No Pay, No Play: Defendant’s Failure To Advance Arbitration Fees Is A Material Breach Of Arbitration Agreement And Precludes Enforcement Of Agreement

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

Arbitration (pd)One of the more vexing procedural issues in arbitration arises when the other side refuses to pay its share of the arbitration fees. The arbitrator won't work for free so you are faced with a dilemma, advance the fees for the other side and try to recover them through the arbitration or have your arbitration dismissed. And, if you opt for the latter approach, can you then sue in court notwithstanding the admittedly valid and binding agreement to arbitrate? The New Jersey Supreme answered one aspect of this question in Roach v. BM Motoring, LLC, holding that defendant's refusal to advance arbitration fees as it was required to do under an arbitration agreement with plaintiffs was a material breach of the contract that precluded defendant from later trying to enforce the agreement.

In Roach, plaintiffs each purchased used cars, at separate times, from defendant. As part of their purchases, each signed a Dispute Resolution Agreement, which provided that "any and all claims, disputes or issues" would be resolved through arbitration. It further required that the arbitration be conducted "in accordance with the rules of the American Arbitration Association before a single arbitrator who shall be a retired judge or attorney," and that defendant would "advance both party's [sic] filing, service, administration, arbitrator, hearing, or other fees, subject to reimbursement by decision of the arbitrator."

After purchasing her car, Plaintiff Jackson filed an arbitration demand against defendant, alleging that defendant violated the Consumer Fraud Act. The AAA advised defendant that it was required to pay the applicable filing fees and arbitrator compensation, but defendant never did. Accordingly, the AAA declined to administer the claim and further advised (1) that it would not administer "any other consumer disputes" involving defendant as a result of defendant's failure to comply with the AAA's rules, and (2) that defendant should remove the AAA name from its arbitration agreement. Jackson never received a response from defendant's to her arbitration demand.

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New Jersey Supreme Court Refuses To Hear Challenge To Waiver Rule

by:  Peter J. Gallagher

The New Jersey Supreme Court has denied a request by a group of challengers to the so-called Waiver Rule (N.J.A.C. 7:1B-1.1, et seq.) — which allows the New Jersey Department of Environmental Protection (”DEP”) to waive certain environmental regulations on a case-by-case basis — to review an Appellate Division decision upholding the rule.  On behalf of amicus New Jersey Business and Industry Association, Porzio helped to defend the Waiver Rule before the Appellate Division.     

As we previously reported here, the Waiver Rule is not a blanket waiver of all regulations. Instead, a waiver will only be available when one of four criteria are met: (1) a public emergency has been formally declared; (2) conflicting rules between Federal and State agencies or between State agencies are adversely impacting a project or preventing an activity from proceeding; (3) a net environmental benefit would be achieved; and/or (4) undue hardship is being imposed by the rule requirements. N.J.A.C. 7:1B-2.1.  Moreover, the Waiver Rule identifies 13 rules and requirements that cannot be waived under any circumstances.

A group of Appellants challenged the Waiver Rule on several grounds, but the Appellate Division rejected the challenge and held that the Waiver Rule was a proper exercise of the DEP's rule-making authority.  The New Jersey Supreme Court has now refused to hear the case, which leaves intact the Appellate Division's decision. 

Appellate Division Endorses “Waiver Rule:” DEP Allowed To Waive Regulations In Limited Circumstances

  by: Peter J. Gallagher

On March 21, 2013, the Appellate Division rejected a challenge to the so-called Waiver Rule (N.J.A.C. 7:1B-1.1, et seq.), which allows the New Jersey Department of Environmental Protection (”DEP”) to waive certain environmental regulations on a case-by-case basis. On behalf of amicus New Jersey Business and Industry Association, Porzio had argued that the Waiver Rule represents a common sense and measured approach to regulation. In its decision, the Appellate Division appears to have agreed.

The history of the Waiver Rule is not long. On January 20, 2010, Governor Christie issued Executive Order No. 2, which sought to better leverage New Jersey’s “enormously valuable assets” by, among other things, “establishing ‘Common Sense Principles’ for State rules and regulations that will give this State the opportunity to energize and encourage a competitive economy to benefit businesses and ordinary citizens.” One of these “Common Sense Principles” required State agencies to “[a]dopt rules for ‘waivers’ which recognize that rules can be conflicting or unduly burdensome,” and further required these agencies to “adopt regulations that allow for waivers from the strict compliance with agency regulations,” provided that “such waivers shall not be inconsistent with the core missions of the agency.”

Although it did not identify Executive Order No. 2 as the source of its authority to do so, shortly after Governor Christie issued the Order, the DEP began developing rules and regulations designed to address the concerns regarding the impact of excessive regulation on New Jersey’s economy. The result was the Waiver Rule, which was only adopted after the DEP solicited public comments to the proposed Waiver Rule through an open public comment period, during which DEP received comments from more than 500 interested parties, and during a public hearing.

Notwithstanding its name, the Waiver Rule is not a blanket waiver of all regulations. Instead, a waiver will only be available when one of four criteria are met: (1) a public emergency has been formally declared; (2) conflicting rules between Federal and State agencies or between State agencies are adversely impacting a project or preventing an activity from proceeding; (3) a net environmental benefit would be achieved; and/or (4) undue hardship is being imposed by the rule requirements. N.J.A.C. 7:1B-2.1.  Moreover, the Waiver Rule identifies 13 rules and requirements that cannot be waived under any circumstances.

A group of Appellants, led by the American Littoral Society Association of New Jersey challenged the Waiver Rule on several grounds.  Today, the Appellate Division rejected that challenge.  First, the court held that the Waiver Rule was a proper exercise of the DEP's rule-making authority.  Specifically, the court held:

"[T]he power to promulgate a regulation implies the incidental authority to suspend or waive its application on certain limited, well-defined circumstances provided such exemption does not circumvent any legislative enactment or purpose, or federal law, is consistent with the agency's statutory core mission and objectives, is accomplished through a properly adopted regulation pursuant to the [Administrative Procedures Act], and establishes appropriate and clear standards for the exercise of agency discretion . . ."

Second, the court held that the Waiver Rule satisfied all of the caveats set forth above — it was limited in its application, was based on well-defined standards, and was not inconsistent with the DEP's core mission. 

The court did agree with Appellants that certain "guidance documents" posted by the DEP on its website in connection with the Waiver Rule were improper.  The court held that these documents went beyond “merely facilitating administrative  implementation of the rules . . . and actually, to some extent, announce[d] new substantive requirements.” As a result, they amounted to the DEP effectively announcing new rules without following the procedures set forth in the Administrative Procedures Act.  Accordingly, the “guidance” documents were struck down.  But, the court was careful to explain that this did not in any way change its conclusion that the Waiver Rule was proper.

Caution: Condo Club’s Careful Consideration Could Have Countered Costly Construction Case

by:  Steven P. Gouin

A recent ruling from the New Jersey Appellate Division highlights how diligent a homeowners' association ("HOA") must be in enforcing restrictions in its governing documents.  After a lengthy court battle, the court found that a South Jersey HOA had not engaged in selective enforcement of architectural restrictions  or constitutional violations.  However,  notwithstanding this positive result, the Court’s decision in Nisch v. Ocean Beach & Yacht Club provides a cautionary tale for HOAs throughout the State, one they would be wise to heed if they want to avoid protracted and costly litigation.   

 

 

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NJDEP Proposes Common-Sense Waiver Rule

by:  Thomas Spiesman

NJDEP
   In furtherance of Governor Chris Christie's Executive Order No. 2 that seeks to establish "Common Sense Principles" to govern New Jersey, the New Jersey Department of Environmental Protection (NJDEP) has proposed a rule to enable it to remove unreasonable impediments to economic growth while ensuring net environmental benefit for the State.  The rule, which is available online here,  would permit the NJDEP to waive strict compliance with regulations in certain limited circumstances that do not compromise protections for the environment or public health. 

 

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