The New Jersey Supreme Court has clarified the enforcement of arbitration provisions, drawing a roadmap for other state courts in the process.

The court's April 14 ruling in Wein v. Morris outlines steps to take to effect waiver of an arbitration provision.  It also holds that orders compelling arbitration are final, and so may be appealed as of right, whether the trial judge has dismissed the case or stayed the proceedings.  Finally, the decision reins in arbitrators who would modify their decisions to grant additional relief beyond the original award. 

Wein grew out of a dispute over lease commission payments. Real estate agents filed suit in Superior Court, despite the fact that their agreements with the property owners included an arbitration clause. The provision required that any controversy, dispute or claim between the parties be "resolved by binding arbitration in accordance with the rules of the American Arbitration Association." The defendant filed an answer, including counterclaims. Neither side sought arbitration. 

Five years into the lawsuit, the trial court ordered arbitration over both parties' objections and dismissed the case. Neither side appealed. The arbitration resulted in a finding favorable to the real estate agents. Later, the arbitrator modified his decision, awarding additional commissions to plaintiffs and adjusting the original commissions calculation. That award was upheld by the trial court, but vacated on appeal.

The Supreme Court held that the trial court improperly ordered arbitration because the parties had demonstrated their intent to waive arbitration. In addition, the court closed a gap in the Uniform Arbitration Act, effective in New Jersey since Jan. 1, 2005, regarding the procedures for appealing an arbitration order and staying the judicial proceeding. Significantly, the court held that such an order would be deemed final, and so could be immediately appealed, whether the court dismisses the action or stays the proceedings pending the arbitration outcome. 

Furthermore, the court ruling, which is not retroactive, directs that a "totality of the circumstances" test be used to determine whether a defendant has given up the right to appeal an arbitration order by participating in the arbitration without objection. The Wein court held that merely raising an objection with the trial court was insufficient and that, at minimum, the defendant should have raised an objection before the arbitrator. 

Additionally, the court found that the arbitrator was authorized to correct computational errors in the award, but not to grant relief beyond his original award. Awarding additional relief, the court directed, would be inconsistent with Rule 46's prohibition against re-determining the merits of a claim that has been decided. 

Finally, the court amended New Jersey Court Rule 2:2-3(a) to add arbitration orders to the list of orders deemed final judgments for appeal purposes. 

The decision of the New Jersey Supreme Court in Wein greatly impacts businesses seeking either to avoid or enforce contractual arbitration provisions. Ballard Spahrs lawyers can provide comprehensive legal counsel in such matters.

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