Broad arbitration provisions cannot compel parties to arbitrate claims not arising out of the subject matter covered by the arbitration agreement. A party to a contract must be careful when agreeing to subsequent or supplemental agreements because unless expressly referenced, the broad arbitration agreement in one contract may not cover a dispute arising out of the other contracts.
For example, in New Jersey, notwithstanding a very strong state public policy regarding compulsory counterclaims and joinder, the State case-law draws a bright line between claims that must be arbitrated under an agreement between the parties and claims that must be litigated (i.e. not added to the arbitration as a compulsory counterclaim or under a joinder rule). In short, in New Jersey, much like New York, a court will not compel a party to arbitrate a matter that the party has not expressly and knowingly agreed to arbitrate. This makes sense because agreeing to arbitrate is an agreement to waive or give up a right to access the courts and waiver of such an important right should not be treated lightly.
In New York, it’s a similar analysis. New York Courts are confronted daily with applications to compel or avoid arbitration – usually brought by “Orders to Show Cause” seeking emergency relief. The emergency is generally because once a party participates in an arbitration, they cannot later complain of waiving their right to litigate the matter. Because arbitration may be onerous – indeed, some litigants in certain situations may prefer to litigate in Court than pay an arbitrator and undergo an arbitration – parties to a dispute take the arbitration v. litigation issue very seriously.
In short, whichever the preference, a party to a dispute should not shoot first and answer questions later. Arbitration provisions in a contract should be carefully thought-out and, if there are amendments or supplemental agreements, the party’s choice to (or not to) arbitrate should be protected in those later agreements.
