CHINWE ATUEGWU VS. EAST ORANGE GENERAL HOSPITALÂ Â (L-6958-13, ESSEX COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2448-14T2
JOHN S. PATTERSON and STELLA
PATTERSON, Individually and
as Joint Tenants,
Plaintiffs-Respondents,
v.
LADENBURG THALMANN & CO. INC.,
Defendant-Appellant.
___________________________________
Submitted September 24, 2015 – Decided February 4, 2016
Before Judges Ostrer and Haas.
On appeal from the Superior Court of New
Jersey, Law Division, Ocean County, Docket
No. L-1435-14.
Sallah Astarita & Cox, LLC, attorneys for
appellant (Mark J. Astarita and Michael D.
Handelsman, on the briefs).
DeVita & Associates, and Timothy J. Dennin
of the New York bar, admitted pro hac vice,
attorneys for respondents (Richard Daniel De
Vita and Mr. Dennin, on the brief).
PER CURIAM
Defendant Ladenburg Thalmann & Co., Inc. (Ladenburg)
appeals from a December 19, 2014, order denying, without
prejudice, its motion to compel arbitration and stay
proceedings.
Plaintiffs John S. and Stella C. Patterson filed their
complaint in May 2014 alleging breach of contract, conversion,
fraud, and related causes of action arising out of their
dealings with Mark C. Hotton while he was a broker at Ladenburg
and Ladenburg Capital Management, Inc., from 1997 to 2005.
Plaintiffs alleged that in July 2013, Hotton pleaded guilty in
federal court to a "massive multi-million dollar money
laundering scheme spanning a period of 17 years," which included
the time he worked at Ladenburg. Plaintiffs alleged Hotton's
misdeeds continued after he left Ladenburg for Oppenheimer Co.,
Inc. Plaintiffs contended they discovered irregularities in
their Oppenheimer accounts, which led to an arbitration and
subsequent confidential settlement with Oppenheimer.
Disclosures made in that arbitration, and plaintiffs' subsequent
investigation, led to their discovery of Hotton's fraudulent
conduct while at Ladenburg. Plaintiffs' action sought to hold
Ladenburg responsible for its former broker's alleged
wrongdoing.
In lieu of an answer, Ladenburg filed a motion to dismiss
on statute of limitations and laches grounds. Plaintiffs
opposed the motion, arguing, among other things, the limitations
period was tolled by the discovery rule. On October 24, 2014,
the court denied the motion without prejudice.
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The next month, Ladenburg filed its answer asserting as an
affirmative defense that plaintiffs' claims were subject to
binding arbitration. Ladenburg also filed a motion to compel
arbitration and stay plaintiffs' action.
In support of its motion, Ladenburg provided two affidavits
of Robert Mateicka, Ladenburg's chief compliance officer. The
purpose of the affidavits was to present evidence of an
arbitration contract. However, both affidavits were based on
"information and belief" as well as personal knowledge.
Mateicka stated in each, "I am fully familiar with the facts set
forth herein from my own personal experience [and] knowledge,
except for those which are stated upon information and belief.
As to those statements, I believe them to be true based on my
review of the documents and records related to this matter."
Attached to Mateicka's first affidavit was what he
described as "a copy of the brokerage account application which
was being used by Ladenburg during the relevant time period."
The application was fifteen pages long; the fields were not
filled in. Page one contained the following instruction:
"Before signing the Brokerage Account Application, please
carefully read the Brokerage Account Customer Agreement. All
account holders must sign their name." Page seven, the
signature page, contained this acknowledgment:
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I represent that I have read the terms and
conditions governing this account and agree
to be bound by such terms and conditions as
currently in effect and as may be amended
from time to time. This account is governed
by a pre-dispute arbitration agreement which
appears on page 15.
I acknowledge receipt of the pre-dispute
arbitration agreement.
Page seven is followed by several pages of fields to be
completed by the customer.
A section titled, "Brokerage Account Pre-Dispute
Arbitration Agreement" appears on page fifteen. There is no
separate signature line on page fifteen. The arbitration clause
states, in all caps:
Brokerage Account Pre-Dispute Arbitration
Agreement
I am aware of the following:
(A) Arbitration is final and binding on the
parties.
(B) The parties are waiving their right to
seek remedies in court, including the
right to jury trial.
(C) Pre-arbitration discovery is generally
more limited than and different from
court proceedings.
(D) The arbitrators' award is not required
to include factual findings or legal
reasoning and any party's right to
appeal or to seek modification of
rulings by the arbitrators is strictly
limited.
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(E) The panel of arbitrators will typically
include a minority of arbitrators who
were or are affiliated with the
securities industry.
I agree that all controversies that may
arise between us concerning any order or
transaction, or the continuation,
performance or breach of this or any other
agreement between us, whether entered into
before, on, or after the date this account
is opened, shall be determined by
arbitration before a panel of independent
arbitrators set up by either the New York
Stock Exchange, Inc., or National
Association of Securities Dealers, Inc., as
I may designate. If I do not notify you in
writing within five (5) days after I receive
from you a written demand for arbitration,
then I authorize you to make such a
designation on my behalf. I understand that
judgment upon any arbitration award may be
entered in any court of competent
jurisdiction.
[(Emphasis added).]
The second attachment to Mateicka's first affidavit was a
page seven signature page executed by plaintiffs on April 28,
2005. This page is identical to the page seven in the blank
application described above, including the acknowledgment of
receipt of the "pre-dispute arbitration agreement which appears
on page 15." Plaintiffs' signed signature page identifies an
account number ending with 7722. Mateicka's affidavit alleged
the signature page was included in plaintiffs' brokerage account
application for that account.
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Plaintiffs opposed Ladenburg's arbitration motion, arguing
the contract Ladenburg presented was incomplete since only
plaintiffs' signature page was presented, and not the rest of
the actual application. Plaintiffs noted that the forms were
dated in 2004, which could not have been used for accounts
plaintiffs opened in 2002 and 2003. Several pages in the blank
application attached to Mateicka's affidavit bear the date
"02/04" at the bottom of the page. Plaintiffs also argued the
arbitration language was ambiguous, and that Ladenburg had
waived its right to invoke the arbitration provision by first
filing a motion to dismiss.
However, plaintiffs did not present any certification
denying that they signed the page seven that Mateicka presented.
They also did not deny that when they signed page seven, they
received the entire Customer Agreement, which included the
arbitration agreement on page fifteen.
In Mateicka's second affidavit, he explained that
Ladenburg's standard practice was to open a new account only
after a completed brokerage account application (which would
include the arbitration agreement) was submitted. He also
stated Ladenburg's standard practice is to "only retain portions
of new brokerage account applications and pre-dispute
arbitration agreements, including the signature page." He
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asserted Ladenburg is required by "17 C.F.R. 240-17a-4(a)" to
retain only certain portions of account applications, including
the signature page, for "a period of six years." See 17 C.F.R.
§ 240.17a-4(a) (requiring certain records to be "preserve[d] for
a period of not less than six years"). Mateicka attached
"Plaintiffs' account verification forms" from 2003, which
referred to four different account numbers. One account number
appears to match the nine-figure account number on the signature
page plaintiffs signed on April 28, 2005.
The trial judge denied without prejudice Ladenburg's motion
to compel arbitration. The court relied on Ladenburg's failure
to present a complete copy of the actual agreement plaintiffs
signed. The court noted that the signed page seven was the only
document that identified plaintiffs as contracting parties. The
court agreed this signed page matched the page seven of the
blank application. Ladenburg's counsel had apparently agreed,
in response to the judge's request, to submit a copy of the full
agreement plaintiffs signed. The judge, in his decision, noted
the full agreement had not yet been submitted.
The court also rejected plaintiffs' argument that the
arbitration language was confusing or ambiguous. However, the
court was unprepared to conclude that the arbitration agreement
plaintiffs allegedly signed in 2005 "relate[d] back" to prior
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years' agreements. Finally, the court declined to decide
plaintiffs' claim that Ladenburg waived its right to seek
arbitration.
This appeal followed. Ladenburg argues the parties entered
into a valid and unambiguous arbitration agreement. Ladenburg
notes that plaintiffs submitted no competent evidence to dispute
Mateicka's assertion that they signed an agreement containing
the arbitration clause on page fifteen.
We exercise plenary review of the trial court's decision
regarding the existence and applicability of an arbitration
agreement. Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186
(2013); Bd. of Educ. of Bloomfield v. Bloomfield Educ. Ass'n,
251 N.J. Super. 379, 383 (App. Div. 1990), aff'd, 126 N.J. 300
(1991); Moreira Constr. Co. v. Twp. of Wayne, 98 N.J. Super.
570, 575 (App. Div.), certif. denied, 51 N.J. 467 (1968).
Whether an arbitration agreement was formed is determined
under general contract principles. Leodori v. CIGNA Corp., 175
N.J. 293, 302, cert. denied, 540 U.S. 938, 124 S. Ct. 74, 157 L.
Ed. 2d 250 (2003). A court may not "subject an arbitration
agreement to more burdensome requirements than those governing
the formation of other contracts." Ibid. We consider
"the contractual terms, the surrounding circumstances, and the
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purpose of the contract." Hirsch, supra, 215 N.J. at 188
(internal quotation marks and citation omitted).
In interpreting an arbitration agreement, we are mindful
that arbitration is considered "a favored method for resolving
disputes." Garfinkel v. Morristown Obstetrics & Gynecology
Assocs., P.A., 168 N.J. 124, 131 (2001). At the same time, the
policy favoring arbitration is "not without limits," and
"neither party is entitled to force the other to arbitrate their
dispute" unless both parties agreed to do so. Id. at 132.
"[T]he [Federal Arbitration Act] specifically permits states to
regulate . . . contracts containing arbitration agreements under
general contract principles . . . ." Martindale v. Sandvik,
Inc., 173 N.J. 76, 85 (2002) (internal quotation marks and
citation omitted).
We agree that Ladenburg failed to present sufficient,
competent evidence of an arbitration agreement with plaintiffs.
However, we reach that conclusion for different reasons than
those expressed by the trial court.1 Ladenburg relied on an
affidavit by Mateicka that purported to be both based on
personal knowledge and "upon information and belief," without
1
See State v. Heisler, 422 N.J. Super. 399, 416 (App. Div. 2011)
(stating an appellate court is "free to affirm the trial court's
decision on grounds different from those relied upon by the
trial court").
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distinguishing between the two. This fails to comply with Rule
1:6-6, which governs the presentation of evidence on motions.
The Rule requires affidavits supporting motions to be based "on
personal knowledge, setting forth only facts which are
admissible in evidence to which the affiant is competent to
testify." See also Jacobs v. Walt Disney World, Co., 309 N.J.
Super. 443, 454 (App. Div. 1998) (factual assertions based
merely upon "information and belief" are inadequate); Lippmann
v. Hydro-Space Tech., Inc., 77 N.J. Super. 497, 504 (App. Div.
1962) (verification "to the best of the knowledge and belief of
[the] deponent" is defective).
Had Mateicka's "affidavit" complied with the Rule,
Ladenburg would have presented sufficient evidence of a binding
agreement to arbitrate. Plaintiffs signed page seven,
acknowledging their "account is governed by a pre-dispute
arbitration agreement which appears on page 15" and that they
had received the arbitration agreement. Plaintiffs did not
provide a certification or any other evidence showing that they
did not execute the fifteen-page agreement that Ladenburg
submitted in blank form. As noted above, plaintiffs' signed
page seven is identical to page seven of the fifteen-page
agreement.
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We recognize that the proponent of an arbitration agreement
bears the burden to prove its existence. Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Cantone Research, Inc., 427 N.J. Super.
45, 59 (App. Div.), certif. denied, 212 N.J. 460 (2012).
However, Ladenburg was not required to produce the complete
original document that plaintiffs signed in order to prove the
contents of their agreement. See N.J.R.E. 1004 ("The original
is not required and other evidence of the contents of a writing
. . . is admissible if . . . [a]ll originals are lost or have
been destroyed, unless the proponent lost or destroyed them in
bad faith"). Plaintiffs signed page seven, which expressly
incorporated the arbitration agreement on page fifteen.
Competent uncontradicted testimony that Ladenburg would not have
accepted plaintiffs' account agreement without the other pages
would be persuasive evidence of the contents of the entire
agreement. Further, plaintiffs signed the representation on
page seven, which states, "I have read, understood and agreed to
the terms set forth in the Customer Agreement herein." The
Customer Agreement includes the arbitration provision on page
fifteen.
It is immaterial that the arbitration clause appeared on a
different page of the agreement than the page plaintiffs signed.
Contracting parties "may agree to arbitrate their disputes by
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referring generally to an arbitration policy contained in a
separate writing, provided that the policy itself clearly
reflects . . . [a] knowing and voluntary waiver of rights."
Leodori, supra, 175 N.J. at 307. In sum, but for Ladenburg's
failure to comply with Rule 1:6-6, Ladenburg would have
established the existence of the arbitration agreement, given
plaintiffs' lack of evidence to the contrary. If Ladenburg lays
a proper foundation for plaintiffs' signed page seven and the
complete fifteen-page agreement, no other documents will be
needed to meet its burden.
We also conclude the arbitration clause in the Customer
Agreement is unambiguous. In particular, the clause governs not
just disputes arising out of the account expressly identified in
the agreement, but also those arising out of "any other
agreement between us, whether entered into before, on, or after
the date this account is opened." Plaintiffs' arguments to the
contrary lack sufficient merit to warrant discussion. R. 2:11-
3(e)(1)(E).
We affirm the order denying without prejudice Ladenburg's
motion to compel arbitration.
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