In Minkowitz v. Israeli, the Appellate Division set aside an arbitration award entered by an arbitrator who had also mediated the arbitrated issues for the parties in a family law matter. The court found the arbitrator exceeded his powers, thus justifying a vacation of the award under N.J.S.A. 2A:23B-23a(4).
The court did acknowledge that R. 1:40-2d(1) recognizes a “mediation-arbitration” process in which “after an initial mediation, unresolved issues are then arbitrated,” but held that such proceedings must be conducted by different neutrals. In the 10 pages devoted to a discussion of this issue, there is one saving phrase. The court stated, “based on our determination, absent the parties’ contract to the contrary, once a neutral assumes the role of mediator, he or she may not assume the role of arbitrator.” In the Minkowitz case, there had been a timely objection to the arbitrator’s continuing after a hiatus in the arbitration during which the arbitrator attempted to facilitate a settlement and then resumed his role as the arbitrator, and there was no agreement that he could continue in his arbitrator role. The facts of the case reveal, however, that there were few if any confidential materials supplied to the arbitrator, but rather, only an in-depth review of financial documents that was discussed with the parties. Some matters were settled, and some continued for eventual evaluation by the arbitrator.
We take issue with the conclusion that the two roles are inherently incompatible. Of course, if matters that have the potential of destroying objectivity are revealed to an arbitrator, he should not continue, and should recuse himself. This is much the same as a judge who holds settlement conferences in an attempt to resolve issues or the entire matter prior to or during a trial. The judge or arbitrator is deemed able to separate inadmissible material heard during settlement discussions from evidence that can properly support a decision. This is also similar to a charge given to a jury when inadmissible evidence is stricken. There are times, however, where the material is of such weight and has sufficient prejudicial effect that a mistrial is required. But in the same manner as judges are not required to forgo holding settlement conferences, arbitrators should not be precluded in the usual course from engaging in mediation efforts.
Experience has shown that many mediations that do not result in a total agreement do establish “high-lows” and that the parties then engage the mediator to arbitrate the matter between those limits. In other cases where the settlement range is not so clearly defined, the parties to a mediation recognize that the mediator has spent so much time reading agreements, listening to the parties’ representations and studying expert reports that the least expensive and time-consuming route is to engage that mediator to arbitrate the dispute. The mediation representations may be considered as the testimony (sometimes with brief cross-examination, but usually not) and the various mediation exhibits then become the documentary evidence in the arbitration. In such cases, the best practice is to have a formal arbitration agreement signed by the parties authorizing this procedure. The aim is to resolve the dispute, not to disqualify the neutral who has aided the parties to conclude the matter.
The court in Minkowitz reached the correct result. Certainly, if the parties have specifically agreed that the arbitrator may continue after mediation, that agreement should be enforced. Minkowitz recognized as much. Of course, if there is proof that the arbitrator can no longer proceed fairly, perhaps because of a lack of continued neutrality perceived by the parties, there should either be no arbitration at all or arbitration should go forward only with a different neutral. In general, however, where parties agree to proceed through mediation and arbitration with the same neutral, their agreement should be enforced.