Form Said 'Mediation,' But It Was Arbitration, Court Rules

An attempt to overturn an arbitration award based on one side's claim that it believed it was engaged in mediation, not binding arbitration—an “unusual circumstance,” as the court put it—has failed.

“With the exception of the retired judge's mistake in having the parties execute a document memorializing the terms of a 'civil mediation,' there is no doubt that the parties agreed to and in fact participated in binding arbitration,” the Appellate Division said Nov. 16 in Marano v. The Hills Highlands Master Association.

As for the retired New Jersey judge who handled the matter, Robert Feldman, he said any claim that the proceedings were anything other than binding arbitration is “dead wrong.”

“It was clearly an arbitration case,” Feldman told the Law Journal. “To mediate that case means one side or the other had to agree to something. Those people, left to their own devices, weren't going to agree to anything.”

The case began as a dispute about flooding between homeowners Richard and Eileen Marano and their homeowners' association at the Hills Highlands community in Basking Ridge. In March 2014, the Maranos' attorney wrote to the association demanding “arbitration,” and in response, the association's attorney disputed the factual allegations and asserted that it was not required to participate in arbitration, but was willing to “participate in ADR,” according to the decision.

The association contended that the Maranos' dispute was with their neighbors, not the association, the court noted.

Correspondence between counsel to the Maranos and the association continued. The court noted the numerous references to “arbitration” contained in those communiques in early to mid-2014.

Feldman, a retired Monmouth County Superior Court judge who now has a solo practice in Neptune, was retained to handle the matter.

“Certainly, everything up to this chronological point demonstrates the parties agreed to arbitrate,” the panel said. “The uncertainty, unfortunately, arose after the retired judge accepted the appointment, when he forwarded a form agreement that called for mediation.”

The document was titled “civil mediation agreement,” though the Maranos' lawyer, in signing it, noted that the proceedings were understood to be arbitration, not mediation, an assertion that the association did not respond to or question, according to the decision.

The neighbors whom the association alleged were responsible for the flooding issue were notified of the proceedings, according to the decision.

The proceedings involved witnesses, and Feldman ultimately issued an “Award In Arbitration,” ordering the association to pay for repairs and to advance repair funds to other property owners affected by the flooding, according to the decision.

In 2015, the Maranos filed an action in Somerset County Superior Court seeking confirmation of Feldman's award. The association opposed it, claiming that the parties engaged in nonbinding mediation, not binding arbitration. Superior Court Judge Yolanda Ciccone issued a letter opinion noting that the parties at times had used “arbitration” and “mediation” interchangeably, but clearly engaged in binding arbitration. The association appealed.

In a per curiam decision, Appellate Division Judges Clarkson Fisher Jr., Thomas Sumners and Scott Moynihan affirmed, finding “no evidence in the record on appeal to suggest that the Association ever asserted that the parties were merely mediating and were not arbitrating their disputes.”

The panel said: “To the extent there is a colorable argument as to what the Association bylaws compel, the record is clear that the parties agreed to arbitrate, not mediate.”

The court noted the association's “interesting questions about the impact of the arbitration award … on individual property owners who were not parties to either proceeding”—raised because the arbitration award could lead to the association demanding neighbors to pay for repairs, even though the neighbors didn't attend the proceedings. But the court said it would not address the questions.

“If any nonparty is aggrieved by the fact or manner in which their rights have been adjudicated by either the arbitrator or the motion court, whether they are so bound will be determined when or if they ever present those grievances,” the panel said.

The Maranos' counsel, Jeffrey Wilson of Hedinger & Lawless in Florham Park, said the association and its counsel “behaved throughout as if it was binding arbitration.”

“I think that this was just a fishing expedition from the beginning,” Wilson added. “This document should have been returned to the judge … but at the time, nobody imagined the issue would be raised.”

The association's appellate counsel, Gregg Sodini of Cutolo Barros in Manalapan, said the association believed it was engaged in mediation, and is considering filing a petition for certification to the state Supreme Court.

“People get loosey-goosey with language,” Sodini said. “It's a good public policy case” that “could have far-reaching effects within the [Hills Highlands] community” because so many homeowners were affected by the flooding issue, he said.

“To agree to binding arbitration is a big deal. … The Supreme Court has said it has to be crystal clear,” he added, noting that although the association is not a consumer, it's also not a sophisticated commercial entity.

Sodini pointed out that Feldman had ex parte contact with each side, which he claimed was in the nature of mediation, but Wilson countered that such contact is not unusual in arbitration.

Feldman said the reference to mediation on the retainer he sent to the parties “meant nothing” as to the nature of the proceedings. “They knew that from day one—that this was going to be binding arbitration.”

“Most of my proceedings are very informal,” Feldman said, noting that, in the Marano matter, there was no strict adherence to evidence rules. Still, he said, confusion about the nature of ADR proceedings typically does not arise.