New Appellate Division Decision on Importance of Arbitration Agreement Formalities: A Cautionary Tale

Fox Rothschild LLP

Fox Rothschild LLP

I have extensively blogged on the importance of formalizing arbitration agreements in the context of divorce or post-judgment actions in compliance with the applicable Court rules, offering technical and practical advice if you considering arbitration as an alternative dispute resolution avenue to resolve your case.

The recent New Jersey Appellate Division case of Kotsogiannis v. Dimaras (A-1426-22) serves as a cautionary tale for divorcing couples, highlighting the critical importance of formalizing agreements to arbitrate through enforceable channels in post-judgment family matters. The case delves into the complexities surrounding deficient arbitration agreements and the crucial role of Rule 5:1-5 of the New Jersey Court Rules in ensuring their enforceability.

Ioanna Kotsogiannis and John Dimaras, divorced in 2015, found themselves embroiled in a post-judgment dispute several years later regarding child support and parenting time adjustments for their eleven-year-old son. Unable to reach an agreement through mediation, Ms. Kotsogiannis filed a motion in 2021, triggering further litigation.

In an attempt to resolve the dispute amicably, the parties entered into a Consent Order in February 2022. The Consent Order outlined adjustments to child support and parenting time, seemingly offering a solution to their ongoing disagreements. However, a critical oversight in the agreement’s execution would have significant ramifications.

Specifically, the critical oversight in the February 2022 Consent Order centered on its failure to comply with the specific requirements outlined in Rule 5:1-5, which identifies the prerequisites for an enforceable consent order, including an arbitration questionnaire, which “shall be signed by each party” and “attached to the . . . [c]onsent [o]rder, and filed with the court.” R. 5:1-5(b)(1). Additionally, the arbitrator selected by the parties must sign an arbitrator disclosure form, attach it to the consent order, and file it with the court. R. 5:1-5(b)(2).

Importantly, per Rule 5:1-5(b)(3)(A), a consent order to arbitrate must not only be executed by the parties, but it must specifically state:

  • the parties understand their entitlement to a judicial adjudication of their dispute and are willing to waive that right;
  • the parties are aware of the limited circumstances under which a challenge to the award may be advanced and agree to those limitations;
  • the parties have had sufficient time to consider the implications of their decision to arbitrate; and
  • the parties have entered into the . . . [c]onsent [o]rder freely and voluntarily, after due consideration of the consequences of doing so.

[Rule 5:1-5(b)(3)(A).]

Moreover, Rule 5:1-5(b)(3)(B) states, in part,

in all family proceedings involving child-custody and parenting-time issues, the . . . [c]onsent [o]rder shall provide that:

  • a record of all documentary evidence shall be kept;
  • all testimony shall be recorded verbatim; and
  • the award shall state, in writing, findings of fact and conclusions of law with a focus on the best interests of the child standard. [Rule 5:1-5(b)(3)(B).]

Rule 5:1-5(b)(3)(C) further requires that “in all family proceedings involving child support issues, the . . . [c]onsent [o]rder shall provide that the award shall state, in writing, findings of fact and conclusions of law with a focus on the best-interests standard, and consistent with R[ule] 5:6A and Rules Appendix IX.”

The agreement in this case critically failed to fulfill the requirements set forth by Court Rule, including the mandatory questionnaire signed by the parties, an arbitrator disclosure form, or the specific terms required under Rule 5:1-5(b)(3). This seemingly minor oversight led to significant consequences.

The trial court, without heeding the husband’s objections related to the prerequisites that were lacking in the execution of the Consent Order, proceeded to issue subsequent orders in August and December 2022, and January 2023. These orders, based on the terms outlined in the February 2022 Consent Order, addressed child support, parenting time, and attorney fees.

The husband appealed. In reversing the trial court’s decision, the Appellate Division determined that the failure to adhere to the Rule’s requirements rendered the entire agreement unenforceable under New Jersey law. This meant that the agreement lacked the legal authority to hold weight in court and dictate the terms of child support and parenting time. Consequently, all subsequent orders stemming from the unenforceable Consent Order, including those addressing child support, parenting time, and attorney fees, were deemed invalid.

This case, thus, serves as a stark reminder of the potential pitfalls associated with failure to adhere to requirements set forth by Court Rule related to agreements to arbitrate. While attempting to resolve disputes outside of formal court proceedings can seem appealing, neglecting to comply with established legal requirements can have significant repercussions, leading to further litigation and wasted time and resources.

For more information concerning arbitration and requirements related thereto, see my prior blog posts:

Setting Aside Bais Din Agreements to Arbitrate Due to Procedural Issues

Arbitration Questionnaire Versus Umpire/Arbitrator’s Disclosure

Vacating an Arbitration Award in the Bais Din – Part I

Vacating an Arbitration Award in the Bais Din – Part II

Do Not Sign Agreement to Arbitrate Without the Advice of a Lawyer

Duress as a Defense to Bais Din Agreements to Arbitrate

Considerations for Custody Arbitrations in Bais Din

Prohibition Against Dayanim Assuming Dual Roles in Custody Arbitrations in Bais Din

Appellate Division Rules That A Court Cannot Compel Arbitration on Get Issue Absent Agreement

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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