Newsletter September 2016

Newsletter September 2016


TITLE VII & LAD: ALTERNATIVE DISPUTE RESOLUTION

Ty Hyderally, Esq.September 2016 Newsletter

Alternative Dispute Resolution or “ADR” is just that – an alternative method for resolving a legal dispute rather than filing a complaint in a judicial forum. ADR encompasses a variety of alternate methods to resolve cases. These include various forms of arbitration and mediation, whether voluntary or mandatory. Parties may choose to participate in ADR pre-litigation – that is, before ever going to court, in an effort to avoid litigation altogether. Parties may also voluntarily agree to participate in ADR during various stages of litigation, in an effort to avoid further costs arising from protracted litigation. Courts may also compel parties to participate in arbitration or mediation while the case is pending in court, and thereby reduce the number of cases on its typically overcrowded docket. In addition, parties may be bound by a previously signed agreement to arbitrate and/or mediate a legal dispute.

Arbitration and mediation differ in a number of ways. Arbitration generally results in a decision that is made by the arbitrator, after the parties have an opportunity to present evidence and cross-examine witnesses, similar to a court proceeding. However, an arbitration hearing is somewhat less formal than a trial, follows procedural rules for the particular type of arbitration that is being conducted, and abides by a more relaxed application of the rules of evidence. An arbitrator’s decision may or may not be final and may be challenged in certain circumstances. Arbitration is normally favored by employers and incorporated into their policies or employee handbook. However, the New Jersey Appellate Division recently held that an arbitration provision included in an employee handbook which also contains language disclaiming that it constitutes an employment contract, is not enforceable. In Morgan v. Raymours Furniture Co., 443 N.J. Super. 338 (App. Div. 2016), the Court relied upon equitable principles in holding that an employer cannot get “both the benefit of its disclaimer in most instances, while insisting that the handbook was contractual when it suits its purposes — a proposition to be rejected if for no other reason than it runs counter to the ancient English proverb: ‘wolde ye bothe eate your cake, and haue your cake?’ John Heywood, Dialogue of Proverbs (1546).” Id. at 342. - See more about the enforceability of employer arbitration agreements at: http://www.employmentlit.com/2016/05/01/employers-cannot-have-their-cake-and-eat-it-too/#sthash.I90b5mON.dpuf

Unlike arbitration, mediation is conducted by a neutral third party, the mediator, who has no authority to make any decisions. Rather, the mediator’s impartial role is to facilitate the parties in voluntarily reaching a resolution of their dispute. The mediation occurs in an informal setting, with parties either sitting around a table, or in different rooms. The mediator may engage in a form of “shuttle diplomacy” moving back and forth between the parties, engaging various techniques to bridge the gap between the parties’ respective positions. However, the parties are not obligated to settle their controversy at mediation. If mediation is unsuccessful in resolving the dispute, the matter normally continues in another forum. In contrast, an arbitrator functions much like a judge, and renders a decision and often an opinion, based upon evidence and testimony presented at a formal hearing. Mediation also differs from arbitration in that it offers the parties the opportunity to fashion unique remedies and protections incorporated into a settlement agreement negotiated by the parties. Arbitration, on the other hand, results in a decision rendered solely by the arbitrator, usually without any input from the parties.

While they differ in a number of ways, arbitration and mediation both offer certain similar advantages over traditional litigation. They both provide quicker paths to deal with a legal dispute than traditional litigation, which is often long and protracted. They also both save not only time but substantial fees and costs as compared to traditional litigation. There is also the emotional strain caused by prolonged litigation that may be lessened if the matter proceeds through a more expeditious process of mediation and/or arbitration.

By Francine R. Foner, Esq.


TITLE VII & LAD: THE MEDIATION PROCESS

Ty Hyderally, Esq.

Alternate dispute resolution programs in New Jersey state court, including mediation and arbitration, are governed by New Jersey Court Rules 1:40-1, et seq. Mediation is more specifically governed by the General Rules for Mediation provided in R. 1:40-4 (“Mediation Rules”), as well as the New Jersey Mediation Act, N.J.S.A. §§ 2A:23C-1 to 2A:23C-13, and the rules of evidence, N.J.R.E. 519. The General Rules for Mediation cover such areas as confidentiality and the conduct of the mediation proceedings.

Confidentiality is a touchstone of the mediation process. As the New Jersey Supreme Court observed in Willingboro Mall, Ltd. v. 240/242 Franklin Ave., L.L.C., 215 N.J. 242 (2013), “[t]he success of mediation as a means of encouraging parties to compromise and settle their disputes depends on confidentiality,” so “our court and evidence rules and the Mediation Act confer a privilege on mediation communications, ensuring that participants’ words will not be used against them in a later proceeding.” Id. at 255. Therefore, as the saying goes “what goes on in Vegas stays in Vegas” can generally also be said of mediations – what goes on in mediations stays in mediations. The Mediation Rules thus provide that “Unless the participants in a mediation agree otherwise or to the extent disclosure is permitted by this rule, no party, mediator, or other participant in a mediation may disclose any mediation communication to anyone who was not a participant in the mediation.” R. 1:40-4(d). In addition, communications made at mediation are generally not subject to discovery or admissible in evidence in a proceeding. Marina Del Rey Assocs. v. Community Realty Mgmt., 2016 N.J. Super. Unpub. LEXIS 1873, *10-11 (App. Div. Aug. 10, 2016); N.J.S.A. 2A:23C-4(a); accord N.J.R.E. 519(a). However, an exception to this rule exists where “the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality, and that the mediation communication is sought or offered in: . . . (2) . . . a proceeding to prove a claim to rescind or reform or a defense to avoid liability on a contract arising out of the mediation. N.J.S.A. 2A:23C-6(b)(2). A party may also establish the substance of a confidential mediation communication in any proceeding by independent evidence. R. 1:40-4(c). Also, a mediator may disclose a mediation communication “to prevent harm to others to the extent such mediation communication would be admissible in a court proceeding.” R. 1:40-4(d). Finally, a mediator “has the duty to disclose to a proper authority information obtained at a mediation session if required by law or if the mediator has a reasonable belief that such disclosure will prevent a participant from committing a criminal or illegal act likely to result in death or serious bodily harm.” R. 1:40-4(d).

The Mediation Rules also require that all parties and their counsel “participate in the mediation process in good faith and with a sense of urgency in accordance with program guidelines.” R. 1:40-4(g). However, there is no definition of what does or does not constitute “good faith” within the meaning of the Mediation Rules. Rather, “[t]he Rule is silent as to the definition of “good faith,” a “concept that defies precise definition.” Hudson City Savings Bank v. Colyer, 2013 N.J. Super. Unpub. LEXIS 263, *22-23 (Ch. Div. Feb. 4, 2013) citing, Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210, 224 (2005). In fact, while a court may compel parties to attend a mediation session and participate in “good faith,” they cannot compel a party to settle. So is it bad faith if a party fails to make an offer or takes a “no pay” position at mediation?

There is scarce case law interpreting the meaning of “good faith participation” in mediation. In the unpublished and therefore nonbinding decision in Hudson City Savings Bank, the defendant borrowers moved to dismiss the bank’s complaint for foreclosure upon the ground that the lender failed to mediate in “good faith” as required by R. 1:40-4(g). Hudson City argued that its reliance on the internal set of guidelines to deny a loan modification was by itself sufficient to sustain a finding of good faith participation in mediation. The Hudson City Savings Bank Court’s decision set the bar on what qualifies as “good faith participation” incredibly low. First, it placed the burden on the party challenging the good faith of the adverse party to provide expert testimony on whether the defendant’s criteria for its position at mediation were unreasonable or were applied unreasonably. This would appear to require that any time a party claims their adversary should be held accountable for its failure to participate in mediation in good faith, they must retain an expert in the field at issue, to opine on the reasonableness of their adversary’s conduct, where the adversary claims to have relied upon internal policies in rejecting a settlement proposal. This certainly turns the concept of mediation on its head, as the mediation process is intended to streamline and reduce litigation costs, such as expert fees, not add to them. The Court further held that absent such expert testimony, only where a party “sit[s] with its arms crossed without intending to entertain any proposal” can lack of good faith be established. Such a standard gives parties who fail to mediate in good faith an easy out, as they can always say that they gave due consideration to any offer but based upon their business judgment decided to reject it. Nonetheless, it does appear to at least mandate that the parties engage in some negotiation and cannot simply refuse “to entertain any proposal” at mediation.

Thus, there have yet to be any cases which give any significant “teeth” to the “good faith” requirement. Rather, it appears that good faith participation in mediation is satisfied by merely showing up at the party and not crossing one’s arms.

By Francine R. Foner, Esq.

 
 

WE HAVE A SETTLEMENT – NOW WHAT?

Ty Hyderally, Esq.

You have been at mediation for several hours and the mediator happily informs you that the other side has agreed upon your last proposal to settle the case. You are relieved that the matter has been settled and get up to leave. Not so fast. Once the parties come to an understanding of the settlement amount and essential terms at mediation in New Jersey, the mediator has an obligation to reduce the settlement to a signed written agreement, or the settlement will not be enforceable. Willingboro Mall Ltd. supra at 245. The mediator will therefore either write up the parties’ agreed upon “essential” terms or have counsel write up an agreement, which is then signed by all parties, subject to a more formal and usually much longer formal settlement agreement to be drafted and signed thereafter. In addition, counsel may have come to the mediation with a pre-drafted formal settlement agreement which the parties then may review and revise as necessary, and sign at the mediation.

In the employment litigation context, the formal settlement agreement includes a number of typical provisions to protect the interests of both the employer and the employee. From the defendants’ standpoint, of primary concern is a general release of claims, as well as release of a myriad of specified claims that the plaintiff releases in exchange for the settlement. In addition, a provision regarding the confidentiality of the settlement is often of critical concern to an employer, as well as tax indemnification language. Other common terms include a mutual non-disparagement clause, a provision that the employer will not contest any unemployment claim, a neutral job reference, and characterization of the settlement monies as gross funds for which a 1099 will be issued, and/or payments from which withholdings will be taken and a W-2 issued, and/or attorney’s fees. There is also often a provision governing what happens in the event either party breaches the settlement agreement.

By Francine Foner, Esq.

 

These articles are for informational purposes only. They do not constitute legal advice, and may not reasonably be relied upon as such. If you face a legal issue, you should consult a qualified attorney for independent legal advice with regard to your particular set of facts. This newsletter may constitute attorney advertising. This newsletter is not intended to communicate with anyone in a state or other jurisdiction where such a newsletter may fail to comply with all laws and ethical rules of that state of jurisdiction.

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