Arbitration in New Jersey

The rules governing arbitration in New Jersey emanate from three sources: the state’s common law; the New Jersey Arbitration Act; and the New Jersey Alternate Procedure for Dispute Resolution Act.

Under Act, N.J.S.A. 2A:24-1, et seq., New Jersey Courts had held that if the parties do not clearly state that they are proceeding under the Act, it will be assumed, in most cases, that the parties are proceeding under the common law. See Heffner v. Jacobson. That changed when N.J.S.A 2A:23B-1, et seq. was enacted, where thereafter, it superseded N.J.S.A. 2A:24-1, et seq., and thereafter, it applied to all agreements to arbitrate, “made on or after January 1, 2003 with the exception of an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement.” Further, under N.J.S.A 2A:23B-3(c), “(o)n or after January 1, 2005, this act governs an agreement to arbitrate whenever made with the exception of an arbitration between an employer and a duly elected representative of employees under a collective bargaining agreement or collectively negotiated agreement.”

Under common law arbitration, only agreements to arbitrate, made after a dispute arises, are enforceable, so agreements to arbitrate future disputes were voidable. Common-law agreements to arbitrate do not have to be in writing to be enforced, but a party seeking to enforce an arbitrator’s award must file a contract alleging damages based on the other party’s breach of the arbitration award.

In contrast to the common law, the New Jersey Arbitration Acts (N.J.S.A. 2A:24-1, et seq. and N.J.S.A 2A:23B-1, et seq.), permit parties to enter into agreements to arbitrate before and after a dispute arises. The agreement, however, must be in writing to be enforced. Additionally, if a party fails to submit to arbitration when there is a binding agreement, the Act permits the injured party to obtain a court order to enforce the arbitration agreement. The Act also permits the court to stay litigation pending arbitration of a valid arbitration agreement.

The last statute involving arbitration is the New Jersey Alternate Procedure for Dispute Resolution Act or (“NJDRA”), N.J.S.A. 2A:23A-1, et seq. In order for the NJDRA to apply, the parties must specify in their arbitration agreement that that statute controls. The major difference between the NJDRA, the New Jersey Arbitration Act and common law arbitration is that the Court Rules regarding discovery apply to arbitrations under NJDRA. Under the Act, discovery is limited by the arbitration agreement. In contrast, discovery under the NJDRA is confined only by the rules of court, thus, the parties can conduct depositions, exchange interrogatories and other forms of discovery.

The above was written by Kevin J. Begley, Esq., and is published with his permission.

NOTE: This Blog/Blawg, NJ Family Issues, is managed by Paul G. Kostro, Esq., an attorney/lawyer/mediator in Linden, Union County, New Jersey.