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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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.

Planning Board Can’t Deny Variance Based on Anticipated Inability of Applicant to Satisfy Site Plan Criteria

by:  Katharine A. Muscalino

The Bay Head Planning Board initially approved a bulk variance application submitted by a property owner who had inherited an irregular lot with just ten feet of frontage, where fifty feet was required.  Finding that denying a bulk variance for the frontage requirement would result in an undue hardship, and that the Applicant had adequately addressed concerns about emergency access to the Property resulting from the lot frontage variance, the Board approved the application with a 5-4 vote.  Per the approval, the Applicant was required to submit a drainage plan for the Borough Engineer’s approval at the time of site plan application.

Upon an objector’s prerogative writ suit, the parties discovered that a board member had voted on the bulk variance without attending all of the meetings or reviewing all of the transcripts.  The bulk variance application was remanded for a new vote, following a review of the transcripts by all of the board members.  The Board then voted to deny the bulk variance, with a 4-5 vote.  In its resolution, the Board explained that it denied application because the applicant had failed to provide “affirmative testimony… by any competent engineer… on how the applicant would address the well known drainage issues which plagued the proposed lot and more assuredly concerned the adjoining property owners.”

 

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