Arbitration

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When can a litigant appeal an arbitration award? In the recent decision of K.V.H. v. W.S.H., the New Jersey Appellate Division clarified the procedures by which a party, dissatisfied by the decisions rendered by an arbitrator, can challenge those awards.

In this matter, the defendant appealed from certain provisions of a series of arbitration awards which were incorporated into a dual final judgment of divorce.  After over two years of contentious divorce litigation, the parties entered into an arbitration agreement and mediation agreement to try to more efficiently resolve the issues in their divorce. The arbitration agreement specifically provided that it was governed by the New Jersey Arbitration Act, N.J.S.A. 2A23B-1 to -32.

The parties selected a retired Superior Court judge to serve in the dual role as mediator/arbitrator.  After resolving certain issues through mediation, the parties executed a binding mediation agreement and proceeded to arbitration. Two arbitration awards, addressing substantive issues and fees as well as a resolution of disposition of personal property, were memorialized in writing by the arbitrator.  One week following the last arbitration award, the parties appeared in Court to obtain a judgment of divorce.

At that appearance, the mediation agreement, both arbitration awards and the resolution of personal property, were all incorporated into the dual final judgment of divorce.  Both parties were questioned about the fairness of the agreements and their decision to proceed with a divorce on that day.

Specifically, the defendant was questioned about whether he freely and voluntarily entered into the arbitration agreement, whether he agreed to incorporate the mediation agreement, arbitration awards and resolution  (collectively referred to as the “agreements” during questioning) into the judgment of divorce, and whether he believed the agreements to be fair and equitable.  The defendant answered in the affirmative to all of those questions.

Further, the defendant was asked to confirm that he understood and was not waiving any rights and remedies under the New Jersey Arbitration Act.  The defendant likewise answered “yes”.

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The Court ultimately found the parties entered into the arbitration agreement freely and voluntarily, and entered a judgment of divorce incorporating the agreements. Importantly, at no point during this proceeding did either party raise any objection to the arbitration awards or ask the Court to vacate, modify or correct same.

Days later, the plaintiff filed a motion to enforce the fee award.  The defendant then filed his notice of appeal.  Subsequently, the defendant filed a notice of cross motion (to plaintiff’s motion) to vacate the fee award. The trial court refused to rule on the cross-motion because of the pending appeal, and entered an order directing enforcement of the fee award.

The Appellate Division dismissed the appeal for lack of jurisdiction pursuant to the New Jersey Arbitration Act.  Specifically, the Court found that the Act limits judicial review of arbitration awards to three distinct scenarios: confirmation, vacation and modification/correction.  Under the Act, there is no direct right to appeal, but a litigant can appeal the trial court’s order on a summary action to confirm, vacate or modify/correct. Accordingly, the trial court must review the arbitration award in a summary action to confirm, vacate or modify/correct and enter an order before a litigant can file an appeal.

The manner by which the defendant challenged the arbitration award in K.V.H. v. W.S.H. was procedurally deficient in several ways.  First, by incorporating the arbitration awards in an uncontested hearing, the Court took no testimony on the substance of the agreements. There was no summary action to confirm, vacate or modify/correct the agreements.  Though the parties agreed to “confirm” the awards and incorporate same into their judgment of divorce, no such order “confirming” the awards was entered by the Court.

Second, the defendant filed his appeal before filing a motion to vacate the award. Accordingly, at the time he filed his appeal, there was no trial court order from which he could appeal.  In so holding, the Court relied upon the plain language of the Act itself as well as the case of Hogoboom v. Hogoboom, which provides that parties are not “entitled to create an avenue of direct appeal to this court”.  Had he filed his cross-motion to vacate and appealed from a subsequent order, the end result in this matter may have been different.

On appeal, the defendant argued that all parties and the trial court understood he was agreeing to entry of a judgment of divorce with the express intention to immediately appeal the arbitration award.  The Appellate Division’s categorical rejection of this argument, and the lesson therefrom, is quite clear.   Strict construction of the Act is required.  Absent a trial court order which expressly confirms, vacates, modifies or correct an arbitration award, a party to an arbitration award has no direct right to appeal.

Arbitration can be an attractive option for litigants for a number of reasons, including the ability to select an arbitrator of your choosing and greater flexibility in controlling the calendar and timing of your case.  However, litigants who seek arbitration as a means of limiting judicial involvement with their case must accept the other side of the coin, and recognize that limited judicial review is one of the tradeoffs for taking your matter out of the court system. This case serves as a reminder for that concession.  That said, parties can also negotiate appellate arbitration if they want to preserve the right of appeal, albeit not to the Court.

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Katherine A. Nunziata, Associate, Fox Rothschild LLPKatherine A. Nunziata is an associate in the firm’s Family Law practice, based in the Morristown, NJ office. You can reach Katherine at (973-548-3324) or at knunziata@foxrothschild.com.

There is an old adage in litigation “know your judge.”  Essentially what that means is that you should find out as much as you can about the judge you are appearing in front of both so you can try to understand what the outcome might be but more importantly, so that you can may a presentation to the judge that she/he will respond positively to.  Some judges will let you go on an one.  Some judges have little patience and you have to get to the point.  With some judges, it seems like the last person to speak wins so you want to make sure you get the last word in.  Others sit there stone faced and say nothing at all.  Some are very interactive with settlement and others are not.  Some have substantial family law experience and others do not.  Some do little to settle and push cases to be tried and others don’t really want or believe that any cases should be tried.  To the extent possible, knowing your judge is an arrow in a lawyer’s quiver that helps them best represent their client.

Does the same thing apply to mediators?  The answer is yes and more importantly, in most cases, unlike the judge who gets assigned to a case, it is the lawyers that have to select and agree upon a mediator.  Of course, you want to select a mediator who you think will most favorably view your case, all things considered.  We had a recent matter where opposing counsel rejected upwards of 20 mediators that we suggested, many retired judges, and would only agree to one or two people that she suggested.  Our guess is that the lawyer perceived that all of the mediators who she had issues with also had issues with her.  That happens.

But aside from selecting a mediator that you think would be substantively/legally helpful, serious thought should go into selecting a mediator whose style and personality would be appealing to your client as well as the other party, to assist the parties to move toward settlement.  I recently had a situation where we selected a second mediator after the matter made little to no progress with the first mediator.  The first mediator was grandfatherly, soft spoken, knowledgeable, impeccably credentialed and had substantial gravitas.  The soft touch was appealing to one of the parties but totally ineffective with the other.  The second mediator had similar if not greater credentials and gravitas in some ways (but not in others), but was much more direct and blunt – and jumped right into the deep water as opposed to letting the process go on hours or multiple sessions.  The party that gelled with the soft spoken mediator was totally turned off by the direct approach and the other party more receptive.  Perhaps with these too, given their very different personalities, there would be no one mediator who checked all of the boxes and could reach both of them.

The point is that you have to know your client and know your mediator and try to agree on one that will be helpful substantively and also be able to develop a relationship of trust with both parties so as to be able to facilitate resolution, if one is possible.

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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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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

Photo credit:  Copyright: <a href=’http://www.123rf.com/profile_zetwe’>zetwe / 123RF Stock Photo</a>

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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.

Connect with Eric: Twitter_64 Linkedin

Photo credit:  Copyright: <a href=’http://www.123rf.com/profile_tashatuvango’> / 123RF Stock Photo</a>

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.