Unenforceable Clause In Arbitration Agreement Does Not Void Agreement

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

Arbitration (pd)One of my children's preschool teachers was fond of saying, "you get what you get and you don't get upset." (Not to my little angel, of course, but to other children.) In Curran v. Curran, the Appellate Division basically applied this admonition to the parties to an arbitration agreement, holding that they got what they intended out of the agreement, therefore they could not argue, after the fact, that an unenforceable provision in the agreement voided the entire agreement.

In Curran, plaintiff filed for divorce from defendant. With the advice of counsel, the parties entered into a consent order to refer all issues incident to their divorce to arbitration under the New Jersey Arbitration Act. In the consent order, the parties acknowledged that any arbitration award that was entered could only be set aside or modified by a court under the limited grounds set forth in the Arbitration Act — e.g., the award was procured by fraud, corruption, or undue means, the court found evidence of "evident partiality" by the arbitrator, the arbitrator exceeded his or her powers, etc.  But the parties also included a handwritten provision, which provided: "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." This is the provision that would cause all of the problems.

After the arbitrator entered a preliminary award, plaintiff requested reconsideration. The arbitrator then issued a comprehensive award setting forth his findings of fact and conclusions of law. Plaintiff filed a motion in the Law Division for an order modifying the award, citing eight alleged "mistakes of law" made by the arbitrator. Plaintiff also argued that the intent of the handwritten provision was not to allow for direct appeal to the Appellate Division, but was instead was evidence that the parties intended a more searching review of the award that what would normally be allowed under the Arbitration Act. The trial court agreed, holding that the paragraph itself was unenforceable because it purported to "create subject matter jurisdiction by agreement." The trial court noted that "[t]he authority of a court to hear and determine certain classes of cases rests solely with the Constitution and the Legislature." But the trial court agreed with plaintiff that the handwritten provision demonstrated the parties' intent to provide for "a little more review" than what would normally be allowed under the Arbitration Act. Therefore, the trial court "in essence act[ed] as the Appellate Division of the arbitrator." It performed a comprehensive review of the arbitrator's decision and affirmed the award. 

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Arbitration Award Stands Even Though One Of The Arbitrators Was Later Convicted Of Crime

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

Divorce decree (pd)Arbitration awards are, by design, difficult to vacate. But what happens when one of the arbitrators who entered the award is later convicted of a crime related, at least to some extent, to an issue in the arbitration. In Litton v. Litton, the Appellate Division addressed this interesting but (hopefully) uncommon occurrence.

In Litton, plaintiff and defendant were married in 1982 and had one child. In 2008, the Family Part entered a judgment of divorce and ordered them to share joint custody of their son. They were also directed to proceed to arbitration before a rabbinical panel, or Beth Din, which they did. The panel, which was comprised of three rabbis, entered an award requiring the husband to pay the wife $5,000 per month until he gave her a Get. (As the Appellate Division explained, a Get is a "written document a husband must obtain and deliver to his wife when entering into a divorce. Without a Get, a wife cannot remarry under Jewish law.") Once the wife received the Get, the husband's monthly support obligation would be reduced to $3,500. The husband was also ordered to pay $20,0250 in arrears, $100,000 in the wife's legal fees, and a fine of $250,000 for "his refusal to disclose information about the couple's joint funds."

Several months later, the wife moved to enforce the award and, apparently, have the husband jailed for not complying with it. The Family Part denied the request and found that the husband was not capable of complying with the support order.

Four years later, the Family Part reduced the husband's support obligation from $5,000 per month to $23 per week. Around the same time, in a "wholly unrelated matter," one of the arbitrators on the panel was charged with, and apparently later convicted  of, "criminal conspiracy to threaten and coerce Jewish husbands to give Gets to their wives."  The husband moved to vacate the arbitration award, arguing that, in light of these charges against one of the rabbis on the panel, "the award was the product of corruption." The trial court denied the motion, holding that there was no causal connection between the arbitration in 2008 and the charges against the rabbi five years later, and that there were two other rabbis on the panel who were not charged as part of the conspiracy. The husband appealed.

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