment decision." Mandelbaum v. Comm'r, T.C. Memo. 1995-255, 1995 WL 350881 (1995), aff'd, 91 F.3d 124 (3d Cir. 1996).

A-1962-22 28 foundation for a 15% marketability discount. She applied Klein's 20% minority

discount for Brad's lack of control because Klein relied on "newer, indexed, and

searchable" Mergerstat8 "control premium studies" data.

Therefore, the third judge found Brad's membership "interest in Autoclear

should be valued under the determinations made by . . . Klein in his expert

report." Accordingly, she applied a 35% discount to Klein's fair value

calculation of $6,232,073 and determined "the value of Brad['s] . . . 29.5%

[membership] interest in Autoclear [wa]s $1,250,153.95."

On January 24, 2023, the third judge denied Brad's motion for

reconsideration of her valuation decision and ordered Autoclear to pay "the net

amount of $380,490.04." She explained in a twenty-four-page oral decision that

defendant, by virtue of the June 3, 2019 judgment, owed Autoclear $869,663.91.

She detailed that the $869,663.91 consisted of Brad's owed amount of

$774,638.15 "plus post-[judgment] interest of $95,025.82." Therefore,

Autoclear was ordered to buy out defendant for $380,490.04, which was the

8 Bus. Valuation Res., 2024 FactSet Review: Excerpt 2 (2024), https://www.bvresources.com/products/factset-review-2024#look-inside-the- review.

A-1962-22 29 third judge's valuation of Brad's membership interest at $1,250,153.95 minus his

amount owed to Autoclear of $869,663.91.

On appeal, Brad contends: (1) it was a misapplication of law and public

policy for the third judge to permit a majority in a membership case to vote the

minority to be responsible for their legal fees, and that the "business judgment

rule" permits circumvention of R. 4:42-9's limitations; (2) res judicata precluded

the third judge from imposing a discount to fair value based on Brad's previous

misconduct that was the subject of the arbitrator's final damage award; (3) the

third judge should not have discounted the fair value of Brad's membership

interest as it did not find "this case" was "extraordinary," and the prior monetary

damage awards precluded such a finding; (4) the arbitrator's 2018 partial and

final awards were invalid because the AAA's rules required three arbitrators to

decide claims alleging more than $1,000,000 in damages; (5) the arbitrator's

unreasoned decision denying Brad an extension to file opposition to plaintiffs'

summary judgment motion constituted misconduct requiring vacatur; and (6) the

second judge's sanction award of $503,000 against Brad was an abuse of

discretion.

Plaintiffs cross-appeal contends the third judge erred in: vacating the

portion of the final arbitration award that required Brad to reimburse Autoclear

A-1962-22 30 for 40% of the legal fees incurred during Phase I; and declining plaintiffs'

application to use the tax book value as the appropriate valuation methodology.

II.

Arbitration

A.

To give context to the arbitration issues presented, we begin by addressing

our standard of review and the New Jersey Arbitration Act's (the Act), N.J.S.A.

2A:23B-1 to -36, governing statutory framework. We review a trial court's

decision to affirm or vacate an arbitration award de novo. Sanjuan v. Sch. Dist.

of W. N.Y., Hudson Cnty., 256 N.J. 369, 381 (2024). "[I]n reviewing a

motion . . . [regarding] an arbitration decision, . . . we must be mindful of New

Jersey's 'strong preference for judicial confirmation of arbitration awards.'"

Ibid. (quoting Middletown Twp. PBA Loc. 124 v. Township of Middletown, 193

N.J. 1, 10 (2007)). The arbitration "award is not to be cast aside lightly" and

may only be vacated "when it has been shown that a statutory basis justifies that

action." Yarborough v. State Operated Sch. Dist. of Newark, 455 N.J. Super.

136, 139 (App. Div. 2018) (quoting Bound Brook Bd. of Educ. v. Ciripompa,

228 N.J. 4, 11 (2017)).

A-1962-22 31 The Act grants arbitrators extremely broad powers. Further, N.J.S.A.

2A:23B-15 "extends judicial support to the arbitration process subject only to

limited review." Barcon Assocs., Inc. v. Tri-County Asphalt Corp., 86 N.J. 179,

187 (1981) (interpreting the Act's predecessor, N.J.S.A. 2A:24-1 to -11). "To

foster finality and 'secure arbitration's speedy and inexpensive nature,' reviewing

courts must give arbitration awards 'considerable deference.'" Borough of

Carteret v. Firefighters Mut. Benevolent Ass'n, Loc. 67, 247 N.J. 202, 211

(2021) (quoting Borough of E. Rutherford v. E. Rutherford PBA Loc. 275, 213

N.J. 190, 201 (2013)). "An award may not be vacated or modified simply

because a court disagrees with the arbitrator's interpretation of the law or view

of the facts; unless the statute's specific requirements for vacating or modifying

an award are met, the award must be confirmed." Rappaport v. Pasternak, ___

N.J. ___, ___ (2025) (slip op. at 29) (citing N.J.S.A. 2A:23B-22).

Under the Act, a judge may vacate an arbitration award for the following

limited reasons:

(1) the award was procured by corruption, fraud, or other undue means;

(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

A-1962-22 32 (3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to [N.J.S.A. 2A:23B-15], so as to substantially prejudice the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers;

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection . . . not later than the beginning of the arbitration hearing; or

(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required . . . so as to substantially prejudice the rights of a party to the arbitration proceeding.

[N.J.S.A. 2A:23B-23(a).]

N.J.S.A. 2A:23B-24 allows for modification of an arbitration award in

certain limited circumstances, stating:

a. Upon filing a summary action within 120 days after the party receives notice of the award pursuant to section 19 of this act or within 120 days after the party receives notice of a modified or corrected award pursuant to section 20 of this act, the court shall modify or correct the award if:

(1) there was an evident mathematical miscalculation or an evident mistake in the description of a person, thing, or property referred to in the award;

A-1962-22 33 (2) the arbitrator made an award on a claim not submitted to the arbitrator and the award may be corrected without affecting the merits of the decision upon the claims submitted; or

(3) the award is imperfect in a matter of form not affecting the merits of the decision on the claims submitted.

b. If an application made pursuant to subsection a. of this section is granted, the court shall modify or correct and confirm the award as modified or corrected. Otherwise, unless an application to vacate is pending, the court shall confirm the award.

c. An application to modify or correct an award pursuant to this section may be joined with an application to vacate the award.

"[T]he standard for modification set forth in N.J.S.A. 2A:23B-24(a)(2) . . . . has

two mandatory components: that the award includes 'a claim not submitted to

the arbitrator and the award may be corrected without affecting the merits of the

decision upon the claims submitted.'" Rappaport, ___ N.J. at ___ (slip op. at

34) (emphasis in original) (quoting N.J.S.A. 2A:23B-24(a)(2)).

Pursuant to N.J.S.A. 2A:23B-15(a), arbitrators are permitted to "conduct

an arbitration in such manner as the arbitrator considers appropriate for a fair

and expeditious disposition of the proceeding." The authority conferred upon

an arbitrator under N.J.S.A. 2A:23B-15(a) includes the power to hold

A-1962-22 34 conferences with the parties before the hearing. It is clear that "when binding

arbitration is contracted for by litigants, the judiciary's role to determine the

substantive matters subject to arbitration ends." Minkowitz v. Israeli, 433 N.J.

Super. 111, 134 (App. Div. 2013). Further, "there is a strong preference for

judicial confirmation of arbitration awards." Id. at 135 (quoting Linden Bd. of

Educ. v. Linden Educ. Ass'n, 202 N.J. 268, 276 (2010)). "In this context, the

arbitrator's powers are limited by the agreement of the parties and an arbitrator

may not exceed the scope of the powers granted to him or her by the parties."

Kimm v. Blisset, LLC, 388 N.J. Super. 14, 25 (App. Div. 2006).

B.

We first address Brad's contention that the third judge erred in failing to

vacate the arbitrator's 2018 awards, as the AAA wrongly denied his June 2016

request to apply the AAA's large, complex commercial dispute rules and appoint

three arbitrators. Brad specifically argues the parties were bound to follow the

2009 AAA rules, and AAA Rule L-2(a) required large, complex commercial

disputes to "be heard and determined by . . . three arbitrators . . . . [i]f the parties

[we]re unable to agree upon the number of arbitrators and a claim or

counterclaim involve[d] at least $1,000,000." Brad posits that because plaintiffs

did not "specif[y] any amount of money" damages in phase I and thereafter

A-1962-22 35 amended their pleadings in 2016 demanding over $1,000,000 in damages, he

was entitled to change to an arbitration with three arbitrators. We are

unpersuaded.

We begin noting that Brad argues the arbitrator's phase II awards were

invalid and should be vacated under N.J.S.A. 2A:24-8, which applies to vacating

an arbitration award related to a collective bargaining agreement. We surmise

Brad intended to rely on the Act, N.J.S.A. 2A:23B-23(a). In reviewing whether

the arbitrator exceeded his powers under N.J.S.A. 2A:23B-23(a)(4), the "judicial

inquiry must consider more than whether a mere mistake occurred." Minkowitz,

433 N.J. Super. at 150. Rather, "the arbitrator[] must have clearly intended to

decide according to law, must have clearly mistaken the legal rule, and that

mistake must appear on the face of the award." Id. at 150-51 (alteration in

original) (quoting Tretina v. Fitzpatrick & Assocs., 135 N.J. 349, 357 (1994)).

Additionally, N.J.S.A. 2A:23B-23(a)(1) permits a judge to vacate an arbitration

award "procured by . . . undue means"; this "ordinarily encompasses a situation

in which the arbitrator has made an acknowledged mistake of fact or law or a

mistake that is apparent on the face of the record." Sanjuan, 256 N.J. at 382 n.1

(alteration in original) (quoting Borough of E. Rutherford, 213 N.J. at 203).

A-1962-22 36 Brad has failed to show either the AAA or arbitrator mistakenly applied

the rules or made a mistake of fact or law. In the present matter, after Brad

successfully moved in 2011 to transfer member plaintiffs' Chancery Division

lawsuit to arbitration pursuant to Autoclear's operating agreement, a single

arbitrator presided over the parties' dispute. Relevantly, member plaintiffs

requested Brad's disassociation from Autoclear based on his alleged misconduct

and alleged damages based on his alleged breach of fiduciary duty. In July 2011,

member plaintiffs requested that the arbitrator determine the value of Brad's

membership interest and void Brad's wrongfully transferred membership interest

in Autoclear to himself. Hence, Brad was on notice of member plaintiffs'

damages claims from the inception of the litigation.

The third judge correctly found the AAA was afforded deference in

interpreting its rules and denying Brad's requested change to three arbitrators.

See Howsam v. Dean Witter Reynolds, 537 U.S. 79, 84 (2002) ("'[P]rocedural

questions which grow out of . . . [a] dispute and bear on its final disposition' are

presumptively not for the judge, but for an arbitrator, to decide." (emphasis

omitted) (quoting John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 557

(1964) (internal quotation marks omitted))). We observe that the AAA's rules

did not address a request to apply the AAA's large, complex commercial dispute

A-1962-22 37 rules and appointment of three arbitrators mid-arbitration after a party filed an

amended pleading. Here, the parties were in their fifth year of arbitration when

Brad made his request. The parties were well past AAA Rule L-1's required

"administrative conference," which was to be held "within [fourteen] days after

the commencement of the arbitration" and prior to the appointment of three

arbitrators. If we were to accept Brad's argument that a party's filing of an

amended pleading alleging over $1,000,000 in damages automatically permits a

change to the AAA's large, complex commercial dispute rules, then a party could

file a calculated amendment to forum shop and appoint three arbitrators after

years with a single arbitrator. This further supports the deference afforded to

the AAA in the application of its rules.

AAA Rule R-53 specifically states that "[t]he arbitrator shall interpret and

apply these rules insofar as they relate to the arbitrator's powers" and "[a]ll other

rules shall be interpreted and applied by the AAA." The AAA was in the best

position to evaluate Brad's request and interpret its rules, which the parties

agreed to. Therefore, we reject Brad's contention that the 2018 partial and final

awards should be vacated, because the AAA acted well within its authority to

review and decide whether his request to increase the number of arbitrators

should be granted. N.J.S.A. 2A:23B-15(a).

A-1962-22 38 We nevertheless address Brad's contention that the third judge erred in

finding he waived the ability to request the AAA apply its large, complex

commercial dispute rules and appoint three arbitrators after plaintiffs amended

their pleading. Relevantly, Brad had notice that plaintiffs claimed over

$1,000,000 in phase I. The arbitrator's May 18, 2015 letter memorialized that

member plaintiffs sought to void Brad's Autoclear loans of $970,000, but the

arbitrator had determined the issue would be addressed in phase II based on the

parties' agreement "to bifurcate" the claims. The record demonstrates Brad was

on notice that member plaintiffs were seeking: his disassociation from

Autoclear; a determination of his buy-out value interest; and his repayment of

the allegedly void $970,000 in loans. Thus, Brad, an attorney and Autoclear's

prior CEO, was advised in 2015 that plaintiffs were litigating both the value of

his approximately 30% interest in Autoclear and $970,000 in disputed loans,

which combined were clearly in excess of $1,000,000. Yet, Brad failed to

request the AAA apply the large, complex commercial dispute rules and appoint

three arbitrators until over a year later in June 2016.

The third judge also correctly noted that Brad failed to raise the arbitration

change before the second judge in January 2016 when he confirmed the partial

final award "in excess of $1[000,000]." The record directly contradicts Brad's

A-1962-22 39 assertion that he only learned in June 2016 that plaintiffs claimed he breached a

fiduciary duty by wrongfully taking loans totaling $970,000. Further, while

Brad had argued the loans were not subject to "an arbitral agreement," he was

not foreclosed from alternatively requesting the AAA apply the large, complex

commercial dispute rules. Notably, AAA Rule R-37 provided that "[a]ny party

who proceed[ed] with the arbitration after knowledge that any provision or

requirement of these rules ha[d] not been complied with and who fail[ed] to state

an objection in writing shall be deemed to have waived the right to object." We

therefore concur with the third judge's finding that Brad waived the election to

have three arbitrators because he received ample notice since 2015 of plaintiffs'

claims for breach of fiduciary duty and disassociation of his membership interest

were worth over $1,000,000.

Further, Brad's status as an attorney and prior self-represented filings also

wholly contradict his argument that his self-representation excused his failure

to timely raise an objection to the use of one arbitrator. The record demonstrates

Brad was clearly familiar with legal applications as evidenced by his litigation

in the Supreme Court of Belize and federal court. "[B]ecause of the strong

judicial presumption in favor of the validity of an arbitral award, the party

seeking to vacate it bears a heavy burden." Minkowitz, 433 N.J. Super. at 136

A-1962-22 40 (quoting Del Piano v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 372 N.J.

Super. 503, 510 (App. Div. 2004)). Brad had sufficient knowledge to timely

raise the issue of the AAA's large, complex commercial dispute rules. For these

reasons, we discern no error in the third judge's December 7, 2018 order denying

Brad's cross-motion to vacate the arbitrator's July 18, 2018 partial final award.

We next address Brad's argument that the third judge erroneously failed

to vacate the arbitrator's final award because the arbitrator wrongly denied him

a further adjournment to file opposition. He contends the arbitrator "did not

specify why a denial was appropriate," and the failure to provide "stated

reason[s]" was misconduct. While Brad cites N.J.S.A. 2A:24-8(c), the

arbitration of collective bargaining agreements vacation of an award statute, we

surmise he intended to argue under N.J.S.A. 2A:23B-23(a)(3), which permits a

judge to set aside an award if "an arbitrator refused to postpone the hearing upon

showing of sufficient cause for postponement."

As memorialized in the arbitrator's December 13, 2018 written decision,

he considered Brad's self-represented "[n]otice of [a]pplication" and "[b]rief,"

but Brad failed to file opposition to plaintiffs' summary judgment motion by the

set filing date of October 3, 2018. Brad's argument ignores that the arbitrator

held a telephonic scheduling conference with the parties in August 2018 and

A-1962-22 41 contemporaneously issued an order that set the filing date for substantive

motions. The arbitrator thereafter granted Brad an extension to submit

opposition by October 15, 2018 and explained the limited extension was based

on Brad's "pattern" of "participation in . . . [a]rbitration." After Brad failed to

file opposition, on October 17, 2018, the arbitrator "advised Brad by email

'that . . . any submission that was received by th[e] [AAA] after 5:00 p.m.[]

on . . . October 18[, 2018,]' would not be accepted." Although Brad had filed

the notice and a brief, he failed to file opposition. The record belies Brad's

arguments that the arbitrator committed misconduct and failed to provide

reasons for denying him a further extension.

We recognize that Brad retained counsel who requested another extension

on October 22, 2018, to file opposition by December 14, referencing that Brad's

ex-wife "had a mild stroke" that required Brad "to care for the[ir] children."

Nevertheless, the arbitrator had the authority to determine that "[a]t some point,

[the litigation] must stop" and deny another extension after previously

"afford[ing] . . . leeway."

Pursuant to AAA Rule R-38, an arbitrator may grant extensions of time

"for good cause . . . [as] established by the[] . . . [AAA's] rules, except the time

for making the award." Further, AAA Rule L-4 permitted the arbitrator to

A-1962-22 42 manage the proceedings by "tak[ing] such steps as they may deem necessary or

desirable to avoid delay and to achieve a just, speedy and cost-effective

resolution of [l]arge, [c]omplex [c]ommercial [c]ases." The arbitration had been

ongoing for years, and AAA Rule R-30(b) provided in pertinent part that "[t]he

arbitrator . . . shall conduct the proceedings with a view to expediting the

resolution of the dispute."

Again, N.J.S.A. 2A:23B-15(a) provides an arbitrator wide authority to

"conduct an arbitration in such manner as the arbitrator considers appropriate

for a fair and expeditious disposition of the proceeding." The arbitrator had

"broad discretion over discovery and other procedural matters." Minkowitz, 433

N.J. Super. at 144; see also Manger v. Manger, 417 N.J. Super. 370, 376-77

(App. Div. 2010) (stating that a party's "right to be heard" and "to present

evidence material to the controversy" was not violated when the arbitrator

declined to accept evidence after the parties failed to submit any by a pre -

determined deadline). We discern no error in the third judge's order denying

Brad's motion to vacate the award after she properly afforded deference to the

arbitrator. For these reasons, we conclude Brad's argument that the arbitrator's

"misconduct" warrants reversal of the third judge's orders refusing to vacate the

partial and final awards are unavailing.

A-1962-22 43 We turn next to plaintiffs' cross-appeal argument that the third judge erred

in vacating the arbitrator's final award that ordered Brad to reimburse Autoclear

for 40% of its legal fees—$314,730.10—incurred in phase I. Specifically,

plaintiffs argue the third judge erroneously vacated the award provision after

finding: there was no agreement between the parties permitting a prevailing

party an attorneys' fees award; the arbitrator exceeded his powers by entering

the fee award; and the award violated New Jersey's public policy disfavoring the

shifting of attorney fees.

Notably, the Act limits an arbitrator's authority to award attorneys' fees

and expenses. N.J.S.A 2A:23B-21(b) states, "An arbitrator may award

reasonable attorney's fees and other reasonable expenses of arbitration if such

an award is authorized by law in a civil action involving the same claim or by

the agreement of the parties to the arbitration proceeding." It is undisputed

Autoclear's operating agreement contained no provision permitting an award of

attorneys' fees to a prevailing party. Therefore, under the Act, the arbitrator's

fee award had to be authorized by law. As the third judge correctly found, "an

arbitral award must be vacated if 'an arbitrator exceeded the arbitrator's

powers.'" N.J.S.A. 2A:23B-23(a)(4).

A-1962-22 44 The arbitrator's attorneys' fee award relied on an analysis of the Supreme

Court's opinion in Niles. We concur with the third judge's determination that

"no exception to the American Rule was established under Niles" for legal fees

incurred in corporate dispute involving "a breach of fiduciary duty in a direct

action." The arbitrator's reliance on Niles was misplaced. In Niles, the Supreme

Court held that in situations where "an executor or trustee reaps a substantial

economic or financial benefit from undue influence, the fiduciary may be

assessed counsel fees incurred by plaintiffs and third parties in litigation to

restore the estate's assets to what they would have been had the undue influence

not occurred." 176 N.J. at 286.

Outside of the fact that this case does not relate to trust litigation involving

undue influence, plaintiffs extrapolate the holding in Niles, arguing Brad's

breach of his fiduciary duty proximately caused Autoclear consequential

damages of attorneys' fees, which Autoclear incurred from litigating phase I of

this corporate dispute. Plaintiffs contort the meaning of attorneys' fees incurred

by litigating against third parties, asserting "[t]he [a]rbitrator awarded legal fees

as consequential damages Brad improperly caused . . . [Autoclear]—not . . .

[member] [p]laintiffs—to incur against a third party," that being member

plaintiffs. Plaintiffs' argument falls short because there were no attorneys' fees

A-1962-22 45 charged to Autoclear "for representation of third parties in the litigation [that]

should be reimbursed" by Brad for his breach of his fiduciary duty. Niles, 176

N.J. at 296. Member plaintiffs' attorneys' fees from phase I cannot fairly be

viewed as consequential damages incurred for third party representation by

Autoclear.

The third judge correctly found vacating the arbitrator's award was

appropriate, as it was a violation of the long-standing public policy supporting

the American Rule. She stated that "[i]f an arbitrator's decision on a question of

public policy . . . plainly would violate a clear mandate of public policy," then

a judge has the authority "to prevent the enforcement of the arbitration award."

As the third judge soundly recognized, plaintiffs were not "forced to litigate a

claim" with a third party "resulting from [Brad's] fiduciary breaches." Rather,

the arbitrator considered Autoclear as the claimant, and the "fees incurred by . . .

[Autoclear] . . . all related to [Brad's] breaches of fiduciary duty." We discern

no error in the third judge's analysis that the misapplication of law violated New

Jersey's firm public policy of applying the American Rule to an award of

attorneys' fees. See Weiss v. Carpenter, Bennett & Morrissey, 143 N.J. 420, 443

(1996). The arbitrator exceeded his authority under N.J.S.A 2A:23B-21(b) by

A-1962-22 46 shifting attorneys' fees to Brad, as no "award [wa]s authorized by law . . . or by

the [operating] agreement."

In sum, we are unpersuaded by plaintiffs' unsupported contention that the

arbitrator's award of $314.730.14 "was simply an award of consequential

damages for Brad committing corporate waste." Therefore, we conclude the

third judge correctly vacated the arbitrator's attorneys' fee award to plaintiffs, as

"[a] court may vacate an arbitration award when it is procured by undue means

or resulted from an arbitrator exceeding his designated powers." Minkowitz,

433 N.J. Super. at 150.

III.

Membership Interest Valuation

"There are [] few assets whose valuation impose as difficult, intricate and

sophisticated a task as interests in close corporations." Steneken v. Steneken,

183 N.J. 290, 296 (2005) (alteration in original) (quoting Torres v. Schripps,

Inc., 342 N.J. Super. 419, 435 (App. Div. 2001)). "[I]n the valuation of a

business, '[t]here is no single formula that will apply to each enterprise.'" Ibid.

(second alteration in original) (quoting Bowen v. Bowen, 96 N.J. 36, 44 (1984)).

"Although there is no general formula that will apply to the 'many different

A-1962-22 47 valuation situations,' the ultimate 'goal is to arrive at a fair market value" when

"there is no market.'" Id. at 297 (quoting Bowen, 96 N.J. at 44). Our Supreme

Court has long-recognized that "'[v]aluing a closely held corporation is a

difficult task [that] . . . is fact sensitive and depends upon the experience of the

appraiser and the completeness of the information upon which his conclusions

are based [because] . . . the valuation of closely-held corporations is inherently

fact-based and thus not an exact science.'" Id. at 297-98 (alterations in original)

(quoting Torres, 342 N.J. Super. at 435). Our Court has elucidated that the three

generally recognized approaches for valuing a closely held corporation "are the

income or capitalized earnings method, the market approach method, and the

cost approach method." Id. at 297.

We review a trial judge's "determinations, premised on the testimony of

witnesses and written evidence at a bench trial, in accordance with a deferential

standard." Nelson v. Elizabeth Bd. of Educ., 466 N.J. Super. 325, 336 (App.

Div. 2021) (quoting D'Agostino v. Maldonado, 216 N.J. 168, 182 (2013)).

"[W]e defer to the trial [judge's] credibility determinations, because it '"hears

the case, sees and observes the witnesses, and hears them testify," affording it

"a better perspective than a reviewing court in evaluating the veracity of a

witness."'" City Council of Orange Twp. v. Edwards, 455 N.J. Super. 261, 272

A-1962-22 48 (App. Div. 2018) (quoting Gnall v. Gnall, 222 N.J. 414, 428 (2015)). We will

"'not disturb the factual findings and legal conclusions of the trial judge' unless

convinced that those findings and conclusions were 'so manifestly unsupported

by or inconsistent with the competent, relevant and reasonably credible evidence

as to offend the interests of justice.'" Griepenburg v. Township of Ocean, 220

N.J. 239, 254 (2015) (quoting Rova Farms Resort v. Invs. Ins. Co. of Am., 65

N.J. 474, 484 (1974)).

"The admission or exclusion of expert testimony is committed to the

sound discretion of the trial [judge]." Townsend v. Pierre, 221 N.J. 36, 52

(2015). A trial judge has "wide discretion to accept or reject an expert's

testimony, either in whole or in part." Sipko v. Koger, Inc., 251 N.J. 162, 188

(2022) (citing Brown v. Brown, 348 N.J. Super. 466, 478 (App. Div. 2002)).

Experts are required to "'give the why and wherefore' that supports the opinion,

'rather than a mere conclusion.'" Townsend, 221 N.J. at 54 (quoting Borough of

Saddle River v. 66 E. Allendale, LLC, 216 N.J. 115, 144 (2013)). They must

"be able to identify the factual bases for their conclusions, explain their

methodology, and demonstrate that both the factual bases and the methodology

are reliable." Id. at 55 (quoting Landrigan v. Celotex Corp., 127 N.J. 404, 417

(1992)).

A-1962-22 49 "Our standard of review for valuation disputes is deferential because the

valuation of closely held corporations is 'inherently fact-based[,]' not based in

'exact science,' and 'frequently become[s] battles between experts.'" Sipko, 251

N.J. at 179 (alterations in original) (quoting Balsamides v. Protameen Chems.,

Inc., 160 N.J. 352, 368 (1999)). However, "we need not give deference to the

trial judge's determinations of what discounts or premiums the determination of

fair value may include, or must exclude, since they are questions of law." Ibid.

(quoting Casey v. Brennan, 344 N.J. Super. 83, 110 (App. Div. 2001), aff'd, 173

N.J. 177 (2002)). "Whether the corporation's fair value should be reduced by a

marketability discount or any other discount is part and parcel of the fair value

determination." Id. at 182.

The buyout section of the Oppressed Shareholder Statute, N.J.S.A.

14A:12-7(8)(a), states in pertinent part:

(8) Upon motion of the corporation or any shareholder who is a party to the proceeding, the court may order the sale of all shares of the corporation's stock held by any other shareholder who is a party to the proceeding to either the corporation or the moving shareholder or shareholders, whichever is specified in the motion, if the court determines in its discretion that such an order would be fair and equitable to all parties under all of the circumstances of the case.

(a) The purchase price of any shares so sold shall be their fair value as of the date of the

A-1962-22 50 commencement of the action or such earlier or later date deemed equitable by the court, plus or minus any adjustments deemed equitable by the court if the action was brought in whole or in part under paragraph 14A:12-7(1)(c).

We address together Brad's contentions that the third judge erred in

applying a combined 35% discount to the fair value of Brad's membership

interest in Autoclear because: plaintiffs had obtained a prior award of monetary

damages against him for misconduct and the case was not extraordinary; and res

judicata barred the application of any discount since "Autoclear had already

pursued all potential damage claims . . . relate[d] to Brad's ownership of

[membership interest] . . . and management during the arbitration." He

specifically argues no discount related to membership oppression was

warranted, this case did not present "extraordinary circumstances" warranting a

discount reduction of $588,000 from his fair value, and the arbitrator's final

award resulting in a $774,638.15 judgment was a final adjudication on the merits

prohibiting any other remedy. After reviewing the record, we disagree and

conclude the third judge's discount application was fully supported by the

record.

A-1962-22 51 The third judge applied a 20% minority discount and a 15% marketability

discount to Brad's membership interest in Autoclear. We recognize at the outset

that "[a] minority discount adjusts for lack of control over the business entity,

while a marketability discount adjusts for a lack of liquidity in one's interest in

an entity." Balsamides, 160 N.J. at 373. A minority discount may apply under

"the theory that non-controlling shares of stock are not worth their proportionate

share of the firm's value because they lack voting power to control corporate

actions." Brown, 348 N.J. Super. at 483 (quoting Lawson Mardon Wheaton v.

Smith, 160 N.J. 383, 398 (1999)). "Marketability discounts 'reflect the

decreased worth of shares of stock in a closely held corporation, for which there

is no readily available market.'" Sipko, 251 N.J. at 182 (quoting Balsamides,

160 N.J. at 375). Our Supreme Court has determined that "in deciding whether

to apply a marketability discount to determine 'fair value' of shares of a

shareholder forced to sell his stock in a judicially ordered buy-out must take into

account what is fair and equitable." Balsamides, 160 N.J. at 377. "[N]either a

marketability nor a minority discount should be applied absent extraordinary

circumstances." Brown, 348 N.J. Super. at 483. "Depending on the facts . . . .

'[a]pplication of the equities . . . [can] dictate[] opposite results.'" Sipko, 251

N.J. at 183 (alterations in original) (quoting Balsamides, 160 N.J. at 382).

A-1962-22 52 Relevantly, our Supreme Court has "emphasized that N.J.S.A. 14A:12-

7(1)(c) does not limit or preempt the courts' equitable power in fashioning

appropriate remedies to a business dispute, specifically observing 'that the

enactment of N.J.S.A. 14A:12-7 was not intended to supersede the inherent

common law power of the Chancery Division to achieve equity.'" Sipko, 251

N.J. at 182 (quoting Brenner v. Berkowitz, 134 N.J. 488, 512 (1993)). The

record in the present case, including the expert opinions, firmly supports that

the third judge correctly determined discounts applied to the fair value of Brad's

membership interest. The third judge correctly recognized that she was

permitted to consider the expert opinions to provide context and a foundation

for the fair application of a discount, but her decision to apply any discount had

to be made based on a review of the totality of established facts. Further, in

addressing whether Brad would receive "a windfall in a buy-out situation caused

by his own bad conduct," the third judge was mindful not "to relitigate already

settled matters" but recognized his actions were relevant to the application of

discounts. In determining there were unremedied "equities" that weighed in

favor of applying discounts to the fair value of Brad's membership interest, the

third judge permissibly considered the detrimental effect of his misconduct

addressed in arbitration, which resulted in plaintiffs' award of damages.

A-1962-22 53 The third judge found Bonavito and Klein offered credible justification

for their respective discount opinions, which were "comprised of satisfactory

empirical data." She also made detailed findings regarding how Brad's

misconduct detrimentally affected Autoclear. She found it relevant that Brad

negatively impacted and devalued Autoclear by: attempting to "obfuscate his

actual . . . [membership] interest" through transfers; attempting to reincorporate

Autoclear in Belize; forcing Autoclear to incur greater legal expenses; and

prolonging the litigation. She correctly noted that "oppressor . . . [members]

should not be able to realize a beneficial windfall at the cost of oppressed . . .

[members] during court ordered buy[-]outs triggered by the oppressor[']s own

adversarial conduct."

Concurring with the third judge's findings, the record supports our

conclusion that "fairness and equity . . . compel the decision to apply . . . a

discount." Sipko, 251 N.J. at 183; see also id. at 184-85 (stating a standard rule

regarding discounts cannot be applied because "[e]ach decision depends not only

on the specific facts of the case, but also should reflect the purpose served by

the law in that context" (alteration in original) (quoting Balsamides, 160 N.J. at

381)). The third judge fully weighed the equities in ordering the fair value of

Brad's membership interest in Autoclear be subjected to a 20% minority discount

A-1962-22 54 based on his lack of control in Autoclear and a 15% marketability discount based

on the lack of a ready market. We reject Brad's argument that the discounts

should be vacated because the third judge did not "make the [necessary] finding

that the case was 'extraordinary.'" The third judge was not required to use the

word extraordinary. She correctly found the discounts applied to Brad's

membership interest after recognizing "discounts are appropriately applied

when representative of the reality of the transaction, the nature of the interest

being transacted and the bearing of equity upon the parties." Therefore, we

discern no reason to disturb the third judge's findings that Brad "acted to the

detriment of . . . Autoclear" members, and it was "in the interest of equity" to

apply the minority and marketability discounts to his membership interest

because they are sufficiently supported by credible evidence in the record.

Relatedly, we reject Brad's contention that res judicata barred the third

judge's application of discounts. The arbitrator's and second judge's monetary

awards were separate and distinct from the third judge's determination of the fair

value of Brad's membership interest. As memorialized in the arbitrator's August

26, 2019 award, which clarified his findings, the December 13, 2018 final award

ordered that Brad's "membership interests in . . . [Autoclear] shall be sold ."

Further, the arbitrator clarified that "[t]he methodology . . . shall be determined

A-1962-22 55 by the [c]ourt upon . . . [plaintiffs] seeking confirmation of th[e] [f]inal [a]ward,"

and "the [third judge] would deal with all aspects of the sale, including

valuation." The valuation of Autoclear and the fair value of Brad's membership

interest were not arbitrated and were specifically reserved for a judicial

determination.

The third judge's discount determination did not "doubly punish[] Brad

for the same conduct." Rather, the arbitrator presided over different claims and

found in favor of plaintiffs that: Brad's wrongly claimed AMFs of

approximately $1,000,000 were void; Brad's repayment of the $700,000

Autoclear loan balance was required; and Brad repayment of $95,000 in medical

expenses was mandated. Similarly, the second judge's enforcement of litigants'

rights award under Rule 1:10-3, sanctioning Brad with plaintiffs' approximately

$504,000 in attorneys' fees and costs, was also a separate claim and did not

preclude the third judge from applying discounts.

"The doctrine of res judicata 'contemplates that when a controversy

between parties is once fairly litigated and determined it is no longer open to

relitigation.'" Selective Ins. Co. v. McAllister, 327 N.J. Super. 168, 172 (App.

Div. 2000) (italicization omitted) (quoting Lubliner v. Bd. of Alcoholic

Beverage Control, 33 N.J. 428, 435 (1960)). Res judicata fosters "the important

A-1962-22 56 policy goals of 'finality and repose; prevention of needless litigation; avoidance

of duplication; reduction of unnecessary burdens of time and expenses;

elimination of conflicts, confusion and uncertainty; and basic fairness.'" First

Union Nat'l Bank v. Penn Salem Marina, Inc., 190 N.J. 342, 352 (2007) (quoting

Hackensack v. Winner, 82 N.J. 1, 32-33 (1980)). Pursuant to res judicata, "a

cause of action between parties that has been finally determined on the merits

by a tribunal having jurisdiction cannot be relitigated by those parties or their

privies in a new proceeding." Velasquez v. Franz, 123 N.J. 498, 505 (1991).

Brad offers no authority for his proposition that discounts may not be applied

after an award of damages for breach of fiduciary duty.

While the arbitrator and judges considered Brad's incidents of misconduct

in their decisions, we conclude those claims and awards were clearly distinct

from the fair value discount consideration of Brad's detrimental conduct.

Therefore, Brad's argument that the third judge granted plaintiffs "another

monetary award for the same conduct" is unsupported by the record. We discern

no error in the third judge's determination that res judicata did not bar the third

judge's application of discounts, which reflect the reality of the fair value of

Brad's membership interest.

A-1962-22 57 Brad next argues the third judge erred in permitting Autoclear to assume

plaintiffs' legal fees as a long-term liability, which resulted in a lower valuation

of Autoclear and, therefore, a reduction in the value of Brad's 29.5%

membership interest in Autoclear. He specifically avers the third judge

incorrectly applied the business judgment rule to Autoclear's Board of

Manager's vote to assume plaintiffs' legal fees because only member plaintiffs

benefitted from the membership dispute, as opposed to all of Autoclear's

members. Brad further contends member plaintiffs were permitted to "indirectly

shift far more of their fees to Brad." We discern Brad's contentions are without

merit.

"The business judgment rule has its roots in corporate law as a means of

shielding internal business decisions from second-guessing by the courts."

Alloco v. Ocean Beach & Bay Club, 456 N.J. Super. 124, 135 (App. Div. 2018)

(quoting Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 175 (2011)). "To

'promote and protect the full and free exercise of the power of management given

to the directors,' the second prong of the business judgment rule 'protects a board

of directors from being questioned or second-guessed on conduct of corporate

affairs, except in instances of fraud, self-dealing, or unconscionable conduct.'"

Ibid. (quoting In re PSE&G S'holder Litig., 173 N.J. 258, 276-77 (2002)). "The

A-1962-22 58 business judgment rule creates 'a rebuttable presumption.'" Id. at 136 (quoting

In re PSE&G S'holder Litig., 173 N.J. at 277). "It places an initial burden on

the person who challenges a corporate decision to demonstrate the decision -

maker's 'self-dealing or other disabling factor.'" Ibid. (quoting In re PSE&G

S'holder Litig., 173 N.J. at 277).

Brad's contention that plaintiffs engaged in self-dealing by litigating for

their sole benefit is directly contradicted by the record. It is undisputed that

there are over twenty-five other members with varying levels of membership

interest in Autoclear and over 100 employees. The record demonstrates that

Autoclear's members benefited from the management dispute litigation

resolution, which resulted in the stabilization of Autoclear's governance and

successful recovery of damages from Brad.

The record amply supports the third judge's findings that: "the litigation

costs [were] . . . an example of business judgment"; "[t]he reasons articulated

were sound"; and Brad failed to proffer sufficient evidence for her to "second-

guess[] the decision of the company." Additionally, because the litigation

benefited Autoclear, its reimbursement of the long-term liability does not

constitute improper attorney fee shifting. While Brad accurately argues the

long[-]term liability "'reduc[ed]' . . . his net equity interest[] in" Autoclear, all

A-1962-22 59 members' interests were reduced. Brad failed to demonstrate any legitimate

evidence rebutting the presumption that Autoclear's assumption of plaintiffs'

legal fees as a long-term liability was not a sound and permissive business

decision. Thus, we discern no error in the third judge's application of the

business judgment rule regarding Autoclear's assumption of member plaintiffs'

legal fees.

C.

On plaintiffs' cross-appeal, they argue the third judge erred in denying

their motions seeking a finding that "an implied agreement" to use the tax book

value existed and consequently, that Brad's membership interest was to "be

valued using [the] tax book value." They argue Autoclear's undisputed historical

record of equity transactions, which all used the prior year's tax book value,

established that the parties implicitly agreed that the tax book value was the

accepted valuation methodology. Autoclear used the tax book value for over

100 equity transactions, but it is undisputed that each was for interest of

approximately 2% or less. Plaintiffs argue Brad's membership interest valuation

was bound to "Autoclear['s] historical methodology of referencing the book

value on the prior-year's tax returns," as he had established and used while CEO.

We are unpersuaded.

A-1962-22 60 It is uncontested that no written agreement to use the tax book value

existed. Plaintiffs failed to meet their burden of proving Brad entered an implied

agreement to use the tax book valuation method for his 29.5% interest in

Autoclear. Valuing Brad's membership interest, which was more than double

that of any other Autoclear member, was readily distinguishable from

Autoclear's historic use of the tax book value for smaller interests. "An implied-

in-fact contract is an agreement manifested by conduct rather than express

written words." Cerkez v. Gloucester City, 479 N.J. Super. 174, 185 (App. Div.

2024). "Courts can find and enforce an implied-in-fact contract based on the

parties' conduct considering the surrounding circumstances." Ibid.

We observe that had Autoclear incurred the cost of obtaining an expert

valuation for each small equity sale and purchase, the valuation expense would

have diminished the membership interest value for each transaction. Plaintiffs

failed to establish Brad's conduct as CEO evinced an agreement to use the tax

book valuation method. Therefore, we conclude the record sufficiently supports

the third judge's finding that plaintiffs failed to establish an implied agreement

between the parties to use the tax book value.

We note after trial, the third judge correctly denied plaintiffs' further

request for the application of the tax book value recognizing, as the experts

A-1962-22 61 posited, that utilizing the tax book value for Brad's membership interest

produced a far lower valuation of Autoclear, which failed to reflect its "fair

value." N.J.S.A. 14A:12-7(8)(a). She reasoned the tax book value of Autoclear

did not include valuable real estate assets, which drastically reduced Brad's

membership interest. It is clear that a trial judge may use "any techniques or

methods which are generally acceptable in the financial community and

otherwise admissible in court" to calculate fair value. Sipko, 251 N.J. at 182.

Therefore, the record well-supports the third judge's findings that "[t]he tax book

value cannot be considered fair under these circumstances," and "[t]he relevant

statute requires the application of fair value."

IV.

Sanctions

Finally, Brad argues the second judge's award of approximately $504,000

in sanctions under Rule 1:10-3 warrants reversal. Specifically, he argues the

second judge wrongly awarded plaintiffs "all of the fees and costs reasonably

incurred from the 2016 temporary restraining orders, as well as the fees for

defending the federal filings by Brad and fees for the second motion." Brad

avers the second judge ignored that after Autoclear's control changed, Brad

"honored the change in management" and did not "interfere[] with [Autoclear's]

A-1962-22 62 operation." He further contends the second judge also failed to consider lesser

sanctions.

We review an "order enforcing litigant's rights under Rule 1:10-3 for an

abuse of discretion." Savage v. Township of Neptune, 472 N.J. Super. 291, 313

(App. Div. 2022), aff'd in part, rev'd in part on other grounds, 257 N.J. 204

(2024); Wear v. Selective Ins. Co., 455 N.J. Super. 440, 458-59 (App. Div. 2018)

(awarding counsel fees under Rule 1:10-3 based on a party's continuous refusal

"to comply with [court] orders"). Litigants may seek to enforce court orders

under Rule 1:10-3. "Specifically, 'Rule 1:10-3 provides a "means for securing

relief and allow[s] for judicial discretion in fashioning relief to litigants when a

party does not comply with a judgment or order."'" Satz v. Satz, 476 N.J. Super.

536, 554 (App. Div. 2023) (alteration in original) (quoting N. Jersey Media Grp.,

Inc. v. State, 451 N.J. Super. 282, 296 (App. Div. 2017)). "The scope of relief

in a motion in aid of litigants' rights is limited to remediation of the violation of

a court order." Savage, 472 N.J. Super. at 312 (quoting Abbott v. Burke, 206

N.J. 332, 371 (2011)). Nevertheless, if a judge "determines that a litigant has

disobeyed an order," then he or she "has discretion and flexibility in fashioning

an appropriate remedy to compel compliance." Lipsky v. N.J. Ass'n of Health

A-1962-22 63 Plans, Inc., 474 N.J. Super. 447, 463 (App. Div. 2023) (citing In re N.J.A.C.

5:96 & 5:97, 221 N.J. 1, 17-18 (2015)).

A judge "is not required to hold an evidentiary hearing on a Rule 1:10-3

motion unless there are material factual disputes concerning the parties'

'compliance with the order or ability to comply.'" Savage, 472 N.J. Super. at

312 (quoting State Dep't of Env't Prot. v. Mazza & Sons, Inc., 406 N.J. Super.

13, 29 (App. Div. 2009)). When seeking to enforce an order and obtain

permissible coercive relief under Rule 1:10-3, the moving party is required to

establish the opposing party's willful non-compliance. See In re N.J.A.C. 5:96

& 5:97, 221 N.J. at 18-19. Further, Rule 1:10-3 provides a judge "discretion

[to] . . . make an allowance for counsel fees to be paid by any party to the action

to a party accorded relief." Consequently, a fee award, which includes

enforcement expenses, is authorized where a party willfully violates a court

order or judgment. Hynes v. Clarke, 297 N.J. Super. 44, 57 (App. Div. 1997).

However, a monetary sanction intended to be entirely punitive rather than

coercive requires a summary contempt proceeding under Rule 1:10-2. See

Ridley v. Dennison, 298 N.J. Super. 373, 381 (App. Div. 1997).

In May 2018, the second judge issued a sixty-eight-page cogent and

comprehensive oral decision explaining why plaintiffs' motion to enforce

A-1962-22 64 litigant's rights was granted and why Brad had to pay plaintiffs' attorneys' fees

and costs. The second judge preliminarily recounted that he had purposely

reserved decision in his June 7, 2016 order on plaintiffs' request for attorneys'

fees and costs related to the order to show cause and the other requested

expenses, which included forensic analysis and computer repair costs related to

Brad's equipment theft. The second judge explained he mistakenly reserved on

addressing an award of fees, believing it better to "see what happen[ed] in the

future," but found the "threat of the financial sanctions did not work." He

thereafter provided an extensive, detailed summary of the matter's long and

tortured history.

The second judge ordered Brad to pay plaintiffs $503,571.88 in fees as

sanctions for purposely violating the February 23, 2016, and June 7, 2016 orders.

The record demonstrates the second judge was intricately familiar with the

issues and orders in question, having presided over multiple Chancery Division

proceedings between the parties over the course of four years. As the second

judge noted, after plaintiffs had moved to enforce litigant's rights, Brad filed a

notice of removal on February 13, 2018, with the United States District Court

for the District of New Jersey, which the federal judge subsequently dismissed.

On May 22, 2018, Brad again sought to remove the Chancery Division action to

A-1962-22 65 the District Court of New Jersey, which the federal judge again dismissed,

finding a lack of subject matter jurisdiction. The federal judge also warned Brad

that any further filings may result in sanctions.

Brad also had a pending federal action filed in New York against plaintiffs

and the AAA. Plaintiffs established that Brad, an attorney, "fil[ed] as much

litigation as he c[ould] possibly handle," which severely jeopardized Autoclear.

In ordering plaintiffs to submit a certification of attorneys' fees and costs, the

second judge thoroughly explained why Brad's multiple federal actions,

involving previously adjudicated issues, violated the June 7, 2016 order and

"that financial sanctions [we]re warranted to compel Brad . . . to comply with"

the prior orders. In contemplating the sanctions and seeking compliance with

prior orders, the second judge recognized the New York federal action was still

pending, and plaintiffs were still actively incurring costs to defend the matter.

On July 13, 2018, the second judge issued an amended order concerning

plaintiffs' motion in aid of litigants' rights "to include attorneys' fees and costs

related to" defending Brad's May 22, 2018 attempt to remove the Chancery

Division action to the District Court of New Jersey. The second judge

meticulously recounted Brad's violations from the time he ordered temporary

restraints against Brad on February 23, 2016, through plaintiffs' enforcement of

A-1962-22 66 litigants' rights motion. He reiterated that "while plaintiffs made a compelling

argument" in June 2016 regarding Brad's actions "to frustrate the [c]ourt's

orders, [he had] thought it . . . appropriate to reserve on the award of counsel

fees." Notably, the second judge found Brad's "action[s] would have permitted

an award of the attorneys['] fees on June 7[], 2016" and highlighted Brad's direct

"theft of . . . [Autoclear's] computer services," "interfere[nce] with the new

management['s] control," and the multiple federal lawsuits Brad filed. After

reviewing the reasonableness of the fees claimed and proofs submitted regarding

Brad's "shocking conduct," he discounted certain fees and costs that had no clear

nexus with Brad's violations.

Based on Brad's contumacious and willful disregard of the second judge's

orders and the established necessity to order coercive sanctions, we discern no

error in the award of approximately $504,000 in attorneys' fees and costs. We

recognize such a high award is atypical to effectuate compliance. The record,

however, substantiates that Brad violated the orders and "continually"

threatened Autoclear's ability to function after the second judge reserved on an

award of attorneys' fees and costs to plaintiffs. The second judge was familiar

with the parties' interests in Autoclear from presiding over the parties' matter for

years; therefore, we discern no error in the second judge's lack of specific ability

A-1962-22 67 to pay findings. We note that Brad did not specifically raise an inability to pay

before the second judge. Because Brad's actions placed Autoclear's "very

survival . . . at stake," the second judge's award imposing attorneys' fees and

costs was appropriate relief.

To the extent that we have not addressed the parties' remaining

contentions, it is because they lack sufficient merit to be discussed in a written

opinion. R. 2:11-3(e)(1)(E).

Affirmed.

A-1962-22 68