A recent Appellate Division opinion confirms the general rule that trial orders confirming, modifying or correcting an arbitration award are precluded from appellate review by statute, the Alternative Procedure for Dispute Resolution Act (APDRA). This decision is an important read for anyone with an arbitration clause in his or her marital settlement agreement.
In DiMaggio v. DiMaggio, the ex-wife appealed a trial court’s order confirming an arbitration award issued pursuant to the APDRA. The award was made after her ex-husband sought a modification of the equitable distribution award set forth in their marital settlement agreement.
The parties divorced in 2007 after a 24-year marriage. Their marital settlement agreement (“MSA”) required the ex-husband to pay $1.4 million to his ex-wife in $200,000 installments, over a period of 5 years, with a 6% annual interest rate. The MSA also required the parties to submit all post-judgment financial disputes to arbitration under the APDRA. On the ex-husband’s application, the arbitrator entered an order reducing and extending the equitable distribution payments. The ex-wife filed a motion for reconsideration with the trial court, which resulted in a limitation of the reduced payment plan to 2 years, at the end of which the ex-husband would be required to demonstrate the appropriateness of further extending the reduced payment plan. In the interim, the ex-wife filed a motion to vacate the arbitrator’s award, which was denied.
The ex-husband made payments in accordance with the modified plan for 2 years, after which the arbitrator conducted hearings to reassess the feasibility of continuing with the reduced plan. At no point was the total amount of the equitable distribution award ($1.4 million) reduced. The modified plan, however, permitted the ex-husband to pay the outstanding sum in $40,000 increments, over 25 years, with a 1% annual interest rate. Following the hearings, the arbitrator confirmed that this reduced payment plan would permanently replace the original plan as set forth in the parties’ marital settlement agreement.
The ex-wife again filed a motion with the trial court to vacate the award. At oral argument, the ex-wife’s attorney argued that the arbitrator made improper fact findings and legal conclusions, ignored pertinent evidence that the ex-husband was hiding assets, and was biased in favor of the ex-husband. The trial court ultimately confirmed the arbitrator’s award.
On appeal, the ex-wife argued that the trial court incorrectly applied the standards of review as set forth in the APDRA, impermissibly adopted the factual and legal conclusions from the court that ruled on her prior motions, and improperly confirmed the award in contravention of public policy.
The Appellate Division stressed that under the APDRA, there is generally no further appeal or review of the judgment resulting when a trial court confirms, modifies or corrects an arbitrator’s award. However, the Appellate Division acknowledged several limited exceptions that enable the appellate court to review the trial court’s decisions regarding arbitration awards issued pursuant to the APDRA:
(1) the appellate court can review trial court orders as they relate to child support issues;
(2) the appellate court can review trial court orders as they relate to attorney’s fees;
(3) the appellate court can review trial court orders that indicate clear bias;
(4) the appellate court can review trial court orders where it is determined that the trial judge misapplied or ignored the standard of review under the APDRA; and
(5) the appellate court can review trial court orders where the arbitrator ordered relief in excess of his or her powers.
The Appellate Division found that where a trial court provides a rational explanation of its decision regarding review of the arbitration award, the general rule of the APDRA applies and appellate review is precluded. Moreover, the appellate court found that none of the limited exceptions to the APDRA were triggered by the trial court order in DiMaggio. Importantly, even if the appellate court disagreed with the trial court’s ruling, the legislative intent to prohibit appellate review must be honored by the court, as long as the trial judge complied with the standards of the statute.
When contemplating whether to incorporate an arbitration clause in a marital settlement agreement, a divorcing party should consult with his or her attorney regarding the implications of the APDRA. While arbitration may be a more efficient and cost-effective way to resolve post-judgment disputes, a party must be aware that he or she will only have one opportunity to appeal the arbitrator’s award – with the trial court. Either party runs the risk of being stuck with an arbitration award he or she does not favor, with more limited opportunities to challenge the award than would otherwise be available if a post-judgment motion was made initially with the trial court.