When “Piecemeal” Adjudication is Required

Waskevich v. Herold Law, P.A., 431 N.J. Super. 293 (App. Div. 2013).  What happens in a case where the parties have agreed to arbitrate some claims between them but not others?  Do all the claims go to arbitration, or all to a court?  Or should the parties engage in “piecemeal” proceedings, with some claims submitted to an arbitrator and others to a court?  In a concise opinion by Judge Koblitz in this employment discrimination case, the Appellate Division ruled that, under the command of the Federal Arbitration Act, 9 U.S.C. §1 et seq. (“FAA”), plaintiff’s claim under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. (“LAD”), was to be litigated in court, while his other claims were to be arbitrated.

Plaintiff, an attorney, became a shareholder at the defendant law firm.  He signed an employment agreement that included an arbitration clause.  Under that clause, the parties agreed to arbitrate “any controversy, claim, or dispute arising out of or relating to this Agreement, including the construction, interpretation, performance, breach, termination, enforceability, or validity thereof ….” 

Things went sour, and plaintiff filed a complaint that alleged employment discrimination in violation of the LAD, as well as common law claims such as breach of contract and tortious interference.  Defendant responded with a motion to compel arbitration.  The Law Division denied the motion, finding that under Garfinkel v. Morristown Obstetrics & Gynecology Assocs., 168 N.J. 124 (2001), the arbitration clause did not cover the LAD claims, and that, in the interest of efficiency, defendant’s request to bifurcate the non-LAD claims and send them to arbitration would also be denied.  This left the entire case in the hands of the courts.

Defendant appealed.  The Appellate Division applied the de novo standard of review since “the issues involve contract interpretation and the application of case law to the facts of the case.” 

Judge Koblitz noted the strong policy, embodied at the federal level in the FAA and in New Jersey in the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 et seq., and in caselaw from both judicial systems, of favoring arbitration.  Nonetheless, because the panel agreed with the Law Division that the parties had not agreed to arbitrate the LAD claim, that claim had to remain in court.  

But that did not mean that the other issues were to stay in court as well.  Judge Koblitz distinguished Garfinkel, where the Supreme Court held that all the issues should be tried because “[j]ust as we view piecemeal litigation as anathema, we also look with disfavor upon the unnecessary bifurcation of disputes between judicial resolution and arbitration.”  The Supreme Court, the panel in this case said, “did not consider the requirements of the FAA.”  As stated in KPMG LLP v. Cocchi, 132 S.Ct. 23 (2011), the FAA requires “that if a dispute presents multiple claims, some arbitrable and some not, the former must be sent to arbitration even if this will lead to piecemeal litigation.”  Thus, although the Law Division judge “not unreasonably determined that the arbitrable issues should remain in court in part to avoid increased counsel fees, [the Appellate Division was] bound by the FAA as interpreted by the United States Supreme Court.”