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Messer v. SGFootwear/Messer Group

BER-C-22-08 (N.J. Super. Law Div. 2008) (Unpublished)

ARBITRATION — Although when there are two related agreements and only one contains an arbitration provision, arbitration can be required of the same parties to both agreements, the same is not true when the two agreements are unrelated and make no reference to each other.

An individual sold his business to a company pursuant to an asset purchase agreement. That agreement provided the seller would be retained as a consultant pursuant to a separate consulting agreement. The agreement also contained an arbitration provision. Additionally, it stated that it could only be changed by an agreement in writing. After the end of the agreement’s two year term, the parties’ relationship was guided by term sheets pursuant to which the consultant continued to provide consulting services. The parties eventually had a dispute about payments and sales royalties allegedly owed to the consultant for the period after the agreement’s term expired. The consultant filed suit. In response, the company filed a motion to compel arbitration and to stay the action pending arbitration. It argued that term sheets relied upon by the parties were extensions of the original agreement. It also sought legal fees from its consultant.

The Court ruled that although New Jersey’s public policy favors the settlement of disputes through arbitration, a court is not empowered to rewrite a contract to broaden the scope of arbitration. It concluded that the term sheet arrangement was separate and distinct from the terminated original agreement, in that its terms were materially different as to remuneration and were not signed by either party. The Court pointed out that the original agreement required modifications to be in writing and because the term sheets were unsigned and did not reference the original agreement, they could not be considered an extension of the original agreement. It also noted the arbitration provision in the original agreement provided that disputes arising out of “this agreement” were to be resolved by arbitration. Therefore, the Court denied the motion to compel arbitration. It also denied legal fees as a sanction because there was no persuasive proof of frivolous, inexcusable or bad faith conduct on the part of the consultant or his counsel.

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