Court Opinion

ID: 4583501
Source: CourtListenerOpinion
Date Created: 2020-11-04 15:14:35.115818+00
Date Added: 2024-06-11T08:48:11.907191
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-0342-19T2

BHARAT RAO and
CHRISTINE RAO,

          Plaintiffs-Respondents,

v.

PRAVIN PATEL,

     Defendant-Appellant.
____________________________

                   Argued October 7, 2020 – Decided November 4, 2020

                   Before Judges Fuentes, Rose and Firko.

                   On appeal from the Superior Court of New Jersey,
                   Chancery Division, Bergen County, Docket No. C-
                   000172-19.

                   Andrew Fede argued the cause for appellant (Archer &
                   Greiner, PC, attorneys; Patrick Papalia and Tyler J.
                   Wicks, on the briefs).

                   David F. Lyttle argued the cause for respondents.

PER CURIAM
      Defendant Pravin Patel (Patel) appeals from an August 1, 2019 order of

the Law Division confirming an arbitration award in favor of plaintiffs Bharat

Rao and Christine Rao (Rao) 1 for the sum of $1,161,883.51 and an August 30,

2019 order assessing costs, attorney's fees, and expenses against Patel in the sum

of $5,359.50. For the reasons that follow, we affirm.

                                        I.

      We discern the following facts from the record. Rao and Patel each owned

a fifty-percent interest in two corporations, Key Products I, Inc. and Key

Products II, Inc., which operated two Dunkin' Donuts stores in Paramus. Patel

agreed to operate the day-to-day operations along with his wife at each location,

and Rao was an absentee owner. Rao made an equal contribution as "seed

money" but was not involved in the operation of the stores. A dispute arose

between the parties when Rao suspected Patel was using monies from the stores

to fund his personal expenses.

      As per their partnership agreement, Rao elected to arbitrate the matter and

sought court intervention on May 23, 2016. Ultimately, the parties entered into

a consent order on July 14, 2016 that transferred the dispute to binding

1
  We sometimes refer to Bharat Rao and Christine Rao as "plaintiffs" in this
opinion. "Rao" refers to Christine Rao.
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arbitration before a retired judge. The arbitration commenced on July 19, 2016

and concluded three years later with the arbitrator issuing a final award on June

3, 2019.

      The parties agreed to retain a joint independent auditor, whose fees were

paid equally by both sides, to conduct a financial review of both companies.

After Patel's inquiry as to whether any prior relationship existed between Rao

and the auditor, and no history having been disclosed, Patel agreed to retain the

auditor. The auditor performed a forensic accounting analysis on unreported

income, expenses claimed without supporting documentation, personal loans

taken by Patel, suspect personnel and payroll payments, and discretionary

spending that was unacceptable under standards promulgated by the Internal

Revenue Service.

      The auditor issued two financial statement attestations or "reports" as

noted by the arbitrator. The first report covering the period from January 1,

2011 through December 31, 2016, indicated Patel failed to report $230,812.66

of business income. Later, the auditor conceded the first report was incorrect

and should only reflect $2,719.25 of unreported income.

      On January 22, 2019, the auditor testified regarding his second report,

which covered the time period beginning January 1, 2017 and ending August 31,

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2018. The auditor opined that corporate payments totaling $20,882.26 for

Patel's health insurance and vehicle expenses constituted "unacceptable

discretionary spending."    The arbitrator took issue with the scope of the

amendment to the parties' shareholder agreement providing Patel was entitled to

"insurance paid" by the companies and concluded it did not include health

insurance. The auditor also assessed $92,394 of equipment against Patel.

      During an off-the-record conversation during the September 8, 2017

arbitration hearing, Patel's attorney learned that the auditor ostensibly had a

relationship with Bharat Rao's brother and moved to have the auditor

disqualified. The auditor denied knowing the brother. The arbitrator conducted

hearings during the arbitration proceedings regarding Patel's allegations on the

issue of the auditor's alleged bias. He ruled that if the auditor could supply a

statement of continued objectivity, he could continue in the arbitration process,

which he did. Thereafter, on September 6, 2018, Patel filed a complaint against

the auditor with the New Jersey Board of Accountancy (Board) alleging

professional misconduct and incompetence. The Board dismissed the complaint

on January 25, 2019.

      On March 13, 2019, the arbitrator issued an order rejecting five of the six

conclusions reached by the auditor in his second report. On March 28, 2019,

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the arbitrator issued an award in favor of Rao in the sum of $1,161,888.51 to be

paid by Patel. The record shows that the arbitrator had to issue seventeen orders

to secure defendant's compliance with discovery and imposed a $15,000

monetary penalty for frustrating the discovery process. He also awarded counsel

fees incurred by Rao to compel Patel to produce discovery and for thwarting

Rao's efforts to obtain information and documents.

      On June 26, 2019, Rao filed a verified complaint seeking confirmation of

the arbitration award pursuant to N.J.S.A. 2A:23B-22 and 2A:23B-25(a). Patel

challenged the summary enforcement action claiming the auditor's findings were

patently biased, fraudulent, and corrupt.

      On July 31, 2019, the trial court heard oral argument and placed its

decision on the record that day. The trial court granted Rao's motion to confirm

the arbitration award, rejected Patel's challenge, and certified the award. In

addition, the trial court did not find any basis to modify the award based on

ministerial errors pursuant to N.J.S.A. 2A:24-9. The trial court explained that

the arbitrator's "decision was perfectly, in his mind, appropriate under the

circumstances"; he "had the benefit of hearing from the parties"; "reading the

reports of the auditor"; and hearing "arguments with respect to the [auditor's]

alleged conflict."

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       Further, the trial court stated, "[a]ll of these matters were raised in front

of [the arbitrator]" and rejected Patel's request for post-arbitration discovery.

On August 1, 2019, the trial court entered an order and judgment confirming the

arbitration award. Thereafter, Rao sought counsel fees and costs against Patel

and on August 30, 2019, the trial court entered an order awarding $5,359.50 to

Rao.

       On appeal, Patel argues that the trial court erred by confirming the

arbitration award; by refusing to grant discovery as to the relationship between

plaintiffs and the auditor; and in awarding counsel fees and costs to plaintiffs

after confirming the award.

                                          II.

       "[T]he scope of review of an arbitration award is narrow." Fawzy v.

Fawzy, 199 N.J. 456, 470 (2009).                Our Supreme Court has held that

"[a]rbitration can attain its goal of providing final, speedy and inexpensive

settlement of disputes only if judicial interference with the process is minimized;

it is, after all, 'meant to be a substitute for and not a springboard for litigation. '"

Barcon Assocs., Ins. Co. v. Tri-County Asphalt Corp., 86 N.J. 179, 187 (1981)

(quoting Korshalla v. Liberty Mut. Ins. Co., 154 N.J. Super. 235, 240 (Law Div.

1977)).    With this goal in mind, "'[a]rbitration should spell litigation's

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conclusion rather than its beginning . . . .'" Borough of E. Rutherford v. E.

Rutherford PBA Local 275, 213 N.J. 190, 201 (2013) (quoting N.J. Tpk. Auth.

v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007)) (alteration in original).

      "The public policy of this State favors arbitration as a means of settling

disputes that otherwise would be litigated in a court." Badiali v. N.J. Mfrs. Ins.

Grp., 220 N.J. 544, 556 (2015). As a result, "courts grant arbitration awards

considerable deference."    E. Rutherford PBA Local 275, 213 N.J. at 201.

Because a trial court's decision to affirm or vacate an arbitration award is a

decision of law, our review is de novo. Minkowitz v. Israeli, 433 N.J. Super.
111, 136 (App. Div. 2013) (citing Manger v. Manger, 417 N.J. Super. 370, 376

(App. Div. 2010)).

      N.J.S.A. 2A:23B-22 sets forth the standard for confirming an arbitration

award. The statute provides:

            After a party to an arbitration proceeding receives
            notice of an award, the party may file a summary action
            with the court for an order confirming the award, at
            which time the court shall issue a confirming order
            unless the award is modified or corrected pursuant to
            section 20 or 24 of this act or is vacated pursuant to
            section 23 of this act.

            [N.J.S.A. 2A:23B-22.]

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      Arbitration awards may be vacated, modified, or corrected by a court if

(1) "procured by corruption, fraud, or other undue means"; (2) the arbitrator was

partial or corrupt, or committed misconduct thereby prejudicing the parties'

rights; (3) the arbitrator refused to postpone the hearing when there was

sufficient cause to do so, failed to consider material evidence, or otherwise

inappropriately conducted the hearing so as to prejudice the rights of the parti es;

(4) the arbitrator exceeded his or her power; (5) there was no agreement to

arbitrate; or (6) the arbitration was conducted without sufficient notice,

substantially prejudicing the rights of the parties. See N.J.S.A. 2A:23B-23(a).

      A court may also modify or correct an award if (1) there was an evident

mathematical mistake; (2) the arbitrator made an award on a claim not submitted

to arbitration; or (3) "the award is imperfect in a matter of form not affecting the

merits of the decision . . . ." N.J.S.A. 2A:23B-24(a).

      A court may only confirm, vacate, modify, or correct arbitration awards

on the grounds provided in the statute. See N.J.S.A. 2A:23B-20 to -24. The

statute "directs a court to correct errors; it does not provide for remand to the

arbitrator." Tretina Printing, Inc. v Fitzpatrick & Assocs. Inc., 135 N.J. 349,

360 (1994). As our Supreme Court stated in Tretina:

            the Legislature intended that courts correct mistakes
            that are obvious and simple—errors that can be fixed

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             without a remand and without the services of an
             experienced arbitrator . . . . [I]n the absence of a
             statutory provision or an authorization in the arbitration
             agreement, a court that is asked to vacate, modify, or
             confirm an award usually has no power, except by the
             consent of the parties, to recommit the matter to the
             arbitrator.

             [Id. at 360-61.]

      Here, the arbitrator considered the evidence, the testimony presented, and

articulated his findings in support of the award. Having reviewed the extensive

record, we discern no basis to vacate the arbitration award or compel post-

arbitration discovery.

      Moreover, we conclude there is no legal basis under N.J.S.A. 2A:23B-23

to disagree with the trial court's ruling upholding the arbitrator's award. To

constitute a valid ground for vacating an arbitration award under "undue means"

in N.J.S.A. 2A:23B-23(a)(1), the error must be "so gross as to suggest fraud or

misconduct." Tretina Printing, Inc., 135 N.J. at 357 (quoting Perini Corp. v.

Greate Bay Hotel & Casino Inc., 129 N.J. 479, 494 (1992). We agree with the

trial court that as new information was brought to the arbitrator's attention about

a potential conflict of interest or impropriety involving the auditor, the arbitrator

gave Patel the opportunity to object and the auditor was tasked with certifying

as to his continued objectivity. We concur in the trial court's view that Patel did

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not establish grounds to allow post-arbitration discovery, and arbitrations are

not designed to devolve into another litigated matter, a posture sought to be

avoided by the use of arbitration in the first place.

      The trial court acted well within its discretion in awarding counsel fees

and costs to Rao under N.J.S.A. 2A:23B-21(b),2 and N.J.S.A. 2A:23B-25(b)(c),

which allows reasonable costs of the summary action to be awarded to the

prevailing party. See Packard-Bamberger & Co. v. Collier, 167 N.J. 427, 440

(2001). Here, the trial court provided a detailed analysis of the lodestar standard

and calculation thereof and the factors set forth in RPC 1.5(a). We note that

plaintiffs sought $7,781.50 in counsel fees and costs but were only awarded

$5,359.50. There was no abuse of discretion in awarding counsel fees and costs

by the trial court.

      The remaining arguments raised by Patel lack sufficient merit to warrant

discussion in a written opinion. R. 2:11-3(e)(1)(E).

      Affirmed.

2
  N.J.S.A. 2A:23B-21(b) states: "An arbitrator may award reasonable attorney's
fees and other reasonable expenses of arbitration if such an award is authorized
by law in a civil action involving the same claim or by the agreement of the
parties to the arbitration proceeding."
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