NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 16, 2013
On appeal from the Superior Court of New Jersey, Chancery Division, Family Part, Bergen County, Docket No. FM-02-826-11.
Herbert & Weiss, attorneys for appellant (Jacob V. Hudnut, of counsel; Helen C. Herbert and Helayne M. Weiss, on the brief).
DeFuccio Clancy & Esposito, LLC, attorneys for respondent (Sharon Clancy, on the brief).
Before Judges Sabatino and Hayden.
In this highly contentious divorce case, plaintiff N.L. ("the wife") appeals the Family Part's denial of her motion to set aside a consensually-appointed arbitrator's decisions concerning alimony, equitable distribution, and other contested issues. Among other things, the wife argued that the arbitrator's decisions were tainted by alleged acts of misconduct and "evident partiality" in favor of defendant V.M. ("the husband"), and consequently should be vacated pursuant to N.J.S.A. 2A:23B-23(a)(2). The motion judge rejected the wife's claims of arbitrator bias and misconduct, and accordingly incorporated the arbitrator's decisions into the terms of a final judgment of divorce ("FJOD").
For the reasons that follow, we reverse the trial court's denial of the wife's motion. Guided by this court's recent opinion in Minkowitz v. Israeli, __ N.J.Super. __ (App. Div. 2013) (delineating the proper role of an arbitrator in divorce litigation), we vacate the arbitration awards and the portions of the final judgment incorporating their terms. We do so because the record shows that the arbitrator unfortunately strayed from his neutral fact-finding role in two significant instances. In one instance, the arbitrator suggested to the wife that she consider voluntarily dismissing her pending municipal complaints alleging criminal conduct by the husband. In the other instance, the arbitrator placed an ex parte telephone call to the wife, urging her to allow the children to be with their father on Father's Day in accordance with the terms of a pendente lite parenting agreement.
In each of the two cited instances, the arbitrator essentially attempted to act as a mediator by prompting the wife to take, or at least to consider taking, certain actions respecting her husband and their children. The parties had not, however, entered into a written agreement authorizing the arbitrator to perform the additional functions of a mediator. As Minkowitz instructs, in the absence of such express written authorization, an arbitrator should not step out of his or her fact-finding arbitral role, even if an arbitrator's reasons for doing so are well-intentioned. Consequently, the arbitrator "exceeded [his] powers, " thereby providing a sufficient basis to vacate his awards under N.J.S.A. 2A:23B-23(a)(4).
Although we reject all of the wife's other claims of arbitrator error, the incidents provide sufficient grounds to set aside the arbitration awards under N.J.S.A. 2A:23B-23(a)(4) and the principles of Minkowitz. Consequently, the matter must be remanded to the Family Part for a trial on the merits or, alternatively, for a new arbitration before a substitute arbitrator who may be mutually agreed upon by the parties.
Because we are remanding this matter for a trial or a new arbitration, we need not recite the facts comprehensively or conclusively. The following relevant background can be gleaned from the present record.
The parties were married in 1991. Prior to the marriage, both parties had attended university and received advanced degrees in Ukraine. In 1992, the parties emigrated from Ukraine to the United States, along with the wife's parents and daughter from a previous marriage. The parties purchased a home in Demarest in October 2000. The wife gave birth to twin sons in July 2002.
The wife filed an initial complaint for divorce in September 2007 in the Family Part. While the divorce litigation was pending, the wife filed criminal complaints against the husband in May 2008, alleging disorderly conduct, N.J.S.A. 2C:33-2(a)(2), and false imprisonment, N.J.S.A. 2C:13-3. A temporary restraining order ("TRO") was also issued against the husband pursuant to a domestic violence civil complaint based on the same set of facts. The TRO was subsequently dismissed by the trial court after a hearing on May 13, 2008. As noted, infra, the criminal complaints were eventually dismissed by the wife on October 7, 2009.
In January 2009, the parties entered into a stipulation of dismissal without prejudice as to the wife's initial divorce complaint. In that stipulation, the parties agreed "[t]o have all issues relating to custody, parenting time, support and equitable distribution sent to Arbitration[.]" Further, the September 6, 2007 filing date of the initial divorce complaint was preserved.
A private attorney was appointed as the first arbitrator. However, the wife subsequently filed an order to show cause in May 2009 to remove the first arbitrator, on the grounds that the arbitrator had attended a baseball game with the husband's attorney. The first arbitrator then withdrew.
Thereafter, the trial court appointed a different individual ("the arbitrator") to replace the first arbitrator. The parties entered into a written "Agreement to Provide Arbitration Services" with the arbitrator, dated September 21, 2009. Among other things, the agreement provided that the arbitration was to "proceed in accordance with N.J.S.A. 2A:23B-1 et. seq."
The parties and their counsel appeared before the arbitrator thirteen times between September 2009 and March 2010. During the course of those transcribed proceedings, the arbitrator took testimony from the parties and numerous lay and expert witnesses. Although one witness required the assistance of an interpreter, the parties testified in English.
At the time of the arbitration proceedings, the wife was working as a non-salaried employee at a private elementary school in exchange for free tuition for the twins. The cost of the tuition would otherwise have been approximately $24, 000 per year. She had previously earned $60, 000 per year as a senior software developer analyst before being laid off in 2000. She did not seek new full-time employment in the computer programming field, but did work part-time for a holistic healing center in 2006 and 2007.
Meanwhile, the husband was employed at J.P. Morgan Chase, where he worked for the investment bank technology division. He received a base salary of $175, 000 per year along with substantial bonuses in the form of cash and restricted stock units ("RSUs"). A forensic accountant jointly retained by the parties for the arbitration found that the husband's average annual pre-tax income for the years 2004, 2005, 2006, and 2008 was $366, 000, although the wife contended that the annual income figure actually exceeded $500, 000.
By letter dated June 2, 2010, the arbitrator ruled on several of the main issues involved in the arbitration. In particular, the arbitrator found that the proceeds from the sale of the marital home should be divided equally, and left to the parties the task of settling the distribution of its contents.
As to the RSUs, the arbitrator found that the units that were awarded to compensate the husband for the job he had held prior to the filing of the wife's initial divorce complaint in 2007 were subject to equitable distribution. The arbitrator further ruled that the wife was entitled to receive twenty-five percent of their gross value. However, he found that any RSUs awarded to the husband, post-complaint, were not subject to equitable distribution.
With respect to the hotly-contested and key issue of alimony, the wife had sought permanent alimony of $108, 333 per year, along with an unspecified amount of rehabilitative alimony. Meanwhile, the husband contended that his alimony payments should be capped at no more than $80, 000 per year, depending upon his yearly cash bonus, for a finite term of six years. After finding that the salary figures provided by the wife had not been supported by the proofs and, further, that the couple had lived beyond their available income, the arbitrator awarded the wife $60, 000 in permanent alimony per year, predicated upon the husband's base salary of $175, 000. In addition, the arbitrator awarded the wife rehabilitative alimony in an amount not to exceed $15, 000 for one year, to be paid by the husband directly to a training program of the wife's choice. Finally, the arbitrator awarded the wife twenty-five percent of any cash bonus that the husband might receive, up to a cap of $30, 000.
The issues respecting custody and parenting time were resolved through a Modified Parenting Plan, which the parties agreed to on March 12, 2010. The wife was apparently designated under that plan as the parent of primary residence, with the father having parenting time. Therapeutic counseling was also ordered.
In October 2010, the wife filed a new divorce complaint in the Family Part, citing irreconcilable differences, along with an order to show cause. In her supporting certification, the wife requested that the June 2010 arbitration decision be vacated, based upon various allegations that the arbitrator had engaged in misconduct and was biased against her. Further, the wife requested that the divorce action be re-listed under its new docket number for an immediate trial. In a written decision on January 3, 2011, the Family Part judge denied the wife's application to vacate the arbitration award.
On January 25, 2011, the arbitrator issued, by letter, another arbitration award, addressing the remaining contested issues in the matrimonial action. The arbitrator made rulings concerning the net proceeds from the sale of the marital residence, arbitration fees, transcript fees, appraisal fees, and other items. The arbitrator directed that the parties bear their own counsel fees. Lastly, the arbitrator issued a determination on the parenting time matters dated July 19, 2011.
The trial court confirmed the arbitration awards on October 13, 2011. Over the wife's continuing objection, the Family Part judge entered an FJOD on November 1, 2011. The FJOD incorporated the terms of the arbitration awards.
The wife now appeals from the Family Part's denial of her application to set aside the arbitration awards, and from the corresponding provisions within the FJOD. The husband has not cross-appealed.
Except as set forth in a written arbitration agreement entered into by the parties, the terms of the Uniform Arbitration Act, N.J.S.A. 2A:23B-1 to -32, control the conduct of civil arbitrations in this state. See Fawzy v. Fawzy, 199 N.J. 456, 469 (2009) (noting that the statute "sets forth the details of the arbitration procedure that will apply unless varied or waived by contract.") (emphasis added) (citing N.J.S.A. 2A:23B-4); see also Minkowitz, supra, slip op. at 22-23.
"It is well-settled that New Jersey's strong public policy favors settlement of disputes through arbitration." Minkowitz, supra, slip op. at 20 (citing Hojnowski v. Vans Skate Park, 187 N.J. 323, 343 (2006)). Our Supreme Court has specifically endorsed the voluntary use of arbitration in the disposition of family-related matters. See Fawzy, supra, 199 N.J. at 471 (noting that arbitration is an acceptable means of resolving claims pertaining to alimony, child support, and child custody).
"'The object of arbitration is the final disposition, in a speedy, inexpensive, expeditious, and perhaps less formal manner, of the controversial differences between the parties.'" Hojnowski, supra, 187 N.J. at 343 (quoting Carpenter v. Bloomer, 54 N.J.Super. 157, 162 (App. Div. 1959)). To accomplish these goals, "the Act vests arbitrators with broad discretion over discovery and other procedural matters to 'conduct an arbitration in such manner as the arbitrator considers appropriate for a fair and expeditious disposition of the proceeding.'" Minkowitz, supra, slip op. at 41 (quoting N.J.S.A. 2A:23B-15(a)). Because an arbitrator makes a final decision that binds the parties, see N.J.S.A. 2A:23B-1, the arbitrator "'should conduct the proceedings in an evenhanded manner and treat all parties with equality and fairness at all stages of the proceedings.'" Minkowitz, supra, slip op. at 40-41 (quoting Barcon Assocs., Inc. v. Tri-Cnty. Asphalt Corp., 86 N.J. 179, 190 (1981)).
Pursuant to the Act, an arbitrator's awards may be vacated by a court on certain limited grounds. Among other things, the awards may be vacated upon a finding of "evident partiality by an arbitrator" or "misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding." N.J.S.A. 2A:23B-23(a)(2). In addition, an arbitration award may be set aside by the court if the arbitrator "exceeded [his or her] powers." N.J.S.A. 2A:23B-23(a)(4). See also Minkowitz, supra, slip op. at 27.
Given the strong public policy favoring consensual arbitration, courts apply a "presumption in favor of the validity of an arbitral award, " and "the party seeking to vacate it bears a heavy burden." Id. at 28 (quoting Del Piano v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 372 N.J.Super. 503, 510 (App. Div. 2004), certif. granted, 183 N.J. 218 (2005), appeal dismissed, 195 N.J. 512 (2005)). "'Otherwise, the purpose of the arbitration contract, which is to provide an effective, expedient, and fair resolution of disputes, would be severely undermined.'" Ibid. (quoting Fawzy, supra, 199 N.J. at 470).
That said, at times a dissatisfied participant in an arbitration proceeding can raise sufficient reasons to vacate an award, under the limited grounds specified in the Act. This right was aptly illustrated in Minkowitz, in which this court set aside an arbitration award in divorce litigation because the arbitrator had "exceeded his powers" by performing mediation functions during the midst of the arbitration and thereafter resuming his decisional role as an arbitrator. Id. at 46.
The panel's opinion in Minkowitz distinguished between, on the one hand, the evaluative functions of an arbitrator and, on the other hand, the facilitative functions of a mediator. Id. at 37-41. As we noted, "[m]ediations are not conducted under oath, do not follow traditional rules of evidence, and are not limited to developing the facts." Id. at 39. In addition, "mediation encourages confidential disclosures to the mediator, whose training is designed to utilize those confidential positions to aid the parties to evaluate their positions, promote understanding of the other side's position, and reach a consensus." Ibid. As part of that role, the mediator may attempt to persuade a disputant that his or her position on an issue is not strong, and that he or she should consider undertaking a conciliatory or less adversarial posture, in the spirit of compromise and a constructive step toward potentially resolving the matter as a whole.
In recognition of the "distinctly different" functions of arbitration as opposed to mediation, the panel in Minkowitz set forth numerous guiding principles. Id. at 44. Among other things, the panel held that, unless the parties in the arbitration of a family matter have set forth in writing an agreement to the contrary, "dual roles are to be avoided." Id. at 45. Absent such written authorization, "once a neutral assumes the role of mediator, he or she may not assume the role of arbitrator." Id. at 46. Although settlement negotiations are not foreclosed by the Act, see N.J.S.A. 2A:23B-15(a), Minkowitz instructs that an arbitrator who undertakes to mediate settlement terms between the parties during the midst of the arbitration must have their mutual permission to engage in that effort. Minkowitz, supra, slip op. at 31, 41-46.
With these principles in mind, we turn to the wife's contentions that the arbitration awards in this case should have been set aside by the trial court. Although she couches her challenges to the awards by invoking the statutory standards of "evident partiality" and "misconduct, " see N.J.S.A. 2A:23B-23(a)(2), for the reasons that follow, we hinge our analysis instead on the Act's authorization for setting aside awards where an arbitrator has "exceeded [his] powers." N.J.S.A. 2A:23B-23(a)(4). We undertake our review de novo, because a ruling to vacate an arbitration award is a decision of law, as to which no special deference is owed to the trial court. See, e.g., Minkowitz, supra, slip op. at 28; Manger v. Manger, 417 N.J.Super. 370, 376 (App. Div. 2010) (citation omitted); see also Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).
Before undertaking our analysis of the legal issues, we begin with a general observation that the conduct of the wife during the arbitration was extremely contentious and adversarial. On several occasions, the arbitrator was forced to deal with interruptions, non-responsive witness answers, and to rule on persistent objections. The wife expressed open antipathy for the husband's attorney. She was frequently rude, sarcastic, and argumentative during her testimony. For example, on one occasion, she told her husband's attorney to "clean [his] ears" in response to a question that he posed to her on cross-examination. In another illustrative instance, the wife referred to opposing counsel on the record as "the biggest jerk in the world" because he had sought her mother's testimony. The arbitrator commendably displayed considerable restraint and patience during the proceedings. That calm exercise of control over the proceedings should not be overlooked, in spite of the arbitrator's two improvident efforts, which we discuss, infra, to resolve certain matters in a manner outside of his assigned role as arbitrator.
Although the wife raises a litany of criticisms of the arbitrator's handling of the case, most of those criticisms are unavailing. Among other things, we reject her various claims that the arbitrator was biased or unfair because, for instance, he properly characterized the husband's counsel's motion "in limine" as a motion to "strike"; or because he invited legal memoranda from the wife's counsel on issues that arose during the proceedings. Apart from the two exceptions we shall address, infra, the wife's criticisms of the ...