ARBITRATION AND MEDIATION OF MATRIMONIAL DISPUTES
(THE NEW AGE)

By Charles F. Vuotto, Esq. and  
Noel S. Tonneman, Esq.

(With Special Thanks To Risa Kleiner, Esq. and Kristin Capalbo, Esq.)

2003

Introduction

Discourage litigation.  Persuade your neighbors to compromise whenever you can.  Point out to them how the nominal winner is often really a loser -- in fees, expenses and waste of time.  As a peacemaker, the lawyer has a superior opportunity at being a good man.  There will still be business enough.

[Abraham Lincoln, 1850].[iii]

     As we continue in the early years of the 21^st Century, our courts and legislatures have provided the ground work for the resolution of disputes outside of the courtroom.  In fact, our courts have voiced an enthusiastic acceptance of alternatives to conventional courtroom dispute resolution.  There is strong judicial approval for the use of arbitration and mediation.  However, the procedures for implementing these alternative dispute resolution approaches are not clear.  This article is intended to help lawyers whose clients wish to pursue alternatives to the traditional adversarial process.

     Specifically, this article will provide a brief overview of how arbitration and mediation of matrimonial disputes have evolved over the years. The authors will discuss some recent developments.  We will explain the differences between the two statutes commonly considered to embrace arbitration -- the Arbitration Act and the New Jersey Alternative Procedure for Dispute Resolution Act.  (“ADR”).  Additionally, we will provide a historical overview of cases addressing the right of review of arbitration and ADR decisions.  This article will highlight the advantages of alternative dispute resolution over traditional litigation.  Most importantly, we will detail the issues that attorneys must address when their respective clients wish to pursue the alternative dispute resolution process and provide sample documents to use when electing either course of alternative dispute resolution. 

Historical Overview

     Historically, arbitration and mediation have been used to settle many different types of disputes.  These disputes have typically fallen into one of the following categories - international disputes, commercial disputes, and labor disputes.  A recent example of the successful employment of an international mediation is that conducted by former President Jimmy Carter in Bosnia.  There are numerous examples of the historic resolution of international conflicts by arbitration, such as its use by warring Greek city states and by various Catholic Popes who acted as arbitrators of conflicts between European countries during the Renaissance.  International attempts to provide a foundation for lasting, global peace have also incorporated arbitration.  Two examples of this are the Permanent Court of Arbitration, which resulted from international meetings conducted between 1899 and 1907 in Hague, Netherlands, and the development of the League of Nations in 1918, which employed arbitration as one mechanism of dispute resolution.[iv]

     Outside the political arena, arbitration and mediation have been used by business worldwide to settle their commercial disputes.  In Europe, businesses of differing national origin have frequently submitted their controversies to arbitration.  Here in the United States, arbitration and mediation are often used to settle labor disputes arising from conflicting interpretations of existing employment contracts, construction disputes between general contractors and subcontractors relating to construction damage claims, or between contractors and owners relating to the interpretation of work and payment clauses in construction contracts, and shareholder disputes concerning the valuation of stock in closely-held corporations, to name but a few examples.  The submission of commercial dispute to mediation and/or arbitration may be done voluntarily, or at the prompting of a governmental agency.[v]

     The federal government has promoted commercial arbitration since 1887, when it passed the Interstate Commerce Act.  The Act set up a mechanism for the voluntary submission of labor disputes to arbitration by the railroads and their employees.  Then, in 1925, Congress passed the Federal Arbitration Act, which governs the arbitration of contractual disputes involving commerce.  More recently, the federal judiciary has found employment disputes, Civil Rights violations, securities fraud, RICO, and anti-trust claims to present arbitrable issues.[vi

     Closer to our collective hearts, as early as 1984 the New Jersey Supreme Court recognized the enforceability of arbitration agreements in matrimonial litigation in the case of Faherty v. Faherty, 97 N.J. 99 (1984). 

     As history shows, arbitration has been used extensively in connection with labor and contract disputes.  In those situations, the litigants are generally disputing limited financial disputes and need a relatively quick decision:  How much do I owe? To how much am I entitled?  What needs to be done to complete this project?  As a result, most of these limited issue arbitrations have historically been subjected to extremely limited rights of review, and have been conducted under N.J.S.A. 2A:24-1 et seq., (hereinafter “the Arbitration Act” or “the Act”).  That statute traces its legislative roots to the laws of 1923. 

     However, in 1987, the legislature enacted N.J.S.A. 2A:23A-1 et seq.  That statute, known as The New Jersey Alternative Procedure for Dispute Resolution Act (hereinafter “ADR”), has distinctly different provisions and rights of review.

     Finally, in June of 2003, Governor McGreevey signed into law the Uniform Arbitration Act, N.J.S.A. 2A:23B-1 et seq.. (the “Uniform Act”).  The legislation took effect immediately and applies to most commercial arbitrations.  After January 1, 2005, all commercial arbitration agreements, regardless of when they were made, will fall under the new law.  The only exception to the coverage of the Uniform Act will be arbitration of issues between an employer and a collective bargaining unit. 

     There is nothing in either the Act or the new Uniform Act that precludes their application to matrimonial disputes.  However, as this article will emphasize, the ADR provides the most appropriate, and currently available, framework for resolution of matrimonial disputes outside of the courtroom.

     To substantiate this conclusion, a review of the provisions of these various statutes and the case law interpreting them is necessary.  Since the vast majority of case law interprets arbitration clauses under the Act, that statute will be discussed first.

The Act

     N.J.S.A. 2A:24-1 et seq. finds its source in the laws of 1923. 

       N.J.S.A. 2A:24-1  provides that:

A provision in a written contract to settle by arbitration a controversy that may arise therefrom... or a written agreement to submit, pursuant to section 2A:24-2 of this title, any existing controversy to arbitration, whether the controversy arise out of contract or otherwise, shall be valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of a contract.

     Once arbitration is invoked, court action is stayed.[vii]   Arbitration is conducted by a single arbitrator, unless otherwise provided.[viii] The arbitrator is granted subpoena power, which is enforceable by the court.[ix]  

     An arbitration award must be in writing.[x]  The arbitration award shall be confirmed by the court if the appropriate summary action is commenced within three months of the delivery of the award to a participant.  Confirmation shall be granted, unless the award is vacated, modified or corrected on the limited grounds set forth in the statute. [xi]

     The power of the court to vacate an arbitration award is extremely limited.  The court shall vacate the award in any of the following cases:

     a.     Where the award was procured by corruption, fraud or undue means;

     b.     Where there was either evident partiality or corruption in the arbitrators, or any thereof;

     c.     Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being showed therefore, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors prejudicial to the rights of any party;

     d.     Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made.[xii]

     The court’s authority to vacate, modify, or correct an arbitration award is similarly extremely limited.  Thus, the court shall modify or correct the award:

     a.     Where there was an evident miscalculation of figures or an evident mistake in the description of  person, thing or property referred to therein;

     b.     Where the arbitrators awarded upon a matter not submitted to them unless it affects the merit of the decision upon the matter submitted; and

     c.     Where the award is imperfect in a matter of form not affecting the merits of the controversy.[xiii]

     These judicial limitations imposed by the Act has  sometimes led to creative judicial interpretations in order to avoid evident errors.

Historical Overview of Cases Addressing the Right of Review of Arbitration under the Act

    The historical roots of commercial arbitration were discussed in In re Grover, 80 N.J. 221 (1979).  There, the Court noted that commercial arbitration serves much the same purpose now as it did in the middle ages.  Thus, the “object of arbitration is the final disposition, in a speedy, inexpensive, expeditious, and perhaps less formal manner, of the controversial differences between the parties.”[xiv]  While the arbitrator’s power is broad, judicial review of its decision is “confined to narrow channels so that arbitration will be an end to litigation rather than the beginning of it.” [xv]

       In fact, our Supreme Court has recognized that an arbitrator is free to fashion a decision that is contrary to applicable law.[xvi] As Justice Pashman stated in his dissenting opinion in In re Grover:

  We have recognized that in order to effectuate the goal of providing an alternate form for the speedy resolution of disputes, the arbitrator’s power must be broad and judicial interference with his role strictly limited.  Thus, the arbitrator decides both the facts and the law, Daly v. Komline Sanderson Eng. Corp., 40 N.J. 175, 178 (1963) - by force of the agreement of the parties “he becomes a judge, with absolute power over the things submitted to his judgment”, Leslie v. Leslie, 50 N.J. Eq. 103, 107 (Ch. 1892) aff’d. 52 N.J. Eq. 332 (E.&A. 1894).  Moreover, an arbitrator “may do what no other judge has a right to do; he may intentionally decide contrary to law and still have his judgment stand” Id., 50 N.J. Eq., at 107.  See Collingswood Hosiery Mills v. American Fed. Of Hosiery Wkrs., 31 N.J. Super. 466, 471 (App. Div. 1954) (Court will not interfere when arbitrator decides “according to his own concept as to what is just and right ***”).[xvii]  

     That being said, however, the arbitrator may not exceed the powers given to him or her under the arbitration agreement, nor render a decision contrary to the authority granted to him under the arbitration contract.  It was for that reason that the arbitration award in Grover was, in fact, vacated.[xviii]  

      Specifically, the Grover Court noted that:

[W]here the parties have set forth in their agreement certain terms and conditions which must be satisfied, the arbitrator may not disregard those terms.  He may not re-write the contract terms of the party.  In the absence of directions to the contrary, his award should be consonant with the matter submitted.  Otherwise, the determination is contrary to the authority vested in him.  Such an award cannot stand representing as it does and, “imperfectly executed” power and having been produced by “undue means”.  N.J.S.A. 2A:24-8-A.[xix]

     The New Jersey Supreme Court’s decision in In re Grover clearly illustrates the importance of a thorough delineation of the arbitrator’s role and authority and the consequences of an award that goes beyond the scope of the contractual authority granted to the arbitrator.  However, In re Grover does not address the implications of an arbitrator’s erroneous application of the law to the issues and facts presented for resolution.  This issue was presented to the Court in Perini Corp. v. Greater Bay Hotel & Casino, 129 N.J. 479 (1992). 

     As with most reported decisions concerning arbitration under the Act, Perini involved commercial litigation when a builder sought review of an arbitration decision it claimed had failed to observe “federal principles of contract law” when determining the owner’s lost profits of its hotel and casino business.  Thus, Perini sought to overturn an arbitration award on the basis of improper application of the law by the arbitrator.

     The Court stated:

The real question is the scope of judicial review.  Even in the public sector, arbitrators have broad latitude to resolve questions of law when interpreting contracts. In public-sector arbitration the scope of judicial review is limited to determining whether or not the interpretation of the contractual language is reasonably debatable” (citation omitted)  Surely, in the private sector similar latitude should be allowed at the very least.  Thus, in private-sector arbitration an arbitrator’s determination of a legal issue should be sustained as long as the determination is reasonably debatable.  (citations omitted).

Whether the arbitrators are viewed as having acted with “undue means” or having “exceeded their powers,” the judicial inquiry must go beyond a search for mere mistakes of law.  Were we to decide otherwise, arbitration would simply become another form of private non-jury trial.  A scope of review that allows an arbitration decision to stand when the interpretation of law is reasonably debatable is consistent with the earlier formulation as set forth in Held (citation omitted).  That formulation requires that the arbitrators must have clearly intended to decide according to law, must have clearly mistaken the legal rule, and that mistake must appear on the face of the award.  In addition, the error, to be fatal, must result in a failure of intent or be so gross as to suggest fraud or misconduct.[xx]

     Notwithstanding pronouncements that appeared to support the non-reviewability of arbitration awards for mistake of law, the Court then went on to discuss the legal errors asserted by Perini to be “clear, substantial, and highly prejudicial.”[xxi]  While the majority of the Court appeared sympathetic to the arguments of the petitioner, and noted the strength of Perini’s claim, it ultimately determined that the arbitrator’s calculation of the award “could find a basis in the evidence.”[xxii]  As a result, the Court upheld the award because it was “satisfied that the arbitrators had not manifestly disregarded any undebateable principle of the law.”[xxiii] 

     Justice Wilentz dissented not as to the ultimate determination upholding the arbitration award, but for the Court’s reasons for doing so.  In his opinion, the Court was following precedent that demonstrated “our judiciary’s modern history of anti-arbitration bias”[xxiv] that allowed arbitration to be not an alternative to litigation, but the first step of the lawsuit.  Recognizing that our existing case law subjected arbitration awards to judicial review, the Chief Justice argued that

We need a new rule, one that is true to our arbitration statute.  Arbitration awards should be what they were always intended to be: final, not subject to judicial review, absent fraud, corruption, or similar wrongdoing on the part of the arbitrators.  Parties who choose arbitration should not be put through a litigation wringer.  whether the arbitrators commit errors of law or errors of fact should be totally irrelevant.  The only questions are:  were the arbitrators honest, and did they stay within the bounds of the arbitration agreement?[xxv]

     Two years later, the new rule advanced by Justice Wilentz became reality when the majority of the Court adopted his reasoning in his dissenting opinion in Perini as the majority rule in Tretina Printing, Inc., v. Fitzpatrick & Associates, Inc., 135 N.J. 349 (1994).

     In Tretina, the parties appointed an arbitrator to resolve their disputes, pursuant to their underlying contract in this commercial litigation matter.  When the award was entered, plaintiff moved for an order confirming the award, while defendant moved for an order vacating or modifying the award.[xxvi] 

     Defendant argued that while essentially finding in favor of plaintiff, the arbitrator had failed to apply a retainage credit owed to defendant when calculating the damage award.  Defendant convinced the trial court that the arbitrator had simply “overlooked” the credit or “had assumed that [plaintiff’s] award would be offset by the retainage amount to which [defendant] was entitled.”[xxvii]  As a result, the trial court modified and reduced the award pursuant to N.JS.A. 2A:24-9(c), which requires a reviewing court to modify or correct an award that is “imperfect in a matter of form not affecting the merits of the controversy.”[xxviii]

     Plaintiff then appealed, claiming the trial court had abused its discretion in modifying the award, rather than asking the arbitrator to clarify the award.  Defendant cross-appealed, arguing the award was so defective that it should have been vacated. 

     The Appellate Division agreed that modification was not available because “the award ignores the basic contours of the parties’ contract, decides some submitted disputes contrary to the evidence, and completely fails to decide others”.[xxix]  As a result, the appellate court vacated the award. 

     The Supreme Court granted certification. Recognizing that the appellate division and the litigants in Tretina relied upon the Perini standard, the Court noted that in Perini, a majority of the Court agreed upon the appropriate standard of review, but could not agree upon its application to the facts.  Similarly, in Tretina, the Court could not reach unanimity in either the standard of review or result.  It did however, now have a majority view that the correct standard of review of arbitration awards should be that as adopted by Justice Wilentz in his dissent in Perini.  Thus, the Court announced the new standard of review as follows:

Basically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators.  [They] can be corrected or modified only for very specifically defined mistakes as set forth in [N.J.S.A. 2A:24-9].  If the arbitrators decide a matter not even submitted to them, that matter can be excluded from the award.  For those who think the parties are entitled to a greater share of justice, and that such justice exists only in the care of the court, I would hold that the parties are free to expand the scope of judicial review by providing for such expansion in their contract; that they may, for example, specifically provide that arbitrators shall render their decision only in conformance with New Jersey law, and that such awards may be reversed either for mere errors of New Jersey law, substantial errors, or gross errors of New Jersey law and define therein what they mean by that.  I doubt if many will.  And if they do, they should abandon arbitration and go directly to the law courts. [xxx]

(emphasis added)

     The Tretina Court concluded that “[b]ecause the record before us contains not even a hint of misconduct by the arbitrator, and because no statutory ground exists for invalidating or modifying the award, we uphold the arbitrator’s award.”[xxxi] 

     By specifically adopting the reasoning of Justice Wilentz’s dissent in Perini, one would think that the Court had finally resolved the issue of judicial review of arbitration awards under the Act:  those awards are not reviewable on the basis of mistake of law unless the underlying arbitration agreement clearly and specifically requires the arbitrator to decide the issue(s) pursuant to New Jersey law.  Thus, the Tretina court opined that individual parties may chose to usurp the limited review of “undue means” and “exceeded their powers” provisions of N.J.S.A. 2A:24-8 by tailoring the arbitration clauses in their contracts to expressly state that the arbitration award may be reversed on grounds of a mistake of law, so long as the parties are specific in defining the types of mistakes of law that will permit such review.

     From personal experience, the authors believe that the courts are still unclear as to the standard of review even after the sharp statement by Justice Wilentz, which ultimately was adopted by Tretina.  One of the authors hereto has arbitrated a matter under an arbitration agreement that, consistent with Justice Wilentz’s suggestion, specifically provided that the arbitrator would render his decision pursuant to New Jersey law.  When review was later sought, the only comment that kept coming from the Court’s discussion was that “arbitration is binding” and review of the legal issue was avoided.

     Of course, the Tretina court did note that there might be that “rare” circumstance when a court would have authority to vacate an arbitration award for public policy purposes.[xxxii]  In particular, the Court noted that heightened judicial scrutiny of an arbitration award might be required in certain matrimonial cases due to the courts’ role as parens patriae.  Tretina, supra citing Faherty v. Faherty,  97 N.J. 99 (1984).

     The appropriateness of arbitration of matrimonial issues was first discussed in New Jersey in the case of Wertlake v. Wertlake, 127 N.J. Super. 595 (Ch.Div. 1974), rev’d. 137 N.J. Super. 476 (App. Div. 1975).  The Chancery Division held that alimony and child support was “a non-arbitrable issue because of the state’s exclusive parens patriae relationship.”[xxxiii]  The Appellate Division reversed, holding that, since the parties had actually submitted their dispute to the court and had not resorted to arbitration, the Chancery Division’s statements regarding the enforceability of arbitration agreements were dicta.[xxxiv]

     The enforceability of arbitrated matrimonial disputes was resolved by our Supreme Court in Faherty v. Faherty, 97 N.J. 99 (1984).  There the Court addressed the enforceability of an arbitration clause in a separation agreement.[xxxv]  That separation agreement, which had been incorporated into the parties’ judgment of divorce, required the parties to submit any financial disputes arising out of the agreement to arbitration, to be conducted under the rules of the American Arbitration Act. When the defendant fell behind in support, the plaintiff filed an application with the court to compel payment of arrears.  Defendant cross-moved to compel arbitration of the issue of arrears as well as future support, since he claimed a change in circumstances.  The trial court compelled the parties to submit to arbitration, which was held over the course of several months.  The arbitrator made no written findings of fact, and neither party requested a transcript.

     Upon receipt of the award, plaintiff moved to confirm same, while defendant cross-moved to vacate the award and obtain a hearing.  The trial court confirmed the award and defendant appealed, claiming, for the first time, that arbitration of domestic disputes regarding alimony and child support was against public policy and therefore, his arbitration clause should not be enforced.  His second argument was that the arbitration award was erroneous.

     First, the Court noted that, “New Jersey has long recognized the validity and enforceability of separation agreements between divorcing spouses.”[xxxvi]  The Court noted that “[a] court generally will enforce an arbitration agreement unless it violates public policy.”[xxxvii]  The Court noted that other jurisdictions around the country have “consistently enforced arbitration clauses to settle matrimonial disputes.”[xxxviii] Noting that “[e]nforcement of arbitration clauses pertaining to alimony as within such agreements is a logical extension of the view, expressed in Schlemm, that parties should be granted as much autonomy as possible in the ordering of their personal lives,” the Court concluded: 

It is fair and reasonable that parties who have agreed to be bound by arbitration in a formal, written separation agreement should be so bound.  Rather than frowning on arbitration of alimony disputes, public policy supports it.  We recognize that in many cases arbitration of matrimonial disputes may offer an effective alternative method of dispute resolution…We accordingly hold today that under the laws of New Jersey, parties may bind themselves in separation agreements to arbitrate disputes over alimony.  As is the case with other arbitration awards, an award determining spousal support would be subject to the review provided in N.J.S.A. 2A:24-8.[xxxix]

     The Court then addressed the potential conflict between arbitration and the courts’ parens patriae responsibilities.  Surveying out of state decisions and commentators, the Court concluded that 

Detractors notwithstanding, there has been a growing tendency to recognize arbitration in child support clauses.  We do not agree with those who fear that by allowing parents to agree to arbitrate child support, we are interfering with the judicial protection of the best interests of the child.  We see no valid reason why the arbitration process should not be available in the area of child support; the advantages of arbitration and domestic disputes outweigh any disadvantages.[xl] 

     However, notwithstanding the Court’s willingness to allow arbitration of child support disputes, the Court emphasized the “non-delegable, special supervisory function in the area of child support that may be exercised upon review of an arbitrator’s award.”[xli]  Thus, to maintain its parens patriae responsibility, the Court held that whenever the validity of an arbitration award affecting child support is questioned on the grounds that it does not provide adequate protection for the child, the trial court should conduct a heightened review of arbitrated child support awards.  This review would consist of a two step analysis.

     First, as with all arbitration awards, the courts should review child support awards to determine whether same should be vacated under N.J.S.A. 2A:24-8.  Assuming the award passed muster on those accounts, the court should then conduct a de novo review of the child support award unless it is clear on the face of the award that the award “could not adversely affect the substantial best interests of the child.”[xlii]  The authors suggest including this exact language in any Arbitration Agreement or related consent order.

     For example, an arbitrator’s award that granted all of the requested child support would automatically satisfy the second test without the need for a de novo review, limiting the spouse challenging the award to the statutory grounds for vacation or modification set forth in N.J.S.A. 2A:24-8.[xliii]  The Court further explained that “only an arbitrator’s award that either reduced child support or refused a request for increased child support could be subject to court review beyond the review provided by statute, because only such an award could adversely affect the interests of the child.”[xliv]  However, the Court further limited the scope of the review by stating that “even awards reducing support would be subject to court review only if they adversely affected the substantial best interests of the child.”[xlv] 

     Although expressly declining to decide the question of whether arbitration of child custody and visitation issues are enforceable, since the issue was not before the Court, the Court hinted:

[W]e note that the development of a fair and workable mediation or arbitration process to resolve these issues may be more beneficial to the children of this state than the present system of courtroom confrontation.  (citations omitted)  Accordingly, the policy reasons for our holding today with respect to child support may be equally applicable to child custody and visitation cases.[xlvi]

     After addressing the appropriateness of arbitration clauses in matrimonial settlement agreements, the Court then applied its ruling to the facts before it.

     First, the Court noted that the AAA rules did not require written findings of fact, since alimony and child support are always subject to modification for changed circumstances, the Court suggested, but did not mandate, that in future arbitrations the Arbitrator make reasonably detailed findings of fact, and that such written findings of fact must always be prepared if requested by either party in the arbitration.[xlvii]

     Next, since the arbitrator’s award on child support denied the defendant’s request for a reduction in child support, the award was not subject to heightened scrutiny.  There were no grounds to vacate the award under N.J.S.A. 2A:24-8.

     However, the Court then addressed its ability to modify or correct the award.  Finding that the arbitrator had failed to apply an “undisputed” credit, the Court exercised its authority to correct an evident miscalculation in the award.

     Most interesting, however, was the Court’s treatment of an alimony award.  The Court noted that parties had agreed that the arbitrator would decide the issues under New Jersey law.  However, the arbitrator granted plaintiff future alimony even though she had remarried.  Since alimony subsequent to remarriage was contrary to New Jersey law, the court vacated that part of the award without further discussion.[xlviii]

     In Lopresti v. Lopresti, 347 N.J. Super. 144 (Ch. Div. 2001), plaintiff filed a motion for implementation of an arbitration award determining weekly alimony.  Defendant filed a cross-motion opposing the award on grounds that the arbitrator failed to supply specific findings and, in the alternative, seeking a modification of the award due to changed circumstances. The issue before the court was “whether or not the arbitrators as a matter of law must set forth findings for their decision to award an amount of alimony.”[xlix] 

     Plaintiff emphasized that Faherty did not mandate such written findings of fact.[l]  Plaintiff further argued that the parties had entered into a consent order for arbitration and  that if defendant wanted specific findings of fact, the order should have reflected his request.[li]

     The court agreed that Faherty did not require written findings of fact. However, the arbitrators had made limited findings with regard to the needs of the plaintiff but made no mention of defendant’s ability to pay.[lii] 

     Despite the courts determination that, pursuant to Faherty, written findings of fact are not required unless requested by a party, the court held that “[s]ince in this case, the arbitrators in fact did render findings related to the needs of the plaintiff, the court will direct that they likewise have a duty to set forth their findings on defendant’s ability to pay.” The court further ordered that because the award of alimony was “not currently in issue,” the defendant must commence his payments of alimony immediately. Additionally, the court addressed the issue of the retroactivity of alimony and the issue of counsel fees, determining that “these issues should likewise await the outcome of the arbitrators’ findings on ability to pay.”[liii]  The court further opined that it might also be necessary to “take testimony on the issues of retroactivity and counsel fees at the final hearing date when the divorce is to be entered.”[liv]

     The issue of non-reviewability of arbitration decisions appears, once again, clouded.

     Since Faherty, the child support guidelines have been adopted, which guidelines presumptively meet the best interest of the children whose parents’ incomes fall within the guidelines.  Presumably, then, an arbitrator’s child support award that is within the guidelines will not be subject to review by the court.

     As time passes, our collective experiences with alternative dispute resolution are enhanced.  A flexible approach is needed.  Indeed, Faherty recognized this flexibility when it suggested that a de novo review “may” be needed.  What did the court mean by its use of the word “may” in this quote?  The answer was suggested by the Court:

As we gain experience in the arbitration of child support and custody disputes, it may become evident that a child’s best interests are as well protected by an arbitrator as by a judge.  If so, there will be no necessity for our de novo review.   However, because of the Court’s parens patriae tradition, at this time we prefer to err in favor of the child’s best interest.[lv]

     There can be little doubt but that judicial interpretation of arbitration is  murky.  Even with commercial arbitration, one cannot always be assured that an arbitration award will end the litigation, although Tretina should put many of the judicial review questions to rest in those areas.  What is clear, however, is that matrimonial arbitration awards cannot be analyzed in the same manner as commercial litigation.  Matrimonial litigation rarely involves the type of limited, financial disputes found in commercial litigation.  Our Supreme Court has announced that there will be different standards of judicial review of matrimonial awards depending upon the issue(s) addressed in the arbitration.  Perhaps it is that presumed need for judicial review that has stunted the growth of matrimonial arbitration.  If that is the reason, then the ADR should put those concerns to rest.  ADR may be the most appropriate method to achieve out-of-court resolution of matrimonial disputes at the current time.

The ADR

     The ADR, which was promulgated in 1987, was clearly intended to provide an alternative to traditional arbitration authorized in the Act.  While the goal of the two statutes is the same -- dispute resolution outside of the courtroom setting -- the method of achieving the result is slightly different.  Most importantly, the authority of the court to review the out-of-court resolution is dramatically expanded under ADR.

     Alternative dispute resolution is statutorily authorized by   N.J.S.A. 2A:23A-1 et seq.  Section 2 of the ADR provides, in pertinent part, that:

a....Any provision in a written contract whereby the parties agree to settle by means of alternative resolution as provided in this act, (1) any controversy that may arise from the contract or from a refusal to perform the contract or (2) any written agreement whereby the parties to an existing controversy agree to use alternative resolution as provided in this act, whether the controversy arose out of a contract or otherwise, is valid, enforceable and irrevocable, except upon such grounds as exist at law or in equity for the revocation of a contract.

     Thus, while the Act refers to arbitration of disputes, the ADR declines the use of that term and refers to “alternative resolution” of a dispute.  Rather than using an arbitrator for dispute resolution, the parties to ADR use an “umpire”, whose role is clearly defined.  Thus, the umpire may not be called upon to testify in any subsequent proceeding relating to the ADR, unless a claim for damages has been made against the umpire.[lvi]  The umpire is granted immunity from any claim for damages arising from the proceeding, unless the award is overturned on the basis of fraudulent conduct of the umpire.[lvii]  As with the Act, the umpire has the authority to issue subpoenas.[lviii]

     The ADR makes it clear that use of the ADR constitutes a “waiver by the parties of the right to trial by jury and to appeal or review, except as specifically provided for in this act.”[lix]

     The ADR is a more “complete” statute than is the Act.  It provides the mechanism for the selection of an umpire, and essentially includes all terms that would otherwise be included within an agreement to submit a dispute to ADR.      The method by which the hearings shall be conducted is clearly delineated, including the fact that the parties shall not be bound by the statutory and common law rules of evidence, but the umpire may make such rulings as to evidence so that the “informality of the proceedings is assured.”[lx]  The umpire may even direct that expert evidence be obtained from an impartial expert.[lxi]

     Not only is provision made within the ADR for conducting discovery, including timetables for its completion,[lxii] but the statute mandates the submission of a party’s factual and legal position with respect to the issues to be arbitrated, at such time as the umpire fixes.[lxiii]

    Putting to rest the issue raised in Lopresti, the ADR requires the umpire to make a written award, stating findings of all relevant material facts and making all applicable determinations of law.[lxiv]

     Unlike the Act, ADR specifically provides for interim rulings by the umpire.[lxv]  Any ruling for civil provisional relief is considered an “intermediate ruling” that may be enforced by the Chancery Division at any time.[lxvi]  The validity of the intermediate ruling may be challenged as a defense to an enforcement application.[lxvii] Emergent application to the court is also permitted.[lxviii]

     The ADR also provides for limited intermediate review by the trial court in “exceptional circumstances” to prevent “a manifest denial of justice.”[lxix]  These “exceptional circumstances” occur when it appears a party will suffer irreparable harm, or damages will not be collectible, unless immediate action by the court is taken.

     Several other distinctions between the Act and ADR are available, but the most significant distinction, other than the umpire’s specific right to make interim rulings, is the scope of judicial review authorized by the ADR.  For the matrimonial litigant and practitioner alike, this distinction may be particularly critical.

     An ADR participant may apply for confirmation of an award within one year of its receipt.[lxx]  Specifically, N.J.S.A. 2A:23A-13, which relates to ADR, provides that:

a. A party to an alternative resolution proceeding shall commence a summary application in the Superior Court for its vacation, modification or correction within 45 days after the award is delivered...

b. In considering application for vacation, modification or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision; provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection c, the court shall make an independent determination of any facts relevant thereto de novo upon such record as it may exist or as it may determine in a summary expedited proceeding...

c. The award shall be vacated on the application of a party who either participated in the alternative resolution proceeding or was served with a notice of intention to have alternative resolution if the court finds the rights of that party were prejudiced by:

(1) Corruption, fraud or misconduct in procuring the award;

(2) Partiality of an umpire appointed as a neutral;

(3) In making the award, the umpire’s exceeding their power or so imperfectly executing that power that a final and definite award was not made;

(4) Failure to follow the procedures set forth in this act, unless the party applying to vacate the award continued with the proceeding with notice of the defect and without objection; or

(5) The umpire’s committing prejudicial error by erroneously applying law to the issues and facts presented for alternative resolution.[lxxi]

The ADR also provides different grounds for vacating the award if the application is by a party who neither participated in or was noticed of the proceedings.[lxxii]

Finally, the ADR provides that the court may modify the award if:

(1) There was a miscalculation of figures or a mistake in the description of any person, thing or property referred to in the award;

(2) The umpire has made an award based on a matter not submitted to them and the award may be corrected without affecting the merits of the decision upon the issues submitted;

(3) The award is imperfect in a matter of form, not affecting the merits of the controversy; or

(4) The rights of the party applying for the modification were prejudiced by the umpire erroneously applying law to the issues and facts presented for alternative resolution.

f.     Whenever it appears to the court to which application is made, pursuant to this section, either to vacate or modify the award because the umpire committed prejudicial error in applying applicable law to the issues and facts presented for alternative resolution, the court shall, after vacating or modifying the erroneous determination of the umpire, appropriately set forth the applicable law and arrive at an appropriate determination under the applicable facts determined by the umpire.  The court shall then confirm the award as modified.[lxxiii]

     In the event the court vacates an award, for any reason other than erroneous application of the law, the court may order a rehearing of any or all of the issues, either before the same umpire or before a new umpire.[lxxiv] 

     The draftsmen of the ADR clearly understood the confusion raised by the case law under the Act as the courts struggled with the standard of judicial review of arbitration awards.  Clearly, the lack of ability to review application of law was a concern to the courts, and this was addressed in the ADR.  This is noted in the legislative comments to N.J.S.A. 2A:23A-12, which provides:

This section provides that the umpire’s decision must be made in accordance with applicable principles of substantive law.  This is a significant change for arbitration, in which an arbitrator is free to fashion an award that is contrary to applicable law.  (Citation omitted).  While cases construing the New Jersey Arbitration Act have held that an arbitrator’s decision that is contrary to applicable law may be overturned on the grounds that it was procured through “undue means”, (citation omitted) where the parties do not expressly state that the New Jersey Arbitration Act applies, it is presumed that the common law of arbitration, and not the New Jersey Arbitration Act, governs the arbitration... Section 12e is intended to make the results of an alternative resolution proceeding more predictable by reducing the possibility that an umpire applying his or her own notions of justice, will make an award that bears no resemblance to the result obtaining in a judicial resolution of the matter.

     Finally, the ADR states that once an ADR award is confirmed, modified, or corrected, a judgment shall be entered by the court and “[t]here shall be no further appeal or review of the judgment or decree.”[lxxv]

     The most commonly expressed fear of arbitration is that an arbitrator will misapply the law and their will be no way to correct that error.  That fear is washed away by the ADR. 

     Of course, it is important to note that the review that will be conducted by the Court of an ADR decision is not necessarily a de novo review.  If the error committed is one of misapplication of the law, then the court will apply the law to the facts as found by the umpire. 

     There is a dearth of case law interpreting the ADR.  However, in Mount Hope Development v. Hundel, 154 N.J. 141 (1998) the constitutionality of the statute was challenged.  There the issue was whether the ADR infringes on an individual’s constitutional right to appeal and on the Supreme Court’s constitutional rule making authority. 

     In Mount Hope, the parties had been mired in disputes for years.  At one point, the parties entered into an interim agreement.  Part of that interim agreement was that any dispute regarding the rights and obligations that stemmed from that agreement would be submitted for resolution under the ADR. 

     Problems developed, and one side filed suit in the Chancery Division against some of the parties involved.  Those parties responded by seeking to compel alternative dispute resolution under the consent judgment and the Court so directed.  Over the course of 20 days, the umpire heard testimony and considered hundreds of documents.  The umpire ultimately ruled in favor of defendants, making interim and final written awards and orders supported by findings of facts and conclusions of law.  When the plaintiff moved to vacate or modify the award, the Court confirmed the award and plaintiff then appealed. 

     On appeal, the defendants argued that plaintiffs had waived their right to appeal by agreeing to submit to ADR.  The Appellate Division dismissed the appeal as barred by the ADR.  The Supreme Court granted certification and considered the constitutionality of the statute as it related to appellate review.

     The Supreme Court affirmed the confirmation of the arbitration award, but not because it determined that the ADR necessarily barred appellate review.  Rather, the Court made it clear that the parties had not negotiated for any further review and therefore had to be held to the terms of their agreement.

     The Court recognized that appellate review is guaranteed by Article 6, Section 5, Paragraph 2 of the Constitution.  However, individuals are free to waive their constitutional rights.  A defendant is free to waive his right to counsel.  A defendant is free to waive his right to remain silent.  Our clients routinely waive their rights to trial when they settle their cases.  Similarly, the constitutional right to appellate review can be waived.

     In this case, the Court found that by voluntarily entering into an agreement under the ADR, which specifically provides for limited rights of review, the plaintiff had waived its right to appellate review.[lxxvi] 

     The more interesting question was whether the legislature, by enacting the ADR, had overstepped its boundaries and that the statute was, therefore, unconstitutional by restricting the right of appellate review contrary to the Court’s rule-making authority. 

     To resolve this dilemma, the Court reached back to Winberry v. Salisbury, 5 N.J. 240, 255, cert. denied, 340 U.S. 877 (1950).  Winberry considered whether a statute providing for an appeal within a year had supremacy over a court rule requiring the filing of an appeal within 45 days.  There the Court concluded that because the Constitution granted the Court the exclusive power to control the Court, subject only to substantive law, the Court rule had supremacy. 

     Relying upon that analysis, the Court found that the ADR does not infringe on the Court’s authority to “control the Courts”.  In reaching that conclusion, the Court stated:

Rule 2:2-3(a)(1) merely implements the constitutional right to appeal.  Just as the constitutional right to appeal may be waived, so may the right granted by Rule 2:2-3(a)(1).  Additionally, the APDRA, unlike most statutes, is not self-executing.  It is a voluntary procedure that only applies if it is invoked in a written agreement.  It imposes no restrictions on the Court or any party. Also, because there are so many other avenues to resolve disputes, a party that does not choose the APDRA suffers no adverse consequences.  In essence, through enactment of the APDRA, the Legislature has created a blueprint for those parties who want their dispute settled by the APDRA so that they do not have to negotiate a complete set of dispute resolution procedures.  Because the Legislature has simply created a voluntary system of dispute resolution procedures, the Legislature has not attempted to override any Court Rule promulgated by this Court, has not intruded on this Court’s authority, and has not violated the doctrine of separation of powers.

We have often stressed this State’s strong public policy favoring arbitration as well as other alternative dispute mechanisms.   See Faherty v. Faherty (citations omitted)… “Our guiding principles should strengthen the systems that encourage these alternatives to litigation, not weaken them.”  (citation omitted)  Prohibiting the Legislature from creating a voluntary system of alternative dispute resolution would be contrary to those principles.[lxxvii]

There is no question that the Court, by 1998, is also concerned about the stretching of the seams of the judiciary and is eager to send any cases it could off to alternative dispute resolution.  By focusing on the voluntary nature of agreeing to the ADR, the Court was able to avoid all Constitutional challenges by relying upon its primary defense that individuals have the right to waive their Constitutional rights.

     Given the overwhelming endorsement of the arbitration process to family law disputes by our Supreme Court since 1984, and the introduction of the ADR in 1987, it is somewhat disconcerting to see how little progress we have made in promoting our clients’ interests through these alternative dispute resolution processes.  Admittedly, the overriding concern of both litigants and attorneys continues to focus on the perceived lack of review of an arbitrator’s award by a reviewing court.  If, in fact, this is the primary reason for reluctance by the matrimonial bar, then the answer is to invoke the arbitration-like procedures of the ADR Act.

Recent Developments

On June 12, 2003, New Jersey became the sixth state to adopt the revised Uniform Arbitration Act when Governor James McGreevey signed S-514 into law, codified at N.J.S.A. 2A:23B-1 et seq.[lxxviii] 

The revised act covers every aspect of arbitration:  compelling arbitrations; selection of arbitrators; discovery; hearing procedures; remedies; judicial reviews; enforcements; and other topics.     Significantly, the Uniform Act specifically provides for interim awards by the arbitrator[lxxix], as does ADR, but does not provide for vacation of an award based upon mistake of law.[lxxx]  However, the Uniform Act specifically provides that “nothing in this act shall preclude the parties from expanding the scope of judicial review of an award by expressly providing for such expansion in a record.”[lxxxi]  Thus, the judicial suggestion of Tretina, supra, has now been codified.

     While the revised Uniform Act is as comprehensive as the ADR with regard to procedures, same will not be discussed in depth here since it appears certain that the purpose of the Uniform Act was to align it with the Federal Arbitration Act.[lxxxii]  As such, it will be most useful in the areas of commercial litigation.  In fact, the legislation applies to most commercial arbitrations.  After January 1, 2005, all commercial arbitration agreements, regardless of when they were made, will fall under the new law. 

There is nothing in the act that would preclude its applicability to the resolution of matrimonial disputes.  The Uniform Act specifically does not apply to or affect the procedures of the ADR.  Similarly, the Uniform Act does not apply to arbitrations governed by the current Arbitration Act.  [lxxxiii]

Therefore, it appears that N.J.S.A. 2A:24-1 et seq., the Act, will soon only apply to an arbitration or dispute arising from a collective bargaining agreement or collectively negotiated agreement while the Uniform Act will apply to all other commercial arbitration.  Neither of these impact the ADR. 

None of these statutes, however, specifically apply to matrimonial disputes.  In 1999, North Carolina became the first state to adopt an arbitration statute specifically designed for family law cases. [lxxxiv]  At least nine other states have legislation that authorizes agreements to arbitrate family law disputes.  Given the interpretation of our various alternative dispute resolution statutes, including arbitration, ADR, and Uniform Arbitration, it is clear that not one of these statues specifically address the myriad of issues that develop during the course of matrimonial litigation—nor the potential need for heightened scrutiny of non-judicial determination of child-related issues.  The need for a specific family law focused alternative dispute resolution statute is clear.

To effectively encourage the use of alternative dispute resolution process in matrimonial litigation, it is urged that New Jersey adopt an ADR statute specifically tailored for matrimonial litigation.  Until then, it is left to us, the practitioners, to draft our own agreements that will meet the needs of our clients and our practice.  To that end, it is urged that specific attention be paid to the detailed provisions of the ADR and the documents provided below.     

In an article dated December 8, 2003, the New Jersey Lawyer: The Weekly Newspaper ran an article entitled