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Drafting New Jersey Arbitration Agreements is Important if at a Later Date a Dispute Arises

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In New Jersey nobody can be forced to arbitrate a dispute unless there is an agreement to do so beforehand. Arbitration agreements are controlled by the Federal Arbitration Act and the New Jersey Arbitration Act.

Arbitration is a process that utilizes a neutral third party to decide a dispute. Disputes are submitted to an arbitrator who makes a binding decision. An arbitrator will review the evidence and then render a binding decision. The decision can then be entered as a judgment by a court and enforced by the Sheriff.

Parties can agree to arbitrate a dispute even after litigation is filed. Arbitration is typically less expensive and faster than litigation. Discovery of information between the parties, however, is greatly reduced, typically limited to the exchange of relevant documents, thereby further reducing costs. Arbitrations themselves are conducted like trials, but are less formal and in private. Arbitrators are then compensated for their time by the parties. Unfortunately, arbitration rulings, generally, cannot be appealed, but that finality can make arbitration less expensive.

Parties to a dispute have considerable discretion about the terms and conditions of arbitration in their Agreement to arbitrate. For example, the parties can decide if the dispute will be submitted to one arbitrator or multiple. The parties can also decide to select a particular arbitrator, or have a neutral third-party select the arbitrator.

However, one thing that is clear in New Jersey is that once the parties agree to arbitrate a dispute, they must do so. In Petersburg Regency, LLC v. Selective Way Insurance Company, the litigants were three years into a civil litigation. The litigants then decided to arbitrate the dispute but did not prepare a written agreement that dictated the specific terms and conditions of the arbitration. When the arbitration was about to proceed the parties had a disagreement to some key terms and conditions and demanded that the arbitration be remanded back to the trial court. Initially the trial court determined that there was “no meeting of the minds” and the parties were required to litigate. On appeal, however, the Appellate Division of New Jersey’s Superior Court ordered the case back to arbitration.

The Appellate Division explained that once parties to a dispute agreed to the arbitration process they must proceed to arbitrate regardless if specific terms and conditions are not agreed to in advance. The Court further explained that the New Jersey Arbitration act has “default” provisions that specify given the arbitration in the absence of agreement on specific terms and conditions.

This recent case is consistent with the public policy in New Jersey that encourages arbitration as an alternative dispute resolution. For this very reason it is important that parties have experienced New Jersey attorneys draft agreements to arbitrate.

Our attorneys regularly represent people and businesses in alternative dispute resolutions, including mediation and arbitration as well as litigation, including drafting arbitration agreements, and litigating disputes about the enforcement of arbitration agreements. To learn more about what we can do to help, e-mail us or call one of our lawyers at (973) 890-0004.