IN THE MATTER OF THE ESTATE OF SAM ATHANASENAS (P-000536-18, BERGEN COUNTY AND STATEWIDE)

• Court: New Jersey Superior Court Appellate Division
• Decided: February 11, 2020
• Docket: A-2532-18T2
• Status: Unpublished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NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court."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-2532-18T2

IN THE MATTER OF THE ESTATE OF SAM ATHANASENAS,

Deceased. _____________________

Argued January 13, 2020 – Decided February 11, 2020

Before Judges Sumners and Natali.

On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. P- 000536-18.

Haralampo Kasolas argued the cause for appellant George Athanasenas (Brach Eichler LLC, attorneys; Haralampo Kasolas, of counsel and on the briefs).

Patrick J. Jennings argued the cause for respondent Constantina Giannaros.

PER CURIAM Appellant George Athanasenas (George1), decedent Sam Athanasenas'

(Sam) son, appeals from the Chancery Division's January 3, 2019 order that

referred his claims to arbitration. After a thorough consideration of the record

and the parties' arguments in light of the applicable legal principles, we reverse.

I.

George and respondent Constantina Giannaros (Constantina) are brother

and sister and co-executors and beneficiaries of Sam's estate. At the time of his

death, Sam was the sole officer, director, and manager of JTS Restaurant

Corporation (JTS), which owned and operated a diner in Fairview, and included

assets such as a liquor license, real property, trade fixtures, goodwill, and

furniture.

According to George, after Sam's death, he secured a $2.5 million cash

offer to purchase the assets of JTS, but never received authorization from

Constantina to close the sale. Instead, Constantina sued George and JTS and

asserted claims for an accounting, shareholder oppression, conversion and

misappropriation, unjust enrichment, breach of fiduciary duty and loyalty, and

imposition of constructive trust.

1 Intending no disrespect, we refer to the parties, and the decedent, by their first names. A-2532-18T2 2 George and Constantina, their respective trusts, and Sam's estate, reached

a settlement agreement on July 19, 2017. According to that agreement, in

exchange for Constantina's voluntary dismissal of her lawsuit, the parties agreed

"to resolve the dispute set forth in the lawsuit and all other disputes between

them by mediation/arbitration." The parties further agreed that mediation and

arbitration would be decided by a single person, former Superior Court Judge

Thomas P. Olivieri (Arbitrator).

The Arbitrator issued a discovery schedule in the arbitration in which he

instructed both George and Constantina to provide "the specifics of each claim

he/she will assert at the [a]rbitration." In a February, 5, 2018 letter, George's

counsel set forth multiple claims in his "bill of particulars": 1) claims of $93,523

and $347,033 for salary and cash infusions into JTS; 2) repayment of a

$26,166.22 advance to Constantina pursuant to the July 19, 2017 settlement

agreement; 3) payment of an $86,204 note payable to George as reflected on the

2016 JTS tax return; 4) proceeds of the sale of the family home in Long Island;

5) payment of his loan to JTS for its legal fees; and 6) approximately $10,000

in miscellaneous items.

Approximately two weeks later, George and Constantina executed a

February 20, 2018 agreement to arbitrate. The agreement indicated that George

A-2532-18T2 3 and Constantina agreed to arbitrate "all issues that could be raised and

adjudicated in the Litigation and as otherwise stated herein except those

excluded from arbitration by [Rule] 5:1-5(a)." Although "Litigation" was not

defined, the agreement specifically referenced that the parties participated in

"litigation involving a dispute between the [p]arties regarding claims referenced

in the February 5, 2018 letter and email from the [p]arties' counsel."

The February 20, 2018 agreement further stated that George and

Constantina were "fully aware of their rights to have all differences that exist

between them . . . heard by the Superior Court of New Jersey, in connection with

the pending Litigation[,] [but] have agreed to waive their right to seek their relief

in court" consistent with the February 20, 2018 agreement. Pursuant to

paragraph two of the agreement, the parties agreed to proceed to arbitration with

the understanding that

[t]he Arbitrator shall have final say in determining whether an issue or dispute is within the scope of the Arbitrator's jurisdiction. If the Arbitrator determines that an issue or dispute is not within the scope of his jurisdiction, then that issue or dispute shall be referred back to the Law Division for determination.

[(Emphasis added).]

A-2532-18T2 4 The agreement also provided that neither party would "have the right or power

to expand, narrow, amend or revoke this [a]greement without the consent . . . of

all of the other [p]arties."

The parties closed the sale of JTS and its assets for $1.75 million the

following day. On June 22, 2018, George's counsel sent a letter to the Arbitrator

requesting leave to amend his February 5, 2018 bill of particulars to add claims

pertaining to Constantina's alleged failure to take the necessary and appropriate

steps to close the earlier $2.5 million offer to purchase the JTS assets, causing a

loss of $375,000. Relying on Perini Corp. v. Greate Bay Hotel & Casino, Inc.,

129 N.J. 479 (1992), he denied counsel's request in a July 2, 2018 email and

determined that in light of the February 20, 2018 agreement which limited the

matters to be arbitrated to the February 5, 2018 submissions, "[w]ithout

[Constantina's] consent, the [a]rbitration cannot be expanded beyond that which

the [p]arties agreed to arbitrate."

After the Arbitrator's denial, and in accordance with the procedure

established in paragraph two of the February 20, 2018 agreement, George filed

an August 7, 2018 complaint in the Chancery Division asserting seven causes of

action against Constantina related to the failed $2.5 million sale: 1) breach of

fiduciary duty as co-executor of Sam's estate; 2) waste; 3) negligence; 4) breach

A-2532-18T2 5 of fiduciary duty of care as officer, director, voting shareholder, and equity

shareholder in JTS; 5) breach of fiduciary duty of loyalty as officer, dir ector,

voting shareholder, and equity shareholder in JTS, 6) oppressed minority

shareholder; and 7) tortious interference with prospective economic advantage

and contractual relations by Constantina and her husband.

Constantina requested that the Arbitrator dismiss George's Chancery

complaint arguing that the claims arising from the unsuccessful $2.5 million sale

were known to George before the February 5, 2018 deadline and he waived those

claims by failing to include them in his bill of particulars. The Arbitrator denied

her request and noted that he did "not have the authority to dismiss the Chancery

[A]ction" and that she needed to "file a [n]otice of [m]otion before the Chancery

judge seeking dismissal of that action."

Constantina moved to dismiss George's complaint which the trial court

denied in a November 9, 2018 order. The trial court noted that "if [it] were to

accept the arguments put forth here, [George] would have no remedy with

respect to the alleged claims" and "the parties themselves . . . agreed that if [the

Arbitrator] determined that the dispute was not within his jurisdiction, then the

matter would be decided by the courts." The trial court also held that since

Constantina "did not wish to pursue the matter or objected to the matter before

A-2532-18T2 6 [the Arbitrator], the [c]ourt [would] allow this matter to proceed in the Superior

Court." The same day, the court entered an order transferring the matter to the

Probate Part and George thereafter filed an amended verified complaint alleging

the same seven causes of action.

Approximately two months later, at a January 3, 2019 case management

conference, the trial court sua sponte reconsidered the November 9, 2018 order

and compelled arbitration. The court memorialized in its order that Constantina

now "consent[ed] to having the issues raised in this matter determined in

arbitration . . . as previously agreed by the parties," and at the case management

conference explained that "[he] made [his original] ruling . . . because it was

[his] understanding that [Constantina] did not consent to hearing these matters

before [the Arbitrator]." The court concluded that "[i]f [the Arbitrator] says now

that you have consent of every [party, you can] send[] . . . everything to me, [the

trial court would] enter an order transferring it to [him]," but if he refused, "then

[the trial court's] ruling [would] stand."

For context, at the case management conference, Constantina consented

to arbitration "as a result of [the trial court's November 9, 2018] ruling." George,

however, now argued against arbitration, despite his earlier attempts to have his

claims heard by the Arbitrator, contending the costs incurred related to

A-2532-18T2 7 remanding the matter to arbitration would be significant. George further

maintained that the arbitration was now too far along and he was "going to have

to go back and re-amend expert reports . . . [and] spend more money in experts"

which was a "big problem . . . given how far along [they were] with the matter,

given the motions that are pending, [and] given the [expert] report [that] is

already completed." George finally contended that his last issue related to the

scope of permissible discovery as "[p]roving the type of claim [he had] before

[the trial court] . . . require[ed] [him] to have full power of depositions,

subpoenas, document demands, [and] interrogatories" which he believed was

"not something that [was] readily available in an arbitration."

II.

We use a de novo standard of review when determining the enforceability

of arbitration agreements. Goffe v. Foulke Mgmt. Corp., 238 N.J. 191, 207

(2019) (citing Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186 (2013)).

The validity of an arbitration agreement is a question of law, and we conduct a

plenary review of such legal questions. Atalese v. U.S. Legal Servs. Grp., L.P.,

219 N.J. 430, 445-46 (2014) (citing Kieffer v. Best Buy Stores, L.P., 205 N.J.

213, 222-23 (2011)); Barr v. Bishop Rosen & Co., Inc., 442 N.J. Super. 599,

605 (App. Div. 2015) (citing Hirsch, 215 N.J. at 186).

A-2532-18T2 8 Arbitration is fundamentally a matter of contract. NAACP of Camden

Cty. E. v. Foulke Mgmt. Corp., 421 N.J. Super. 404, 424 (App. Div. 2011). "An

agreement to arbitrate 'must be the product of mutual assent, as determined

under customary principles of contract law.'" Barr, 442 N.J. Super. at 605-06

(quoting Atalese, 219 N.J. at 442). "Mutual assent requires that the parties

understand the terms of their agreement" and, where the "agreement includes a

waiver of a party's right to pursue a case in a judicial forum, 'clarity is required.'"

Id. at 606 (citation omitted). That is, "the waiver must be clearly and

unmistakably established, . . . should clearly state its purpose, . . . [a]nd the

parties must have full knowledge of the legal rights they intend to surrender. "

Ibid. (citations omitted).

Because "arbitration is a matter of contract[,] . . . a party cannot be

required to submit to arbitration any dispute which [it] has not agreed so to

submit." Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Cantone Research, Inc.,

427 N.J. Super. 45, 59 (App. Div. 2012) (quoting Howsam v. Dean Witter

Reynolds, 537 U.S. 79, 83 (2002)); see also First Options of Chi., Inc. v. Kaplan,

514 U.S. 938, 945 (1995) ("[A] party can be forced to arbitrate only those issues

it specifically has agreed to submit to arbitration."). Therefore, "[a] court must

look to the language of the arbitration clause to establish its boundaries [,]" and

A-2532-18T2 9 "may not rewrite a contract to broaden the scope of arbitration." Hirsch, 215

N.J. at 188 (quoting Garfinkel v. Morristown Obstetrics & Gynecology Assocs.,

P.A., 168 N.J. 124, 132 (2001)).

III.

George principally maintains that the language in the February 20, 2018

arbitration agreement "confirms that the parties agreed to arbitrate only those

claims set forth in [the] February 5, 2018 submission[s]," specifically his claims

set forth in his February 5, 2018 bill of particulars. He also maintains that the

arbitration agreement "makes clear that the decision on whether to arbitrate [his]

claims was not vested with the trial court, but with the arbitrator." George

concludes that since both the arbitrator and trial court, in reliance on the

arbitrator's decision, determined that his claims were not arbitrable, "the trial

court erred . . . when it overruled the arbitrator's determination and compelled

arbitration sua sponte."

Constantina argues that George's Chancery Action is subject to arbitration

pursuant to the July 19, 2017 settlement agreement. She maintains that

agreement "could not have been clearer, nor could the arbitration language have

been any broader," and thus "[a]ll disputes between [George and her] in all

capacities, including Sam's estate, were subject to arbitration." Constantina

A-2532-18T2 10 emphasizes that she objected to George introducing additional claims in the

arbitration "not because the arbitrator did not have jurisdiction," but rather

because "the known claim was brought late." She concludes, however, that

"[g]iven the [c]ourt's ruling that [George] is entitled to have the claims heard,

the claims must proceed in arbitration and the matter was properly returned to

the arbitrator."

We agree with George's arguments that the trial court erred in compelling

arbitration as the February 20, 2018 arbitration agreement clearly limited the

broad language of the July 19, 2017 settlement agreement to restrict the scope

of arbitration to the issues set forth in the parties' February 5, 2018 submissions.

As noted, the February 20, 2018 agreement explicitly referred to "litigation

involving a dispute between the [p]arties regarding claims referenced in the

February 5, 2018 letter and email from the [p]arties' counsel." By compelling

arbitration of George's new claims pertaining to his alleged loss in the sale of

the JTS assets, the court improperly rewrote the parties' second agreement by

broadening the scope of arbitration to include claims that were beyond what the

parties consented to in the more limited February 20, 2018 agreement. See

Hirsch, 215 N.J. at 188.

A-2532-18T2 11 Moreover, the court's January 3, 2019 decision rendered ineffective the

provision in the February 20, 2018 agreement that the Arbitrator had "final say

in determining whether an issue or dispute is within the scope of [his]

jurisdiction" and that if he determined an issue was not within his jurisdiction,

the dispute would be referred to the Law Division. The Arbitrator initially

determined correctly that he could not expand the arbitration beyond the

February 5, 2018 submissions without the parties' consent, which at the time

clearly did not exist, and George properly sought relief in the trial court. Thus,

it was error for the court to refer George's claims back to arbitration contrary to

the parties' express language in the agreement.

The court's decision to compel arbitration was principally based on

Constantina's revised decision at the January 3, 2019 case management

conference to agree to arbitrate the dispute regarding the sale price for the

business which formed the basis for George's Chancery Division complaint.

Although we acknowledge that the parties have essentially switched positions,

as noted, the record does not indicate that George and Constantina agreed to

arbitrate those claims. Indeed, both the Arbitrator and the trial court in its first

ruling clearly stated that mutual consent did not exist, which is supported by the

February 20, 2018 agreement (specifically the "litigation . . . regarding claims

A-2532-18T2 12 referenced in the February 5, 2018 letter and email" language) and the

reservation in paragraph two that at least some claims (those "the Arbitrator

determines . . . is not within the scope of his jurisdiction") would not be

arbitrated and instead "referred back to the Law Division for determination." If

the February 20, 2018 agreement did not limit the arbitration agreement

contained in the July 19, 2017 settlement agreement, there would have been no

purpose to enter the February 20, 2018 agreement and include reference to the

February 5, 2018 bill of particulars.

Further, at the time the court reconsidered its original ruling, George

clearly indicated that he no longer desired arbitration of those claims, a not

unreasonable position given that he complied with the February 20, 2018

agreement and filed and prosecuted a separate complaint in the Chancery

Division, and incurred costs and expenses in doing so which included appearing

at two court conferences as a result of Constantina's initial lack of consent and

the Arbitrator's ruling. Thus, it was error for the court to base its decision based

on Constantina's revised and unilateral consent after the circumstances had

changed.

A-2532-18T2 13 IV.

In sum, we conclude the trial court erred in compelling arbitration of

George's claims with respect to the alleged loss of the $2.5 million sale of the

JTS assets. As discussed, the February 20, 2018 agreement effectively limited

the original arbitration agreement to the claims set forth in the parties' February

5, 2018 submissions to the Arbitrator. Consequently, we reverse the January 3,

2019 order and remand the matter to the Chancery Division for further

proceedings consistent with this opinion.

In light of our decision, we need not address George's second argument

that Constantina waived her right to arbitrate the additional claims when she

objected to the inclusion of those claims and rendered the Superior Court as the

only forum where George could seek relief. We similarly need not address

George's third argument that the trial court abused its discretion when it sua

sponte reconsidered its November 9, 2018 decision because it lacked jurisdiction

to reconsider its original order after the twenty-day limitation set forth in Rule

4:49-2.

Reversed and remanded.

A-2532-18T2 14