Court Opinion

ID: 4217138
Source: CourtListenerOpinion
Date Created: 2017-11-02 13:15:25.028791+00
Date Added: 2024-06-11T14:42:15.318343
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                 APPROVAL OF THE APPELLATE DIVISION

                                          SUPERIOR COURT OF NEW JERSEY
                                          APPELLATE DIVISION
                                          DOCKET NO. A-2448-14T2

JOHN S. PATTERSON and STELLA
PATTERSON, Individually and
as Joint Tenants,

     Plaintiffs-Respondents,

v.

LADENBURG THALMANN & CO. INC.,

     Defendant-Appellant.
___________________________________

          Submitted September 24, 2015 – Decided February 4, 2016

          Before Judges Ostrer and Haas.

          On appeal from the Superior Court of New
          Jersey, Law Division, Ocean County, Docket
          No. L-1435-14.

          Sallah Astarita & Cox, LLC, attorneys for
          appellant (Mark J. Astarita and Michael D.
          Handelsman, on the briefs).

          DeVita & Associates, and Timothy J. Dennin
          of the New York bar, admitted pro hac vice,
          attorneys for respondents (Richard Daniel De
          Vita and Mr. Dennin, on the brief).

PER CURIAM

     Defendant       Ladenburg    Thalmann   &   Co.,    Inc.   (Ladenburg)

appeals   from   a     December   19,    2014,   order   denying,   without

prejudice,     its     motion     to    compel   arbitration     and   stay

proceedings.
       Plaintiffs     John       S.    and    Stella      C.    Patterson       filed     their

complaint in May 2014 alleging breach of contract, conversion,

fraud,    and   related      causes          of       action    arising      out     of   their

dealings with Mark C. Hotton while he was a broker at Ladenburg

and    Ladenburg     Capital          Management,        Inc.,       from    1997    to   2005.

Plaintiffs alleged that in July 2013, Hotton pleaded guilty in

federal     court     to     a        "massive         multi-million          dollar      money

laundering scheme spanning a period of 17 years," which included

the time he worked at Ladenburg.                         Plaintiffs alleged Hotton's

misdeeds continued after he left Ladenburg for Oppenheimer Co.,

Inc.      Plaintiffs       contended         they      discovered      irregularities         in

their    Oppenheimer       accounts,         which       led    to    an    arbitration      and

subsequent         confidential              settlement              with      Oppenheimer.

Disclosures made in that arbitration, and plaintiffs' subsequent

investigation,       led    to    their      discovery          of    Hotton's      fraudulent

conduct while at Ladenburg.                  Plaintiffs' action sought to hold

Ladenburg       responsible            for     its       former        broker's        alleged

wrongdoing.

       In lieu of an answer, Ladenburg filed a motion to dismiss

on    statute   of    limitations            and       laches    grounds.           Plaintiffs

opposed the motion, arguing, among other things, the limitations

period was tolled by the discovery rule.                             On October 24, 2014,

the court denied the motion without prejudice.

                                                  2                                    A-2448-14T2
    The next month, Ladenburg filed its answer asserting as an

affirmative     defense      that    plaintiffs'         claims   were      subject    to

binding arbitration.          Ladenburg also filed a motion to compel

arbitration and stay plaintiffs' action.

    In support of its motion, Ladenburg provided two affidavits

of Robert Mateicka, Ladenburg's chief compliance officer.                             The

purpose    of   the    affidavits       was      to    present     evidence     of     an

arbitration contract.           However, both affidavits were based on

"information     and     belief"       as       well     as   personal      knowledge.

Mateicka stated in each, "I am fully familiar with the facts set

forth herein from my own personal experience [and] knowledge,

except for those which are stated upon information and belief.

As to those statements, I believe them to be true based on my

review of the documents and records related to this matter."

    Attached      to     Mateicka's         first      affidavit      was     what     he

described as "a copy of the brokerage account application which

was being used by Ladenburg during the relevant time period."

The application was fifteen pages long; the fields were not

filled    in.     Page    one       contained      the    following      instruction:

"Before    signing     the     Brokerage         Account      Application,      please

carefully read the Brokerage Account Customer Agreement.                              All

account    holders     must     sign    their       name."        Page   seven,       the

signature page, contained this acknowledgment:

                                            3                                  A-2448-14T2
           I represent that I have read the terms and
           conditions governing this account and agree
           to be bound by such terms and conditions as
           currently in effect and as may be amended
           from time to time. This account is governed
           by a pre-dispute arbitration agreement which
           appears on page 15.

           I acknowledge receipt            of   the    pre-dispute
           arbitration agreement.

Page   seven   is    followed     by   several    pages    of    fields     to   be

completed by the customer.

       A   section      titled,        "Brokerage      Account     Pre-Dispute

Arbitration Agreement" appears on page fifteen.                   There is no

separate signature line on page fifteen.               The arbitration clause

states, in all caps:

           Brokerage      Account      Pre-Dispute      Arbitration
           Agreement

           I am aware of the following:

           (A)      Arbitration is final and binding on the
                    parties.

           (B)      The parties are waiving their right to
                    seek remedies in court, including the
                    right to jury trial.

           (C)      Pre-arbitration discovery is generally
                    more limited than and different from
                    court proceedings.

           (D)      The arbitrators' award is not required
                    to include factual findings or legal
                    reasoning and any party's right to
                    appeal or to seek modification of
                    rulings by the arbitrators is strictly
                    limited.

                                        4                                 A-2448-14T2
          (E)   The panel of arbitrators will typically
                include a minority of arbitrators who
                were   or   are  affiliated  with   the
                securities industry.

          I agree that all controversies that may
          arise between us concerning any order or
          transaction,      or     the   continuation,
          performance or breach of this or any other
          agreement between us, whether entered into
          before, on, or after the date this account
          is    opened,    shall   be  determined   by
          arbitration before a panel of independent
          arbitrators set up by either the New York
          Stock     Exchange,    Inc.,  or    National
          Association of Securities Dealers, Inc., as
          I may designate. If I do not notify you in
          writing within five (5) days after I receive
          from you a written demand for arbitration,
          then I authorize you to make such a
          designation on my behalf. I understand that
          judgment upon any arbitration award may be
          entered    in    any   court  of   competent
          jurisdiction.

          [(Emphasis added).]

    The second attachment to Mateicka's first affidavit was a

page seven signature page executed by plaintiffs on April 28,

2005.   This page is identical to the page seven in the blank

application   described   above,   including   the   acknowledgment   of

receipt of the "pre-dispute arbitration agreement which appears

on page 15."    Plaintiffs' signed signature page identifies an

account number ending with 7722.       Mateicka's affidavit alleged

the signature page was included in plaintiffs' brokerage account

application for that account.

                                   5                           A-2448-14T2
      Plaintiffs opposed Ladenburg's arbitration motion, arguing

the   contract       Ladenburg      presented     was      incomplete        since      only

plaintiffs' signature page was presented, and not the rest of

the actual application.              Plaintiffs noted that the forms were

dated   in    2004,    which    could      not   have    been      used    for   accounts

plaintiffs opened in 2002 and 2003.                  Several pages in the blank

application        attached    to    Mateicka's      affidavit           bear    the    date

"02/04" at the bottom of the page.                   Plaintiffs also argued the

arbitration        language    was    ambiguous,        and     that      Ladenburg      had

waived its right to invoke the arbitration provision by first

filing a motion to dismiss.

      However,       plaintiffs      did    not    present         any    certification

denying that they signed the page seven that Mateicka presented.

They also did not deny that when they signed page seven, they

received      the    entire    Customer      Agreement,         which     included       the

arbitration agreement on page fifteen.

      In     Mateicka's        second      affidavit,         he       explained        that

Ladenburg's standard practice was to open a new account only

after   a    completed     brokerage       account      application        (which      would

include      the    arbitration      agreement)      was      submitted.          He    also

stated Ladenburg's standard practice is to "only retain portions

of    new      brokerage       account       applications           and     pre-dispute

arbitration        agreements,      including     the      signature        page."        He

                                            6                                     A-2448-14T2
asserted Ladenburg is required by "17 C.F.R. 240-17a-4(a)" to

retain only certain portions of account applications, including

the signature page, for "a period of six years."                See 17 C.F.R.

§ 240.17a-4(a) (requiring certain records to be "preserve[d] for

a   period    of   not   less    than   six   years").    Mateicka   attached

"Plaintiffs'       account      verification    forms"   from   2003,    which

referred to four different account numbers.              One account number

appears to match the nine-figure account number on the signature

page plaintiffs signed on April 28, 2005.

      The trial judge denied without prejudice Ladenburg's motion

to compel arbitration.           The court relied on Ladenburg's failure

to present a complete copy of the actual agreement plaintiffs

signed.      The court noted that the signed page seven was the only

document that identified plaintiffs as contracting parties.                 The

court agreed this signed page matched the page seven of the

blank application.          Ladenburg's counsel had apparently agreed,

in response to the judge's request, to submit a copy of the full

agreement plaintiffs signed.            The judge, in his decision, noted

the full agreement had not yet been submitted.

      The    court   also    rejected     plaintiffs'    argument    that   the

arbitration language was confusing or ambiguous.                However, the

court was unprepared to conclude that the arbitration agreement

plaintiffs allegedly signed in 2005 "relate[d] back" to prior

                                         7                            A-2448-14T2
years'   agreements.      Finally,     the   court     declined         to     decide

plaintiffs'    claim    that    Ladenburg    waived    its    right      to      seek

arbitration.

      This appeal followed.       Ladenburg argues the parties entered

into a valid and unambiguous arbitration agreement.                     Ladenburg

notes that plaintiffs submitted no competent evidence to dispute

Mateicka's assertion that they signed an agreement containing

the arbitration clause on page fifteen.

      We exercise plenary review of the trial court's decision

regarding    the   existence    and   applicability     of    an    arbitration

agreement.     Hirsch v. Amper Fin. Servs., LLC, 215 N.J. 174, 186

(2013); Bd. of Educ. of Bloomfield v. Bloomfield Educ. Ass'n,

251 N.J. Super. 379, 383 (App. Div. 1990), aff'd, 126 N.J. 300

(1991); Moreira Constr. Co. v. Twp. of Wayne, 98 N.J. Super.
570, 575 (App. Div.), certif. denied, 51 N.J. 467 (1968).

      Whether an arbitration agreement was formed is determined

under general contract principles.           Leodori v. CIGNA Corp., 175
N.J. 293, 302, cert. denied, 540 U.S. 938, 124 S. Ct. 74, 157 L.

Ed. 2d 250 (2003).        A court may not "subject an arbitration

agreement to more burdensome requirements than those governing

the   formation    of   other    contracts."          Ibid.        We    consider

"the contractual terms, the surrounding circumstances, and the

                                      8                                      A-2448-14T2
purpose    of    the    contract."        Hirsch,      supra,      215    N.J.    at    188

(internal quotation marks and citation omitted).

     In interpreting an arbitration agreement, we are mindful

that arbitration is considered "a favored method for resolving

disputes."           Garfinkel     v.   Morristown        Obstetrics      &    Gynecology

Assocs., P.A., 168 N.J. 124, 131 (2001).                       At the same time, the

policy    favoring       arbitration       is      "not     without      limits,"       and

"neither party is entitled to force the other to arbitrate their

dispute" unless both parties agreed to do so.                             Id. at 132.

"[T]he [Federal Arbitration Act] specifically permits states to

regulate . . . contracts containing arbitration agreements under

general contract principles . . . ."                       Martindale v. Sandvik,

Inc.,    173 N.J. 76,   85    (2002)       (internal      quotation      marks    and

citation omitted).

     We    agree       that   Ladenburg      failed       to    present       sufficient,

competent evidence of an arbitration agreement with plaintiffs.

However, we reach that conclusion for different reasons than

those expressed by the trial court.1                       Ladenburg relied on an

affidavit       by    Mateicka     that   purported        to    be   both      based    on

personal knowledge and "upon information and belief," without

1
  See State v. Heisler, 422 N.J. Super. 399, 416 (App. Div. 2011)
(stating an appellate court is "free to affirm the trial court's
decision on grounds different from those relied upon by the
trial court").

                                             9                                   A-2448-14T2
distinguishing between the two.                 This fails to comply with Rule

1:6-6, which governs the presentation of evidence on motions.

The Rule requires affidavits supporting motions to be based "on

personal     knowledge,          setting    forth     only      facts       which       are

admissible in evidence to which the affiant is competent to

testify."       See also Jacobs v. Walt Disney World, Co., 309 N.J.

Super.    443,       454   (App.   Div.    1998)    (factual     assertions          based

merely upon "information and belief" are inadequate); Lippmann

v. Hydro-Space Tech., Inc., 77 N.J. Super. 497, 504 (App. Div.

1962) (verification "to the best of the knowledge and belief of

[the] deponent" is defective).

       Had   Mateicka's          "affidavit"       complied     with        the      Rule,

Ladenburg would have presented sufficient evidence of a binding

agreement       to     arbitrate.          Plaintiffs      signed        page      seven,

acknowledging          their   "account     is     governed     by   a      pre-dispute

arbitration agreement which appears on page 15" and that they

had    received      the   arbitration     agreement.         Plaintiffs        did     not

provide a certification or any other evidence showing that they

did    not   execute       the     fifteen-page      agreement       that     Ladenburg

submitted in blank form.               As noted above, plaintiffs' signed

page    seven     is    identical    to    page    seven   of    the     fifteen-page

agreement.

                                           10                                     A-2448-14T2
      We recognize that the proponent of an arbitration agreement

bears the burden to prove its existence.                    Merrill Lynch, Pierce,

Fenner & Smith, Inc. v. Cantone Research, Inc., 427 N.J. Super.
45,   59     (App.    Div.),     certif.    denied,         212 N.J. 460    (2012).

However,     Ladenburg     was    not   required       to    produce      the      complete

original document that plaintiffs signed in order to prove the

contents of their agreement.               See N.J.R.E. 1004 ("The original

is not required and other evidence of the contents of a writing

. . . is admissible if . . . [a]ll originals are lost or have

been destroyed, unless the proponent lost or destroyed them in

bad   faith").        Plaintiffs    signed       page    seven,        which    expressly

incorporated         the   arbitration          agreement         on    page       fifteen.

Competent uncontradicted testimony that Ladenburg would not have

accepted plaintiffs' account agreement without the other pages

would   be    persuasive       evidence    of    the    contents        of    the     entire

agreement.       Further,      plaintiffs       signed      the    representation          on

page seven, which states, "I have read, understood and agreed to

the terms set forth in the Customer Agreement herein."                                    The

Customer Agreement includes the arbitration provision on page

fifteen.

      It is immaterial that the arbitration clause appeared on a

different page of the agreement than the page plaintiffs signed.

Contracting parties "may agree to arbitrate their disputes by

                                           11                                       A-2448-14T2
referring    generally     to    an    arbitration      policy      contained     in   a

separate    writing,      provided      that     the    policy       itself     clearly

reflects . . . [a] knowing and voluntary waiver of rights."

Leodori, supra, 175 N.J. at 307.                 In sum, but for Ladenburg's

failure     to   comply    with       Rule     1:6-6,   Ladenburg        would    have

established the existence of the arbitration agreement, given

plaintiffs' lack of evidence to the contrary.                      If Ladenburg lays

a proper foundation for plaintiffs' signed page seven and the

complete    fifteen-page        agreement,      no   other    documents       will     be

needed to meet its burden.

      We also conclude the arbitration clause in the Customer

Agreement is unambiguous.             In particular, the clause governs not

just disputes arising out of the account expressly identified in

the   agreement,    but     also      those     arising      out    of   "any     other

agreement between us, whether entered into before, on, or after

the date this account is opened."                Plaintiffs' arguments to the

contrary lack sufficient merit to warrant discussion.                         R. 2:11-

3(e)(1)(E).

      We affirm the order denying without prejudice Ladenburg's

motion to compel arbitration.

                                          12                                  A-2448-14T2