Laurence J. Rappaport v. Kenneth Pasternak, 332 A.3d 713

The case arises from an arbitration between Laurence J. Rappaport and Kenneth Pasternak (and others), relating to disputes among members of several real estate LLCs known as the KABR entities.
Rappaport, a former manager and equity member, was removed from his roles and claimed entitlement to various forms of compensation, including future distributions of "carried interest."
The parties' operating agreements required arbitration of disputes; both parties made broad claims in arbitration, including rights to future compensation under the agreements.
After hearings, the arbitrator awarded Rappaport $4.9 million (netting $3.8 million after offsets) but denied him future carried interest, finding all his rights had been redeemed by the damages awarded.
Rappaport challenged confirmation of the award in Chancery Division and then appealed to the Appellate Division, which modified the award in his favor, concluding the arbitrator decided a claim not submitted by the parties.
Defendants appealed to the New Jersey Supreme Court, which now reviews whether the Appellate Division properly modified the arbitrator's award under the applicable arbitration statutes and case law.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Was the issue of carried interest submitted	Rappaport: Carried interest was not submitted, so arbitrator’s denial exceeded authority	Pasternak: Carried interest was submitted and fully argued by both parties	Yes; the issue was submitted and argued by both sides; arbitrator’s ruling was proper
Did Appellate Division apply correct review	Rappaport: Appellate Division properly scrutinized scope, as issue was not raised during arbitration	Pasternak: Appellate Division ignored deferential review required by arbitration law	No; Appellate Division failed to show required deference and misapplied statute
Did modification of the award meet statutory bar	Rappaport: Arbitrator granted relief on a claim not submitted, so modification under N.J.S.A. 2A:23B-24(a)(2) proper	Pasternak: No claim was decided that wasn’t presented—so modification not allowed under statute	No; statutory requirements not satisfied—issue was submitted and merits were affected
Consequences for disputes over arbitration scope	Rappaport: Ambiguity should not prejudice a party’s unasserted rights	Pasternak: Parties responsible for clearly excluding issues in writing prior to arbitration	Parties who wish to exclude claims must do so clearly in writing prior to arbitration

Perini Corp. v. Greate Bay Hotel & Casino, 129 N.J. 479 (N.J. 1992) (adopts extremely deferential standard for review of private arbitration awards)
Tretina Printing, Inc. v. Fitzpatrick & Assocs., 135 N.J. 349 (N.J. 1994) (modifies Perini concurrence into majority rule; limits judicial intervention in private arbitration awards)
Bound Brook Bd. of Educ. v. Ciripompa, 228 N.J. 4 (N.J. 2017) (arbitrator’s award in public sector context subject to correction only for statutory violations)
Kearny PBA Local No. 21 v. Town of Kearny, 81 N.J. 208 (N.J. 1979) (arbitration awards only vacated on statutory grounds)