The right to Arbitrate rather than Litigate


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The right to Arbitrate rather than Litigate…

Recent cases illustrate two important legal principals involving the right to resolve family disputes in New Jersey by voluntary, alternative dispute resolution procedures, such as arbitration and mediation, rather than trial. Our courts have held that parents have a fundamental and constitutionally protected liberty interest in raising their children, which includes the right to submit any family controversy to a decision maker of their own choosing. Subject to safeguards to protect the best interests of the child, this fundamental parental right does not evaporate when an intact marriage breaks down. Yet, absent an agreement to arbitrate between the parties, courts do not have the authority to compel parties to submit their disputes to binding arbitration.

In Fawzy v. Fawzy, Christine and Samih Fawzy, married in 1991, had two children, who were 8 and 9 years of age when the divorce complaint was filed in 2005 in Middlesex County. Trial was scheduled, but the couple agreed on the record to arbitrate all custody and parenting issues.

After the first few arbitration sessions, Samih tried to back out of the arbitration, filing an order to show cause, which was denied. The court then entered a judgment of divorce, adopting the arbitration award concerning custody and parenting-time. The arbitration continued on financial issues. Samih then switched lawyers, and filed a second order to show cause asking the court to vacate the award, and stay the arbitration pending appeal. The second order to show cause was also denied.

Samih appealed. The Appellate Division reversed and remanded, finding “that custody and parenting time issues cannot be subject to binding arbitration or to any form of arbitration that restricts the court’s ability to consider the best interest of the child.”

Christine Fawzy filed a petition for certification while her husband filed a cross-petition, both of which were granted by the Supreme Court. The Court then reversed the Appellate Division’s decision, holding that parents in New Jersey have a right to arbitrate parenting and custody issues in a divorce action. The Court held, in pertinent part, as follows:
[The] entitlement to autonomous family privacy includes the fundamental right of parents to make decisions regarding custody, parenting time, health, education, and other child-welfare issues between themselves, without state interference… [and that right] does not evaporate when an intact marriage breaks down”. … Indeed, we have no hesitation in concluding that, just as parents “choose” to decide issues of custody and parenting time among themselves without court intervention, they may opt to sidestep the judicial process and submit their dispute to an arbitrator whom they have chosen.

However, the Court established some limits. While parents may arbitrate parenting and custody matters, the state has a duty to intervene in order to prevent harm to a child. If harm is found, a judge must act in the best interests of the child. Therefore, there must be a complete documentary record of the arbitration, with testimony recorded, and arbitrators must issue findings of fact and conclusions of law. In addition, the agreement to arbitrate must be in writing or otherwise recorded, must clearly show the parents understood what rights they were waiving and must specify the issues to be arbitrated.

In contrast, the court in Capital Finance Inc. v. Maureen Bell Asterbadi, entered an order on remand directing the parties to confer about a disputed issue (i.e., the rental value to be associated with the defendant’s exclusive occupancy of real property owned by both plaintiff and defendant) and, if the parties could not agree, to submit the issue “to binding arbitration before an arbitrator mutually satisfactory to the parties, with the costs thereof to be shared equally by the parties.” The judge also required the parties to submit any disputes they could not resolve involving other issues to binding arbitration, with the costs of arbitrating those disputes to be borne by the party whose position the arbitrator did not accept.

Defendant appealed, arguing that the judge did not have the authority to compel the parties, who had no agreement to arbitrate any dispute, to submit their disputes to binding arbitration. The Appellate Division agreed, holding that:
The law is well-settled. A court may not enter an order compelling arbitration sua sponte or on the request of one party absent a statute or an agreement of the parties compelling resolution of the dispute in that manner. Thus, the provisions of the order compelling arbitration exceed the authority of the court, and, for that reason must be reversed.

Therefore, neither party involved in a dispute in New Jersey can use any method but litigation to resolve their dispute unless the adversary voluntarily agrees to utilize the alternative dispute resolution procedure.

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