(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience
of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of
brevity, portions of any opinion may not have been summarized).
GARRETT M. HEHER v. SMITH, STRATTON, WISE, HEHER AND BRENNAN, ET AL. (A-10/11-95)
(NOTE: This is a companion case to Weiss v. Carpenter, Bennett & Morrissey also decided today.)
Argued September 27, 1995 -- Decided March 6, 1996
STEIN, J., writing for the Court.
The issue on appeal is whether an arbitration provision in a law firm agreement is enforceable if the dispute in
question implicates the clear mandate of public policy underlying Rule of Professional Conduct (RPC) 5.6.
The Smith, Stratton, Wise, Heher and Brennan (SSWH&B) partnership agreement (Agreement) provided for
arbitration of any dispute arising out of the Agreement or the partnership relationship. The Agreement also provided that
arbitration was to be the only form of dispute resolution and that arbitration awards were binding and unappealable. In
addition, the Agreement provided that partners who withdrew from the firm and thereafter competed with the firm in any
manner forfeited certain benefits available to partners who withdrew from the firm but did not compete in any way (the
forfeiture provision).
Robert A. White and Todd D. Johnston became partners at SSWH&B in 1978. They withdrew from the firm in
July 1987, about one year after Garrett Heher, a former partner, had left the firm. White and Johnston joined another law
firm and engaged in competition with SSWH&B. In November 1987, White and Johnston demanded arbitration of certain
contested issues, including their entitlement to the stated benefit under the Agreement. White and Johnston specifically
raised the issue of the enforceability of the forfeiture provision. On February 13, 1992, the arbitrator issued a lengthy
decision rendering awards to White and Johnston on certain issues. The arbitrator, however, found the forfeiture provision
valid and would not award White and Johnston their stated benefits. The arbitrator declined to defer decision on the
enforceability of the forfeiture provision until this Court decided Jacob v. Norris McLaughlin & Marcus, which was then
pending. White and Johnston accepted and negotiated all checks received from SSWH&B.
The Court issued its decision in Jacob on May 28, 1992, holding invalid under RPC 5.6 a provision of a law firm
partnership agreement that required departing partners to forfeit termination-related compensation if they competed with
the firm. In August 1992, Heher filed a complaint in Superior Court against SSWH&B and former and current members
of the firm, including White and Johnston, alleging that the forfeiture provision of the Agreement was void as a matter of
public policy and, therefore, he was entitled to the stated benefit provided for in the Agreement. Heher also argued that
because the forfeiture provision was void as a matter of public policy, it was not arbitrable, but was subject to the
jurisdiction of the courts. Among other things, Heher sought a permanent injunction preventing SSWH&B from arbitrating
the issue of his entitlement to the stated benefit under the Agreement, and sought judgment in an amount equal to the
stated benefit, together with prejudgment interest, attorneys' fees and costs.
SSWH&B moved to dismiss Heher's complaint or to stay the proceedings pending an arbitration to determine his
entitlement to benefits under the Agreement. Heher cross-moved for summary judgment on the issue of arbitrability of the
dispute and on his claim for the stated benefit plus prejudgment interest, fees and costs. Defendants White and Johnston
moved to dismiss Heher's complaint as to them. The trial court denied SSWH&B's motion to dismiss the complaint,
finding the forfeiture provision void and concluding that Heher's entitlement to compensation under the Agreement was
not arbitrable. The court withheld decision on Heher's cross-motion for summary judgment. SSWH&B moved for
reconsideration, alleging that Heher's departure from the firm with several of the firm's major clients decreased the firm's
prospective earnings and diminished the value of its good will. Referring to another provision of the Agreement, SSWH&B
argued that Heher's claim to benefits was affected by this diminished good will. The firm also contended that Heher was
estopped from asserting the invalidity of the forfeiture provision because he had participated in drafting the Agreement.
White and Johnston filed an answer to Heher's complaint and a cross-claim against SSWH&B for stated benefits
under the Agreement, seeking to void the February 1992 arbitration award and seeking indemnification from SSWH&B for
any potential personal monetary liability to Heher. White and Johnston simultaneously filed a motion for summary
judgment on their cross-claim for stated benefits. SSWH&B filed a cross-motion to dismiss White and Johnston's cross-claim.
As to SSWH&B's motion for reconsideration, the trial court confirmed its prior ruling that the forfeiture provision
was void, but ordered arbitration on all other contested issues. On Heher's cross-motion, the court found the uncontested
amount of the stated benefit due Heher under the Agreement was $143,355 and referred certain issues to arbitration. The
court directed the arbitrator to make specific findings of fact and state specific reasons for the determinations of Heher's
entitlement to prejudgment interest, the law firm's loss of good will, and the validity of the firm's estoppel argument.
Regarding White and Johnston, the court denied their summary judgment motion against SSWH&B and granted
SSWH&B's cross-motion to dismiss their cross-claim for benefits, reasoning that the cross-claim was untimely. The trial
court granted White's and Johnston's cross-motion to dismiss Heher's complaint as to them, reasoning that Heher's claim
for benefits did not arise until after White and Johnston had left the firm.
On appeal, the Appellate Division concluded that the trial court should have stayed all proceedings arising from
Heher's complaint, including Heher's challenge to the forfeiture provision, pending arbitration of all issues, noting that the
arbitrator's decision would be subject to enhanced judicial review. The court reversed the denial of SSWH&B's motion to
stay litigation and ordered the arbitration to proceed. The court also reversed the trial court's dismissal of Heher's claim
against White and Johnston, noting that White and Johnston, as signatories to the Agreement, had agreed to arbitrate all
disputes arising out of the Agreement or relationship. On White's and Johnston's cross-appeal, the Appellate Division
affirmed the trial court's dismissal of their cross-claim for benefits under the Agreement, reasoning that the cross-claim was
untimely because White and Johnston failed to bring suit to vacate the February 1992 arbitration award within three
months of delivery of the award. The Appellate Division also held that their cause of action was one that arose out of the
partnership relationship obligating them to submit the matter to arbitration.
The Supreme Court granted both the Heher's petition for certification and White's and Johnston's cross-petition.
HELD: An arbitration provision in a law firm agreement is enforceable if the dispute in question implicates the clear
mandate of public policy underlying RPC 5.6 so long as the arbitrator's decision is subjected to an enhanced level
of judicial review in order to afford appropriate relief from an arbitration award that obviously violate a clear
mandate of public policy.
1. In order to assure that the parties honor their contractual commitment, Heher's claim for termination benefits must
proceed to arbitration despite the public policy issues implicit in his challenge to the validity of the forfeiture provision.
Arbitrators are capable of resolving such disputes in a manner consistent with the public policies underlying RPC 5.6. In
addition, the arbitrator's disposition would be subjected to an enhanced level of judicial review in order to afford
appropriate relief from an arbitration award that obviously would thwart a clear mandate of public policy. (pp. 13-15)
2. In Weiss v. Carpenter, Bennett & Morrissey, the Court clarified its reference in Jacob to the possible application of
estoppel principles to bar a partner from challenging an otherwise invalid forfeiture provision. Moreover, as found by the
Appellate Division, Heher's claim against White and Johnston must be resolved in arbitration. Furthermore, although
White and Johnston's potential liability are secondary to that of the partnership, their joinder as defendants in a proceeding
that seeks to establish the partnership's liability is both appropriate and consistent with the entire-controversy doctrine.
(pp. 15-16)
3. The trial court properly dismissed White's and Johnston's cross-claim to vacate the February 1992 arbitration award
because they failed to comply with the statutory requirement that parties seeking to vacate an arbitration award must do so
within three months of the date of the award was rendered. (p.16)
Judgment of the Appellate Division is AFFIRMED.
O'HERN, J., concurring in part and dissenting in part, concurs in the opinion and judgment of the Court insofar
as it orders arbitration of the contractual dispute subject to the standard of review set forth in the Court's opinion. Justice
O'Hern disagrees with that part of the opinion that subjects Johnston and White to the jurisdiction of the arbitrators for
imposition of liability under the Agreement without permitting the arbitrators to consider either the entitlement of
Johnston and White to benefits under the Agreement or the inequity of holding them liable for benefits to others without
any credit for benefits to which they are equally entitled.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK, GARIBALDI and COLEMAN join in
JUSTICE STEIN's opinion. JUSTICE O'HERN filed a separate opinion concurring in part and dissenting in part.
SUPREME COURT OF NEW JERSEY
A-10/
11 September Term 1995
GARRETT M. HEHER,
Plaintiff-Appellant
and Cross-Respondent,
v.
SMITH, STRATTON, WISE, HEHER
AND BRENNAN, a New Jersey general
partnership, WILLIAM J. BRENNAN,
III, HUGH D. WISE, JR., HENRY S.
BROAD, JOHN ROBERT HEHER, ARTHUR
S. LANE, CHRISTOPHER S. TARR, ANNE
REICHELDERFER, ALEXANDER P. WAUGH,
JR., WENDY L. MAGER, RICHARD J.
PINTO, BRIAN P. SULLIVAN, SUZANNE
M. McSORLEY, MARSHA E. NOVICK,
ROBERT C. JOHNSTON, PETER R.
FREED, THOMAS E. HASTINGS, ELIZABETH
R. SALASKO, DOROTHY FECHT LUNTEY,
DAVID J. SORIN, JAMES SCOTT HILL,
ROBERT P. GORMAN, and EDWIN B. KAGAN,
Defendants-Respondents
and Cross-Respondents,
and
TODD D. JOHNSTON and ROBERT A.
WHITE,
Defendants-Respondents
and Cross-Appellants,
and
EDWARD J. GEOGHEGAN and JOHN DOE
AND JANE DOE, said names being
fictitious,
Defendants.
Argued September 27, 1995 -- Decided March 6, 1996
On certification to the Superior Court,
Appellate Division.
Richard M. Altman argued the cause for
appellant and cross-respondent (Pellettieri,
Rabstein and Altman, attorneys).
Bruce W. Clark argued the cause for
respondents and cross-appellants (Dechert,
Price & Rhoads, attorneys; Mr. Clark, Todd D.
Johnston, and Robert A. White, pro se, on the
briefs).
William B. McGuire argued the cause for
respondents and cross-respondents (Tompkins,
McGuire & Wachenfeld, attorneys; Marianne M.
DeMarco, on the briefs).
The opinion of the Court was delivered by
STEIN, J.
In Weiss v. Carpenter, Bennett & Morrissey, ___ N.J. ___
(1995), also decided today, we considered the appropriate
standard of judicial review of private-sector arbitration awards
involving the validity of law firm agreement termination
provisions in the context of Rule 5.6 of the Rules of
Professional Conduct (RPC). The primary issue in this appeal is
the collateral question whether an arbitration provision of a law
firm agreement is enforceable if the dispute in question
implicates the clear mandate of public policy underlying RPC 5.6.
The Smith, Stratton, Wise, Heher and Brennan (SSWH&B)
partnership agreement (Agreement) provided for arbitration of
"[a]ny dispute arising out of [the] agreement or the partnership
relationship," and further provided that arbitration was to be
"the sole forum for the resolution" of such disputes. The
arbitrators' award was to be "final" and not appealable "to any
court." The Agreement also provided that partners who withdrew
from the firm and "thereafter compete[d] with the firm in any
way" forfeited certain benefits available to partners who
withdrew from the firm but did not compete (the "forfeiture
provision").
In Jacob v. Norris, McLaughlin & Marcus,
128 N.J. 10, 22-26
(1992), we held invalid under RPC 5.6 a provision of a law firm
partnership agreement that required departing partners to forfeit
termination-related compensation if they competed with the firm.
Relying on Jacob, supra, plaintiff Garrett M. Heher (Heher) filed
a complaint in the Chancery Division seeking to enjoin
arbitration of his dispute with SSWH&B over the enforceability of
the forfeiture provision of the SSWH&B Agreement. Heher claimed
that arbitration of the dispute was precluded because the
forfeiture provision was clearly void under Jacob. SSWH&B moved
to stay proceedings on Heher's complaint pending arbitration of
all contested issues. The trial court, reasoning that the
forfeiture provision was unenforceable pursuant to Jacob,
concluded that Heher's challenge to the forfeiture provision need
not be submitted to arbitration, but referred the remaining
contested issues to arbitration. In an unreported, per curiam
decision, the Appellate Division reversed, holding that the
entire dispute between Heher and SSWH&B was subject to
arbitration pursuant to the terms of the partnership agreement.
Heher was a partner in the law firm of SSWH&B from 1966 to
August 4, 1986, when he voluntarily withdrew from the firm.
Heher continued to engage in the private practice of law in New
Jersey and a number of Heher's former clients continued to retain
him following his withdrawal. The partnership agreement at issue
was in effect from June 1, 1983, through at least August 1987.
Article IV(4) of the Agreement provided:
Upon the termination of a partner's interest in
the firm by death or permanent disability; or upon a
partner's termination other than by death or permanent
disability, provided that he has been a partner for at
least five (5) years and does not thereafter compete
with the firm in any way (including, without
limitation, by engaging in the private practice of law
in New Jersey, whether as a sole practitioner or
member, principal or associate in a law firm), the firm
shall pay to him (or his estate; hereinafter together
"former partner"), the following benefits:
(1) A stated benefit . . . .
(2) A supplemental benefit . . . .
The "stated benefit" was defined as "an amount equal to the average of the partner's annual compensation from the firm . . . for the five (5) consecutive years next before the firm year in which his interest in the firm was terminated." The Agreement further provided that SSWH&B's obligation to pay stated benefits in any given year would be limited to a certain percentage of the
firm's gross receipts for the prior year. The Agreement provided
that the stated benefit would be paid in eight equal quarterly
installments commencing in the first quarter following the
partner's termination.
The "supplemental benefit," which was to be paid in each of
the three years following the year in which the last stated
benefit was made, was defined as "twenty percent (20") of the
gross fees received in each such year from the clients of the
terminated partner." The supplemental benefit would be paid only
if gross fees received from the terminated partner's clients
during the eight calendar quarters following his termination (or
thereafter received for work done for those clients during that
period) equalled at least twice the amount of the total stated
benefit paid to the terminated partner.
Article V of the Agreement provided for arbitration of all
disputes:
5.1 Any dispute arising out of this agreement or the
partnership relationship, including a dispute whether a
given dispute arises out of this agreement or the
relationship, shall be submitted to arbitration.
5.2 Arbitration shall be the sole forum for the
resolution of disputes arising out of this agreement or
the partnership relationship. The arbitrators' award
resolving any such dispute shall be final and shall not
be appealed to any court.
After withdrawing from the firm, Heher informed SSWH&B of his intention to arbitrate certain disputes arising on his withdrawal. The parties never commenced arbitration proceedings,
however, either because Heher did not pursue arbitration or
because the two arbitrators named by the parties never met to
choose a third arbitrator as provided for by the Agreement.
Defendants Robert A. White and Todd D. Johnston became
partners in the firm in 1978. They withdrew from SSWH&B in July
1987, about one year after Heher had left the firm. On leaving
SSWH&B, White and Johnston joined the law firm of Dechert, Price
& Rhoads and engaged in competition with SSWH&B. In November
1987, White and Johnston demanded arbitration of a variety of
contested issues, including their entitlement to the stated
benefit under the Agreement. In their "Statement of Issues,"
White and Johnston specifically raised the issue of the
enforceability of the forfeiture provision. On February 13,
1992, the arbitrators issued a lengthy decision in which they
made awards to White and Johnston on a number of other contested
matters, but, holding the forfeiture provision valid, declined to
award White and Johnston their stated benefits. The arbitrators
rejected White and Johnston's request to defer decision on the
enforceability of the forfeiture provision until this Court
decided Jacob, supra, which was then pending. On February 25,
1992, SSWH&B issued checks to White and Johnston in partial
satisfaction of the arbitration award. White and Johnston
accepted and negotiated the checks. Both sides moved for
reconsideration. On April 20, 1992, the arbitrators denied the
reconsideration motions but modified the award. On April 23,
1992, SSWH&B issued checks to White and Johnston for the balance
due under the modified award. White and Johnston also accepted
and negotiated those checks.
This Court issued its decision in Jacob, supra, on May 28,
1992. Thereafter, in August 1992, Heher filed a complaint in
Superior Court, Chancery Division, against SSWH&B and a number of
former and current members of the firm, including White and
Johnston. Heher alleged that the forfeiture provision of Article
IV(4) of SSWH&B's Agreement was void as a matter of public policy
and that he was therefore entitled to the stated benefit provided
for in the Agreement. He further alleged that "[b]ecause the
non-compete requirement of Article IV(4) is void as a matter of
public policy, that issue cannot be [] subject to a binding non-appealable arbitration as required by Article V of the Agreement
and is therefore subject to the jurisdiction" of the courts.
Heher sought a permanent injunction preventing SSWH&B from
arbitrating the issue of his entitlement to the stated benefit
under the Agreement. Heher also demanded judgment in an amount
equal to the stated benefit, together with prejudgment interest,
attorneys' fees, and costs. Lastly, Heher demanded that SSWH&B
provide an accounting of gross fees received by the firm so that
Heher could determine whether he was entitled to assert a claim
for the supplemental benefit provided for by the Agreement.
SSWH&B moved to dismiss Heher's complaint or to stay
proceedings on the complaint pending an arbitration to determine
Heher's entitlement to benefits under the Agreement. Heher filed
a cross-motion for summary judgment on the issue of the
arbitrability of the dispute and also on his claim for the stated
benefit plus prejudgment interest, fees, and costs. Defendants
White and Johnston moved to dismiss Heher's complaint as to them.
The trial court ruled that the validity of the forfeiture
provision was a "pure question of law," about which there was
"nothing to arbitrate." Finding the forfeiture provision "void,"
the court concluded that the issue of Heher's entitlement to
compensation under the Agreement was not arbitrable, but noted
that if the parties had a dispute "as to the amounts due,
prejudgment interest, [or the] liability of individual partners,"
then arbitration would be appropriate. The court therefore
denied SSWH&B's motion to dismiss Heher's complaint, but withheld
decision on Heher's cross-motion for summary judgment pending
further submissions from the parties.
SSWH&B moved for reconsideration of the denial of its motion
to dismiss Heher's complaint. The firm conceded that Heher had
stated accurately his earnings for the years 1982 through 1986,
inclusive, upon which his claim for stated benefits relied. The
firm alleged, however, that Heher's departure from the firm with
seven or eight of the firm's "major" clients decreased SSWH&B's
prospective earnings and diminished the value of its goodwill.
The firm referred specifically to Article IV(8) of the Agreement
and implied that Heher's claim to benefits under the Agreement
was affected by the alleged loss in firm goodwill. Article
IV(8), which apparently relates only to the tax treatment of
benefits received under the Agreement, provided in relevant part:
The [stated and supplemental] benefits provided in
this Article IV represent payments for a former
partner's interest in partnership goodwill, and as such
are made for said partner's interest in partnership
property under I.R.C. section 736(b)(2)(B), entitling
said partner or the successor in interest of a deceased
partner to capital gains treatment.
The firm also contended that Heher was estopped from asserting
the invalidity of the forfeiture provision because, as a senior
partner and a member of the firm's Finance Committee, he had
participated in drafting the Agreement.
White and Johnston filed an answer to Heher's complaint and
a cross-claim against SSWH&B for stated benefits under the
Agreement, seeking to void the February 1992 arbitration award
that denied them their stated benefits. They also sought
indemnification from SSWH&B in the event they became personally
liable for monies owed to Heher. White and Johnston
simultaneously filed a motion for summary judgment on their
cross-claim for stated benefits. SSWH&B filed a cross-motion to
dismiss White and Johnston's cross-claim.
The trial court denied in part and granted in part SSWH&B's
motion for reconsideration, confirming the court's prior ruling
that the forfeiture provision was void, but ordering arbitration
of all other contested issues. The court also granted in part
and denied in part Heher's cross-motion for summary judgment.
The court found that the uncontested amount of the stated benefit
due Heher under the Agreement was $143,355, and referred to
arbitration the following issues: (1) whether Heher was entitled
to prejudgment interest, and if so, from what date, and in what
amount; (2) whether Heher's stated benefit of $143,355 should be
adjusted to account for loss of goodwill, as alleged by SSWH&B;
and (3) whether there was any validity to SSWH&B's allegation
that Heher was estopped from asserting the invalidity of the
forfeiture provision because of his participation in drafting the
Agreement. The court directed the arbitrators to make specific
findings of fact and to state specific reasons for their
determinations on all issues.
Regarding White and Johnston, the court denied their summary
judgment motion against SSWH&B and granted SSWH&B's cross-motion
to dismiss their cross-claim for benefits. The court reasoned
that the cross-claim was untimely, because White and Johnston had
failed to move to vacate the February 1992 arbitration award
within three months of this Court's decision in Jacob. The trial
court granted White and Johnston's cross-motion to dismiss
Heher's complaint as to them, over the objection of SSWH&B that
White and Johnston's individual liability to Heher raised an
arbitrable issue. The trial court reasoned that Heher's claim
for benefits did not arise until after White and Johnston had
left the firm.
Heher appealed and moved to stay arbitration pending appeal.
SSWH&B cross-appealed, as did White and Johnston. The trial
court stayed arbitration pending appeal, and ordered that count
three of Heher's complaint, seeking supplemental benefits under
the Agreement, be subject to arbitration.
The Appellate Division determined that arbitrators "are not
precluded from deciding issues implicating public policy," and
observed that Jacob did not hold that "only courts are capable of
implementing the rule of law enunciated in that opinion."
Accordingly, the court concluded that the trial court should have
stayed all proceedings arising from Heher's complaint--including
Heher's challenge to the forfeiture provision--pending
arbitration of all issues, noting that the arbitrators' decision
would be subject to judicial review consistent with Faherty v.
Faherty,
97 N.J. 99, 109-10 (1984), and Tretina Printing, Inc. v.
Fitzpatrick & Assocs., Inc.,
135 N.J. 349, 364 (1994). The court
therefore reversed the denial of SSWH&B's motion to stay
litigation and ordered the arbitration to proceed forthwith. The
court also reversed the trial court's dismissal of Heher's claim
against White and Johnston. The court noted that White and
Johnston, as signatories to the Agreement, had agreed to
arbitrate all disputes, including disagreements about "whether a
given dispute arises out of [the] [A]greement or the
relationship," reasoning that the issue of whether Heher's claim
arose before White and Johnston terminated their relationship
with SSWH&B was "precisely the type of issue" the parties had
agreed to arbitrate.
Regarding White and Johnston's cross-appeal, the Appellate
Division affirmed the trial court's dismissal of their cross-claim for benefits under the Agreement. The Appellate Division
reasoned that the cross-claim was untimely because White and
Johnston failed to bring suit to vacate the February 1992
arbitration award within three months of delivery of the award.
See N.J.S.A. 2A:24-7. Responding to White and Johnston's
assertion that Jacob, supra, provided them with a "new" cause of
action, the Appellate Division held that that action was one that
arose out of the "partnership relationship," obligating White and
Johnston to submit the matter to arbitration.
On Heher's motion for reconsideration, the Appellate
Division issued a supplemental order requiring the arbitrators to
issue a written opinion setting forth findings of fact and legal
conclusions to facilitate judicial review.
Heher filed a Petition for Certification and White and
Johnston filed a Cross-Petition. Heher seeks review of the
Appellate Division's decision ordering arbitration of all issues.
Heher contends that the invalidity of the forfeiture provision is
not arbitrable, that SSWH&B's alleged defenses based on estoppel
and loss of goodwill are not available under the facts of this
case, and that the amount of prejudgment interest due is not
disputed. He therefore asserts that he is entitled to the stated
benefit of $143,355, because "there is nothing left to
arbitrate."
In their Cross-Petition, White and Johnston seek review of
the Appellate Division's affirmance of the dismissal of their
cross-claim against SSWH&B. They also seek review of the
Appellate Division's reversal of the trial court's dismissal of
Heher's complaint as to them. We granted Heher's Petition for
Certification, and White and Johnston's cross-petition,
140 N.J. 326 (1995), and now affirm.
Regrettably, our disposition of this appeal prolongs the delay in resolving Heher's claim for compensation from SSWH&B emanating from his withdrawal from the firm in 1986. Nevertheless, concerning the primary issue before us--whether the arbitration provision of SSWH&B's partnership agreement is enforceable if the pending dispute implicates the clear mandate of public policy underlying RPC 5.6--we are firmly convinced that Heher's claim for termination benefits must proceed to arbitration despite the public policy issues implicit in his challenge to the validity of the forfeiture provision. That conclusion is fortified by our confidence in arbitration and in the ability of arbitrators to resolve such disputes in a manner
consistent with the public policies underlying RPC 5.6. As we
observed in Weiss, supra:
Our longstanding endorsement of arbitration
as a favored remedy, see Faherty, supra, 97
N.J. at 105, reflects its value as a
procedure for resolving disputes out of court
that in the process combines the advantages
of privacy and efficiency. Its virtues have
special application to conflicts arising out
of agreements between lawyers in practice
together. Such conflicts are best resolved
quickly and efficiently, and the parties'
best interests are likely to be served by a
dispute-resolution process that limits
notoriety about the underlying issues. That
the dispute may require the arbitrator to
address and resolve issues that affect public
policy does not imply that the parties must
forego the advantages of arbitration and turn
at once to the courts.
[___ N.J. at ___-___ (slip op. at 27-8).]
See also Hackett v. Milbank, Tweed, Hadley & McCloy, 80 N.Y.2d 870, 871-72, 587 N.Y.S.2d 598, 599, 600 N.E.2d 229, 230 (1992) (holding that dispute over withholding of law partner's right to receive termination benefits from firm should proceed to arbitration despite contention that denial of benefits would violate public policy); Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 27-28, 111 S. Ct. 1647, 1653, 114 L. Ed.2d 26, 38 (1991) (holding that important public policies underlying Age Discrimination in Employment Act do not preclude compulsory arbitration of claim asserting violation of Act). Moreover, the arbitrator's disposition will be subjected to an enhanced level of judicial review in order to afford appropriate relief from an arbitration award that obviously would frustrate a clear mandate
of public policy. Weiss, supra, ___ N.J. at ___ (slip op. at
31). Thus, in requiring that the dispute proceed first to
arbitration, we assure that the parties honor their contractual
commitment to arbitrate, presuming that the arbitrator's award
will vindicate the public policy interests at stake in a manner
consistent with our holdings in Jacob and Weiss, but reserving
the power of judicial review to override awards that violate a
clear mandate of public policy. Ibid.
Concerning issues other than the validity of the forfeiture
provision that are to be submitted to the arbitrator, we note
that in Weiss we clarified our reference in Jacob to the possible
application of estoppel principles to bar a partner from
challenging an otherwise invalid forfeiture provision, observing
that that statement referred only "to a unique and extraordinary
exercise of control by a dominant partner in a law firm * * *
[who] exerted a dominating influence in insisting that the
forfeiture provision be enforced against withdrawing partners."
Id. at ___ (slip op. at 36).
We are fully in accord with the Appellate Division's
conclusion that Heher's claim against White and Johnston also
must be resolved in the arbitration. Contrary to the contention
of White and Johnston, the arbitrator could find that Heher's
claim against them as partners accrued in 1986 when the firm
refused to pay Heher the "stated" and "supplemental" benefits
pursuant to the partnership agreement, prior to the time that
White and Johnston left the firm. Moreover, although White and
Johnston's potential liability to Heher is secondary to that of
the partnership, their joinder as defendants in the proceeding
that seeks to establish the partnership's liability is both
appropriate and consistent with the entire controversy doctrine.
See Seventy-Three Land, Inc. v. Maxlar Partners,
270 N.J. Super. 332, 335-38 (App. Div. 1994); La Mar-Gate, Inc. v. Spitz,
252 N.J. Super. 303, 309-10 (App. Div. 1991).
Finally, we agree with the Appellate Division's
determination to uphold the trial court's dismissal of White and
Johnston's cross-claim to vacate the February 1992 arbitration
award that enforced the forfeiture provisions of the partnership
agreement against them. As the Appellate Division correctly
observed, White and Johnston failed to comply with N.J.S.A.
2A:24-7, which requires that parties seeking to vacate an
arbitrator's award do so within three months of the date the
award was rendered. See City of Atlantic City v. Laezza,
80 N.J. 255, 268 n.2 (1979).
We affirm the judgment of the Appellate Division.
CHIEF JUSTICE WILENTZ and JUSTICES HANDLER, POLLOCK,
GARIBALDI and COLEMAN join in JUSTICE STEIN's opinion. JUSTICE
O'HERN filed a separate opinion concurring in part and dissenting
in part.
SUPREME COURT OF NEW JERSEY
A-10/
11 September Term 1995
GARRETT M. HEHER,
Plaintiff-Appellant
and Cross-Respondent,
v.
SMITH, STRATTON, WISE, HEHER
AND BRENNAN, a New Jersey general
partnership, WILLIAM J. BRENNAN,
III, HUGH D. WISE, JR., HENRY S.
BROAD, JOHN ROBERT HEHER, ARTHUR
S. LANE, CHRISTOPHER S. TARR, ANNE
REICHELDERFER, ALEXANDER P. WAUGH,
JR., WENDY L. MAGER, RICHARD J.
PINTO, BRIAN P. SULLIVAN, SUZANNE
M. McSORLEY, MARSHA E. NOVICK,
ROBERT C. JOHNSTON, PETER R.
FREED, THOMAS E. HASTINGS, ELIZABETH
R. SALASKO, DOROTHY FECHT LUNTEY,
DAVID J. SORIN, JAMES SCOTT HILL,
ROBERT P. GORMAN, and EDWIN B. KAGAN,
Defendants-Respondents
and Cross-Respondents,
and
TODD D. JOHNSTON and ROBERT A.
WHITE,
Defendants-Respondents
and Cross-Appellants,
and
EDWARD J. GEOGHEGAN and JOHN DOE
AND JANE DOE, said names being
fictitious,
Defendants.
O'HERN, J., concurring in part and dissenting in part.
I concur in the opinion and judgment of the Court insofar as
it orders arbitration of the contractual dispute subject to the
standard of review set forth in the opinion of the Court. I do
not agree, however, that defendants Johnston and White should at
once be subject to the jurisdiction of the arbitrators for
imposition of liability under the law firm's termination
agreement without permitting the arbitrators to consider either
the entitlement of Johnston and White to benefits under the
agreement or the inequity of holding them liable for benefits to
others without any credit for benefits to which they were equally
entitled.
NO. A-10/11 SEPTEMBER TERM 1995
ON APPEAL FROM
ON CERTIFICATION TO Appellate Division, Superior Court
GARRETT M. HEHER,
Plaintiff-Appellant
and Cross-Respondent,
v.
SMITH, STRATTON, WISE, HEHER
AND BRENNAN, etc., et al.,
Defendants-Respondents
and Cross-Respondents,
and
TODD D. JOHNSTON and ROBERT A.
WHITE,
Defendants-Respondents
and Cross-Appellants,
and
EDWARD J. GEOGHEGAN and JOHN DOE
AND JANE DOE, said names being
fictitious,
Defendants.
DECIDED March 6, 1996
Chief Justice Wilentz PRESIDING
OPINION BY Justice Stein
DISSENTING OPINION BY
CONCURRING/DISSENTING OPINION BY Justice O'Hern