New World Solutions, Inc. (“NWS”) and Asta Funding Inc. (“Asta”) entered into an agreement which contained an arbitration clause. After a dispute arose and the parties undertook arbitration, the arbitrator entered an award against NWS and its principals. Asta sought to confirm the award, while the principals challenged the arbitrator’s jurisdiction and sought to vacate the award.
Acknowledging that it is the court which decides the issue of the arbitrator’s jurisdiction to hear a case, the Court noted that a party’s agreement “may validly provide that the arbitrator is to determine his or her own jurisdiction.” Here, the arbitration clause provides arbitration will be conducted “in accordance with the Commercial Arbitration Rules of the American Arbitration Association.” Section R-7(a) of the Rules provides that “the arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.” This conferred the authority to determine jurisdiction over the principals to the arbitrator.
The Court further determined the claims against NWS’ principals were arbitrable under New Jersey law. Even though the principals were non-signatories to the arbitration agreement, they were bound under the theories of corporate veil-piercing/alter ego, estoppel and successor in interest.
The award was ultimately confirmed, despite the principals’ objections on a number of substantive grounds including: alleged false statements made to the arbitrator by Asta; alleged refusal of the arbitrator to hear evidence; that the arbitrator exceeded his authority by issuing pre-hearing subpoenas and by awarding injunctive relief and damages. The Court held that none of these grounds were supported by the record.
Asta Funding, Inc. v. David Shaun Neal, et al., 14-2495 (UDSC D.N.J. June 30, 2016)