In the recent case of Spaeth v. Srinivasan, 959 A.2d 290, 403 N.J. Super. 508 (N.J. Super., 2008), the Court explained arbitration clauses as follows:
“In New Jersey, consent arbitration is authorized and approved by statute. Our Uniform Arbitration Act of 2003(Act), N.J.S.A. 2A:23B-1 to -32, L. 2003, c. 95, authorizes courts to recognize and enforce arbitration agreements. N.J.S.A. 2A:23B-5, -6;1 see also Wein v. Morris, 194 N.J. 364, 376, 944 A.2d 642 (2008); Van Duren v. Rzasa-Ormes, 394 N.J.Super. 254, 257, 926 A.2d 372 (App.Div.2007), aff'd o.b., 195 N.J. 230, 948 A.2d 1285 (2008). Our courts have long noted our public policy that favors the "use of arbitration proceedings as an alternative forum." Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 489, 610 A.2d 364 (1992); see also Delta Funding Corp. v. Harris, 189 N.J. 28, 39, 912 A.2d 104 (2006). "An arbitration agreement is a contract and is subject, in general, to the legal rules governing the construction of contracts." McKeeby v. Arthur, 7 N.J. 174, 181, 81 A.2d 1 (1951) (citations omitted); see also Hojnowski v. Vans Skate Park, 187 N.J. 323, 343, 901 A.2d 381 (2006). An arbitration clause's validity is determined by "considering the intentions of the parties as reflected in the four corners of the written instrument." Leodori v. CIGNA Corp., 175 N.J. 293, 302, 814 A.2d 1098 (2003).
To be sure, a waiver will preclude the enforcement of a contractual provision to arbitrate. Waiver under New Jersey law "involves the intentional relinquishment of a known right and thus it must be shown that the party charged with the waiver knew of his or her legal rights and deliberately intended to relinquish them." Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 291, 544 A.2d 377 (1988). In other words, for there to be a waiver of arbitration rights, a party must know of the right and affirmatively reveal the intent to waive the right. Knorr v. Smeal, 178 N.J. 169, 177, 836 A.2d 794 (2003). "An effective waiver requires a party to have full knowledge of his legal rights and intent to surrender those rights." Ibid.
Parties can expressly waive their rights to arbitration. Wein, supra, 194 N.J. at 376, 944 A.2d 642. They can also waive these rights by implication. Knorr, supra, 178 N.J. at 177, 836 A.2d 794. "The intent to waive need not be stated expressly, provided the circumstances clearly show that the party knew of the right and then abandoned it, either by design or by indifference." Ibid. "The party waiving a known right must do so clearly, unequivocally, and decisively." Ibid.
There is a presumption against waiver of an arbitration agreement, which can only be overcome by clear and convincing evidence that the party asserting it chose to seek relief in a different forum. Am. Recovery Corp. v. Computerized Thermal Imaging, 96 F.3d 88, 92 (4th Cir.1996); Sherrock Bros., 260 Fed.Appx. 497, 500 (3d Cir.2008). There is no single test for the type of conduct that may waive arbitration rights. In fact, "the mere institution of legal proceedings ... without ostensible prejudice to the other party" does not constitute a waiver. Hudik-Ross, Inc. v.XXXXX Corp., 131 N.J.Super. 159, 167, 329 A.2d 70 (App.Div. 1974); see also Gavlik Constr. Co. v. H.F. Campbell Co., 526 F.2d 777, 783 (3d Cir. 1975) ("it is not the inconsistency of a party's actions, but the presence or absence of prejudice which is determinative of the issue of waiver"). In Hudik-Ross, for instance, we found no waiver when arbitration was not demanded "until four months after the institution of plaintiff's lawsuit" and the promise to arbitrate was pleaded in an affirmative defense. 131 N.J.Super. at 167, 329 A.2d 70. Rather, the presence or absence of prejudice has been deemed determinative of the issue of waiver. Angrisani v. Fin. Tech. Ventures, L.P., 402 N.J.Super. 138, 150, 952 A.2d 1140 (App.Div.2008). Thus, in Farese v. McGarry, 237 N.J.Super. 385, 568 A.2d 89 (App.Div.1989), we found the plaintiff landlord's right to rely on arbitration was waived by his filing a complaint which alleged a claim for injury to the property and by filing an answer to the counterclaim which did not allege arbitration as a defense until it was amended approximately nine months after the complaint was filed and two weeks before trial. Id. at 394, 568 A.2d 89.
Similarly, the Court found mutual waiver of the contractual right to arbitrate where the lawsuit was pending for three-and-one-half years before a party filed a motion to compel arbitration. Wein, supra, 194 N.J. at 376, 944 A.2d 642. There, [t]he plaintiffs filed their complaint in Superior Court without reference to arbitration, demonstrating their intent to resolve the dispute in court. Defendants likewise filed an answer and asserted several counterclaims without seeking enforcement of the arbitration clauses. Thereafter, the parties engaged in almost five years of court-monitored discovery. Even after defendants filed a motion to compel arbitration, and then withdrew it, the court permitted discovery to continue. If that were not enough, the parties clearly expressed their desire to waive arbitration when they objected to the trial court's order compelling them to submit to arbitration and asserted at the hearing that they wished to waive arbitration and proceed in court.[Ibid.]
The Court found that faced with that unequivocal waiver, coupled with the duration of the discovery proceedings and the trial judge's extensive involvement in managing this suit, it was error for the judge to order the matter to arbitration. Ibid.
On the other hand, simply wasting a party-opponent's time and money was found to be insufficient to constitute prejudice under the analogous FAA. Rush v. Oppenheimer & Co., 779 F.2d 885, 888 (2d Cir.1985). Also, when parties specifically indicate they will be moving to compel arbitration, the opposing party is unable to show prejudice. Angrisani, supra, 402 N.J.Super. at 150-51, 952 A.2d 1140.”
Thus, there must be clear and convincing evidence of the intent to waive the arbitration provision, which binds BOTH parties and if one party had the case dismissed on the basis of the arbitration clause then there is no intentional waiver and the parties are still bound by that clause.