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Authored - NJ Contract Law Update - Can Parties Agree to Waive the Right to Appeal From an Arbitration Award?
JANUARY 18, 2013 | Windels Marx - Commercial Litigation

In Cozzolino v. Cozzolino, 2012 WL 6097090 (N.J.App.Div. Dec. 10, 2012)--a corporate (not matrimonial) dispute--the Court affirmed the principle that parties clearly so agreeing can waive the right to appeal an arbitration decision, certainly beyond the decision by a trial-level court whether or not to confirm the award.

In Cozzolino, the parties had specifically agreed to irrevocably-binding arbitration, to definitively decide their disputes. It appears that in large measure, they so agreed because an arbitration of that type was necessary in order to induce the Bankruptcy Court to look favorably upon a bankruptcy plan being advanced in connection with one of the related businesses.

The public policy underlying the judicial preference to at least have a trial court review an award seems to dovetail with the major issues to be considered when an award needs to be confirmed: such as bias, lack of notice, or the somewhat-more-amorphous 'an arbitrator exceeded his/her powers'. However, it is not clear that sophisticated parties cannot explicitly agree to waive most if not all trial-level issues--by agreeing that the arbitration award will be "final and binding", or perhaps even-clearer language. (Of course, true enforcement of an award requires a court--and thus requires some sort of judicial confirmation.) Certainly in New Jersey, under Tretina v. Fitzpatrick & Assoc., Inc., 135 N.J. 349 (1994), the grounds for appeal are already inherently limited.

The issue of whether a crystal-clear waiver by sophisticated parties of even trial-level review would be successful (although ostensibly disfavored by the Cozzolino Court) was moot in that case. That review had already occurred, and the trial court had in fact found the arbitration confirmable.

The appellant's attempt in Cozzolino to argue that a specific "stipulation" was ignored by the arbitrator was to no avail. Ostensibly this was because there was at least a difference of opinion on the issue; and implicitly, we assume, because of the courts' unwillingness to involve themselves in the subject matter of the dispute, especially given the party sophistication and clear waivers present in Cozzolino.

The main moral of the story is that whatever its virtues, arbitration will give each party only one true bite of the apple, with very limited judicial review even if the arbitrator committed legal error. A secondary theme is that where the parties jointly represent to a court (there, the Bankruptcy Court) that an arbitration is to be fully binding in all senses (there, apparently in order to give the Bankruptcy Court comfort in waiting for and/or implementing a Plan), the parties will not be permitted to renege on those representations after the fact.

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Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.

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