In an opinion issued May 10, 2013, Petersburg Regency, L.L.C. v. Selective Way Insurance Company, the Appellate Division of the New Jersey Superior Court held that if the parties agreed to arbitrate their dispute, but did not clearly identify the parameters of the arbitration, they would be bound by the provisions of the New Jersey Arbitration Act. The facts are quite complex. In September 2004, Petersburg Regency, L.L.C. (“Regency”) filed a complaint against Selective Way Insurance Company (“Selective Way”) for claims arising out of a hurricane which damaged a hotel owned by Regency in Petersburg, Virginia. In February 2007, the parties appeared for a settlement conference and agreed to dismiss the action and to proceed with binding arbitration. The parties did not prepare or execute a written agreement spelling out the terms and conditions of the arbitration. Over the next four years, the arbitrator supervised extensive discovery between the parties. The arbitrator did not make any substantive rulings nor was any testimony taken. Once the arbitration hearing was scheduled, Selective Way raised several issues regarding the arbitration, including an assertion that it had preserved a right to appeal a final award by the arbitrator on a plenary basis and that it had a right to file and obtain a ruling by the trial court on a summary judgment motion regarding its counterclaim. In light of these disputes, the arbitrator declined to proceed with the arbitration and directed the parties to present the issues to the court.
In February 2012, the trial court ruled that the arbitration should not proceed, finding that there was no meeting of the minds on the conditions, parameters, and/or scope of the nature of the arbitration, or the right to appeal. The court directed the parties to litigate their disputes and pursue their remedies in an action which had been commenced in Virginia by Selective Way.
The Appellate Division reversed, holding that the arbitration would be governed by the provisions of the New Jersey Arbitration Act, N.J.S.A. 2A:23B-1, et seq. While the Act does allow the parties to modify or supplement the standard terms and conditions of the arbitration, unless the parties specifically agreed to any additional terms and conditions, the terms and conditions set forth in the statute control. The Appellate Division accordingly directed the arbitration to proceed, without any of the additional terms and conditions sought by Selective Way.
The court directed that, when parties agree to submit a dispute to binding arbitration, to avoid the problems presented in this case, they should prepare and execute a written agreement setting forth the terms and conditions of the arbitration, specifically any modifications to the procedures set forth in the New Jersey Arbitration Act. If a party agrees to submit a dispute to binding arbitration, it should make sure it is clear as to what is to be arbitrated, if there are any issues to be decided by the court, and if there is to be a right of appeal.
This case illustrates that arbitration is not always a prompt or efficient method of resolving disputes. The complaint was originally filed in September 2004. By May 2013, the dispute has not yet been resolved, although, in addition to the pending arbitration, a trial is scheduled in Virginia to take place this month. Before anyone agrees to refer a matter to binding arbitration, they should determine that arbitration is an effective way to resolve the dispute. In this case, arbitration was apparently not the best way to proceed.