When can a litigant appeal an arbitration award? In the recent decision of K.V.H. v. W.S.H., the New Jersey Appellate Division clarified the procedures by which a party, dissatisfied by the decisions rendered by an arbitrator, can challenge those awards.
In this matter, the defendant appealed from certain provisions of a series of arbitration awards which were incorporated into a dual final judgment of divorce. After over two years of contentious divorce litigation, the parties entered into an arbitration agreement and mediation agreement to try to more efficiently resolve the issues in their divorce. The arbitration agreement specifically provided that it was governed by the New Jersey Arbitration Act, N.J.S.A. 2A23B-1 to -32.
The parties selected a retired Superior Court judge to serve in the dual role as mediator/arbitrator. After resolving certain issues through mediation, the parties executed a binding mediation agreement and proceeded to arbitration. Two arbitration awards, addressing substantive issues and fees as well as a resolution of disposition of personal property, were memorialized in writing by the arbitrator. One week following the last arbitration award, the parties appeared in Court to obtain a judgment of divorce.
At that appearance, the mediation agreement, both arbitration awards and the resolution of personal property, were all incorporated into the dual final judgment of divorce. Both parties were questioned about the fairness of the agreements and their decision to proceed with a divorce on that day.
Specifically, the defendant was questioned about whether he freely and voluntarily entered into the arbitration agreement, whether he agreed to incorporate the mediation agreement, arbitration awards and resolution (collectively referred to as the “agreements” during questioning) into the judgment of divorce, and whether he believed the agreements to be fair and equitable. The defendant answered in the affirmative to all of those questions.
Further, the defendant was asked to confirm that he understood and was not waiving any rights and remedies under the New Jersey Arbitration Act. The defendant likewise answered “yes”.
The Court ultimately found the parties entered into the arbitration agreement freely and voluntarily, and entered a judgment of divorce incorporating the agreements. Importantly, at no point during this proceeding did either party raise any objection to the arbitration awards or ask the Court to vacate, modify or correct same.
Days later, the plaintiff filed a motion to enforce the fee award. The defendant then filed his notice of appeal. Subsequently, the defendant filed a notice of cross motion (to plaintiff’s motion) to vacate the fee award. The trial court refused to rule on the cross-motion because of the pending appeal, and entered an order directing enforcement of the fee award.
The Appellate Division dismissed the appeal for lack of jurisdiction pursuant to the New Jersey Arbitration Act. Specifically, the Court found that the Act limits judicial review of arbitration awards to three distinct scenarios: confirmation, vacation and modification/correction. Under the Act, there is no direct right to appeal, but a litigant can appeal the trial court’s order on a summary action to confirm, vacate or modify/correct. Accordingly, the trial court must review the arbitration award in a summary action to confirm, vacate or modify/correct and enter an order before a litigant can file an appeal.
The manner by which the defendant challenged the arbitration award in K.V.H. v. W.S.H. was procedurally deficient in several ways. First, by incorporating the arbitration awards in an uncontested hearing, the Court took no testimony on the substance of the agreements. There was no summary action to confirm, vacate or modify/correct the agreements. Though the parties agreed to “confirm” the awards and incorporate same into their judgment of divorce, no such order “confirming” the awards was entered by the Court.
Second, the defendant filed his appeal before filing a motion to vacate the award. Accordingly, at the time he filed his appeal, there was no trial court order from which he could appeal. In so holding, the Court relied upon the plain language of the Act itself as well as the case of Hogoboom v. Hogoboom, which provides that parties are not “entitled to create an avenue of direct appeal to this court”. Had he filed his cross-motion to vacate and appealed from a subsequent order, the end result in this matter may have been different.
On appeal, the defendant argued that all parties and the trial court understood he was agreeing to entry of a judgment of divorce with the express intention to immediately appeal the arbitration award. The Appellate Division’s categorical rejection of this argument, and the lesson therefrom, is quite clear. Strict construction of the Act is required. Absent a trial court order which expressly confirms, vacates, modifies or correct an arbitration award, a party to an arbitration award has no direct right to appeal.
Arbitration can be an attractive option for litigants for a number of reasons, including the ability to select an arbitrator of your choosing and greater flexibility in controlling the calendar and timing of your case. However, litigants who seek arbitration as a means of limiting judicial involvement with their case must accept the other side of the coin, and recognize that limited judicial review is one of the tradeoffs for taking your matter out of the court system. This case serves as a reminder for that concession. That said, parties can also negotiate appellate arbitration if they want to preserve the right of appeal, albeit not to the Court.
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Katherine A. Nunziata is an associate in the firm’s Family Law practice, based in the Morristown, NJ office. You can reach Katherine at (973-548-3324) or at knunziata@foxrothschild.com.
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