Arbitration in New Jersey; Should You Consider It?

Arbitration has been defined in New Jersey as the "voluntary reference of a dispute by the parties to ... an arbitrator or arbitrators chosen by the parties who ... agree the decision will be final and binding upon them.” Arbitration is an agreed upon substitution of the NJ court system with an alternative decision maker(s).

Arbitration and alternative dispute resolution ("ADR”) are today commonly used to resolve disputes. Litigation in the traditional courtroom setting can take many years to resolve and the costs of litigation are high.  Parties to disputes want alternatives to the courts in NJ.  That’s why an experienced NJ arbitration law attorney makes a lot of sense.


WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF ARBITRATION?

Arbitration has its pluses.  It also has its minuses.  Here are some of the benefits and disadvantages of NJ arbitration to think about.

Advantages of Arbitration

1)  Speed:  The primary benefit of arbitration is its speed.  Cases are generally resolved in months, not years.  Today, in NJ parties to a dispute are subject to multi-year delays in the judiciary.  The scheduling of the arbitration can be set by the parties themselves in conjunction with the arbitrator.

2)  Simplicity: The procedural rules of arbitration are (much) less formal than those of the legal system, and disputes that arise during arbitration can be resolved much faster than the NJ Rules of Civil Procedure. 

3)  Costs:  The cost of arbitration is also generally less than the cost of formal litigation.  However, one must consider the potential for high filing fees imposed by the various arbitration associations when doing the cost benefit analysis. The filing fee is often based on the dollar amount of the dispute. 

4)  Privacy:  The arbitration process also provides the parties with more privacy than in the NJ court system since arbitration is done privately between the parties and none of the filings are public records.  Traditional filings in the NJ court system are always considered to be public records absent a secrecy order of the court. Privacy is advantageous when the parties are seeking to protect trade secrets and other confidential business information, or the litigation has the potential to be embarrassing. 

5):  Finality:  Finally, because of the limited nature of judicial review of arbitration awards, an additional advantage of the arbitration process is finality. Basically, the arbitrator’s decision is final and non-appealable, except in very limited circumstances.  Instead of a case taking years from beginning to end (appeal of appeals, motion to vacate, etc.), a final decision is reached generally within 6-12 months. 

Disadvantages of Arbitration in NJ

There are disadvantages to arbitration or "traps” that the inexperienced party or their counsel may not appreciate. 

1)  A Marginal Arbitrator with Lots of "Discretion”.  The biggest disadvantage is the unpredictability and the limited opportunity for judicial review of an unfavorable or outright bad arbitration award. Many arbitrators are not attorneys and, therefore, may be limited in their attention to detail and fact finding.  Even worse, these arbitrators have very few limitations to their discretion and decision making during the course of the arbitration. Unless the parties stipulate to applicable legal principals in their agreement to arbitrate, arbitrators often do not follow the law, and disputes are often decided solely upon an arbitrator’s view of what is "right”.  Many parties who select arbitration as their method for dispute resolution in NJ are unaware that their dispute will not necessarily be resolved in accordance with New Jersey substantive law. Ultimately, there is no guarantee that a party with the law on their side will obtain a favorable outcome. 

2)  Inadequate Opportunity for Discovery:  A further disadvantage of arbitration is the limited use of traditional discovery techniques and procedures available in the NJ civil courts. Although the Federal Rules of Civil Procedure as well as the New Jersey Rules of Court allow for liberal discovery in court actions, there are no specific provisions permitting discovery in proceedings under the New Jersey Arbitration Act or the Federal Arbitration Act.  General1y, discovery is available to parties in arbitration proceedings if the parties agree or the arbitrator orders.  New Jersey has no law or procedure that guarantees basic discovery rights in an arbitration proceeding.  It’s all at the discretion of the arbitrator.

3)  The Non-Applicability of the NJ Rules of Evidence in Arbitration Cases in NJ:  The NJ Rules of Evidence do not apply in NJ arbitration proceedings absent agreement of the parties. This can be either an advantage or a disadvantage of arbitration. Basically, the arbitrator will consider everything he/she deems relevant to the disputed case.  An experienced and knowledgeable arbitrator in the subject matter of the dispute can mitigate this harm and the absence of the NJ Rules of Evidence are less of a problem in reaching a just result.  The key to a meaningful arbitration proceeding is the use of an experienced NJ arbitration attorney who can identify in advance and incorporate important conditions to the conduct of the arbitration proceeding (when possible) to avoid the catastrophic selection of a poorly qualified or biased arbitrator. 

Contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com to schedule a consultation about your particular arbitration matter.  He welcomes your calls and inquiries and you’ll find him very approachable and easy to talk to.



Call our managing partner, Fredrick P. Niemann, at 888-800-7442 or e-mail him at fniemann@hnlawfirm.com



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