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.  

Continue reading “Wait. This Is Arbitration? I Thought It Was Mediation.”

Clear Arbitration Provision, Negotiated By Sophisticated Party While Represented By Counsel Deemed Enforceable

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

Arbitration def (pd)The headline of this post is a little like "Dog bites man." But, given the recent trend in New Jersey of "man bites dog" type cases where courts have invalidated arbitration provisions that once seemed unambiguous (look here, here, and here for examples), the headline should make more sense.

In Columbus Circle NJ LLC v. Island Construction Co., LLC, the Appellate Division enforced an arbitration provision contained in a construction contract. Plaintiff was a single-member LLC that retained defendant to build a $1.9 million home on the bay in Avalon, New Jersey. Plaintiff's representative circulated an initial draft contract for the project that used the standard American Institute of Architects (AIA) forms. These forms contain a provision entitled "BINDING DISPUTE RESOLUTION," which, as the name suggests, requires the parties to choose "the method of binding dispute resolution" for any claims between them that are not resolved by mediation. In the draft it circulated, plaintiff's representative checked off "Arbitration pursuant to Section 15.4 of AIA Document A201-2007," rather than "Litigation in a court of competent jurisdiction." Before it was signed, the attorney for the LLC's sole member reviewed the draft and proposed changes, as did defendant, but none of these changes appear to have altered the dispute resolution provision.

During construction, disagreements arose between the parties regarding the cost of the project, leading both parties to terminate the contract. When mediation apparently failed, defendant filed a demand for arbitration. Three months later, plaintiff sued in state court. Defendant successfully moved to dismiss plaintiff's complaint and compel arbitration, and Plaintiff appealed.

Continue reading “Clear Arbitration Provision, Negotiated By Sophisticated Party While Represented By Counsel Deemed Enforceable”