Court Opinion

ID: 9650110
Source: CourtListenerOpinion
Date Created: 2023-08-23 15:25:08.287242+00
Date Added: 2024-06-11T18:12:18.411998
License: Public Domain

STEIN, J.,
dissenting.
Acknowledging that resolution of this appeal does not depend on the standard by which courts should review errors of law in private-contract arbitration awards, ante at 359, 640 A.2d at 793, the Court nevertheless overrules Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 610 A.2d 364 (1992), and “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 ].” Ante at 352, 640 A.2d at 789. Although the difference between the standard now adopted by the majority and the standard adhered to by the plurality in Perini is of enormous importance to parties contemplating the use of private-contract arbitration, the distinction is entirely irrelevant to the only issue that divides the Court in this case: whether we should confirm or remand for clarification an arbitration award that appears to have disregarded or overlooked an item of “retainage” in the amount of $201,148.
The source of law that authorizes modification of arbitration awards to correct miscalculations or mistakes is statutory, not judicial. N.J.S.A 2A:24-9 provides:
The court shall modify or correct the award in any of the following cases:
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;
*368b. Where the arbitrators awarded upon a matter not submitted to them unless it affects the merit 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.
Thus, the critical inquiry before us turns on the meaning of the award and requires an essentially factual determination whether “there was an evident miscalculation of figures or an evident mistake in the description of a person, thing or property” in the award itself. The standard of review of arbitration awards advocated by the plurality in Perini, as well as that advanced in the Chief Justice’s concurrence, are simply beside the point.
I
Other than its resolution of the issue of the arbitrator’s treatment of the retainage item, I agree with the majority’s conclusion that what the Appellate Division identified as flaws and omissions in the award do not constitute a basis adequate to justify disturbance of the award. For example, the Appellate Division noted that the arbitrator made no award with respect to various claims by the contractor for delay damages and interest. 262 N.J.Super. at 50-51, 619 A.2d 1037. In addition, the Appellate Division concluded that the arbitrator’s award to the owner was excessive in respect of a concrete loading dock and was inconsistent with the contract in respect of awards for replacement of glass and repair of cables. Id. at 51, 619 A.2d 1037. The Appellate Division concluded that the defects in the award it had identified were “ ‘gross, unmistakable, undebatable, or in manifest disregard of the applicable law and leading to an unjust result.’ ” Id. at 52, 619 A.2d 1037 (quoting Perini, supra, 129 N.J. at 496, 610 A.2d 364). The majority concludes that, notwithstanding the defects identified by the Appellate Division, “no statutory ground exists for invalidating or modifying the award.” Ante at 358, 640 A.2d at 793. Except for the retainage item, I concur with the majority’s disposition.
*369That the arbitrator may have decided to ignore certain claims or decided others in a manner different from the way a court would have resolved them ordinarily does not justify invalidating an award. That conclusion is consistent with both the Perini plurality opinion, 129 N.J. at 494-97, 610 A.2d 364, as well as the Chief Justice’s concurring opinion in Perini. Id. at 548-49, 610 A.2d 364.
The retainage item, however, has nothing to do with errors of law on the part of the arbitrator. The arbitrator’s award was divided into two sections. The first summarized the claims of Fitzpatrick & Associates, Inc. (Fitzpatrick), the contractor. The second summarized the claims of Tretina Printing Corporation (Tretina), the owner. Under the heading “Fitzpatrick Claims,” the arbitrator had designated “Retainage” as the fourth numbered category of claims. The contract authorized the owner to retain an amount equal to 150% of the cost of completion of unfinished items; as each unfinished item was completed, the owner was to pay the related amount of retainage to the contractor. Fitzpatrick claimed that the retainage withheld was $201,148, a figure disputed by Tretina but characterized as an “uncontested fact” by the Chancery Division.
Under the heading “Retainage” in the arbitration award, the arbitrator inserted the following language and amounts, constituting a portion of the funds credited to Fitzpatrick:
“Construction management fee $100,000.00
(interest at 10% for 33 months) 27,500.00
TOTAL $127,500.00”
In determining to modify the award, the Chancery Division noted that the arbitrator’s inclusion of an award for part of the construction-management fee under the heading “Retainage” is a non sequitur. The contract provided in Article 7 for a Construction Manager’s Fee of $200,000, a provision separate from the retainage provision in Article 11. The arbitrator’s award of $100,000, plus interest, as a construction manager’s fee under the *370heading of “Retainage” affords no explanation for the arbitrator’s apparent mistake in failing to account for the retainage either under that heading or elsewhere in the award. As the Chancery Judge observed:
It is unclear how the arbitrator handled the item of retainage. During the course of Fitzpatrick’s work some $201,148 had been retained by Tretina in accordance with the terms of the contract. These were monies held out of payments authorized as a reserve to cover any deficiencies which later turned up regarding that approved work. Had the contract been satisfactorily completed, Fitzpatrick would have been entitled to the retainage—in whole or in part. However, the monies have always been, and are today, held by Tretina. The arbitrator in making his net award of $260,267.66 in favor of Tretina either overlooked or assumed that the parties would recognize the offset that Fitzpatrick was entitled to for the retainage. It is clear as one reads the award that the retainage did not enter into his computation. Under his disposition of the Fitzpatrick claims the arbitrator lists as #4 “Retainage” but then proceeds to discuss the construction management fee (an entirely different matter) under that heading. Retainage was not a separate claim. It was a liquidated fund to be turned over to Fitzpatrick in whole or in part only if it did not breach its contract and only to the extent that approved work did not require repair or redoing. Tretina prevailed on its claim of breach by Fitzpatrick. The arbitrator liquidated all of its damage claims (save the ones involving the sewer pipe, sprinklers, clip meters and loading dock clearance). The retainage then must be treated as a credit on the amount due, since Tretina has never paid over that money. I will modify the arbitrator’s award in that regard as I am permitted to do. N.J.S.A, 2A:24-9(c).
Following the Chancery Division’s modification of the award to credit Fitzpatrick with the omitted amount of retainage, Tretina sought reconsideration of that determination, relying on its attorney’s certification to support its contention that a remand to the arbitrator was the appropriate and authorized mechanism for resolving any ambiguity in the award. Noting that the Chancery Court had characterized as “unclear” the arbitrator’s handling of the retainage, the certification of Tretina’s attorney states:
If this be so, then the matter should have been remanded to the arbitrator for a clarification as to how, if at all, he handled the issue of retainage. At the oral argument * * * the [c]ourt indicated it was inclined to send the parties back to the arbitrator for just that purpose. Both parties agreed that, if the [cjourt thought the award to be ambiguous, they would not object to such a procedure.
* * * I believe it is unlikely that Klausner overlooked that figure in his award. Rather, it is just as likely, if not more probable, that the arbitrator combined the *371construction management fee being -withheld with the retainage and made a lump-sum adjusted award for the two items of $100,000. * * *
[ ] Tretina believes the only way to know fully what the arbitrator intended, specifically if he took the retainage into account and how, is to ask him. Therefore, Tretina is concurrently preparing a subpoena which will be served on the arbitrator * * * commanding Mr. Klausner’s presence at court for oral testimony only for the limited purpose of ascertaining what he did with the retainage claim. Note that Tretina is not requesting the arbitrator to re-evaluate the award, or even to inquire into the merits, but simply tell us what he did in forming the award on the issue raised by Judge McGann.
* * * If the arbitratorias] testimony reveals that he did include the retainage in the award, the court could then withdraw and modify its decision in line with his true intent. On the other hand, if he testifies [that] he did overlook the retainage claim, then the [c]ourt’s decision is absolutely correct and Tretina must live with the result.
[ ] At this time, however, the arbitrator’s true intent and what he considered in making the award is unknown. Until his true intention is known, Tretina has been deprived of the vast majority of its award based upon this [c]ourt’s own sense of what is a proper award herein. * * * If the modification truly reflects the arbitrator’s intent or it is clear that the arbitrator overlooked a portion of the claim, the [c]ourt’s action is both proper and necessary. However, to the extent there is an ambiguity in the award, this [cjourt should not substitute its own judgment for that of the arbitrator. It will only be upon the arbitrator’s sworn testimony that this determination can be made. Otherwise, the [c]ourt’s decision is based only upon speculation.
[Emphasis added.]
The principle is well-settled that the power of courts to modify arbitration awards to correct evident mistakes includes the power to remand to the arbitrator in order to obtain clarification of the award. In La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569 (1967), the Third Circuit addressed the inherent power of federal courts to remand an arbitration award to the arbitrator to clarify its meaning, under circumstances strikingly similar to those before us. Noonan, a general contractor, had demanded arbitration concerning the amount due it in respect of a contract to construct a shopping center. The arbitrators rendered an award in favor of Noonan for $30,861.64. Shortly thereafter La Vale filed suit to recover the difference between the amount of the award and the sum of $56,429.66 that it had paid to Noonan while the arbitration was pending. Noonan asserted that that payment was overdue *372and had been taken into account by the arbitration award. The district court remanded the matter to the arbitrator to clarify whether the arbitrator had taken into account the payment made by La Vale while the arbitration was pending. In affirming the District Court’s order, the Third Circuit explained that the remand did not have the effect of reopening the arbitration:
Where the award, although seemingly complete, leaves doubt whether the submission has been fully executed, an ambiguity arises which the arbitrator is entitled to clarify. The resolution of such an ambiguity is not within the policy which forbids an arbitrator to redetermine an issue which he has already decided, for there is no opportunity for redetermination on the merits of what has already been decided. Instead, the clarification of an ambiguity closely resembles the correction of a mistake apparent on the face of the award and the determination of an issue which the arbitrators had failed to decide. Thus, in the present case the arbitrators will act only to remove the cloud of doubt as to whether they considered the payment of $56,429.66 in making their award and will in no way reopen the merits of the controversy.
[Id. at 573.]
Other courts similarly have recognized the appropriateness of a remand to the arbitrators in order to clarify an apparent ambiguity in the award. See, e.g., Local 719, American Bakery & Confectionery Workers v. National Biscuit Co., 378 F.2d 918, 926 (3d Cir.1967); Hanford Atomic Metal Trades Council v. General Electric Co., 353 F.2d 302, 307-08 (9th Cir.1966); United Steelworkers v. Timken Roller Bearing Co., 324 F.2d 738, 741 (6th Cir.1963); United Steelworkers v. Interpace Corp., 447 F.Supp. 387, 391 (W.D.Pa.1978); Todd Shipyards Corp. v. Industrial Union of Marine & Shipbuilding Workers, 242 F.Supp. 606, 611 (D.N.J.1965); Transport Workers Union v. Philadelphia Transportation Co., 228 F.Supp. 423, 426 (E.D.Pa.1964); Jersey City Police Officers Benevolent Ass’n v. Jersey City, 257 N.J.Super. 6, 11, 607 A.2d 1314 (App.Div.1992). In explaining the relationship between the purposes of arbitration and the desirability of remanding to clarify ambiguous awards, the Ninth Circuit in Han-ford, supra, observed:
We share the view of the district court that the opinion required clarification and interpretation. We also share the view of the district court that this was a task to be first performed by the arbitration committee and not the court, and that the *373court properly remanded the matter to the arbitration committee for such clarification and interpretation. It is appellant’s position that once the arbitrators have acted, it is the duty of the court to interpret and enforce the award, rather than to send the matter back to the arbitrators, to the end that the further delay involved in sending the matter back can be avoided. We think, however, that all of the foregoing cases accept the philosophy that where the parties have elected to submit their disputes to arbitration, they should be completely resolved by arbitration, rather than only partially resolved. In some cases the carrying out of this philosophy will require remanding the matter to the arbitrators, and we think that this is such a case.
[ 353 F.2d at 307-08 (citations omitted).]
I perceive no inconsistency at all between the deferential standard for sustaining arbitration awards today adopted by the Court, ante at 359, 640 A.2d at 793, and the settled and accepted practice of resubmission of ambiguous awards to arbitrators for clarification. To the contrary, the Legislature’s specific requirement that in ease of “an evident miscalculation of figures or an evident mistake in the description of a person, thing or property * * * [t]he court shall modify and correct the award, to effect the intent thereof,” N.J.S.A. 2A:24-9, reflects the Legislature’s intention that mistaken or ambiguous arbitration awards should not be rubber-stamped by a reviewing court. Because an ambiguous award, such as the one before us, can be clarified by the simple and pragmatic expedient of resubmission to the arbitrator for that singular purpose, the majority’s insistence on confirming the award in its present form is unsettling. We need not elevate our interest in the finality of arbitration awards over a court’s ability to “promote justice between the parties,” ibid., particularly where, as here, the objectives are compatible.
II
As noted, I consider this case to be an entirely inappropriate occasion to revisit the holding in Perini. Because that view obviously has not prevailed, I hasten to adopt the majority’s view that no purpose would be served in revisiting the underlying arguments that divided the Court in Perini: “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 *374arguments included therein.” Ante at 359, 640 A.2d at 793. Nevertheless, I adhere to the views expressed in the Perini plurality opinion concerning the appropriate standard for judicial review of arbitration awards, 129 N.J. at 494-97, 610 A.2d 364, as well as with the view I expressed in Perini that “[t]he reliability of arbitration as an alternative method of dispute resolution mandates judicial intervention in extreme cases * * * in which a settled legal principle and industry practice have been repudiated by the arbitrators’ award.” Id. at 556, 610 A.2d 364 (Stein, J., concurring in part and dissenting in part).
Justice HANDLER and Justice O’HERN join in this opinion.
CLIFFORD, J., concurring in the result.
For affirmance—Justices HANDLER, O’HERN and STEIN— 3.
For reversal and remandment—Chief Justice WILENTZ, and Justices CLIFFORD, POLLOCK and GARIBALDI—4.