A New Jersey appeals court has rejected an attorney's attempt to arbitrate her feud with a former law partner based on contract language stating that the parties "may submit the dispute to binding arbitration."

Maureen E. Vella was hit with a suit from ex-partner David J. Singer for breach of contract in August 2023 over her departure from Hillsborough's Vella, Singer & Associates.

Vella moved to dismiss the suit, claiming that "she never would have entered into an agreement" calling for her disputes with ex-partners "to be resolved in open court."

After a trial court denied Vella's motion to dismiss, Appellate Division Judges Maritza Berdote Byrne and Katie Gummer noted that an average person might not know that arbitration is a substitute for the right to have one's claim adjudicated in a court of law. But attorneys such as Vella and Singer "had the sophistication to understand the import of arbitration," the judges said.

'May'

Appellate Division Judge Katie Gummer. Courtesy photo

To dismiss this case and compel arbitration, Vella does not have to establish the agreement contained "an express waiver of the parties' right to seek relief in a court of law," the appellate court found. But she still must demonstrate that the parties had a "meeting of the minds" in which they agreed to adopt a requirement to arbitrate.

"And that she cannot do based on the plain language of the agreement," Berdote Byrne and Gummer wrote.

The word "may" generally conveys that an action is permissive, not mandatory, the judges wrote.

The partnership agreement in question states that "[i]n the event of a dispute among the shareholders, the shareholder[s] agree to conduct good faith negotiations in order to settle the dispute." Next, it states "[i]f the dispute cannot be settled within 30 days, the shareholders agree to submit the dispute to mediation before a mutually-agreed upon mediator."

But in the rest of that section, the parties did not use the mandatory "agree to" phrase but instead used "may," the judges stated.

The agreement went on to say that "if mediation proves unsuccessful within 45 days of submission of the dispute, the shareholder may submit the dispute to binding arbitration before a mutually agreed upon arbitrator. If the parties cannot agree to a mediator/arbitrator, the dispute may be submitted to JAMS using the procedures outlined by JAMS."

Gummer and Berdote Byrne cited a 2019 Appellate Division ruling, Medford Township School District v. Schneider Electric Buildings Americas, in which a contract contained mandatory and permissive terms. In that case, the court found the arbitration clause was permissive and not mandatory.

"We reach the same conclusion here. Instead of using the phrase 'agree to' in the sentences about arbitration, the parties used 'may.' Had they intended to require submission of the dispute to binding arbitration after a failed mediation, they could have and should have explicitly stated so by using 'shall' or even continuing to use the phrase 'agree to,'" Gummer and Berdote Byrne wrote.

"But they didn't. Instead, they used the word 'may.' The plain language of the agreement convinces us arbitration was permissive and not mandatory," the judges wrote.

According to the suit, Vella and Singer each owned 50% of the firm and were equally responsible for its debts, according to its October 2019 contract.

But Vella allegedly failed to pay her share of the firm's debt after resigning, according to the suit.

Vella allegedly participated in "financial malfeasance" by preparing deceptive financial reports, altering financial data, making a record of fake shareholder meetings, misdirecting income due to making distributions to benefit only herself, and making misrepresentations to the firm's financial institutions and to the state, the filing claimed.

Kenneth Thyne of Simon Law Group in Somerville, representing Vella, said he was "disappointed" by the decision.

Thyne said the appeals court's interpretation made the contract language "meaningless."

"If you put in that you may institute arbitration, that means you're getting a contractual right that you didn't have before you sign the contract," Thyne said.

The lawyer for Singer, Somerville solo practitioner Brian M. Cige, said of the ruling, "I think every decision that clarifies whether someone can be compelled to arbitrate or not is important and helpful. Everybody's going to have different language in their contracts, but I think it reaffirms what cases don't have to be arbitrated."