Wait. This Is Arbitration? I Thought It Was Mediation.

by:  Peter J. Gallagher (@pjsgallagher) (LinkedIn)

Early in the movie, My Cousin Vinny, Joe Pesci's character, Vincent Gambini, tells the judge that he has significant experience trying cases in New York. The judge does some research and learns that there is no record of anyone named Vincent Gambini trying any cases in New York. Gambini then does what one should never do, he lies to the judge. He tells the judge that he tried cases under the name Jerry Gallo. Gambini thinks this is a brilliant move because Jerry Gallo is a notable New York lawyer who Gambini has read about in the papers. Unfortunately for Gambini, however, he never read the articles about Jerry Gallo's death. Naturally, the judge finds out that Jerry Gallo is dead, and confronts Gambini, which leads to the following exchange:

I imagine this may have been similar to what the defendant in Marano v. The Hills Highlands Master Association, Inc. said when it received an unfavorable arbitration award. "Did you say binding arbitration? No. We were participating in non-binding mediation. Not arbitration." Things worked out for Vincent Gambini in the movie, they did not work out so well for defendant in Marano. 

In Marano, plaintiffs owned a unit in a condominium development. The relationship between unit owners, like plaintiffs, and the association was governed by the association's bylaws, which "arguably include[d] an arbitration provision." So, after a dispute developed between plaintiffs and the condominium association over a "flooding condition" in their backyard, plaintiffs' attorney wrote to the association's attorney to demand arbitration. He received no response, so he wrote again and stated that unless the association's attorney confirmed that he was "in the process of arranging for the arbitration proceeding," plaintiffs would sue to compel arbitration. The association's attorney responded by disputing some of the claims in plaintiffs' letter but agreeing to participate in "ADR" (alternative dispute resolution). Several weeks later, plaintiffs' attorney again wrote to the association's attorney asking for confirmation that the parties would proceed to an "arbitration hearing," with a hearing officer who would serve "as an arbitrator." In response, the association's counsel contacted a retired judge to determine his availability and willingness to serve as "the arbitrator."

Up to this point, it appears clear that the parties were discussing arbitration, not mediation. What happened next created the confusion that sent the case down the path that would eventually land it before the Appellate Division.  

The retired judge who had been selected to serve as the arbitrator circulated a "form agreement that called for mediation," and was entitled, "civil mediation agreement." The parties signed the agreement. In his cover letter returning the signed agreement, however, plaintiffs' counsel wrote that the proceeding was not a mediation, but rather "an arbitration proceeding for which you will be asked to render an award." The association's counsel did not respond or question plaintiffs' counsel's characterization of the proceedings. According to the Appellate Division, the record contains numerous other communications, all of which refer to the proceedings as an arbitration, not a mediation. 

When the proceedings were completed, the retired judge issued a decision, which he called "Award In Arbitration." The retired judge found in plaintiffs' favor and directed the association to hire a contractor to make repairs to the property pursuant to an engineering report that had been submitted during the arbitration, and to advance the funds for the work subject to reimbursement from other affected lot owners who were not parties to the arbitration proceedings.

Plaintiffs moved to confirm the award. The association opposed the motion, arguing, among other things, that they never agreed to arbitrate.  The trial court granted the motion, holding that "although at times the parties' use of the words 'arbitration' and 'mediation' had been inconsistent, there was no question but that the parties engaged in binding arbitration before the retired judge." The Appellate Division affirmed. Although it acknowledged that the case presented "unusual circumstances," it held that there was "no evidence in the record on appeal to suggest that the [a]ssociation ever asserted that the parties were merely mediating and were not arbitrating their disputes.