Nelson Mullins is proud to announce a victory before the New Jersey Supreme Court on behalf of The KABR Group, a real estate development company and its principals, in a long running dispute with its former officer Laurence J. Rappaport.
In Laurence J. Rappaport v. Kenneth Pasternak, the Supreme Court confirmed that Rappaport, an ousted real estate investment partner, was not entitled to a $25 million carried interest payout. In the decision filed on April 1, which was the Court’s first opportunity to consider the standard of review for a private sector arbitration award under section 2A:23B-24(a)(2) of the New Jersey Arbitration Act (NJAA), the Court reversed the Appellate Division’s decision to modify an arbitration award on the purported grounds that the arbitrator ruled on a matter not submitted to him by the parties. The plaintiff argued that his claim for carried interest was not submitted to the arbitrator even though the claim was within the scope of the parties’ arbitration agreement.
The Court rejected the argument, finding the claim was submitted to the arbitrator and even if it were not, the NJAA does not allow courts to modify awards unless it can be modified without affecting the merits of the award. The Court suggested that if parties want to exclude one or more issues that fall within the scope of the arbitration agreement, they should identify those issues in writing for the arbitrator and all parties prior to the arbitration.
Nelson Mullins partner Howard W. Schub represented The KABR Entities.
“We are thrilled the Supreme Court fully adopted our arguments that the Appellate Division improperly modified the arbitrator’s award in violation of the New Jersey Arbitration Act," said Schub. "Plaintiff tried to create a new avenue to challenge arbitration awards by arguing a right to appeal even where the arbitrator decided a claim squarely within the scope of the arbitration agreement. But the Court properly closed the road, confirming New Jersey’s commitment to arbitration as an alternative to litigation and the finality of arbitration awards as long as the arbitrator is honest and stays within the bounds of the arbitration agreement, as he clearly did here.”
Original source can be found here.