In the New Jersey Superior Court, personal injury lawsuits are subject to mandatory arbitration pursuant to Rule 4:21A-1. These suits would include automobile accidents and all other personal injury matters except professional malpractice and products liability lawsuits. Once an arbitration award is entered, a decision needs to be made whether to accept or reject the award. What are the consequences of this decision?
While it is mandatory to participate in the arbitration hearing, any party may reject the arbitration award by filing with the court a demand for a trial de novo within 30 days of the award and paying a filing fee of $200. If the award is rejected, the court will then schedule the case for a trial. Hence, while it is mandatory to participate in the arbitration, the award is not binding if either party rejects the award. Pursuant to Rule 4:21A-6, a trial is to be scheduled within 90 days of the rejection of the award.
However, under this rule, the party rejecting the award could be subject to an award of reasonable costs incurred by the other party under certain circumstances. The “rejecting” party may be liable to pay the reasonable costs, including attorney’s fees, incurred after rejection of the award by those parties not demanding a trial de novo.
No costs will be awarded if the party demanding the trial de novo obtains a verdict at least 20% more favorable than the award. Or, if the award entered no award for monetary damages, no costs will be awarded if the party demanding the trial de novo obtains a verdict of at least $250. Thus, the award of costs will depend upon the ultimate verdict, as compared to the arbitration award.
Costs to be awarded under this court rule, however, are relatively modest. Attorney’s fees to be awarded shall not exceed $750 in total, nor $250 per day. Compensation for witness costs, including expert witnesses, shall not exceed $500. And, if the court is satisfied that an award of reasonable costs will result in substantial economic hardship, it may deny an application for cost or award reduced costs.
Most cases will either settle within the 30 day time period following the award or one of the parties will file for a trial de novo. But, what happens if the case does not settle within that time period and no party files a demand for a trial de novo?
Within 50 days after the filing of the award, any party may move for confirmation of the arbitration award and entry of judgment thereon. The judgment of confirmation shall include prejudgment interest. If no party files for a trial de novo and no party moves to confirm the award within 50 days of the filing of the award, then the court would enter an order dismissing the action.
In practice, no party will move to confirm the award within the first 30 days because either the parties will be negotiating or considering a settlement or it would simply prompt the other party to reject the award and file a trial de novo request. However, it is important to realize that, if you are satisfied with the award, if you do not settle the case within 30 days of the arbitration award, there may be consequences.
After the 30 day time period, the other party can move to confirm the award and request the entry of a judgment. At that point, you may not be able to negotiate settlement terms, both monetary and nonmonetary, including obtaining a release or other nonmonetary terms. Also, you could be subject to the payment of prejudgment interest (if the other party requests it, it is mandatory for the court to award it), which would be added on top of the arbitration award that was entered. Last, it means that a judgment is entered against the defendant, which then requires a warrant to satisfy that judgment to reflect on the court’s docket that the judgment has been paid. If the case is being defended through an insurance company, the carrier must understand that the consequence of permitting the award to be confirmed could result in a judgment against its insured.
Thus, all of these factors must be taken into consideration when deciding whether to accept or reject an arbitration award within that 30 day time period following the arbitration hearing.
