Arbitration is an increasingly common method of resolving business and commercial disputes in New Jersey. Many contracts contain mandatory arbitration clauses that require parties to resolve disputes outside of court. Understanding how arbitration works, when it applies, and what rights you may be giving up is critical before signing an agreement or when a dispute arises. The following questions and answers address common concerns about arbitration in New Jersey and explain what business owners and individuals should know about the process.
What is Arbitration?
Arbitration is a dispute resolution process by two or more individuals or entities who, by voluntary agreement, establish terms by which their dispute or disagreement is submitted to a neutral third party for a binding decision.
What is Mediation?
Mediation is not arbitration. It is a process in which parties voluntarily agree to submit their dispute or disagreement to a neutral third party whose role is to help them reach a settlement, rather than to make a binding decision.
How Does Arbitration Differ from Mediation?
An arbitrator has the authority to make a binding decision that is legally enforceable. A mediator, by contrast, is a facilitator who helps the parties reach a mutually acceptable resolution but does not impose a decision.
How Does Arbitration Differ from Litigation and What Are the Advantages of Arbitration?
Litigation takes place in court before a judge or jury and follows formal rules of procedure and evidence. Arbitration, by contrast, is a private dispute resolution process conducted before a neutral arbitrator and is typically less formal than court proceedings. Discovery is often more streamlined, hearings can be scheduled more efficiently, and the parties may select a decision-maker with subject-matter expertise. As a result, arbitration can offer advantages such as privacy, flexibility, efficiency, and in many cases, a faster resolution than traditional litigation.
Is a Binding Arbitration Clause Enforceable?
Yes. Binding arbitration clauses that are clearly written and properly drafted are generally enforceable under New Jersey and federal law. If a contract contains a valid arbitration provision, the parties are typically required to arbitrate their dispute if one party demands it.
How Do I Know Whether My Case is Subject to Arbitration?
If your contract or agreement contains an arbitration provision that covers the type of dispute involved, your case will likely be subject to arbitration. Unless both parties agree to waive arbitration, courts generally enforce valid arbitration clauses.
Who Determines Whether a Dispute Must Be Arbitrated?
If there is a disagreement about whether a claim falls within the scope of an arbitration clause, a court may initially determine whether arbitration is required. In some instances, the arbitration agreement itself may provide that the arbitrator decides that issue.
Who Can Be an Arbitrator and How Is an Arbitrator Selected?
An arbitrator is a neutral individual selected by the parties or appointed pursuant to the arbitration agreement. Arbitrators are often experienced attorneys or professionals with subject-matter expertise, though they are not required to be licensed judges. The parties may agree on an arbitrator directly, and if they cannot reach an agreement, the administering organization or selection procedure outlined in the contract typically provides a list of qualified candidates from which the arbitrator is chosen.
Are There Rules That Govern Arbitration Proceedings?
Yes. Arbitration proceedings are governed by the parties’ agreement and, in many cases, by the rules of the administering arbitration organization. Those rules address procedures such as discovery, motion practice, hearings, and evidence.
Is Discovery Allowed in Arbitration?
Yes, but it is usually more limited than in traditional litigation. Arbitration is designed to be more streamlined and efficient. The arbitrator has discretion to determine the scope of document exchange, depositions, and other discovery tools. The goal is often to reduce delay and expense.
Can Witnesses and Evidence Be Presented?
Yes. Arbitration hearings allow parties to present testimony, documents, and other evidence. While the procedures are generally less formal than in court, each side has the opportunity to present its case and challenge the other side’s evidence.
Can an Arbitrator Award Damages and Attorney’s Fees?
An arbitrator can award damages and other remedies permitted by the contract or applicable law. Whether attorney’s fees and costs can be awarded depends on the language of the agreement and the governing legal standards. Arbitration awards can include compensatory damages and, in some cases, equitable relief.
Can an Arbitration Award Be Appealed?
Appeals of arbitration awards are extremely limited. Courts generally will not overturn an award simply because one party disagrees with the outcome. An award may only be vacated under narrow circumstances, such as fraud, corruption, evident partiality, or if the arbitrator exceeded his or her authority.
Does New Jersey Have Laws That Govern Arbitration?
Yes. New Jersey has adopted statutes governing arbitration proceedings, and courts rely on both statutory and case law when reviewing arbitration-related issues.
What Happens in the Arbitration Process?
In arbitration, the parties present evidence and arguments to a neutral arbitrator. After considering the submissions and testimony, the arbitrator issues a written decision known as an arbitration award.
What Does the Term “Arbitration Award” Mean?
An arbitration award is the final written decision issued by the arbitrator. It sets forth the outcome of the dispute and is enforceable in court like a judgment.
Is an Arbitrator’s Decision Legally Binding?
Yes. Arbitration decisions are generally final and binding on the parties, subject only to very limited grounds for challenge or vacatur.
How Does the Arbitration Appeal Process Work?
Appeals of arbitration awards are extremely limited. A party seeking to challenge an award must file an application in court within strict time limits, and courts will only vacate or modify an award under narrow statutory grounds.
Where Are Arbitration Hearings Held?
Hearings are typically held at a location agreed upon by the parties or designated in the arbitration agreement. In some cases, hearings may be conducted virtually or at a neutral office location.
How Long Does Arbitration Take?
Arbitration is generally faster than traditional litigation. Many matters are resolved within several months to a year, depending on the complexity of the dispute and the parties’ scheduling availability.
How Much Does Arbitration Cost?
The cost of arbitration depends on the arbitrator’s fees, the administering organization’s fee structure, and the complexity of the case. While arbitration can be more efficient than litigation, the parties are typically responsible for paying the arbitrator’s compensation and administrative fees.
What are Some of the Benefits and Disadvantages of Voluntary Arbitration?
Your question is very broad and would require many pages to answer. May I suggest that you visit the page on this site titled “Advantages and Disadvantages of New Jersey Arbitration” for a thorough listing of what I believe are the pros and cons of New Jersey Arbitration.
What Types of Cases Are Commonly Resolved Through Arbitration in New Jersey?
Many civil and commercial disputes in New Jersey can be resolved through arbitration. Common examples include business contract disputes, partnership and shareholder disagreements, construction matters, employment claims, restrictive covenant disputes, and other commercial conflicts. Arbitration clauses are frequently included in business agreements requiring disputes to be handled outside of court.
Can a Party Be Forced Into Arbitration?
Yes. If a contract contains a valid and enforceable arbitration clause, a court can compel arbitration even if one party later decides to litigate. Courts generally enforce properly drafted arbitration agreements under both state and federal law, provided the language clearly reflects the parties’ intent to waive their right to a jury trial.
Is Arbitration Private?
In most cases, arbitration is private. Unlike court proceedings, which are generally part of the public record, arbitration hearings and filings are typically confidential. This can be especially beneficial for businesses seeking to protect proprietary information or avoid public exposure of disputes.
Are Arbitration Clauses Always Enforceable?
Not always. To be enforceable, an arbitration clause must be clearly written and must reflect that the parties knowingly waived their right to pursue claims in court. Poorly drafted clauses or overly one-sided provisions may give rise to legal challenges.
Closing
Arbitration can be an efficient and effective alternative to litigation, but it also carries important legal consequences. Whether you are seeking to enforce an arbitration agreement, challenge one, or prepare for an upcoming arbitration proceeding, experienced legal guidance can make a significant difference. If you have questions about arbitration or your contractual rights, consulting with knowledgeable counsel can help protect your interests and position you for the best possible outcome. If you need assistance, please contact Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright at (732) 863-9900, or email him at fniemann@hnlawfirm.com to schedule a consultation about your arbitration matter. He welcomes your calls and inquiries. You’ll find him very approachable and easy to talk to. Fred Niemann has previously been approved as a New Jersey Mediator by the NJ Supreme Court.
Arbitration Lawyers serving these New Jersey Counties:
Monmouth County, Ocean County, Essex County, Cape May County, Camden County, Mercer County, Middlesex County, Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County
Fredrick P. Niemann Esq.