A254

An Act concerning arbitration and mediation and amending P.L.2003, c.95.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 11 of P.L.2003, c.95 (C.2A:23B-11) is amended to read as follows:

11. Appointment of Arbitrator; Service as a Neutral Arbitrator.

a. If the parties to an agreement to arbitrate agree on a method for appointing an arbitrator, that method shall be followed, unless the method fails. If the parties have not agreed on a method, the agreed method fails, or an arbitrator appointed fails or is unable to act and a successor has not been appointed, the court, on application of a party to the arbitration proceeding, shall appoint the arbitrator. An arbitrator so appointed has all the powers of an arbitrator designated in the agreement to arbitrate or appointed pursuant to the agreed method.

b. An individual who has a known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party may not serve as an arbitrator required by an agreement to be neutral.

c. An individual who has a known, direct, and material interest in the outcome of the arbitration proceeding or a known, existing, and substantial relationship with a party may not serve as a party arbitrator if such information has not been disclosed pursuant to section 12 of this act.

d. An individual appointed as a party arbitrator may be predisposed toward the appointing party. From and after the commencement of an arbitration, an arbitrator shall act in good faith and exercise the arbitrator's responsibilities in a manner consistent with the authority placed in the arbitrator by the courts of this State and this act.

e. An individual appointed as arbitrator in a matter may assume the role of mediator in that matter, however, an arbitrator who assumes the role of mediator may not, thereafter, serve as arbitrator in that matter unless an agreement by the parties to the arbitration proceeding permits the arbitrator to resume the role of arbitrator.

(cf: P.L.2003, c.95, s.11)

2. Section 23 of P.L.2003, c.95 (C.2A:23B-23) is amended to read as follows:

23. Vacating Award.

a. Upon the filing of a summary action with the court by a party to an arbitration proceeding, the court shall vacate an award made in the arbitration proceeding if:

(1) the award was procured by corruption, fraud, or other undue means;

(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this act, so as to substantially prejudice the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers;

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; [or]

(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding; or

(7) the award was entered by a person who, following appointment as an arbitrator, subsequently assumed the role of mediator and then subsequently resumed the role of arbitrator and the award was entered after the person resumed the role of arbitrator.

b. A summary action pursuant to this section shall be filed within 120 days after the aggrieved party receives notice of the award pursuant to section 19 of this act or within 120 days after the aggrieved party receives notice of a modified or corrected award pursuant to section 20 of this act, unless the aggrieved party alleges that the award was procured by corruption, fraud, or other undue means, in which case the summary action shall be commenced within 120 days after the ground is known or by the exercise of reasonable care would have been known by the aggrieved party.

c. If the court vacates an award on a ground other than that set forth in paragraph (5) of subsection a. of this section, it may order a rehearing. If the award is vacated on a ground stated in paragraph (1) [or], (2) or (7) of subsection a. of this section, the rehearing shall be before a new arbitrator. If the award is vacated on a ground stated in paragraph (3), (4), or (6) of subsection a. of this section, the rehearing may be before the arbitrator who made the award or the arbitrator's successor. The arbitrator shall render the decision in the rehearing within the same time as that provided in subsection b. of section 19 of this act for an award.

d. If the court denies an application to vacate an award, it shall confirm the award unless an application to modify or correct the award is pending.

(cf: P.L.2003, c.95, s.23)

3. This act shall take effect immediately.

STATEMENT

This bill clarifies that an arbitrator appointed under P.L.2003, c.95 (C.2A:23B-1 et seq.) who then assumes the role of mediator may not then resume the role of arbitrator unless the parties agree.

The current statute is silent as to whether an arbitrator who is appointed pursuant to the arbitration law may assume the role of mediator and then subsequently resume the role of arbitrator. The Appellate Division of the Superior Court specified in Minkowitz v. Israeli, 433 N.J. Super. 111 (App. Div. 2013) that parties could voluntarily enter into an agreement which permits a person who is appointed as arbitrator to assume a role of mediator, and then subsequently assume the role of arbitrator, but in the absence of such an agreement, an arbitrator appointed under the act may not assume the role of mediator and, thereafter, resume the role of arbitrator. The court noted that a mediator, whose role is to guide parties toward a mediated resolution, may become privy to party confidences and therefore cannot subsequently retain the appearance of a neutral factfinder, which is necessary to conduct a binding arbitration proceeding.

The Appellate Division further specified that an award entered by an arbitrator who has resumed the role of arbitrator after assuming the role of mediator must be vacated unless the parties enter into an agreement permitting the arbitrator to resume the role of arbitrator after serving as mediator. The court further specified that any awards entered by the arbitrator prior to serving as mediator should not be vacated. The bill codifies this provision of the court’s decision as well.