Date: April 11, 20221Attorney: Donald A. Dennison

Both lawyers and non-lawyers alike are familiar with arbitration clauses found in contracts. Whether the arbitration clause is found in a nursing home admissions agreement, or everyday “adhesion contracts” (for example, contracts governing the use and enjoyment of social media platforms), arbitration clauses can be found nearly everywhere – except a Last Will and Testament according to a recent New Jersey Superior Court decision.

Black’s Law Dictionary defines “arbitration clause” as “a clause inserted in a contract providing for compulsory arbitration in case of disputes as to rights or liabilities under  [the contract]” In the subject case, In the Matter of the Estate of Samuel P. Hekemian, Deceased, Docket No. P-479-21, the Court  was presented with the issue of whether  an arbitration provision contained in the Last Will and Testament of a decedent is enforceable. In other words, can one or more parties named in a Last Will and Testament compel arbitration as a means for resolving disputes that arise under the terms of a Will?

State laws vary on the subject, and each state has its own laws governing the enforceability of arbitration clauses and the procedures for enforcing such provisions. For instance, New York has long prohibited arbitration clauses in Wills, as they would, if effective, undermine the purpose of the Surrogate’s Court in matters involving the disposition of a decedent’s property and the administration of decedent’s estates. See Matter of Jacobovitz, 58 Misc. 2d 330 (N.Y. Surr. Ct. 1968).

In New Jersey’s recent Hekemian decision, the Court acknowledged New Jersey’s strong public policy favoring arbitration as a form of alternative dispute resolution but concluded that like an in terrorem clause (a/k/a “no contest” clause), an arbitration provision contained in a Will is not enforceable if the party challenging the Will or challenging the actions of the Executor(s) have probable cause to do so. In Hekemian, the Court found that probable cause existed to challenge the administration of Decedent’s estate when the Executor failed to keep a beneficiary of the Estate apprised of the Estate’s affairs, prompting the beneficiary to petition the court for an accounting.

In concluding that the arbitration clause was unenforceable, the Court relied on state contract law. Under state contract law, a court is required to analyze the arbitration provision by initially asking “whether the agreement to arbitrate all, or any portion of a dispute is the product of mutual assent, under the customary principles of contract law.” Atalese v. U.S. Legal Services Group, L.P., 219 N.J. 430, 442 (2014).  Here, the Court found that the parties did not mutually assent to the arbitration clause since they were not involved in the preparation of the Will.  Accordingly, the arbitration provision in the Will could not be binding on them. 

 

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