Skip to main content



Sciamarelli v. Semet

A-0448-09T2 (N.J. Super. App. Div. 2010) (Unpublished)

ARBITRATION —Where the party seeking an arbitration names both the entity entering into the contract and an officer of that entity as defendants, an arbitrator cannot rule on the liability of the officer if the officer was not a party to the arbitration agreement or if it does not find an independent basis for imposing liability on the officer, such as by piercing the entity’s veil.

A corporation entered into a remodeling contract with a homeowner. The contract, which was executed by the corporation’s president in his official capacity, but not individually, contained an arbitration provision. The homeowners initiated an arbitration proceeding against the corporation and its president for breach of contract. The arbitrator awarded damages in favor of the homeowner and against the corporation and its president. The president filed suit to vacate the arbitration award insofar as it applied to him individually.

The lower court directed the arbitrator to advise it in writing as to whether she intended to include the corporation’s president, individually, in the award, and if, so to advise as to the basis for including him in the arbitration award. The arbitrator responded that she intended to include the president since he was listed in the original complaint and that the homeowners relied on his expertise to rebuild the home. The lower court then found in the president’s favor and vacated the arbitration award as applied to him individually. The homeowner appealed, but the Appellate Division affirmed.

The homeowner argued that the lower court erred: (1) in understanding what was submitted for arbitration and the scope of the arbitrator’s authority; (2) in appreciating the rules and practices governing the arbitration; (3) in applying contract principles regarding the president’s liability for corporate wrongdoing; and (4) in finding that the homeowner failed to present facts sufficient to pierce the corporate veil. The Court found insufficient merits to the homeowner’s arguments.

The Court first noted that the president was not a party to the remodeling contract. Then, the Court rejected the homeowner’s attempt to justify the arbitrator’s exercise of authority over the president merely because he was named as a respondent. In essence, the homeowner argued that once the president was named as a respondent in the arbitration proceeding, he had an affirmative duty to give notice that he was challenging the arbitrator’s authority to resolve claims against him personally. The Court noted that even though the initial responsive pleading by the president did not challenge the arbitrator’s authority, the president’s counsel did raise the argument later and the arbitrator never ruled on it even though she was required to do so.

The Court then found that even if the president was a proper party, the arbitrator never established the basis for imposing liability on him for the corporation’s acts. There must be a basis for piercing the corporate veil and impose personal liability on a corporate officer. In this case, the arbitrator noted that the homeowner relied on the president’s expertise. However, that is not sufficient to suggest that the homeowner was confused about the identity of the party with whom he was contracting, nor was it sufficient to suggest that the president was using the corporate form to defraud the homeowner. Unless there was a basis for piercing the corporate veil, the arbitrator should not have issued an award against the president individually. The Court took umbrage with the arbitrator’s argument that she had the authority to issue an award against the president individually because he was named as a respondent in the arbitration proceeding without proofs necessary to pierce the corporate veil.


MEISLIK & MEISLIK
66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 • info@meislik.com