You be the Judge: Arbitration Clause

If you are a party to an agreement with an arbitration clause, this may interest you.

Arbitration is not presumed.  Parties are not held to have forfeited their right to a trial unless they clearly have agreed to substitute an arbitration proceeding.  If the parties clearly agree to substitute an arbitration for the determination of particular issues, a court will generally enforce their agreement and compel arbitration of those issues.

But not always . . .

In a recent appeal the Appellate Division of the Superior Court reviewed a case that involved a lease commission agreement between plaintiff and defendant.  The agreement clearly provided that disputes between the parties were to be arbitrated.

But plaintiff brought suit for damages in the Superior Court, not in arbitration.   

After having managed the case for five years, the trial court-- on its own--determined that arbitration was appropriate and required the parties to arbitrate the dispute in accordance with their agreement.

Neither party appealed from the order requiring arbitration.  Both participated in a lengthy arbitration.  The arbitrator awarded plaintiff more than $1,000,000.

The trial court confirmed the award and defendant appealed.

YOU BE THE JUDGE:  Can parties to a contract waive a provision that clearly provides for arbitration of disputes?

The Appellate Division vacated the arbitration award.  The Court held that parties to a clear contract agreement to arbitrate can waive that contract right by their conduct.
It concluded that the trial court had erred in compelling arbitration because the parties had waived the right to arbitrate by having engaged in litigation instead for many years.

The Appellate Division also held that defendant's participation in the court-required arbitration did not affect its right to seek redress.  After being ordered to arbitrate, defendant had no choice but to appear before the arbitrator, lest it default in those proceedings.  

The decision points out that a courtroom can bring justice and may be the only way to protect your rights. We know courtrooms; we have harnessed the power of the law in courtrooms to bring justice for our clients for decades. Please contact us to discuss how we can help you in a new lawsuit or provide a "second opinion" about your pending lawsuit. There is no obligation for the initial consultation.