In Vanderslice v. Stewart, No. 073362, 2015 N.J. LEXIS
54 (N.J. Jan. 29, 2015), the Supreme Court of New Jersey decided
that a defendant could demand a trial de novo after a nonbinding
arbitration award was entered against it, despite its failure to
timely pay the required filing fee associated with the demand. This
decision is a good reminder that "nonbinding" arbitration
in the Superior Court of New Jersey may in fact become binding on a
party under a variety of circumstances. Significantly, under Rule
4:21A-6, if a party fails to demand a trial de novo within 30 days
of the arbitration award's entry, it becomes a final judgment
against that party.
Under New Jersey's court rules, certain civil actions are
submitted to mandatory, nonbinding arbitration after the end of the
discovery period. If a party is dissatisfied with the
arbitrator's decision, it may make a demand for a trial de novo
by filing the required demand forms, accompanied by a check, within
30 days of the filing of the arbitration award. A party may opt out
of nonbinding arbitration by sending a certification to the
Arbitration Administrator before the scheduling of the case for
arbitration or 15 days after, explaining why the matter is not fit
for nonbinding arbitration. After the case has been scheduled for
arbitration, a formal motion is required to remove it. If any party
objects to the removal of the case from arbitration, a judge makes
the final determination.
The plaintiff in Vanderslice sued the defendants -- Camden
County, Camden County Fire Police Department and one of the
Department's sergeants -- for personal injuries sustained in a
motor vehicle accident. The case was referred to mandatory,
nonbinding arbitration. The arbitration panel determined that the
defendants were 100 percent liable and awarded the plaintiff
$145,970 in noneconomic damages and lost wages. The next day, the
defendants submitted a demand form to the Arbitration Administrator
to vacate the arbitration award and proceed to trial.
However, the defendants attached a payment voucher that gave the
court the right to draw on Camden County's account with the
State Treasury. The Arbitration Administrator forwarded the payment
voucher to the State Treasurer, which issued a check 30 days later.
The Arbitration Administrator received the check two days later, 32
days after the arbitration award. Because the check was not
received within 30 days of the award, as required by the court
rules, the Arbitration Administrator concluded the defendants'
demand was not timely filed and neither filed the demand nor
deposited the check. The Arbitration Administrator did not notify
the defendants, as is required by Rule 1:5-6(c)(1)(A), that their
payment was nonconforming.
The defendants were alerted to their payment error only when the
plaintiff moved to confirm the arbitration award and enter
judgment. The trial court permitted the defendants to file their
demand late, concluding they "substantially complied"
with the court rules. The case proceeded to trial and the jury
returned a verdict in favor of the defendants. The plaintiff
appealed, arguing the trial court should not have permitted the
defendants' late filing. The Appellate Division agreed and
entered judgment in favor of the plaintiff, concluding that
defendants failed to show "extraordinary circumstances"
justifying the late filing of their demand.
The Supreme Court of New Jersey reversed the Appellate
Division's decision and found the demand was timely filed. The
Court relied on Rule 1:5-6(c)(1)(A), which requires the court clerk
to return a document to the party seeking to file it as
"Received but not Filed" if the filing fee has not been
paid. The filing party then has 10 days to cure its error. The
Court held that because the Arbitration Administrator failed to
notify the defendants that their filing was deficient, the 10-day
cure period never commenced. The Court concluded that because the
Arbitration Administrator received the check from the State
Treasurer before the defendants were even notified of their
deficient filing, the demand was not received out of time
"[b]y any measure."
Importantly, the Court did not address whether "substantial
compliance" or "extraordinary circumstances"
constitutes the proper standard for a motion to relax the 30-day
limit for filing a demand for a trial de novo.
Vanderslice underscores the potential finality of
nonbinding arbitration, particularly for unsuspecting parties. If
an arbitrator enters an award against a party, that award may
become a final judgment unless the party affirmatively acts
to vacate it. In Vanderslice, the Supreme Court of New
Jersey clarified only the standard applicable to demands that are
timely filed but deficient in some form. It left unresolved how
courts should adjudicate a party's motion to file a demand
after the 30-day limit has expired.
In addition to carefully complying with Rule 4:21A-6's
requirements, parties should determine at the outset of the case
whether they want to participate in nonbinding arbitration. If not,
parties should take advantage of the opt-out provisions as early as
practicable. Nonbinding arbitration in the Superior Court is a
misnomer, and parties should be aware of its many potential traps
or they risk finding themselves subject to an adverse judgment
without even going to trial,
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
