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The plain language of contracts and arbitration provisions, not the character of the remedy sought, govern questions of arbitrability, according to a New Jersey appellate court.
In Birnbaum v. Calabro, 2007 WL 1790589 (N.J. Super. Ct. App. Div. June 22, 2007), Birnbaum appealed an order to compel arbitration of several claims arising out of employment and shareholder agreements with Calabro. The lower court issued an order compelling arbitration of all claims, deciding that the monetary character of the damages sought by Birnbaum was "generally for compensation from employment, cognizable under the Employment Agreement subject to arbitration."
On appeal, Birnbaum argued that most of the claims did not arise out of the Employment Agreement but out of the Shareholder Agreement, which lacked an arbitration provision for any claim beyond those involving disposition of assets upon dissolution.
The Court agreed with Birnbaum and held that the lower court erred in finding all of his claims were arbitrable under the Employment Agreement. The Court specifically held that the prior decision was "not consistent with the plain language of the agreements," and that the mere fact that Birnbaum "sought monetary damages did not mean his causes of action were based on compensation claims arising out of his employment relationship…." The Court found that only "disputes as to [Birnbaum's] rights under [the] Agreement and concerning the employment relationship" were arbitrable under the Employment Agreement, and only a "dispute over…disposition of…assets…in connection with…dissolution" was arbitrable under the Shareholder Agreement. The Court remanded the case for a ruling on which claims fell within those limitations.
The Court observed that Calabro "could have provided an integration clause in both contracts or all-inclusive language such as 'any or all claims or disputes' in the arbitration clause of the Employment Agreement if they intended to require that disputes arising out of the shareholder relationship be submitted to arbitration." But there was no integration clause or all-inclusive language.
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