Are There Restrictions on the Arbitrator Serving as Mediator?
The different roles of arbitrators and mediators are well recognized in dispute resolution.
An arbitrator is essentially selected by the parties to provide a final determination of substantive issues, often with the expectation that the process will afford benefits in terms of speed, cost, finality and confidentiality.
Mediators, on the other hand, engage in a facilitative process in which they seek to assist the parties in achieving a settlement. Mediation often involves the disclosure of confidential information by one party to the mediator; this exchange allows the mediator to suggest possible resolutions based upon a clearer understanding of the interests of the parties.
If an arbitrator preliminarily serves as a mediator, however, can this result in the invalidation of the arbitrator's continuing authority to render an award?
Such an unanticipated disqualification of an arbitrator was recently considered in New Jersey in Minkowitz v. Israeli (Superior Court of New Jersey, Appellate Division, decided Sept. 25, 2013).
In Minkowitz, a matrimonial dispute, the parties had agreed to submit the matter to binding arbitration.
Thereafter, the attorneys and accountants for the parties met with the arbitrator to discuss certain limited aspects of the dispute and to receive recommendations regarding resolution. Various agreements in writing were reached, including a memorandum of understanding described as having been reached between the parties "after mediation with the assistance of the 'arbitrator.'"
Following these negotiations, one party sought not only to have these prior agreements set aside but also to disqualify the arbitrator because he had participated as a mediator. The arbitrator disagreed that his prior activities reflected mediation on his part. He continued with the arbitration (with the approval of the trial court) and entered further arbitration decisions relating to the remaining outstanding issues.
Eventually, the New Jersey Superior Court, Appellate Division, held that the prior agreements and memorandum of understanding were binding as settlement agreements that were not precluded by the agreement to arbitrate. These arbitrator-assisted agreements "were not the product of arbitration, but mediation." The court said, "Even though the parties contracted to pursue 'binding arbitration' their change of course to utilize mediation will not invalidate their settlement agreements."
The court further decided, however, that as the parties had interacted with the selected arbitrator as a mediator, he could no longer revert to his original role as an arbitrator with respect to the remaining issues. Accordingly, any arbitration decisions rendered by him subsequent to his service as a mediator were invalid and must be set aside. A new arbitrator would be named for the remaining proceedings.