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Angrisani v. Financial Technology Ventures, L.P.

A-5477-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

ARBITRATION — Where claims under one agreement, lacking an arbitration provision, are inextricably intertwined with a dispute governed by a contract requiring arbitration, then both disputes would be subject to arbitration, but if they are not inextricably intertwined, one can be resolved by arbitration and the other by a court proceeding.

A businessman developed a plan to facilitate international money transfers from country to country. He sought investors and also sought to acquire an already existing money transfer operation. An individual with experience with money transfers and global banking agreed to invest in the plan. The investor bought a large amount of stock in a corporation formed by the businessman. The businessman was to continue serving as the CEO, president, and as a member of the board of directors of the re-formed corporation. The parties also entered into an employment agreement requiring any disputes between the parties to be arbitrated. The stock purchase agreement did not contain any arbitration provisions. As part of the implementation of the plan, the investor facilitated the purchase of a foreign money transfer operation.

Soon afterwards, the businessman sued both the investor and the corporation upon discovering that the money transfer operation had been acting in violation the laws of the country where the operation was based and also possibly federal law. Included in his complaint were allegations that the investor had been advised by its counsel that the money transfer operation may have violated the law. According to the businessman, he then demanded that representatives from the investor inform the other board members of the money transfer operation’s potentially illegal actions. The investor refused and then had the corporation fire the businessman as both CEO and president. The businessman’s claims included claims of breach of contract, intentional concealment, and fraudulent misrepresentation. His claims also included those of tortious interference with his employment contract and that his termination was in retaliation for confronting the investor over the money transfer operation’s illegal activities. The lower court found that all of the businessman’s claims had to be arbitrated.

On appeal, the businessman argued that his claims against the corporation and the investor were wrongly submitted to arbitration by the lower court. The Appellate Division found that the businessman’s claims against the corporation regarding the illegality of the money transfer operation’s actions could not be imputed to the corporation because at the time the agreement was entered into, the corporation was still under his control. It also found that his claims against the corporation fell under the employment agreement and were to be arbitrated. The Court, however, found that the dispute between the businessman and the investor was based on the stock purchase agreement and that since there was no arbitration provision in the stock purchase agreement, the investor could not compel arbitration based on the businessman’s employment agreement with the corporation. It disagreed with the lower court’s finding that the claims against investor were inextricably intertwined with the claims against the corporation and as a result, had to be arbitrated. The Court pointed out that claims that are sent to arbitration because they are inextricably intertwined with dispute governed by a contract requiring arbitration usually involved a non-signatory to the contract closely allied with a party to the contract. Additionally it pointed out that such a standard was not intended to override the legal principle that arbitration could only be compelled on parties who had contractually agreed to resolve their disputes through arbitration.

Based on its findings and conclusions, the Court dismissed the businessman’s claims against the corporation and allowed arbitration with the corporation to proceed, but reversed the lower court’s dismissal of the businessman’s claims against the investor, remanding them instead to the lower court for further proceedings.

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