Malik v. Ruttenberg
942 A.2d 136, 398 N.J. Super. 489 (2008)
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Rule of Law:
An arbitrator or an arbitration organization is immune from civil liability for acts performed in a quasi-judicial capacity, which includes controlling the proceedings. This immunity is coextensive with that of a judge and protects against liability for decisions made while managing a hearing, such as calling a recess or denying a motion to remove a participant.
Facts:
- Ric Malik entered into a contract to perform substantial home renovations.
- A dispute arose between Malik and the homeowners, which, per the contract, was submitted to arbitration with the American Arbitration Association (AAA).
- Peter Liloia was appointed as the arbitrator for the proceeding, which was described as protracted and contentious.
- On November 17, 2005, Malik's attorney requested that Liloia remove the homeowners' attorney from the proceeding.
- Liloia denied the request to remove the attorney and called a brief recess.
- During the recess, the homeowners' attorney allegedly assaulted Malik in the lobby, outside the arbitration room.
- Liloia did not witness the altercation.
Procedural Posture:
- Ric and Karen Malik sued the American Arbitration Association (AAA) and arbitrator Peter Liloia in a New Jersey trial court, alleging negligence.
- AAA and Liloia filed a motion to dismiss the complaint, arguing they were protected by arbitral immunity.
- The trial court judge denied the initial motion to dismiss.
- After filing an answer, AAA and Liloia renewed their motion to dismiss.
- The trial court judge again denied the motion to dismiss, finding that the Maliks had stated a viable cause of action in tort.
- The Superior Court of New Jersey, Appellate Division, granted AAA and Liloia (as appellants) leave to appeal the trial court's interlocutory order. The Maliks are the respondents in this appeal.
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Issue:
Does the arbitral immunity provided by N.J.S.A. 2A:23B-14a protect an arbitrator and an arbitration organization from civil liability for an alleged failure to control a participant, which resulted in a physical assault during a recess of the arbitration proceeding?
Opinions:
Majority - Cuff, P.J.A.D.
Yes. The arbitral immunity provided under state law protects an arbitrator and an arbitration organization from civil liability for actions taken within their adjudicative function. The New Jersey Arbitration Act (N.J.S.A. 2A:23B-14a) explicitly grants arbitrators and arbitration organizations immunity from civil liability to the same extent as a judge acting in a judicial capacity. This judicial immunity is absolute and applies to all 'judicial acts' performed within the individual's jurisdiction. The court determined that controlling the proceedings—including denying a request to remove an attorney and calling a recess—is a quintessential judicial function. Therefore, any alleged failure in performing this function, even if it leads to harm, is protected by absolute immunity. To hold otherwise would render the immunity afforded to the arbitrator illusory and undermine the policy of favoring arbitration as an efficient means of dispute resolution.
Analysis:
This decision significantly reinforces the breadth of arbitral immunity in New Jersey, extending it beyond the final decision to cover the procedural management of the hearing itself. By classifying an arbitrator's control over the conduct of the parties and the scheduling of recesses as a core 'judicial act,' the court makes it exceedingly difficult to hold arbitrators and their sponsoring organizations liable for anything short of actions taken in the complete absence of jurisdiction. This ruling strengthens the finality of arbitration by protecting arbitrators from collateral attacks based on how they managed a proceeding, thus allowing them to make necessary, and sometimes contentious, procedural rulings without fear of subsequent litigation.
