Tricky Case on an Express Waiver of a Right to Arbitrate

Joseph Ginarte founded a law firm, Ginarte LLP (the Firm), in 1982. In 1991, he took on a partner and entered into a partnership agreement that included a provision for arbitration. The Firm hired Michael Gallardo in 2003, and he became a partner in 2007. He was named managing partner in 2013. The parties seem to dispute whether Mr. Gallardo was ever made aware of or made a party to the Firm’s arbitration agreement.  A document from 2018 references a partnership agreement. A document from 2019 states that the Firm “does not have a formal Limited Liability Partnership Agreement as in effect on the date hereof.” Curiouser and curiouser.

Mr. Gallardo was terminated in February, 2023, allegedly for having tried to lure twelve clients to a new firm. In March, 2023, he filed suit in the New Jersey Chancery Division, alleging that the Firm had retaliated against him for protected activities. He sought a limited protective order, which was granted on March 8th and amended on March 9th. A motion to compel arbitration remained pending.

On March 17th, having retained new attorneys, the Firm filed its own complaint in the Chancery Division and sought temporary restraints on Mr. Gallardo, relating to his alleged improper poaching of clients. At a hearing in the Chancery Division, after unsuccessful settlement talks, the parties agreed to move their cases to the Law Division. During that hearing, both parties agreed that the Firm had waived its right to compel arbitration.

The Firm once again retained new counsel, and in May, 2023, it filed with the Law Division a motion in lieu of answer to compel arbitration. That motion was denied. The trial court concluded that the Firm had expressly waived its right to compel arbitration. The Firm demanded rehearing, but the trial court affirmed its earlier decision. The Firm took an appeal to the Appellate Division.

In Gallardo v. Ginarte, the New Jersey Appellate Division affirmed in an unpublished opinion. The Firm objected that the the trial court had not applied the proper test, which under New Jersey law derives from Cole v. Jersey City Med. Ctr., 215 N.J. 265 (2013).  But the Appellate Division, like the trial court on reconsideration, found the Cole case to be applicable only in cases of implied waivers. Here, the waiver was express. 

I can see why the opinion is unpublished. It doesn’t seem like a hard case, and it is very much tied to its facts. The Chancery Division asked counsel if they intended to waive the right of arbitration, and they said that the did. Pretty open and shut. There’s a written record of the proceedings. There’s no dispute about the facts.

And yet, I feel like there is a television mini-series to be written about this case. Maybe it would not be as lush as The Gilded Age, but there is definitely a story behind the case. We have a partnership that is alleged both to have had a partnership agreement and not to have had a partnership agreement. We have a defendant Firm that cycles through three sets of attorneys and ends up having to litigate when it claimed a right to arbitrate. Why did the case start in chancery and move to law? Mr. Gallardo is alleged to have been both a managing partner and someone who had not come to the office since 2020. 

Finally, there is the matter of the waiver. Perhaps we have nothing more complicated here than poor lawyering. Perhaps there was a lawyerly miscalculation. Perhaps one set of lawyers had a strategy that did not involve arbitration; the new set of lawyers preferred arbitration. During the colloquy with the Chancery Division, the Firm’s attorney might have meant nothing more than, “We are waiving our right to arbitration with respect to our motion for a protective order, which is the only thing pending in the Chancery Division.” Perhaps the attorney meant something like, “We are waiving our right to move to compel in the Chancery Division, without prejudice to our right to seek arbitration in the Law Division.” But that is not what they said.

We can rejoice that for once a case will proceed in litigation. If it does, we will be able to discover some of the delicious details of this case without having to await the mini-series.