Court Opinion

ID: 9650108
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:25:08.275298+00
Date Added: 2024-06-11T18:12:18.404747
License: Public Domain

PER CURIAM.
This appeal and cross-appeal arise out of an arbitrator’s award in a construction-management-contract dispute. The Chancery Division modified and confirmed the award. The Appellate Divi*352sion reversed and vacated the award. In re Arbitration Between Tretina Printing, Inc. v. Fitzpatrick & Assocs., Inc., 262 N.J.Super. 45, 55, 619 A.2d 1037 (1993). We granted certification, 133 N.J. 442, 627 A.2d 1147 (1993), and now reverse the judgment of the Appellate Division and reinstate the arbitrator’s award. Moreover, the Court adopts as a rule governing judicial review of private-contract arbitration awards the standard set forth in the Chief Justice’s concurring opinion in Perini v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 610 A.2d 364 (1992).
I
Fitzpatrick & Associates, Inc. (Fitzpatrick) entered into a contract with Tretina Printing Corporation (Tretina) for the design and construction of a printing plant and office building. The parties agreed to a “guaranteed maximum price” (GMP) of $2,566,050, which reflected a guarantee by Fitzpatrick that the total cost of the project, including any corrective work and a construction-management fee, would not exceed that sum. The contract provided that Tretina would pay Fitzpatrick a $200,000 construction-manager’s fee (provided that Fitzpatrick did not breach the contract) as part of the total cost. If the cost of the completed project exceeded the GMP, Fitzpatrick would absorb those costs itself. If the total cost turned out to be less than the GMP, then Tretina would turn over to Fitzpatrick thirty percent of the savings as well as the construction-management fee.
In addition, the contract contained a provision for “retainage,” under which Tretina was entitled to withhold payment to Fitzpatrick of a sum equal to 150% of the estimated cost of completing any unfinished or unsatisfactory work. On completion of that work, Tretina would become obligated to pay Fitzpatrick the amount it had retained to cover the potential cost. Lastly, the contract specifically provided that “all claims, disputes, and other matters * * * arising out of, or relating to, this Agreement or the breach thereof * * * shall be decided by arbitration” and that the arbitrator’s decision “shall be final * *
*353When Tretina failed to pay one of Fitzpatrick’s requisitions, Fitzpatrick filéd a claim for arbitration; Tretina cross-claimed because of Fitzpatrick’s allegedly deficient and incomplete work in several areas of the construction. By that time, Tretina had paid Fitzpatrick $2,119,819. Thus, under the contract terms, at the time that the parties began arbitration, Tretina was liable for up to $446,231 of all of the remaining construction costs, including the cost of corrective work and Fitzpatrick’s construction-management fee of $200,000.
The arbitrator, appointed by the American Arbitration Association, conducted twenty-two arbitration sessions over a one-year period, heard twenty-one witnesses, and reviewed 222 exhibits before issuing his written award. The award contained two lists consisting of Fitzpatrick’s claims and Tretina’s claims. Next to each item on the list the arbitrator either assigned a dollar amount, directed Fitzpatrick to complete or to pay for the cost of completing the claimed deficiency, or denied the claim. The “TOTAL AWARD TO FITZPATRICK” was $269,912.34 and the “TOTAL AWARD TO TRETINA” was $520,180.00, leaving a “TOTAL NET AWARD TO TRETINA” of $260,267.66.
Tretina moved for an order confirming the award and Fitzpatrick moved for an order vacating or modifying it. In a written decision, the Chancery Division modified the award and confirmed it as modified. Although the trial court made a few minor changes, it deferred to the arbitrator’s judgment on all but one issue, namely, retainage. The arbitrator had listed Fitzpatrick’s fourth claim as:
4. Retainage
Construction management fee $100,000.00 ■ (interest at 10% for 33 months) 27,500.00
TOTAL $127,500.00
As the trial court observed, the construction-management fee is entirely different from retainage. In addition, the court explained that retainage was not a separate claim; rather, it was a fund held by Tretina, who was required to pay it to Fitzpatrick “only if *354[Fitzpatrick] did not breach its contract and only to the extent that approved work did not require repair or redoing.” Thus, according to the court, after the arbitrator calculated the damages that Fitzpatrick owed Tretina, he should have treated the retain-age as a credit against those damages because Tretina has never paid over the retained money. The court reasoned that the arbitrator had either overlooked the retainage claim or had assumed that Tretina’s award would be offset by the retainage amount to which Fitzpatrick was entitled. Thus, after reducing somewhat the arbitrator’s net award to Tretina, the trial court reduced that award by $201,148, the “accumulated retainage” claimed by Fitzpatrick, bringing Tretina’s net award down to $61,369.66.
Tretina appealed to the Appellate Division, claiming that the trial court had mistakenly exercised its discretion in modifying the award and in not requiring the arbitrator to clarify his award. Fitzpatrick cross-appealed, arguing that the award was so defective that the Chancery Division should have vacated it. The Appellate Division, after conducting a detailed analysis of the contract and of the arbitration proceedings, concluded that of the two judicial remedies, modification or vacation of the award, provided by the Arbitration Act, N.J.S.A 2A:24-1 to -11 (the Act), modification was not available because “the award ignores the basic contours of the parties’ contract, decides some submitted disputes contrary to the evidence, and completely fails to decide others.” 262 N.J.Super. at 52-53, 619 A.2d 1037. The court therefore vacated the award. Id. at 53, 619 A.2d 1037. In reaching that decision the Appellate Division relied on Perini, supra, 129 N.J. 479, 610 A.2d 364, and on N.J.S.A 2A:24-8.
II
The Act provides that once an arbitrator issues an award, any party to the arbitration may seek confirmation of that award in the Superior Court within three months of the arbitrator’s deci*355sion. N.J.S.A 2A:24-7. If the trial court does not confirm the award, it can either vacate the award, N.J.SA 2A:24-8, or modify or correct it. N.J.SA 2A:24-9. However, the statute narrowly defines the circumstances under which a court may resort to those remedies.
Under the Act a court shall vacate an arbitration award:
a. Where the award was procured by corruption, fraud or undue means;
b. Where there was either evident partiality or corruption in the arbitrators, or any thereof;
c. Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause being shown therefor, or in refusing to hear evidence, pertinent and material to the controversy, or of any other misbehaviors prejudicial to the rights of any party;
d. Where the arbitrators exceeded or so imperfectly executed their powers that a mutual, final and definite award upon the subject matter submitted was not made.
When an award is vacated and the time within which the agreement required the award to be made has not expired, the court may, in its discretion, direct a rehearing by the arbitrators.
[N.J.SA 2A:24-8]
The Act also provides that a court shall modify or correct an award:
a. Where there was an evident miscalculation of figures or an evident mistake in the description of a person, thing or property referred to therein;
b. Where the arbitrators awarded upon a matter not submitted to them unless it affects the merits of the decision upon the matter submitted; and
c. Where the award is imperfect in a matter of form not affecting the merits of the controversy.
The court shall modify and correct the award, to effect the intent thereof and promote justice between the parties.
[N.J.S.A 2A:24-9.]
The Chancery Division confirmed and modified this arbitrator’s award on the strength of N.J.SA 2A:24-9c, which requires a reviewing court to modify or correct an award that is “imperfect in a matter of form not affecting the merits of the controversy.” In reversing, the Appellate Division relied on N.J.SA 2A:24-8a and d, under which a court must vacate any award that has been procured by “corruption, fraud, or undue means,” or in which the *356arbitrator “so exceeded or imperfectly executed [his] powers” that his award on the matter submitted was not “mutual, final, and definite.”
In this Court the litigants, as did the Appellate Division, perceive the essential question to be the extent to which, and the standard under which, an arbitrator’s award can tolerate judicial review. The Appellate Division vacated the award under what it termed “the Perini standard,” see 262 N.J.Super. at 49, 619 A.2d 1037, and the parties’ arguments revolve around whether that “standard,” which today we reject, has been met in this case.
Perini involved a contract dispute between Perini Corporation as construction manager and Greate Bay Hotel & Casino as owner. Perini contended that the arbitrators had failed to observe “settled principles of contract law” in the calculation of the owner’s lost profits from its hotel and casino business. 129 N.J. at 484, 610 A.2d 364. Perini alleged that the arbitrators had erred by including delay damages in the owner’s award. It argued that the damages had not been contemplated by the parties, that they included lost profits based on delays that had been experienced after substantial completion of the project, and that the damages were speculative and disproportionate. Id. at 488-89, 610 A.2d 364. It urged that those mistakes of law constituted a sufficient basis on which to vacate the award. Id. at 484, 610 A.2d 364. Although the plurality opinion acknowledged the persuasiveness of Perini’s arguments, it nevertheless concluded that the arbitrators’ calculation of the award could find a basis in the evidence. Id. at 500, 509, 509-10, 515, 517, 610 A.2d 364. Even though the plurality members were troubled by the magnitude of the award, they were satisfied that the arbitrators had not manifestly disregarded any undebatable principle of law, and thus they upheld the award. Id. at 517-18, 610 A.2d 364.
In reviewing the narrow circumstances in which a court can vacate an arbitration award, the Perini plurality concluded that the “undue means” and “exceeded their powers” provisions of the statute embraced egregious mistakes of law; thus, a court could *357vacate an arbitrator’s award on that basis. Id. at 496, 610 A.2d 364. The plurality members emphasized, however, that they did not intend “that the arbitrators be judges or that their decisions be subject to the same appellate supervision as those of judges.” Id. at 493, 610 A.2d 364. Rather, the scope of judicial review should be limited. “Thus, in private-sector arbitration an arbitrator’s determination of a legal issue should be sustained as long as the determination is reasonably debatable.” Ibid. The plurality opinion concluded that the purpose of a court’s review is to guard against arbitrator errors that on their face are undebatable, unmistakable, gross, or in manifest disregard of the applicable law. Id. at 496, 610 A.2d 364. Thus, the plurality in Perini would allow a court to vacate an award when an arbitrator makes a mistake in respect of an undebatable point of law. The plurality opinion articulated the appropriate standard of judicial review as follows:
Whether the arbitrators are viewed as having acted with “undue means” or having “exceeded their powers,” the judicial inquiry must go beyond a search for mere mistakes of law. Were we to decide otherwise, arbitration would simply become another form of private non-jury trial. A scope of review that allows an arbitration decision to stand when the interpretation of law is reasonably debatable is consistent with the earlier formulation set forth in Held [v. Comfort Bus Line, 136 N.J.L. 640 [57 A.2d 20] (Sup.Ct.1948) ]. That formulation requires that the arbitrators must have clearly intended to decide according to law, must have clearly mistaken the legal rule, and that mistake must appear on the face of the award. In addition, the error, to be fatal, must result in a failure of intent or be so gross as to suggest fraud or misconduct.
[ 129 N.J. at 494, 610 A.2d 364.]
The Chief Justice, concurring in the judgment in Perini, would have even further restricted the courts’ role in reviewing voluntary private-sector arbitration awards. Id. at 519, 610 A.2d 364 (Wilentz, C.J., concurring). His concurring opinion argued that “[ajrbitration awards should be what they were always intended to be: final, not subject to judicial review absent fraud, corruption, or similar wrongdoing on the part of the arbitrators.” Ibid. Thus in most cases the Chief Justice would not vacate an award even though it might be based on a mistake of law. The concurrence *358urged that the statute, N.J.S.A 2A:24-8, reflected that interpretation of the law, id. at 540, 610 A.2d 364, and that the Court should overturn precedent that was inconsistent with the rule that the Chief Justice advocated. Id. at 519, 610 A.2d 364.
Finally, the dissenters in Perini agreed with the plurality’s standard but disagreed with the result that should be reached by applying that standard to the parties’ claims. See id. at 549-56, 610 A.2d 364 (Stein, J., concurring in part and dissenting in part).
Therefore, although a majority of those who sat in Perini agreed on the controlling standard, they could not agree on its application to the circumstances of that case. In this case as well we do not achieve unanimity in respect of the correct standard of review or in the result; but a majority of the Court now agrees that the correct standard of review is not that adopted by five members who sat in Perini (Justices Clifford, Handler, O’Hern, and Stein, and Judge Keefe, temporarily assigned), but rather the standard set forth in the Chief Justice’s opinion concurring in the judgment in Perini, in which Judge Arnold Stein, temporarily assigned, joined. That standard is as follows:
Basically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators.. [They] can be corrected or modified only for very specifically defined mistakes as set forth in [N.J.S.A. 2A:24-9], If the arbitrators decide a matter not even submitted to them, that matter can be excluded from the award. For those who think the parties are entitled to a greater share of justice, and that such justice exists only in the care of the court, I would hold that the parties are free to expand the scope of judicial review by providing for such expansion in their contract; that they may, for example, specifically provide that the arbitrators shall render their decision only in conformance with New Jersey law, and that such awards may be reversed either for mere errors of New Jersey law, substantial errors, or gross errors of New Jersey law and define therein what they mean by that. I doubt if many will. And if they do, they should abandon arbitration and go directly to the law courts.
[ 129 N.J. at 548-49, 610 A.2d 364.]
Because the record before us contains not even a hint of misconduct by the arbitrator, and because no statutory ground exists for invalidating or modifying the award, we uphold the arbitrator’s award. In doing so, we need not confront the parties’ *359arguments that focus on Perini’s plurality opinion, given our rejection of the standard announced therein. Nor need we rehash the extensive treatment that the pertinent authorities were given in the contesting opinions in Perini, for we cannot improve on the arguments included therein. Three members now join the Chief Justice in the views expressed in his Perini concurrence, which therefore requires reinstatement of the arbitrator’s award. We announce our adoption of the new standard governing review of arbitration awards so that parties who resort to private-party arbitration may be guided accordingly, not because the outcome in this appeal turns on which standard we apply. It does not. We are satisfied that under either standard the result would be the same.
Ill
Which brings us to the dissent. A decent respect for our dissenting colleague’s thoughtful opinion, which would lead to a remand to the arbitrator for clarification (a result both parties resisted at oral argument before us), impels us to explicate our differing view in some detail.
The dissent’s reliance on N.J.S.A 2A:24-9 as a basis for a remand is misplaced. That section of the Act requires a court to modify or correct an arbitration award in only three types of cases. Subsection a, on which the dissent relies, covers cases in which the award contains “an evident miscalculation of figures or an evident mistake in the description of a person, thing or property referred to therein.” The clear purpose of that section is to enable the court to correct simple arithmetical errors, such as 2 + 2 = 5, or obvious mistakes in identification, such as 14 Hill Street instead of 41 Hill Street. See, e.g., Creter v. Davies, 30 N.J.Super. 60, 62, 103 A.2d 392 (Ch.Div.) (applying N.J.S.A 2A:24-9a to correct arithmetical error on face of award), aff'd, 31 N.J.Super. 402, 107 A.2d 17 (App.Div.1954).
*360The dissent argues that the arbitration award in this case is ambiguous. Post at 373, 640 A.2d at 801. We agree. The perceived ambiguity in the award arises from the arbitrator’s allocation of the retainage sum allegedly due Fitzpatrick. Our dissenting colleague suggests that the retainage issue presents an “evident miscalculation of figures” requiring judicial action. Yet as the dissent explains, the arbitrator did not make a simple mistake in his addition or subtraction; rather the contention is that he omitted entirely one of the party’s claims. Although we cannot determine from the face of the award whether the arbitrator erred in his dealing with the retainage, we are confident that any such error does not constitute a mere “miscalculation” and is by no means “evident.” We refuse to shoehorn this case into a category in which it clearly does not fit simply because we discern either an absence of specificity in the arbitrator’s analysis or an ambiguity in the arbitrator’s treatment of that claim.
Moreover, N.J.S.A 2A:24-9 directs a court to correct errors; it does not provide for a remand to the arbitrator. In addition, both N.J.S.A 2A:24r-9b and -9c direct a court to modify an award only if those changes will not affect the merits of the controversy. The clear implication from N.J.S.A 2A:24-9 is that the Legislature intended that courts correct mistakes that are obvious and simple—errors that can be fixed without a remand and without the services of an experienced arbitrator. Thus, even if the alleged error in this case did constitute an “evident miscalculation,” the proper action for the court would be to correct it, not to remand to the arbitrator. Because we conclude that N.J.S.A 2A:24-9 is inapplicable to this case, we find no statutory basis for a remand.
Beyond that, we disagree as well with the dissent’s contention that the power of courts to resubmit ambiguous awards to arbitrators for clarification is “well-settled.” Post at 371, 640 A.2d at 799. On the contrary, in 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 *361matter to the arbitrator. Held v. Comfort Bus Lines, Inc., 136 N.J.L. 640, 57 A.2d 20 (Sup.Ct.1948). Resubmission is foreclosed because with the rendering of an award, an arbitrator exhausts his or her commission. Id. at 641, 57 A.2d 20. In fact, our research discloses only one case in which a court relied exclusively on its inherent power to resubmit an ambiguous award to the arbitrator, La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569 (3d Cir.1967), and that case is readily distinguishable from the one before us.
La Vale Plaza, on which the dissent primarily relies, concerned a construction-contract arbitration award that left uncertainty about how the arbitrator had dealt with an outstanding balance owed to one party. Although the Third Circuit decided that the common law and not the Pennsylvania arbitration statute governed the case, it noted that the arbitration statute explicitly authorized a court to modify or resubmit an award to the arbitrator for clarification. 378 F.2d at 570-72. In determining that the court had the power under the common law to resubmit the question of the outstanding balance to the arbitrator, the court relied on the Pennsylvania statute’s clear expression of public policy favoring resubmission of awards. Id. at 573-74.
We differentiate La Vale Plaza from our case on two bases. First, this case, unlike La Vale Plaza, involves statutory arbitration, not common-law arbitration. The parties moved to confirm the award in court under N.J.S.A. 2A:24-7, and the record shows that the parties and the court assumed that N.J.S.A. 2A:24r-8 and -9 controlled the proceedings. Therefore, we review this arbitration under the arbitration statute, which does not authorize resubmission, and not under some other set of principles. Second, the New Jersey statute does not reflect a public-policy determination similar to Pennsylvania’s. In fact, our Act suggests a contrary policy favoring finality and limited judicial involvement. Because the New Jersey arbitration statute governs this case, the Third Circuit’s reasoning in La Vale Plaza to justify resubmission is inapplicable.
*362Nor are the federal labor-law cases persuasive authority here. As did the Illinois Supreme Court in Rauh v. Rockford Products Carp., 143 Ill.2d 377, 158 Ill.Dec. 523, 574 N.E.2d 636 (1991), we decline to follow those cases on review of a commercial arbitration award. Id. at 390, 158 Ill.Dec. at 530, 574 N.E.2d at 643. The Illinois court looked instead to the Illinois Uniform Arbitration Act, which specifies the grounds for vacating or modifying an award. Ibid.
Moreover, the federal labor-law cases address the federal courts’ authority under § 301 of the Labor-Management Relations Act, 29 U.S.C.A. § 185, to enforce collective-bargaining agreements that contain arbitration clauses. The United States Supreme Court has interpreted that section as conferring on the federal courts broad latitude for fashioning a body of substantive law from the policy of the national labor laws. United States v. American Mfg. Co., 363 U.S. 564, 567-68, 80 S.Ct. 1343, 1346, 4 L.Ed.2d 1403, 1406-07 (1960); Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S.Ct. 912, 918, 1 L.Ed.2d 972, 980-81 (1957). The fundamental goal of those labor laws is to curtail industrial strife and work stoppages through the arbitration of grievances. United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 577-78, 585, 80 S.Ct. 1347, 1350-51, 1354, 4 L.Ed.2d 1409, 1414-15, 1419 (1960); Textile Workers Union, supra, 353 U.S. at 454-55, 77 S.Ct. at 917, 1 L.Ed.2d at 979.
Arbitration in the context of a labor dispute differs from private-contract arbitration in important ways. Parties enter commercial contracts voluntarily. They act without any compulsion to deal with each other instead of with some other party. The arbitration clause in their contracts represents a way to settle disputes informally should any arise. In a labor agreement, however, the parties must deal with each other. They have no choice. In that circumstance the agreement to arbitrate is vital to keeping the relationship between the parties afloat and guided by a set of agreed-to rules. Warrior & Gulf Navigation, supra, 363 U.S. at 580, 80 S.Ct. at 1351-52, 4 L.Ed.2d at 1416. In a commercial contract, arbitration is produced by a breakdown in *363the parties’ agreement. The parties use it as a last resort. In the labor arena, arbitration serves as the machinery under a collective-bargaining agreement that is “at the very heart of the system of industrial self-government.” Id. at 584, 80 S.Ct. at 1352, 4 L.Ed.2d at 1416. Accordingly, the decisions of the federal courts reflect a strong preference for settling all aspects of labor disputes through the arbitration process. American Mfg., supra, 363 U.S. at 568-69, 80 S.Ct. at 1346-47, 4 L.Ed.2d at 1407; Warrior & Gulf Navigation, supra, 363 U.S. at 582, 585, 80 S.Ct. at 1353, 1354, 4 L.Ed.2d at 1417,1419; United Steelworkers v. Enterprise Wheel & Car Carp., 363 U.S. 593, 595-99, 80 S.Ct. 1358, 1360-62, 4 L.Ed.2d 1424, 1427-29 (1960); Textile Workers Union, supra, 353 U.S. at 455, 77 S.Ct. at 454-55, 1 L.Ed.2d at 979. Therefore, if a union and management cannot agree on the scope of an arbitration award or on the method of enforcing the award, courts, seeking to defer to the arbitration process, may resubmit the issue to the arbitrator for clarification. Resubmission is based not on any explicit provision in a federal statute but rather on the underlying policy of advancing industrial peace. J.A. Bryant, Annotation, Comment Note.—Power of Court to Resubmit Matter to Arbitrators for Correction or Clarification, Because of Ambiguity or Error in, or Omission from, Arbitration Award, 37 A.L.R.3d 200, 220 (1971).
We acknowledge that in limited circumstances a court can remand to an arbitrator for reconsideration or clarification. For example, in Jersey City Police Officers Benevolent Ass’n v. City of Jersey City, 257 N.J.Super. 6, 607 A.2d 1314 (1992), the Appellate Division properly directed the trial court to resubmit one issue to the arbitrator where it “had been neither submitted to nor decided by the arbitrator” in the initial proceedings. Id. at 11, 607 A.2d 1314. The arbitrator had not exercised his powers relating to that issue, so his authority had never expired. Likewise, if the obligations under an award are unclear to the parties, a court may resubmit the question to the arbitrator for clarification. The purpose of those types of resubmissions is to allow the arbitrator to settle all the issues without judicial encroachment on the *364arbitration process, not to explain how the arbitrator arrived at the conclusions contained in the award.
In the case before us, however, the arbitrator has settled all the disputed issues. We may remain uncertain about the analysis that led to the stated result on one discrete issue, the retainage question; but asking an arbitrator to explain his or her reasoning works against the very goals of arbitration: finality and expedition. Remands for reconsideration or further explanation threaten the reliability of arbitration awards. Moreover, requiring an arbitrator to justify a decision reflects a lack of faith in the arbitration process and is inconsistent with our commitment to maintaining arbitration as an alternative to litigation in the courts.
In this case, the parties’ obligations could not be clearer: one owes the other a sum of money. No one contends that the arbitrator never considered retainage. The parties presented evidence on that issue and the award has a retainage section. We conclude that an ambiguity in how the arbitrator calculated one part of a multi-claim, complex contract dispute provides no basis for resubmitting the award to the arbitrator for clarification.

W

Finally, and but distantly related to the foregoing discussion, we add our recognition that in rare circumstances a court may vacate an arbitration award for public-policy reasons. For example, in Faherty v. Faherty, 97 N.J. 99, 477 A.2d 1257 (1984), we held that “whenever the validity of an arbitration award affecting child support is questioned on the grounds that it does not provide adequate protection for the child, the trial court should conduct a special review of the award.” Id. at 109, 477 A.2d 1257. That heightened judicial scrutiny is required because of the courts’ traditional role as parens patria. Id. at 111, 477 A.2d 1257. Similarly, in a public-sector arbitration setting, a court can properly vacate an award because of a mistake of law. Communications Workers v. Monmouth County Bd. of Social Servs., 96 N.J. 442, 476 A.2d 777 (1984). That exception is *365necessary because public policy demands that a public-sector arbitrator, who must consider the effect of a decision on the public interest and welfare, issue a decision in accordance with the law. Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 217, 405 A.2d 393 (1979).
Additionally, in Faherty, supra, we concluded that a combination of public-policy reasons and a mistake of law warranted judicial vacation of the arbitration award. We vacated a portion of the arbitration award because it granted one spouse alimony after she had remarried, and because, unlike the contract in this case, the parties in Faherty had agreed that the arbitrator would decide legal issues in accordance with New Jersey law. 97 N.J. at 112, 477 A.2d 1257. Because the alimony allowance in Faherty represented a fundamental error of New Jersey law, the court properly vacated that portion of the award.
V
The judgment of the Appellate Division is reversed. The cause is remanded to the Chancery Division for entry there of a judgment confirming the arbitration award in all respects.