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Van Duren v. Rzasa-Ormes

195 N.J. 230, 948 A.2d 1285 (2008)

ARBITRATION — Courts will enforce arbitration agreements that provide for non-appelability except to the extent that such an agreement forecloses any right to initial judicial review as to whether an arbitration award violates corporate policy.

Two business partners with holdings in several automobile dealerships and related real estate holdings had a dispute. After failing to settle it, and after retaining separate counsel, they executed a binding arbitration agreement. Under it, a mutually chosen arbitrator’s decision was to be “final, binding, and conclusive,” and “not subject to an appeal to any authority in any forum.” Additionally, they foreswore any legal action other than to confirm or enforce (but not to vacate) the arbitration award.

The arbitration spanned a period of five years. At no stage during the proceedings was any challenge made to the validity of the arbitration agreement or was a claim of fraud, duress, economic compulsion, unequal bargaining power, or unconscionability associated with the execution of the contract made. After a final arbitration order was entered, one partner filed a legal action to confirm the award. The other partner moved to vacate the award, alleging that the arbitrator was biased, incompetent, and had made misrepresentations. She also argued that the non-appealability clause of the arbitration agreement was void as against public policy. The lower court confirmed the arbitration award by holding that the complaining partner was bound by her consent to the chosen arbitrator, and that her perceived self-perceived conflicts of interest of the arbitrator were self-created. The defeated partner moved to appeal, arguing that the waiver was unenforceable to bar claims of arbitrator bias and misconduct.

The Appellate Division, as affirmed by the New Jersey Supreme Court, concluded that it had no jurisdiction to hear an appeal. It found that the parties to the arbitration agreement were sophisticated business parties, each represented by counsel. The Court upheld the non-appealability clause to the extent that it foreclosed appellate court review, but found it invalid to the extent that it foreclosed any right to initial judicial review as to whether the award violated public policy. However, the Court found the lower court engaged in meaningful review on that question and had found no cognizable grounds to vacate the award. It also observed that the second partner never alleged any violation of public policy that might otherwise serve to compel limited appellate review, such as by claiming bias or misconduct on the part of the lower court or unconscionability in the formation of the contract.

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