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(NOTE: The status of this decision is Unpublished.) Original Wordprocessor Version
(NOTE: The status of this decision is Unpublished.)
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-1242-11T1
ZAVODNICK, PERLMUTTER &
BOCCIA L.L.C.,
Plaintiff-Respondent,
v.
ALLEN ZAVODNICK,
Defendant-Appellant.
August 2, 2012
Argued May 1, 2012 - Decided
Before Judges Payne and Reisner.
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On appeal from Superior Court of New Jersey,
Chancery Division, Hudson County, Docket
No. C-110-11.
John R. Dineen argued the cause for appellant (Netchert, Dineen & Hillmann,
attorneys; Mr. Dineen, on the brief).
Jonathan Koles argued the cause for respondent (Koles, Burke & Bustillo, L.L.P.,
attorneys; Mr. Koles, on the brief).
PER CURIAM
Defendant, Allen Zavodnick (sometimes referred to herein as AZ), appeals from an October 5, 2011
judgment confirming an arbitration award in favor of his former law firm, plaintiff Zavodnick, Perlmutter &
Boccia, L.L.C., finding that he had ceased providing services to the firm and authorizing the remaining
members of the firm to buy out his interest in it. On appeal, defendant argues that the court erred in
confirming the arbitrator's award because the arbitrator exceeded the authority granted to her by the
plaintiff's submission. Additionally, defendant argues that the court erred in confirming the arbitration
award because it contravened express provisions of the operating agreement requiring a judicial
determination of whether a withdrawal event had occurred. We decline to accept defendant's arguments
and affirm.
In 2005, defendant entered into an operating agreement with two of his former employees, Joseph G.
Boccia and Mitchell D. Perlmutter, thereby creating a three-member limited liability company. The
agreement contained the following provisions of relevance to this litigation:
2.9.2. Each Member shall devote his best efforts to serving the Company and its
clients in a professional manner and shall devote his full working time and
attention to the affairs of the Company unless otherwise approved by the
Managers. . .
2.9.3. Notwithstanding Section 2.9.2, it is acknowledged and understood that the
nature and amount of AZ's services to the Company shall be generally consistent
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with the nature and amount of services which he had rendered to or for the
benefit of the AZ Proprietorship during 2003 and 2004. It is the intention of the
Members that AZ's services to the Company shall be primarily supervisory in
nature; that he shall focus his attention on generating new business, managing
the intake of files, developing overall strategy for the handling of cases, being
available to act as a "problem-solver" on cases being handled by other Company
attorneys, being available to handle specific aspects of cases as he determines in
the best interests of the Company and otherwise taking responsibility for
management and administration of the firm (to the extent not delegated to
others); and that he shall not be required to work a minimum number of hours
on client cases.
14.1. Mandatory Purchase and Sale. Upon the occurrence of a Withdrawal Event
with respect to any Member, the Company shall be obligated to purchase, and
the Member or the Member's legal representatives, as the case may be ("Seller"),
shall be obligated to sell, the Seller's entire Membership Interest.
20. DISPUTE RESOLUTION. Any dispute or controversy arising under this
Agreement shall be determined and settled by arbitration before the American
Arbitration Association in Jersey City, New Jersey. The parties to the arbitration
shall use their best efforts to select one arbitrator by unanimous consent. If the
parties are unable to agree on the selection of the arbitrator, then in such event
one arbitrator shall be selected by the American Arbitration Association. The
arbitration award shall be final and binding upon all of the parties thereto, and
judgment on the award may be entered by any court having competent
jurisdiction. The arbitrator shall not, however, have the power to modify or
cancel any express provision of this Agreement.
22.21. "Disability" means, with respect to any Member, the Member's inability,
by reason of injury or illness, to render usual and customary services on behalf
of the Company in accordance with this Agreement for a continuous period in
excess of six (6) months . . .                                                          . If a determination is made by the Company that a
Member has been Disabled for a continuous period in excess of six (6) months,
then in such event the Company shall notify the Member of its determination.
Within 30 days after the Company's notice has been delivered to the Member,
the Member shall have the right to have the Company's determination reviewed
by a physician of his choice, and if his physician does not agree with the
Company's determination within such 30-day period, then in such event the
determination of the Member's Disability shall be subject to arbitration pursuant
to Section 20. The determination of the Member's Disability shall be deemed final
upon the expiration of the 30-day period following the delivery of the Company's
notice (if the matter does not go to arbitration) or upon receipt of the arbitrator's
decision, as the case may be.
22.42. "Preferred Withdrawal" means with respect to any Member, the first to
occur of:
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(i) the death of the Member;
(ii) the Disability of the Member; or
(iii) the Member's resignation, complete retirement or otherwise ceasing to
render professional services for the Company in accordance with this
Agreement for any reason other than death, Disability or Misconduct . . .
22.51. "Withdrawal Event" means, with respect to any Member, the first to occur
of a Preferred Withdrawal or a Nonpreferred Withdrawal. It is
acknowledged and understood that this Agreement intentionally does not
contain any provisions by which a Member may be involuntarily
terminated by the Company absent death, Disability or Misconduct.
Therefore, if a Member ceases to render professional services for the
Company in accordance with this Agreement for any reason other than
death, disability or Misconduct, such event shall be treated . . . (iii) as a
Preferred Withdrawal if it occurs with respect to AZ . . . at any time.
Thereafter, the firm hired defendant's son, who had just graduated from law school. However, the
son's performance was found not to be acceptable by Boccia and Perlmutter, and he was terminated by
them, against the wishes of defendant.
Thereafter, in the summer of 2009, defendant suffered a significant health incident. Following those events,
defendant failed to do work equivalent to that which he had done in 2003-04 as he agreed to do in the
operating agreement. Although he came to the office, he ceased legal work virtually entirely.
On March 30, 2010, Boccia and Perlmutter sent a pre-arbitration letter to defendant announcing their
intention to invoke the disability provision of the operating agreement as a means for obtaining defendant's
withdrawal from the firm. Upon invocation of the disability provision, defendant had thirty days to contest
his status by having his condition reviewed by a physician of his choice. Defendant did nothing.
On September 20, 2010, Boccia and Perlmutter requested arbitration in a letter to the American Arbitration
Association. Their letter noted Section 2.9.2 of the operating agreement, which required that "each Member
shall devote his best efforts to serving the Company and its clients in a professional manner and shall
devote his full working time and attention to the affairs of the Company unless otherwise approved by the
Members." The letter also noted the provisions of Section 2.9.3, specifying defendant's duties. The letter
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then continued by describing the manner in which defendant had violated those sections, as well as the
hostility manifested by defendant toward other members of the firm. It further described defendant's health
incident in 2009 and his refusal to be examined by a physician, despite a May 7, 2010 request. The letter
then concluded with the following as issues for arbitration:
If AZ refuses to submit to appropriate medical examination, the arbitrator must
determine if this refusal is a withdrawal event. Similarly, the arbitrator must
determine if AZ's lack of work, competency, or hostility towards us are
withdrawal events. §22.51.
In a counterclaim, defendant alleged misconduct by the firm, pursuant to Section 22.35, by stopping
payment of his weekly draw at the end of December 2010, as well as a breach of fiduciary duty pursuant to
Section 2.10.
Following an arbitration hearing, the arbitrator found that defendant1 had failed to perform his duties after
December 2009, and that his failure constituted a "withdrawal event" under Section 22.51 of the operating
agreement that would be considered a Preferred Withdrawal under Section 22.42, obligating plaintiff to
purchase and defendant to sell his interest in the firm pursuant to Sections 14.1 and 14.2 of the operating
agreement. The arbitrator found that there was inadequate evidence to determine whether defendant was
disabled, that he had not committed misconduct as defined in the operating agreement, and that whether
he violated the Limited Liability Company Act was beyond the scope of the arbitration.
Addressing defendant's counterclaim, the arbitrator denied interim relief in the form of an award requiring
the firm to continue to pay him his draw, noting that Perlmutter and Boccia acknowledged their obligation
to buy out defendant's interest and their further position that the draw paid to defendant through 2010 met
or exceeded the anticipated buyout price. The arbitrator ruled on this basis that interim relief was not
warranted because a money award would make defendant whole.
The arbitration award was confirmed by the trial court.2
As we have stated, defendant has appealed, arguing that the arbitrator exceeded the scope of the authority
granted to her and that the operating agreement required a judicial resolution of the issues raised in the
arbitration. Because the request for arbitration, as we have summarized it, clearly encompassed the issue of
whether defendant's disability or his cessation of professional service constituted a withdrawal event, and
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because the operating agreement's plain terms required arbitration of that issue, we find defendant's
arguments to be of insufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Affirmed.
1 For consistency, we use the designations for the parties applicable to the present litigation.
2 We have no record of the resolution of any buyout issue in the matter, and that aspect of the
litigation has not been addressed on appeal. Although the appeal is therefore interlocutory in nature, we
have determined to resolve the issues raised before us in the interest of business expediency.
This archive is a service of Rutgers School of Law - Camden.
This archive is a service of Rutgers School of Law - Camden.
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