Curran v. Curran
181 A.3d 1025, 453 N.J. Super. 315 (2018)
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Rule of Law:
An illegal or unenforceable clause within an arbitration agreement can be severed, and the remainder of the agreement can be enforced, so long as the illegal clause does not defeat the primary purpose of the contract.
Facts:
- After Robert Curran filed for divorce from Debra Curran, the two parties agreed to resolve the economic issues of their divorce through binding arbitration pursuant to the New Jersey Arbitration Act.
- The parties' attorneys inserted a handwritten clause into the arbitration agreement stating, 'The parties reserve their rights to appeal the arbitrator's award to the appellate division as if the matter was determined by the trial court.'
- Both Robert and Debra Curran initialed this handwritten addition to the agreement.
- The parties also signed a separate retainer agreement with the selected arbitrator, which explicitly stated that the arbitrator's decision would be final, binding, and not appealable except under the limited grounds provided by the New Jersey Arbitration Act.
- The arbitrator conducted the proceedings and issued a final award resolving the economic issues between Robert and Debra Curran.
Procedural Posture:
- After the arbitrator issued a final award, Robert Curran filed a motion in the Law Division (trial court) to modify the award, citing the handwritten appeal clause.
- Debra Curran filed a cross-motion in the trial court to confirm the arbitration award.
- The trial judge found the appeal clause unenforceable but proceeded to conduct a comprehensive review of the award before confirming it.
- The trial court entered an order confirming the arbitration award.
- Robert Curran (appellant) appealed the trial court's order to the Appellate Division of the Superior Court of New Jersey, arguing for the first time that the entire arbitration agreement was void due to the illegal clause. Debra Curran is the appellee.
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Issue:
Does an illegal clause in an arbitration agreement, which purports to create a right to a direct appeal to the Appellate Division, render the entire arbitration agreement and the resulting award unenforceable?
Opinions:
Majority - Currier, J.A.D.
No, an illegal clause in an arbitration agreement does not render the entire agreement unenforceable if the clause can be severed without defeating the contract's primary purpose. The primary purpose of this agreement was the resolution of the parties' divorce issues through binding arbitration, a goal that is not defeated by striking the unenforceable appeal provision. The strong public policy favoring arbitration supports severing the offending clause and upholding the remainder of the agreement. Parties cannot create subject matter jurisdiction by contract, so the clause allowing a direct appeal to the Appellate Division was correctly identified as illegal and unenforceable. However, because the central purpose—to arbitrate the dispute—was clear and was fulfilled, the trial court correctly severed the invalid clause and confirmed the award after finding no statutory grounds for vacating it.
Analysis:
This case reinforces New Jersey's strong public policy in favor of arbitration and applies the contract law principle of severability to arbitration agreements. The decision clarifies that parties cannot contractually create appellate jurisdiction where none exists by statute or constitutional provision. It establishes that an attempt to do so, while illegal, will not necessarily void the entire arbitration agreement. This precedent guides lower courts to preserve arbitration awards by severing improper procedural clauses, so long as the core agreement to arbitrate remains intact, thereby promoting finality and efficiency in dispute resolution.
