New Jersey Arbitration Act Fills Gaps In Agreements To Arbitrate
Contracts sometimes require that any dispute arising under the contract be resolved through binding arbitration. Other times, the parties to a lawsuit may agree to have their case decided through binding arbitration, rather than continuing to trial before a court. Litigants often find that arbitration is a quicker and less costly means of resolving disputes.
When parties agree to arbitrate, they have a lot of discretion as to the terms and conditions of the arbitration process. Should there be one arbitrator or multiple arbitrators? Should the parties jointly select the arbitrator, or should the arbitrator be selected by a third party? Should the arbitrator follow the rules of the American Arbitration Association? Should there be a right to a full appeal from the arbitrator’s decision? These are a just a few of the provisions the parties may address in their agreement to arbitrate.
In Petersburg Regency, LLC v. Selective Way Insurance Company, the litigants were three years into complex civil litigation when they agreed to remove their case from the courts and submit their dispute to binding arbitration. The parties did not, however, prepare a written agreement spelling out the terms and conditions of the arbitration. As a result, when the arbitration was ready to proceed, the parties disagreed as to the key terms and conditions of the arbitration process and went back to the trial court. The judge determined that “there was ‘no meeting of the minds’ on the conditions, parameters and/or scope of the nature of the arbitration” and, therefore, sent the parties back to litigating the case in the courts.
On appeal, the Appellate Division of New Jersey Superior Court reversed and sent the case back to arbitration. The appellate court urged litigants and their attorneys to memorialize the terms of an arbitration in writing before embarking on the arbitration process. However, the court held that where the parties agree to binding arbitration without specifying the terms and conditions in advance, the case is governed by the so-called “default” provisions of the New Jersey Arbitration Act. That law specifies how arbitrations in New Jersey are to be governed, although it permits the parties to waive or vary most of these default statutory procedures.
This recent decision is consistent with the public policy in New Jersey of encouraging arbitration and other alternative dispute resolution procedures.