March 08, 2018 Practice Points

Mixing It Up: Did We Mediate or Arbitrate?

By Mitchell L. Marinello

The appellate court of New Jersey recently decided a case in which the losing party argued that an arbitration award should not be confirmed because the parties had mediated, not arbitrated, their dispute. The case is a reminder that all parties—including the neutral—should be careful to properly document the nature of the proceedings. Richard Marano and Eileen Marano v. The Hills Highlands Master Association, Inc. Case No. A-5538-15T1, (Superior Court of New Jersey, Appellate Division, November 16, 2017).

The Maranos’ property was subject to the by-laws of an association (Association). The property flooded and the Maranos and the Association agreed to resolve their dispute about the flooding through the involvement of a retired judge. The Association’s by-laws contained an arbitration provision that arguably applied to the dispute. In their correspondence with each other and the retired judge, both parties referred to the upcoming proceedings as an arbitration.

When the retired judge accepted the appointment, however, he forwarded the parties a form agreement that provided for mediation and that was entitled “civil mediation agreement.” That is the agreement the parties signed. The Maranos’ counsel wrote the retired judge and pointed out that the proceeding was actually an arbitration, not a mediation. The Association’s counsel did not respond to this letter or otherwise question the nature of the proceeding. Thereafter, at various times, both parties referred to the proceeding as an arbitration. Nonetheless, there were also a few times when the parties referred to the proceedings as an ADR proceeding rather than uniformly calling it an arbitration.

After the retired judge issued an award, the Association resisted confirmation on the ground that the parties had agreed to mediate, not arbitrate, their dispute. The trial court rejected this argument and the appellate court affirmed. It held that,

[w]ith the exception of the retired judge’s mistake in having the parties execute a document memorializing the terms of a “civil mediation,” there is no doubt that the parties agreed to and in fact participated in a binding arbitration.

One might be inclined to say, “All’s well that ends well,” but the error in the form of the agreement used and the failure to sign a new agreement clearly stating that the proceeding was an arbitration gave the losing party a basis for resisting confirmation of the award and led to delay and litigation expense that should have been entirely unnecessary.

Mitchell L. Marinello is a partner at Novack and Macey LLP in Chicago, Illinois.

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