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  • 11/20/2017

    Be Careful What You Wish For: Arbitration Is Not Mediation

    Client Alert

    Written by: Michael S. Karpoff

    A recent decision by the Appellate Division of New Jersey’s Superior Court demonstrates the need for precision in defining what method of alternative dispute resolution (ADR) an association utilizes or agrees to. Carelessly referring to the ADR procedure as an arbitration can make the ultimate decision binding upon the parties, even if one of the parties had something else in mind.

    Attorneys’ Communications Outweighed Asserted Intent

    In Marano v. The Hills Highlands Master Association, Inc., decided on November 16, the court rejected the association’s argument that it was not bound by an arbitration award because the procedure it had used was intended to be a mediation. The court found that plaintiff’s counsel had repeatedly referred to the procedure as an arbitration and the hearing officer as the arbitrator without objection by the association’s attorney, and, in fact, the association’s attorney had referred on at least one occasion to the hearing officer as “the arbitrator.” The hearing officer submitted to the attorneys an agreement to mediate, which they signed. However, she  apparently understood her role as being an arbitrator because she later issued an “Award in Arbitration.”

    The trial court confirmed the arbitration award over the association’s objection, and the Appellate Division affirmed that decision. The association argued that the parties had merely agreed to mediate the dispute. The appellate court concluded that notwithstanding the mediation agreement that was signed, the record demonstrated that the parties had agreed to binding arbitration.

    ADR Process Should Be Accurately Described

    Unfortunately, clients, and even some attorneys, frequently misunderstand the distinctions between the types of alternative dispute resolution mechanisms available and refer in general to ADR as “arbitration.” We have even seen statements by judges in judicial opinions that an association must make available an “arbitration” process when the courts actually meant the broader “alternative dispute resolution” required by the New Jersey Condominium Act and the NJ Planned Real Estate Development Full Disclosure Act. 

    Thus, in setting up ADR policies, associations, with the assistance of their attorneys, must clearly define what type or types of ADR mechanisms they will offer. Moreover, we suggest that in proposing or agreeing to ADR with an owner or any other party, the type of ADR being proposed or agreed upon should be accurately stated in writings signed on behalf of both parties so that there is no misunderstanding. If any party misidentifies the procedure agreed upon, the other party needs to correct that error promptly, and any disagreement over the process selected needs to be resolved before participating in the process.

    For more information on this or any other issue concerning your community association, please contact one of our Community Associations attorneys. For breaking news or updates on new blog posts, follow us on Twitter at: @njcondolaw.