Schedule a Consultation: (973) 274-5200

Drafting Checklist: Issues to Cover
In an Arbitration Provision


By Charles C. Abut

WITH DIVORCE litigation becoming more and more complex, matrimonial attorneys and their clients are encountering the concept of "alternative dispute resolution" with increasing frequency and the vehicles of mediation and arbitration are being used more than ever before.  The purpose of this article is to provide the practitioner with a checklist for use in drafting an arbitration provision, for inclusion in a property settlement agreement, or in a stipulation and/or agreed court order providing for arbitration.

Who will be the arbitrator? No aspect of the arbitration process is more important than the selection of the arbitrator.  Sometimes, a single arbitrator, such as an experienced matrimonial attorney or a retired judge, will suffice.  Occasionally, a panel of two or three arbitrators, such as an accountant or other financial expert, mental health professional, or a business or other appraiser, may be called for, to cover a spectrum of various disciplines.

How will the arbitrator be selected?  Usually, standard arbitration clauses provide for arbitrator selection to be conducted by the relevant tribunal, such as the American Arbitration Association. But this selection process can also be conducted by the attorneys, especially using the services of a growing number of provider companies.  Agreeing on the selection process is a must; actually choosing the arbitrator in advance is preferable.

What procedures will be used in the arbitration?  Consideration should be given to whether discovery will be permitted prior to the arbitration hearing, as well as subpoena power with respect to both documents and witnesses.  If the parties wish to have the proceedings remain private, a confidentiality/protective provision should be drafted.

Scheduling should be provided for, addressing the availability of the arbitrators, counsel and the parties.  Ideally, arbitration proceedings should  be scheduled on consecutive days, until completion, and the arbitration provision should further provide for a starting date within a specific time, such as 30 days from the date of execution of the controlling document.

To the extent that your jurisdiction permits partial or complete jury trials in matrimonial actions, language should be inserted to provide for the appropriate waiver.

Since the term “ matrimonial agreement" has become an oxymoron, anticipate the likelihood of future proceedings, and therefore whether they, too, are to be arbitrated.

Normally, the Rules of Evidence are not strictly applied in arbitration.  Consider drafting language similar to the following:

The Rules of Evidence shall not be controlling but serve as a guide to the arbitrator concerning the admissibility of any evidence.

Who will pay for costs and fees?  Under the rules of the American Arbitration Association, the party initiating arbitration must pay an initial filing fee, based on the amount m controversy, and this can be substantial.  Whether these rules are followed, or other procedures implemented, you should provide m the first instance for how the arbitration will be funded, including compensation of the arbitrators.  Because counsel fees will be incurred by both parties, the award and allocation of such fees should also be considered.  A clause such as the following might be appropriate:

The arbitrator shall determine how arbitration costs shall be allocated between the parties, and shall also have the power to award counsel fees and costs rendered in connection with the arbitration, as well as leading up to the arbitration .. The payment of any initial or subsequent retainer to the arbitrator shall be advanced by the parties, pursuant to the determination of the arbitrator.

What is the scope of the arbitration?  Unless specific issues are to be carved out, you  should establish the arbitrator' s power to adjudicate all relevant issues. Procedurally, one way to address the completion of the case is to provide for arbitration in a final judgment, which would adjudicate the decree and grounds for the divorce itself, and then provide that all financial and other issues are to be resolved by arbitration, including equitable distribution, alimony and the like.  You should address whether the arbitrator is required to make findings of fact and conclusions of law, since these are not normally required as part of an arbitration. In addition, thought should be given to whether the parties agree to have the arbitration award appeal able, on the same grounds as a court judgment, or appeal able only for the normal statutory reasons, such as misconduct by the arbitrator or fraud.

Because the arbitration award is likely to encompass money judgments, you should address the authority of the arbitrator to assess interest on any award, as well as the power to grant punitive damages or sanctions.

Will the arbitration proceedings be transcribed?  Unlike court hearings, ordinarily, arbitration proceedings are not recorded. For various reasons, however, the parties may want to have transcripts prepared and available.  Consider the following language:

 A record of arbitration proceedings shall be made through a certified court reporter, to be selected by the arbitrator, and the costs for the reporter and any transcripts shall be determined and allocated by the arbitrator.

 Will the arbitration clause be enforceable?  In addition to having the operative document signed by the attorneys and entered by the court, the parties should be signatories as well. Have each of the parties initial each page.  Make the arbitration clause bold and prominent.  Further, specifically provide that the issue of arbitrability must also be arbitrated, as well as any issues concerning the validity of the arbitration clause or proceeding.

It remains to be seen whether arbitration will ultimately prove to be a more effective process than divorce litigation.  In the interim, practitioners need to sharpen their arbitration tools, in order to achieve the maximum in the effective representation of their clients.

Message Us

If You Have a Case, Give Us A Call Today!

973-274-5200

X CLOSE

Bergen County Office

401 Hackensack Ave
Ste 706
Hackensack, NJ 07601

Open Today 8:30am - 5:30pm

Morris County Office

19 Cattano Ave.
Morristown, NJ 07960

Open Today 8:30am - 5:30pm

Essex County Office

425 Eagle Rock Ave
Ste 100
Roseland, NJ 07068

Open Today 8:30am - 5:30pm

Somerset County Office

440 Route 22 E
Ste 170
Bridgewater, NJ 08807

Open Today 8:30am - 5:30pm

X CLOSE

Message Us

X CLOSE