News & Noteworthy

Authored - NJ Contract Law Update - One Difference Between Generic Arbitration and AAA Arbitration
AUGUST 02, 2013 | Windels Marx - Commercial Litigation

Pepper v. Sadley, 2013 WL 2257842 (N.J.App.Div. May 24, 2013), is instructive on certain arbitration issues that might recur:

A. The parties had agreed to binding arbitration, pursuant to a Consent Order, following the institution of New Jersey litigation regarding a "boundary dispute". The parties agreed to certain distinct procedural guidelines within the arbitration. At the conclusion of the arbitration, the arbitrators' interpretations of those guidelines, and other more substantive matters, were given 100% deference by the courts--and the arbitration was affirmed. However, the Appellate Division disagreed with the trial Court's Order that "[y] 100% of the arbitrator's fees on the basis that defendant was the prevailing party". The appellate court found the following considerations compelling:

1(a) The Court made an analogy to "fee shifting" under R. 1:4-8. That analogy seems imperfect, since the arbitrators' cost would be more akin to an expense than to the kind of direct attorneys fees envisioned by that Rule.

(b) Following the same problematic analysis, the Court indicated that because (in its view) the frivolous litigation rule applied, the absence of a finding of frivolous conduct precluded the so-called fee shift.

2. There seems to have been some impression that not including the fee shift in the Order--particularly because it was a Consent Order--was a factor in the reversal by the appellate court.

3. Perhaps most pertinently (in terms of arguments likely to be faced by advocates in the future), the Court felt that arbitration fees were ordinarily 'split' under precedent and other authority; and "[t]his record provides no basis by statute, rule, or otherwise to depart from this principle".

B. Lawyers familiar with proceedings before the American Arbitration Association (AAA) know that are they bound by AAA Rules and principles regarding the AAA's right to shift all AAA-related fees, including arbitrators' fees. See AAA Commercial Arbitration Rule 43(c). Thus, presumably the outcome would be different (1) for an "Order" or "Award" by the AAA1 shifting arbitrators' fees: than it was (2) for the judicial Order in Pepper, where no such underlying rules seem to have been involved.

Contact & Legal Disclaimer

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.

1 Or other entity with similarly clear rules.

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