State Farm had a contract with Arbitration Forums, Inc. ("AF") providing for AF to arbitrate PIP reimbursement disputes.

In moving to compel arbitration, State Farm represented that AF was the least costly, charging a $70 fee, and the fastest forum with the most arbitrators. Thus, State Farm's motion requested arbitration through AF.

The trial court granted State Farm's motion and ordered arbitration through AF. The trial court noted that Hereford had not suggested an alternative arbitration organization and had not provided a persuasive reason why AF should not conduct the arbitration.

When the order was entered, AF was providing in-person arbitration hearings in New Jersey. AF subsequently discontinued its practice of in-person hearings in favor of telephonic hearings.

Hereford moved to compel AF to conduct an in-person arbitration hearing at a physical location. Hereford argued that the New Jersey Uniform Arbitration Act ("NJUAA"), N.J.S.A. 2A:23B-1 to -32, which governed the intrastate dispute, required an in-person hearing for all arbitrations.

State Farm took no position on Hereford's motion.

The trial court denied Hereford's motion to compel an in-person hearing. It reasoned that in-person hearings were not required under the NJUAA, and that the parties would not be deprived of their due process rights by appearing telephonically.

Hereford appealed, contending that it was entitled to a hearing at a physical location under the NJUAA.

New Jersey Law

The NJUAA provides that an arbitrator:

may conduct an arbitration in such a manner as the arbitrator considers appropriate for a fair and expeditious disposition of the proceeding.

The Appellate Court's Decision

The appellate court affirmed.

In its decision, the appellate court explained that the NJUAA did not specify that an arbitration hearing must be "in-person" and it did not define whether "in-person" meant at a physical location, telephonically, or otherwise.

Instead, the appellate court said, the NJUAA granted the arbitrator discretion to conduct a "fair and expeditious disposition" in a manner considered appropriate by the arbitrator.

Accordingly, the appellate court held that the NJUAA did "not require an in-person hearing for every arbitration."

After noting that the rules of the American Arbitration Association ("AAA") and the rules of the International Institute for Conflict Prevention & Resolution ("CPR") did not require in-person hearings in all arbitrations, the appellate court reasoned that, absent an express provision in the parties' contract, the type and manner of the hearing was "left to the discretion of the arbitrator."

Moreover, it added, if a hearing was afforded, it could be "in-person, by telephone, or by other electronic means."

The appellate court then ruled that, absent a contract between the parties providing otherwise or a specialized showing, telephonic hearings were permissible under the NJUAA. A telephone hearing, the appellate court concluded, would afford the parties "the opportunity to be heard, present evidence, cross-examine witnesses, and make arguments."

The case is State Farm Guaranty Ins. Co. v. Hereford Ins. Co., No. A-3749-16T3 (N.J. App.Div. March 14, 2018). Attorneys involved include: David J. Dickinson argued the cause for appellant (McDermott & McGee, LLP, attorneys; Gabrielle J. Pribula, on the brief); Leah A. Brndjar argued the cause for intervenor-respondent Arbitration Forums, Inc. (Goldberg Segalla LLP, attorneys; Leah A. Brndjar, of counsel and on the brief).