As we have all seen and heard, alternate dispute resolution (ADR) is all the rage. Two common methods of ADR are mediation and arbitration. To describe the two as simply as possible, in mediation, the parties and their attorneys (and perhaps even their experts), meet with a neutral third party to help them to come to an amicable resolution of the matter. With arbitration, the parties submit the matter to a third party to decide. Arbitration is often very much like a trial, but the matter is tried to a private judge. The parties can agree that the rules of procedure and evidence can be relaxed, or they can agree that the arbitration have the same or a similar formality that a trial would have. There are several reasons that people use arbitration as an alternative to litigation. Some people believe that it is faster and less expensive than a trial in court. Some times it is and some times it isn’t. Other think that they would rather choose their judge then be subject to the random assignment in the judicial system. Others still may have no choice but to go to arbitration because there are issues that they cannot try before a judge who may have a duty to report the matter to the IRS (see my prior blog post on this topic.) Now, with matters tried in court, parties have a right to appeal the decision to the Appellate Division if they don’t like the decision. Is it the same for arbitrations? The answer is clearly. Some things like, custody, can be arbitrated, but given the higher scrutiny because of the need to protect the children, the Supreme Court has determined that there needs to be greater procedural safeguards and the ability to review custody decisions (see my prior blog post on this topic.) Thus, while not necessarily an appeal, the trial court can be asked to review the records. As to other issues, when you agree to arbitrate, it used to be all of the rage to put a right of Appellate review right into your arbitration agreements. Unfortunately, no one asked the Appellate Division, who, in the case of Hogoboom v. Hogoboom rejected that process out of hand. Specifically, they held:
“…Basically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators. [They] can be corrected or modified only for very specifically defined mistakes as set forth in [N.J.S.A. 2A:24-9]. If the arbitrators decide a matter not even submitted to them, that matter can be excluded from the award. For those who think the parties are entitled to a greater share of justice, and that such justice exists only in the care of the court, I would hold that the parties are free to expand the scope of judicial review by providing for such expansion in their contract; that they may, for example, specifically provide that the arbitrators shall render their decision only in conformance with New Jersey law, and that such awards may be reversed either for mere errors of New Jersey law, substantial errors, or gross errors of New Jersey law and define therein what they mean by that.” … Here, the parties afforded themselves an expanded scope of review, as they were, by contract and by statute, permitted to do. The parties were not, however, entitled to create an avenue of direct appeal to this court. .. It is settled that consent of the parties does not create appellate jurisdiction. … In our judgment, the parties must seek initial review of these awards in the trial court. The trial court is charged with employing the standard of review the parties contractually agreed upon in determining whether these awards, or either of them, should be vacated or modified. …
The issue of Appellate review of an arbitration award recently came up again in the case of Shelley v Shelley, an unreported (non-precedential) opinion decided by the Appellate Division on April 21, 2015. In that case, the husband appealed a trial court order confirming an arbitration award. In Shelley, the parties agreed to arbitrate the financial issues of their divorce under the Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -30. After engaging in the arbitration, the arbitrator issued a detailed decision from which plaintiff requested modification. Even though, his request for modification was out of time, the arbitrator addressed each of his claims and affirmed the award. He then raised the same claims to the trial court in opposition to the motion to confirm the award. The trial court issued what the Appellate Division deemed were “two well-reasoned and comprehensive opinions” wherein she found that the husbands arguments lacked merit, and that he “… he had not demonstrated that the arbitrator committed any factual or legal error.” The same issues were raised on appeal. The Appellate Division ultimately dismissed the appeal, concluding that they had no jurisdiction to hear it. Why, might you ask if there is an appeal as of right from trial court opinions? Because the agreement to arbitrate essentially took away those rights. In fact, the Appellate Division held:
The APDRA, N.J.S.A. 2A:23A-1 to -30, is a voluntary procedure for alternative dispute resolution. Mt. Hope Dev. Assoc. v. Mt. Hope Waterpower Project, 154 N.J. 141, 145 (1998). The grounds to vacate, modify or correct an arbitration award under the APDRA are limited. An arbitrator’s decision on the facts is final if supported by substantial evidence. N.J.S.A. 2A:23A-13(b). Appeals pursuant to the APDRA may be filed with the trial division of the Superior Court, which can vacate or modify an award, but only if certain conditions are present. Here, the trial court exercised its appellate review role, and found the arbitration award should be confirmed. The question before us is whether we have jurisdiction to hear plaintiff’s appeal from the trial court’s decision, under N.J.S.A. 2A:23A-18(b). The Supreme Court has determined that, in general, N.J.S.A. 2A:23A-18(b) precludes appellate review with only a few exceptions, in rare circumstances, where the Appellate Division is compelled by public policy concerns or the need to exercise its supervisory authority. …None of those rare circumstances exist in this case.
So that’s it? If you arbitrate, then you can’t appeal? Not quite. Just like you can agree to arbitrate the initial determination of the issues, you can also agree to an appellate arbitration, as well. I have had matters where our initial arbitration agreement called for the use of a panel of two retired appellate division judges (didn’t have to be – could have been anyone we agreed to be the appellate arbitrators), who would then decide the matter as if they were sitting as a regular appellate panel. While in that case, you essentially lose the chance to appeal to the Supreme Court, you still have a body to review the matter if you think that the arbitrator got it wrong in the first case. The take away, however, is that your arbitration agreement must clearly spell out the scope of review and who will review the matter – taking into consideration what the court system can and cannot do with regard to an arbitration award. _________________________________________________________
Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric is resident in Fox Rothschild’s Roseland and Morristown, New Jersey offices though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or firstname.lastname@example.org. Connect with Eric: Photo credit: Copyright: <a href=’http://www.123rf.com/profile_lculig’>lculig / 123RF Stock Photo</a>