Arons & Solomon | February 20, 2015 | Articles
What You Should Know about Arbitration and Divorce in New Jersey
Arbitration is a method of resolving disputes in a divorce matter outside of the traditional courtroom. In particular situations, you may want to consider arbitration, such as where complex financial issues require testimony necessitating trial dates spread out over many months with lots of waiting for the Judge to be available in a congested court system. Or, perhaps nearly all issues are resolved by agreement but the parties need help with a remaining “sticky” issue or issues. Or, more commonly, there may be issues relating to unreported or under-reported income as discussed below.
What is divorce arbitration?
In arbitration, a neutral third party who is usually a lawyer or retired judge selected by both parties serves as the arbitrator. The arbitrator hears the issues and testimony of the parties and their witnesses, and reviews the evidence as a judge would at a trial.
The divorcing couple sets ground rules.
The parties not only select the arbitrator, they also agree in advance to whatever ground rules will be used in the arbitration process, which adds some flexibility and comfort to a generally uncomfortable situation. For example, the parties may agree in advance of the hearing to relax the Rules of Evidence and procedural rules that would be applicable in a courtroom. Adding to the more relaxed nature of arbitration is the fact that it generally takes place in a private office. There should be a court report present, however, to maintain an accurate record in the event of appeal.
Arbitration may expedite the matter.
Since the Rules of Evidence and Court procedures are generally relaxed in arbitration, the arbitrator may reach a decision more quickly than a judge. Additionally, arbitration can often be scheduled to begin early in the day and run for consecutive days, something that is rarely, if ever, possible in Family Court. Alternatively, parties may be able to schedule arbitration around work or childcare responsibilities rather than having to march to the Court’s schedule.
Arbitration may save you money.
Even after paying the arbitrator, arbitration may save money since it is a more efficient use of everyone’s time.
Sheridan v. Sheridan, 247 N.J. Super. 552 (Ch.Div. 1990).
If either party is self-employed or there are possible issues of unreported or under-reported income, so-called “Sheridan” issues may arise. In the landmark case of Sheridan v. Sheridan, the court was asked to decide if the couple’s marital property, acquired through questionable funds which were not reported for federal or state taxing purposes, was subject to equitable distribution. In Sheridan, the court ruled that the parties’ use of large sums of undeclared cash generated from illegal activities for living expenses, real estate, and other purposes justified a one-year stay on the distribution of the remaining assets of the marital estate so that governmental agencies could intervene while the Court reported the matter to the taxing authorities.
Sheridan has come to mean that where a judge receives credible evidence of unreported or under-reported income, he or she is obligated to report the parties to the taxing authorities. Generally, arbitrators are not under the same obligation. However, if arbitration is being considered due to suspected unreported or under-reported income, the parties must inquire of arbitrators they are considering as to their positions with regard to reporting parties having unreported or under-reported income to the taxing authorities.
The arbitrator’s decision is binding.
Unlike mediation, a process which is non-binding, arbitrated decisions are binding, just as if the judge had made a decision from the bench. And just as a judge’s decision can be appealed, so, too, can an arbitrated decision be appealed.
At Arons & Solomon, our family law attorneys can recommend trusted divorce arbitrators who are unbiased and who render decisions in a fair and balanced way. Our lawyers have experience in all approaches to divorce and marital dispute resolution.