arbitration

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In 2015, I wrote a post on this blog with the same title because seemingly, this issue has been resolved for some time.  All too often, parties would agree to mediate their disputes but would try to reserve a right to appeal, as of right, to the Appellate Division, as if the matter was tried by the family court.  Since the Hogoboom case in 2007, lawyers have should have known that this was a no-no.  In fact, in Hogoboom, the Appellate Division specifically held that:

“…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. …

That seems clear enough, yet today, there was a reported (precedential) decision in Curran v. Curran that addressed this issue again.  In Curran, the parties agreed to arbitrate and entered into arbitration agreement which contained the very limited right to vacate an arbitration award per the New Jersey Arbitration Act.  However, the wife’s attorney wrote in the following sentence, “The parties reserve their rights to appeal the arbitrator’s award to the appellate division as if the matter was determined by the trial court.”  I guess they forgot about Hogoboom. If that was not bad enough, the parties signed the arbitrator’s retainer acknowledging that they were bound by the decision, except for the limited reasons under the act, and further, that they gave up their right of appeal.

After the arbitration, the husband filed a motion in court to vacate the award.  In refusing to vacate the award, the trial judge found the hand written addition preserving the right to appeal was unenforceable stating:

… that there was no provision under the Act to permit a direct appeal from an arbitrator’s decision to the Appellate Division. In addressing paragraph 3A, the judge stated: “The parties are not permitted to create subject matter jurisdiction by agreement which I think they tried to do here. The authority of a court to hear and determine certain classes of cases rests solely with the Constitution and the Legislature.” He concluded that paragraph 3A was unenforceable.

The trial judge did give a greater analysis of the matter than just permitted under the Act finding that that is what the parties had bargained for, and acted as “an Appellate Division of the arbitrator”  The Husband appealed asserting for the first time that the hand written addition preserving the right to appeal was illegal and voided the entire arbitration agreement and subsequent proceedings.

The Appellate Division disagreed and held that the unenforceable provision could be severed from the agreement.  The court held:

The primary purpose of the agreement was the resolution of the issues incident to the parties’ divorce through binding arbitration pursuant to the Act. This is evident from the contractual language stating: “The Parties having determined

that such issues be referred to binding Arbitration pursuant to the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 et. seq. . . . The parties shall attend binding Arbitration pursuant to the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 et. seq.” The parties attached an inclusive list to the agreement of all of the issues they intended the arbitrator to consider and resolve. The purpose of the agreement was for a final resolution of those issues. The arbitration agreement noted in multiple provisions that it was binding and not appealable, other than the limited grounds specified under the Act to modify or vacate an award.

Paragraph 3A did not defeat the parties’ intent to have their matrimonial litigation determined and considered by an arbitrator in an expeditious and comprehensive manner. After reviewing the parties’ submissions, the arbitrator rendered a preliminary award. Oral argument was heard on Robert’s application for reconsideration of the award. The arbitrator subsequently issued comprehensive findings of fact and conclusions of law, and a detailed final award. …

Severance of paragraph 3A does not defeat the primary purpose of the agreement. To the contrary, a revocation of the final award would only serve to frustrate the parties’ intent of reaching a final resolution to their matrimonial litigation and defeat the purpose of the arbitration agreement. The agreement is valid and enforceable.

As I noted in 2015, you can arbitrate and preserve a right of appeal.  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.

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Eric S. Solotoff, Partner, Fox Rothschild LLPEric 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 Morristown, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973) 994-7501, or esolotoff@foxrothschild.com.

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Arbitration – essentially, a private trial in which the parties hire a fact-finder who serves in lieu of a judge – has become an increasingly common means of resolving family law disputes.  Although an arbitration may be conducted with all the formalities of a trial, usually parties can agree to dispense with certain formalities, some of which can be costly for the parties.  Arbitration takes a trial out of the sometimes messy court system, usually guarantees a decision will be made in a timely manner, and ensures that the trial does not become a matter of public record.  In family law matters where the issues can be sensitive and the testimony potentially embarrassing to the parties, this may be preferred by the parties.

Another advantage to arbitration is that the litigants are not beholden to the deadlines of the Court system.  They can move on with their lives and even get divorced, while agreeing to defer certain issues to arbitration on a more relaxed timelines.  But sometimes this can backfire.

In a recent unpublished (non-precedential) decision, Shah v. Shah, the Appellate Division addressed the question:  “What happens to an agreement to arbitrate when nobody arbitrates?”

The answer given by the Appellate Division is an interesting one, especially in light of the facts of the Shah case.  In a nutshell, here they are:

  • The Shahs entered into an agreement resolving at least some of their issues in January 2003.  As to those issues that were not resolved (and there were a whopping seventeen of them), they agreed that they would proceed to arbitration.  They agreed on an arbitrator, paid his retainer, and set a date for arbitration.  However, the arbitration did not go forward and after several years passed, Arbitrator # 1 returned the retainer.
  • In 2008, the parties mutually agreed upon a new arbitrator, Arbitrator # 2.  However, neither of them took any steps to retain him.
  • In 2009, Mr. Shah filed a motion to compel the arbitration, expand the scope of the arbitration beyond the seventeen issues identified in the parties’ agreement, and appoint a new arbitrator.  The Court granted Mr. Shah’s motion and appointed Arbitrator # 3.  The Court also entered a discovery schedule, and entered an order directing the parties as to the manner in which Arbitrator # 3’s retainer would be paid.  Despite Mrs. Shah’s apparent attempts to move forward with Arbitrator # 3, Mr. Shah did nothing.  Eventually, Arbitrator # 3 wrote to the Court to, understandably, advise that he would not arbitrate until his retainer agreement was signed.  Neither party signed it.
  • In 2015 (now twelve years after the parties agreed to arbitrate), Mr. Shah once again asked the Court to compel the arbitration, this time asking that Arbitrator # 2 be appointed.  Mrs. Shah cross-moved.  Among other things, she asked the Court to terminate the parties’ obligation to arbitrate.  The Court granted Mrs. Shah’s request, reasoning that – twelve years later – the parties were in very different financial circumstances and could not be made to arbitrate at this point.  The Court also opined that the parties had waived their rights to arbitrate.
  • Mr. Shah moved for reconsideration of the Court’s Order, which the Court denied.

That brings us to Mr. Shah’s appeal.  In pertinent part, Mr. Shah argued that the decision of the lower court should be reversed because the judge incorrectly concluded that the parties had waived their rights to arbitrate due, essentially, to the passage of time.

The Appellate Division agreed with the judge below and concluded that the parties had waived their rights to arbitrate.  This is an interesting conclusion in light of the definition of a waiver:

Waiver is the voluntary and intentional relinquishment of a known right. The intent to waive need not be stated expressly, provided the circumstances clearly show that the party knew of the right and then abandoned it, either by design or indifference. [internal citations omitted].

Indeed, under the facts of the Shah case, there was no question that the parties had unduly delayed in proceeding to arbitration.  Mr. Shah apparently admitted to the Court that he was unhappy with Arbitrator # 3’s fee and therefore did nothing to move forward with the court-appointed arbitrator he had asked for in the first place.

At the same time, there were efforts over the years to move forward with the arbitration.  The major consideration the Appellate Division seems to have made was the amount of time that had passed, regardless of the fact that the parties had – at various points over that time period – made efforts to move forward with the arbitration.  One can imagine that this could be a closer call under even a slightly different set of facts.  For example, what if the facts were identical, but had occurred over the course of five years instead of twelve?

What is clear is that at some point, if parties do not arbitrate then the right to do so is waived, even if the parties have an agreement in place to proceed to arbitration, and one of them wants to enforce it.

headshot_diamond_jessicaJessica C. Diamond is an associate in the firm’s Family Law Practice, resident in the Morristown, NJ, office. You can reach Jessica at (973) 994.7517 or jdiamond@foxrothschild.com.

The recent Appellate Division case of Sirigotis v. Sirigotis, although unpublished (non- precedential), provides a great reminder of how important it is to know the “rules of engagement”.

In Sirigotis, the parties were able to resolve a majority of their issues by consent but agreed to submit the remaining unresolved issues to “final and binding” arbitration to be conduct by a retired judge. The parties provided the arbitrator a list of open issues that were to be decided.

The parties agreed to the appropriate amount of base alimony but a remaining open issue was that wife had an additional claim for alimony should husband’s income rise over a certain level as well as the inclusion of specific language in the award regarding plaintiff not being able to maintain the standard of living Crews v. Crews. Husband had objected to both of these requests.   During one of many arbitration sessions, the arbitrator had initially indicated that “all Crews [language] is out” because the issue of the determination of the marital lifestyle was not “before him”. Notwithstanding, in a later submission from wife, she again raised the issue of additional alimony on the grounds that the base alimony would not neither meet her needs or the marital lifestyle.  Husband’s submission argued that no additional alimony should be paid as the base alimony would “without question” meet wife’s needs and exceeds the marital lifestyle. Moreover, Husband requested that language be inserted that specifically indicated that both parties would be able to maintain a lifestyle reasonably comparable to that enjoyed during the marriage.

The reasons the parties were at odds over this language is because the standard of living and the likelihood that each party can maintain a reasonably comparable standard of living is a factor that must be considered when awarding alimony. This factor is of import because it serves as the touchstone for the initial alimony award and for adjudicating later motions for modification of the alimony award when ‘changed circumstances’ are asserted.

Ultimately, the arbitrator denied wife’s request to predicate more alimony based on a “future event” (increased income) and left wife to make an application to the Court in the future if necessary. The arbitrator also agreed with the husband that wife could maintain the standard of living.

Once the final arbitration award was issued, the wife moved to vacate the arbitration award in the trial court asserting that the arbitrator exceeded his authority by addressing the standard of living issue. Although the trial court found that the arbitrator had the authority to address the issue, the court ultimately vacated the arbitrator’s Crews finding and remanded for further proceedings, finding that plaintiff did not have the opportunity to give all her proofs on the issue.  Both parties appealed.

The Appellate Division found the trial court erred in vacating the Crews finding and reversed and remanded to the trial court to confirm the arbitrator’s award. In doing so, it reminded us that arbitration awards are given considerable deference therefore the party seeking to vacate it bears a heavy burden, with the scope of review being narrow.

While arbitration is ‘creature of contract’ and an arbitrator exceeds his or her authority if they decide something outside the scope, the Appellate Division found that be virtue of the issues raised by the wife herself, the Crews issue had to be decided. Moreover, the Appellate Division found that the wife had ample time and ability to present evidence on this issue and indeed did so by virtue of oral testimony, written submissions and voluminous exhibits.

The take away from this case is regardless of whether you decide to mediate, arbitrate or litigate, some or all of your divorce, it is important to know the “rules of engagement”. It is imperative to engage an experienced professional to help guide you through the ins-and-outs. You do not want to find yourself at a disadvantage simply because you were not aware of the rules.

You hear people talk all the time these days that mediation and arbitration, or quite frankly, any alternate dispute resolution (ADR) methods are the best things since sliced bread.  They may very well be in the right case – which these days may be most of them given judicial backlogs, and other factors making presenting cases to a court undesirable.  They may not be the panacea that people think they are, especially when you don’t frame what you want the arbitrator to do or how you want them to do it, correctly.  In fact, I have previously blogged that the right to appeal is not automatic unless you contract for it.

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The issue of a less than ideal arbitration agreement coming back to bite a litigant in the behind was exemplified again yesterday in the unreported (non-precedential) Appellate Division case of Little v. Little.  In that case, the parties agreed to arbitrate a Tevis claim seeking damages for alleged spousal abuse and battered woman’s syndrome before a retired judge. Rather than a full blown arbitration agreement, spelling out all of the desired standards, a right of appeal, etc., the agreement to arbitration was only memorialized in an order, which stated in total:

ORDERED, that the matter is hereby dismissed as the parties have agreed to submit to binding arbitration with a retired judge agreed on between the parties, which arbitration shall take place on or before February 15, 2013, the costs of which will be shared equally by the parties.

After the arbitration took place, the arbitrator issued a two-page written arbitration decision that awarded plaintiff $125,000 “for the physical and mental injuries sustained by her during her marriage…” The award did not set forth any findings of fact or conclusions of law.  Thereafter, the plaintiff moved to confirm the award and the defendant moved to vacate the award, both because of the lack of findings of fact and the reliance on a letter produced after the close of discovery.  The cross motion was denied and the arbitration award confirmed, leading to an appeal.

Defendant appealed claiming that  (1) the arbitration award was against public policy and should be vacated because without findings of fact and conclusions of law it cannot be determined if the award was procured by corruption, fraud or other undue means; and (2) the arbitrator’s reliance on the letterproduced after the close of discovery in constituted undue means.  The Appellate Division rejected both of those arguments.

As to the lack of fact finding, the Court specifically noted:

The scope of arbitration and the requirements of an arbitrator are controlled by contract. Minkowitz v. Israeli, 433 N.J. Super. 111, 132-33 (App. Div. 2013). If the arbitration agreement does not require the arbitrator to make specific factual findings or follow particular procedures, the arbitrator is free to make an award in a manner consistent with the Arbitration Act. N.J.S.A. 2A:23B-4. The Arbitration Act only requires the arbitrator to “make a record of an award.” N.J.S.A. 2A:23B-19(a). Moreover, the arbitration award provides that an arbitrator may conduct an arbitration in any manner that the arbitrator considers appropriate, with the goal of disposing of the matter fairly and expeditiously. N.J.S.A. 2A:23B-15(a). Accordingly, we have previously explained:

[W]ithout an agreement to the contrary, the power of the arbitrator is simply to issue an award that resolves a dispute. If they have not agreed in advance, the parties cannot, for example, force an arbitrator to give reasons for an award or to write a decision explaining his or her view of the facts. Neither can they appeal from the award as they could if they had proceeded to litigate their matter in court. Rather, the rights of the parties following issuance of an award, in the absence of an agreement to the contrary, are entirely governed by statute. (internal citation omitted).

As to the reliance on the letter produced after the close of discovery:

Arbitrators are not bound by the rules of evidence, and instead may determine the admissibility, relevance, materiality and weight of any evidence. N.J.S.A. 2A:23B-15(a). Additionally, an arbitrator may permit any discovery that he or she determines to be appropriate, taking into account the goal of making the proceeding fair, expeditious, and cost-effective. N.J.S.A. 2A:23B-17(c).

What is the takeaway here?  If you want the rules of evidence to apply, put that in your arbitration agreement.  If you want findings of fact and conclusions of law, put that in your arbitration agreement.  If you want a right of review greater than the very limited right of review contained in the arbitration statute, put it in your arbitration agreement.  Otherwise, you can be left with very little remedies if you disagree with a decision, and like the litigant in this case, very little ability to determine what the decision was actually based upon.

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Eric SolotoffEric 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 esolotoff@foxrothschild.com. Connect with Eric: Twitter_64 Linkedin

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Resolving issues pertaining to a divorce matter are not only costly and challenging, but if parties’ choose to litigate their issues before a sitting Family Part Judge, their dirty laundry becomes public record.

In order to resolve divorce litigation in a more private setting, parties have the choice of attending mediation and/or arbitration as alternative dispute resolution options. In addition to maintaining privacy, these alternative options usually bring matters to a resolution more quickly than the backlogged Court system is able to, and are more cost-effective. Further, given the more informal setting, there is usually a reduced level of conflict between the parties and attorneys.

When a Complaint for Divorce is filed, pursuant to New Jersey Court Rule 5:4-2(h), the first pleading of each party must include an affidavit or certification “that the litigant has been informed of the availability of complementary dispute resolution (‘CDR’) alternatives to conventional litigation, including but not limited to mediation or arbitration, and that the litigant has received descriptive literature regarding such CDR alternatives.” A copy of the Court-approved descriptive literature describing alternative dispute resolutions can be found here: http://www.judiciary.state.nj.us/notices/2006/n061204.pdf

With regard to arbitration, on September 1, 2015, the New Jersey Supreme Court adopted Rule 5:1-5, which applies to all Agreements to Arbitrate and Consent Orders to Arbitrate between and among parties to any proceeding heard in the family part, except: (A) the entry of the final judgment of annulment or dissolution of relationship; (B) actions involving the Division of Child Protection and Permanency; (C) domestic violence actions; (D) juvenile delinquency actions; (E) family crisis actions; and (F) adoption actions, which may not be arbitrated.

Fawzy v. Fawzy

The adoption of Rule 5:1-5 is essentially a codification of the 2009 New Jersey Supreme Court decision Fawzy v. Fawzy, 199 N.J. 456 (2009). In Fawzy, the parties agreed to resolve all matters pertaining to their divorce proceeding through binding arbitration. While the arbitration was in progress, the husband attempted to stop the proceeding and restrain the arbitrator from issuing custody or parenting time award. The Court denied the husband’s efforts to both stop the arbitration or restrain the arbitrator from ruling on custody and parenting time, and the arbitrator subsequently issued a custody and parenting time award.

The husband then sought to vacate the arbitration award and disqualify the arbitrator from ruling on the remaining issues of the matter, arguing that “parties cannot submit custody issues to binding arbitration because doing so deprives the court of its parens patriae obligation to assure the best interests of the child.”Fawzy v. Fawzy, 199 N.J. 456, 466 (2009). The trial judge denied the husband’s application, and the Husband appealed. The Appellate Division subsequently reversed, holding that “matrimonial litigants cannot submit custody issues to final, binding, non-appealable arbitration.” Id. at 466. The wife then filed a petition for certification to the Supreme Court on this issue.

New Jersey Supreme Court Justice Virginia Long issued an opinion holding that “within the constitutionally protected sphere of parental autonomy is the right of parents to choose the forum in which their disputes over child custody and rearing will be resolved, including arbitration”. Id. 461-462.

However, since the Arbitration Act does not require the recording of testimony or a statement of findings and conclusions by the arbitrator, in order to protect a parties right to challenge an arbitration award with respect to custody and parenting time, Justice Long additionally mandated that “a record of all documentary evidence adduced during the arbitration proceedings be kept; that testimony be recorded; and that the arbitrator issue findings of fact and conclusions of law in respect of the award of custody and parenting time. Without that, courts will be in no position to evaluate a challenge to the award.” Id.

Arbitration Procedure

As previously mentioned, all family law matters may be arbitrated unless they fall into one of the express exceptions under R. 5:5-1(a), which are listed above.

Once parties decide to resolve their matter through arbitration, R. 5:5-1(b) requires that several prerequisites be met. These are: (1) execution of the Arbitration Questionnaire; (2) execution of a Consent Order to Arbitrate or Arbitration Agreement; and (3) placement on the court scheduling Arbitration Track.

Specifically, with regard to the Agreement or Consent Order:

(A) Insofar as an Agreement or Consent Order relates to a pending family proceeding, the Agreement or Consent Order shall state:

(i) the parties understand their entitlement to a judicial adjudication of their dispute and are willing to waive that right;

(ii) the parties are aware of the limited circumstances under which a challenge to the award may be advanced and agree to those limitations;

(iii) the parties have had sufficient time to consider the implications of their decision to arbitrate; and

(iv) the parties have entered into the Agreement or Consent Order freely and voluntarily, after due consideration of the consequences of doing so.

(B) In addition, in all family proceedings involving child-custody and parenting-time issues, the Agreement or Consent Order shall provide that:

(i) a record of all documentary evidence shall be kept;

(ii) all testimony shall be recorded verbatim; and

(iii) the award shall state, in writing, findings of fact and conclusions of law with a focus on the best-interests of the child standard.

(C) Further, in all family proceedings involving child support issues, the Agreement or Consent Order shall provide that the award shall state, in writing, findings of fact and conclusions of law with a focus on the best-interests standard, and consistent with R. 5:6A and Rules Appendix IX.

As you can see, the subparagraphs of this rule have codified the requirements mandated by Justice Long in the Fawzy opinion, which protect a parties’ right to challenge custody and parenting time arbitration awards with a clear and concise record.

Take Away

It should be remembered that the new arbitration rule represents the minimum that is required by law to be in an Arbitration Agreement, and attorneys should be mindful of this when drafting Consent Orders or Agreements to Arbitrate. Clients should be fully aware of all of the issues that will or will not be litigated by the arbitrator, pursuant to the agreement, and the narrow scope of review that accompanies an arbitration award.  The more clear and concise the Arbitration Agreement is, the less likely it will be challenged by a disgruntled litigant who is unhappy with the award received.

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. …

38911415_s 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 SolotoffEric 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 esolotoff@foxrothschild.com. Connect with Eric: Twitter_64 Linkedin Photo credit:  Copyright: <a href=’http://www.123rf.com/profile_lculig’>lculig / 123RF Stock Photo</a>

Earlier today, Robert Epstein posted an interesting piece entitled The Psychology of Mediation.  Whether people like it or not, alternative dispute resolution (ADR) is here to stay as the new norm.  Court backlogs are long and trial dates are scarce, even when you want them.  Moreover, the system is set up to have numerous settlement events, from mandatory custody and parenting time mediation, to mandatory Early Settlement Panels (ESP), to mandatory economic mediation (post ESP), to Intensive Settlement Conferences (ISCs), to Intensive Settlement Panels (ISPs), to Blue Ribbon Panels, etc.

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 There are times when clients or other lawyers say that they don’t want to go to mediation because they feel it will be a waste of time because the case has no chance of settling.  In my experience, mediation very rarely is a waste of time.  Here are a few reasons why:

  • This may be the first time you get a settlement proposal from the other side, even if it is off the wall.
  • This may be the first time that you get a real settlement proposal such that even if you cannot settle at that point, you can start the process of moving the case toward settlement
  • You may find out what are real issues and what are fake issues.  In short, you may be able to narrow the issues is dispute.
  • You may find out what is really important to the other side
  • You may find out why things are important to the other side – the psychology of mediation so to speak
  • You may find out the proposed legal basis for the other party’s position for the first time.  If you don’t settle, you can use this as the opportunity to start building your defense.
  • You may find out the alleged factual basis for the other party’s position for the first time and similarly use this to figure out what proofs you need to defeat that position.
  • You can use the mediation to shut down bad positions – either because the other side finally sees that they are going nowhere, and/or the mediator tells them so.  Of course, this can lead to the creation of new theories of the case and new arguments that you will have to rebut.
  • This may be the first time that the other party (or your client too) is hearing a learned, non-biased view of their case.  There are times where I think that they other side is off of the wall and that it is the lawyer, not the client that is the problem.  In those cases, I may want to start mediation sooner rather than later so that the other party hears that there may be problems with the positions that they are taking.  Maybe this leads to that party getting new counsel or maybe it leads to them doing some more research to confirm what they learned from the mediator. 
  • Mediation can demystify the process and put people in a atmosphere where there is productive dialogue, about anything, for the first time in months. 
  • You may learn useful information that was previously undisclosed.
  • You may be able to resolve and get rid of the small issues, even if the major issues remain unresolved.

What is the take away?  Don’t be so quick to dismiss the possible of benefits of mediation, even if you don’t settle. the entire case. 

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Eric SolotoffEric 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 esolotoff@foxrothschild.com.

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B.M. – that is before the Minkowitz decision that we previously blogged on (which lead to a second post on arbitration best practices), it was common practice at the start of an arbitration, just like it is common practice before the start of a trial, to take one last crack at trying a case.  Sometimes it even happens after some of the testimony has gone in, again, both at trial and at an arbitration.  As we learned from Minkowitz, that is now verboten unless the parties agree in advance and in writing that the arbitrator can also serve in a mediaiton/settlement role.

Solution Stock PhotoImage courtesy of freedigitalphotos.net.

Yesterday we learned that this applies to cases that were arbitrated before the Minkowitz case was decided.  Specifically, in N.L. v. V.M., an unreported (non-precedential) opinion, that is what occured, even though the court “recognized [sic] that the arbitrator’s ultimate rulings on the merits of the divorce issues do not
appear to have been manifestly lopsided, at least in terms of the parties’ respective litigation positions.”  The Appellate Division found that the wife “during the arbitration was extremely contentious and adversarial” and was “frequently unreasonable.”  In fact, the court noted that

we begin with a general observation that the conduct of the wife during the arbitration was extremely contentious and adversarial. On several occasions, the arbitrator was forced todeal with interruptions, non-responsive witness answers, and to rule on persistent objections.  The wife expressed open antipathy for the husband’s attorney. She was frequently rude, sarcastic, and argumentative during her testimony. For example, on one occasion, she told her husband’s attorney to “clean [his] ears” in response to a question that he posed to her on cross- examination.    In another illustrative instance, the wife referred to opposing counsel on the record as “the biggest jerk in the world” because he had sought her mother’s  testimony. The arbitrator commendably displayed considerable restraint and patience during the proceedings. That calm exercise of control over the proceedings should not be overlooked, in spite of the arbitrator’s two improvident efforts, which we discuss, infra, to resolve certain matters in a manner outside of his assigned role as arbitrator.

The Appellate Division rejected the wife’s claims that the arbitrator was unfair or biased. That said, because the process was corrupted by “well intentioned” attempts to resolve unrelated issues, the whole arbitration (which took 13 days) will have be re-done with a new arbitrator.

Just for context, the arbitration centered on some pretty standard equitable distribution issues and alimony where the husband’s income was a found to average $366,000 and the wife’s income was the equivalent of $24,000 and she had previously earned $60,000.  Again, this seems to be pretty garden variety stuff.

So what was the arbitrator’s big sin causing this reversal.

In one instance, the arbitrator suggested to the  wife that she consider voluntarily dismissing her pending municipal complaints alleging criminal conduct by the husband. In the other instance, the arbitratorplaced an ex parte telephone call to the wife, urging her to allow the children to be with their father on Father’s Day in accordance with the terms of a pendente lite parenting agreement.

The Court noted that there concerns about the wife’s municipal complaints potentially being used to gain leverage in the matrimonial case and the arbitrator had suggested that there were other ways to address those issues.

At the end of the day, the arbitrator, thinking he was acting in everyone’s best interests, strayed from his decision making role and now the parties have to start over.  As they say, no good deed goes unpunished.  Given the report of the wife’s conduct, maybe this is exactly what she wants.

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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 esolotoff@foxrothschild.com.

As noted in yesterday’s post on  Minkowitz v. Israeli, the Appellate Division held that once you serve as a mediator, cannot then serve as an arbitrator, absent prior written consent to the dual role.  But the decision written by Judge Lihotz did more than that.  She seemingly opined upon what should be the “best practices” for binding arbitration, in large measure noting that the trial court was too involved in the process after arbitration was agreed to.

 

Flowchart And 3d Character Shows Process Or Procedure Stock Photo*Image courtesy of FreeDigitalPhotos.net

The decision noted, as follows:

We close with these observations.    Arbitration, particularly binding arbitration, must be purposefully chosen, and the parameters must be designated in a contract between the parties. If binding arbitration is selected as the forum for resolution of disputes, a litigant cannot jump back and forth between the court and the arbitral forum. By its very nature, arbitration does not permit such a hybrid  system.  Further,  arbitration “should be a fast and inexpensive way to achieve final resolution of . . . disputes and not merely a way-station on route to the courthouse,” Borough of E. Rutherford, supra, 213 N.J. at 201 (internal quotation marks and citations omitted). Attempts to return to the court, except to confirm the final arbitration award, are at odds with this objective.

In the matter at bar, the parties’ contract concisely defined matters to be addressed in arbitration, yet from commencement, the Family Part maintained involvement such as scheduling case management and entertaining a motion for a protective order, both of which fall directly within the adjudicatory responsibilities of the arbitrator. N.J.S.A.  2A:23B-17e. Moreover, the parties held a mistaken belief that court intervention was permitted to check the decisions of the arbitrator.   This is untenable. The Act’s provisions are unmistakable: once binding arbitration is chosen and the arbitrator(s) named, the court is no longer involved in reviewing or determining the substantive issues.     The court’s role is circumscribed to confirm a final arbitration award, correct obvious errors, and consider whether the award should be vacated, only when one of the limited bases set forth in N.J.S.A. 2A:23B-23 has occurred.  The piecemeal approach  demonstrated here prolonged the final result and eliminated the main benefit of arbitration, “to provide an effective, expedient, and fair resolution of disputes[.]”    Fawzy, supra,  199 N.J. 470 (citations omitted).

Finally, had the parties actually followed the path of binding arbitration, the need for a PSA would be obviated because an issued arbitration award would be confirmed by court order assuring compliance. No separate agreement memorializing the order is needed. Insistence upon preparation of a PSA appears to result from habit, not necessity.

Lastly, we do not mean to suggest parties who seek to arbitrate disputes should abandon all hope of amicable resolution.   We urge parties to exhaust possible settlement alternatives prior to contracting for arbitration.   If arbitration is accepted, parameters for settlement discussions should be set by the arbitrator.  (Emphasis added.)

I think that this last part of the case will be particularly helpful to the bench and bar.  I have seen judges handle this in a whole host of ways, without any hint of uniformity.  What this doesn’t say is what should happen procedurally with the divorce.  I have had some judges insist that the parties get divorced before going to arbitration, which brings with it a whole host of COBRA and ERISA issues, to name a few.  Other judges, who allowed the parties to proceed to arbitration, actively case managed the arbitration to make sure that it proceeded quickly, even if the parties and arbitrator wanted otherwise.  This is clearly because the case remains on the active docket and thus could look bad from a statistics perpective.  A resolution suggested by others would be to create an “arbitration track” to take these cases out of the normal divorce case statistics. In any event, any guidance to procedural uniformity is a good thing.

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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 esolotoff@foxrothschild.com.

Given the shortage of judges, backlog in the system and the rash of new judges, alternative dispute resolution has been coming more and more prevalent in the divore cases.  For as long as I can remember, custody and parenting time mediation and Early Settlement Panels have been mandatory in New Jersey.  For the last decade, give or take, there has been mandatory economic mediation too.  Throw in Intensive Settlement Conferences (ISCs), Intensive Settlement Panels (ISPs), Blue Ribbon Panels, Blitz Weeks, etc. and the message is clear – do everything you can to avoid a trial and settle your case.

Bilancia Su Piano Bianco Stock Photo*Image courtesy of FreeDigitalPhotos.net

But what if you cannot settle your case but for a variety of reasons, tax, or otherwise you need a decision?  What do you do?  An alternative is arbitration, where the case is presented to a private judge in a manner determined by the parties and decided with relative finality.  What often happens once you select your arbitrator?  The settlement process oftens picks up again with that person.  Maybe even that person begins to serve as a mediator, either formally or informally.  Can that person then serve as an arbitrator?  Yesterday (9/25/13), the Appellate Division said no in the case of Minkowitz v. Israeli and concluded that “… once the arbitrator functioned as a mediator, he may not then conduct arbitration hearings.”

The facts of that case, while interesting, are not that important for this discussion other than to know that at some point, the arbitrator that was selected morphed into a mediator – although he didn’t believe so.  Plaintiff asserted that the:

arbitrator “committed misconduct and exceeded his powers by acting as botha mediator and an arbitrator.” She further explains the arbitrator aidedmediation of the disputes, then, when she sought underlying documentation, he”enforced the [agreements] that he had written [as a mediator] as if they were the result of an actual arbitration,” converting the result to a binding arbitration award.

The Appellate Division noted that this was an issue of first impression.  The Court then noted:

While we recognize the Act envisions a need for flexibility to meet a wide variety of situations presented in arbitration proceedings, we are not persuaded the Act intended an appointed arbitrator may first assume the role of mediator then switch back to conduct final arbitration hearings. As noted, an effective mediator gains each party’s confidence and offers advice to steer them toward settlement.   Those confidential communications gained in mediation are precluded from being considered in a court contest, Isaacson v. Isaacson, 348 N.J.  Super.
560, 577 (App. Div.), certif. denied, 174 N.J. 364 (2002), and would similarly be precluded from consideration in an arbitration hearing. See also Willingboro Mall, supra, ___ N.J. (slip op. at 9) (“Communications made during the course of a mediation are generally privileged and therefore inadmissible in another proceeding.”).

The court went on to hold:

Based on our review of the distinctly different proceedings of arbitration and mediation, we conclude the positions of arbitrator and mediator are in conflict. An arbitrator must “maintain ‘broad public confidence in the integrity and fairness of the [arbitration] process.'” Barcon, supra, 86 N.J. Super.  at 190 (quoting Holtzmann, The First Code of Ethics for Arbitrators in Commercial Disputes, 33 The Business Lawyer 309, 312 (1977)).  If the same person acts as a mediator, obtains  party confidences or offers opinions on the issues in dispute, a conflict arises were he or she to then switch roles to act as an arbitrator, making the final call.   We find the need for an  arbitrator’s complete objectivity bears heavily on the integrity of the arbitration process. This concern becomes even more  problematic when arbitrating matrimonial disputes between already suspicious adverse parties.

In the family law context, we could envision parties agreeing in writing to allow one person to perform these roles regarding separate issues; for example, mediation of custody matters and arbitration of financial issues. However, this should be the parties’ choice.  Absent a specific agreement clearly defining and accepting the complementary dispute resolution rofessional’s roles, dual roles are to be avoided.

So the court made clear that a dual role is still permissible, but only if the parties agree to it, in writing, in advance.  The court then noted the better practice, as follows:

It is advisable for parties to exhaust all applicable dispute resolution alternatives, including settlement conferences and mediation before undertaking arbitration. Once these available courses are exhausted and arbitration is chosen, the arbitrator should promptly commence hearings and resolve matters expeditiously.  (Emphasis added).

The court went on to discuss how arbitration should proceed and how the trial court should be out of that process.  That will be the subject of another blog

Query how the rationale of this holding holds up when juxtaposed against the fact that judges hold Intensive Settlement Conferences and otherwise try to assist in settlement all of the time.  In fact, there was another unreported decision yesterday that said recusal of a judge who was involved in settlement discussions was unnecessary because that is part of the judicial role.  Do not judges serving in these roles her things they would not hear during a trial?  Do they not hear confidential settlement positions?  Perhaps that will be a discussion for another day.

That said, the takeaway here is that if you want your arbitrator to assist in settlement, then you have to put it in writing that she/he can do so.  If you want the arbitration process to be pure, then then do all that you can to settle before the arbitration starts, but when it starts, call your first witness.

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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 esolotoff@foxrothschild.com.