PATERSON MEDICAL PLAZA, LLC, VS. LITANA DEVELOPMENT, INC. (L-4395-16, PASSAIC COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE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-2978-18T1
PATERSON MEDICAL PLAZA,
LLC,
Plaintiff-Respondent,
v.
LITANA DEVELOPMENT, INC.,
Defendant-Appellant.
_____________________________
Argued telephonically March 25, 20201 –
Decided April 13, 2020
Before Judges Fuentes, Mayer and Enright.
On appeal from the Superior Court of New Jersey, Law
Division, Passaic County, Docket No. L-4395-16.
Robert Ethan Bennet argued the cause for appellant
(Tesser & Cohen, attorneys; Danielle E. Cohen and
Robert Ethan Bennett, on the briefs).
1
This matter was argued telephonically in accordance with the Chief Justice
Rabner's March 15, 2020 Notice to the Bar.
Mandelbaum Salsburg PC, attorney for respondent
(Ryan M. Buehler, on the brief). 2
PER CURIAM
Defendant Litana Development, Inc. (Litana) appeals from a February 22,
2019 order denying its motion to confirm an arbitration award and March 1 and
March 8, 2019 orders compelling re-arbitration. We reverse the orders
compelling re-arbitration and remand the matter to the trial court to confirm the
arbitration award and to consider the additional relief requested in Litana's
motion to confirm the award.
Plaintiff Paterson Medical Plaza, LLC (PMP) contracted with Litana for
construction of a medical facility. Upon completion of the work, Litana claimed
PMP failed to pay for all work and services performed pursuant to the parties'
written contract and signed change orders.
2
On January 28, 2020, the day before the originally scheduled argument date,
counsel for Paterson Medical Plaza, LLC advised that he could not appear
because his legal services had been terminated by the client. Counsel requested
an adjournment of the January 29, 2020 argument to allow the client to retain
new counsel and we adjourned the matter to March 25, 2020. Because Paterson
Medical Plaza, LLC is a corporation, Rule 1:21-1(c) requires any appearance in
court be "through an attorney authorized to practice law in this State." Despite
several inquiries by staff at the Appellate Division Clerk's Office, Paterson
Medical Plaza, LLC failed to retain new counsel and therefore we consider the
written arguments in the merits brief filed on behalf of Paterson Medical Plaza,
LLC.
A-2978-18T1
2
Litana claimed its last day of work on the project was August 9, 2016. A
few days later, PMP terminated the contract with Litana. On October 24, 2016,
Litana filed a construction lien claim against PMP's property in the amount of
$272,050.
PMP immediately filed an order to show cause and verified complaint
seeking to discharge Litana's construction lien. In the verified complaint, PMP
claimed Litana's lien amount was "willfully exaggerated." In addition to the lien
discharge, PMP sought damages for breach of contract, breach of the implied
covenant of good faith and fair dealing, lost profits, and unjust enrichment.
Litana filed an answer and counterclaim. In its counterclaim, Litana requested
damages based on breach of contract.
The trial court denied PMP's application to discharge the lien. Thereafter,
PMP filed a motion to compel arbitration. In a March 13, 2017 order, the judge
compelled the parties to arbitrate their disputes and retained jurisdiction to
enforce the arbitrator's award. 3
Arbitration hearings were held over a five-day period in 2018. PMP's
claim before the arbitrator focused solely on discharging the construction lien.
PMP argued the lien amount alleged by Litana was grossly overstated. In
3
The trial court stayed the litigation pending the arbitration.
A-2978-18T1
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arbitration, Litana sought in excess of $1 million in damages, plus interest and
attorney's fees. Litana arrived at that amount based on the parties' written
contract, signed change orders, and its alleged additional costs associated with
the project.
The arbitrator heard testimony from the parties' witnesses and reviewed
documents provided in support of their claims. Based on the testimony and
documents, the arbitrator found Litana's lien claim was not overstated and
ordered PMP to pay Litana the sum of $552,202.22.
In his April 17, 2018 single-spaced, seven-page written award, the
arbitrator determined Litana's work and services under the base contract and
signed change orders totaled $4,682,314.81. 4 The arbitrator rejected some of
Litana's claimed $808,202.22 in additional documented expenses and its claimed
additional work in the amount of $47,620. He concluded there was no writing
memorializing the $47,620 sum and therefore denied Litana's request for
payment of that amount. The arbitrator also rejected Litana's claim that it
allegedly advanced $420,000 to PMP, finding "little persuasive explanation . . .
4
This amount represents the original contract amount of $4,051,000, plus a
December 31, 2013 written change order for $414,314.81, plus an October 6,
2014 written change order for $175,000, plus a September 18, 2015 written
change order for $42,000.
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as to why payments totaling $420,000 were made by Litana to PMP." The
arbitrator concluded the $420,000 sum represented "the return to PMP of unused
proceeds of the construction loan." The arbitrator "accept[ed] the testimony and
proofs presented by Litana with regard to the balance of the additional
documented expenses it claim[ed]," determining the sum of $388,202.22 was
sufficiently documented. The arbitrator calculated the total work and services
provided by Litana to PMP was valued at $5,070,517.03. 5
The arbitrator denied Litana's request for interest, attorney's fees, and
costs, finding the parties had a "good faith dispute[]" and Litana lacked
documentation related to some of the work because the parties had a
"cooperative and informal relationship."
At the arbitration, PMP did not claim it was owed any money but argued
it was entitled to set-off amounts against Litana's claims. The arbitrator rejected
certain of PMP's set-off claims based on alleged deficiencies and incomplete
work performed by Litana and explained why he rejected those set-off amounts.
The arbitrator also denied PMP's claim for lost profits as speculative.
5
The arbitrator arrived at this amount by adding the base contract and change
order work, totaling $4,682,314.81, plus the additional work performed by
Litana in the amount of $388,202.22.
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However, the arbitrator awarded PMP the following credits: $80,000 for
stucco work not completed by Litana; $34,000 for elevator repair work; $4750
for the elevator room HVAC; and $4300 for installation of the elevator room
floor. The total amount credited to PMP by the arbitrator was $123,050. The
arbitrator's credit calculation in favor of PMP far exceeded Litana's suggested
credit of $15,000 for the work it did not perform.6 The arbitrator determined
PMP paid Litana a total of $4,395,264.81.
Deducting the amount paid by PMP, and crediting PMP for defective work
and work not performed by Litana, the arbitrator concluded Litana was owed
$552,202.22.7
Dissatisfied with the award, PMP sought a modification from the
arbitrator. Based on his review of the post-arbitration submissions, the arbitrator
denied PMP's request to modify the award because "[t]here [were] no 'clerical,
typographical, technical, or computational errors in the [a]ward.' I see no reason
6
PMP claims the arbitrator's award failed to consider a $15,000 credit.
However, the arbitrator credited PMP in an amount nearly ten times the credit
amount Litana argued should be applied for incomplete work.
7
The arbitrator's ultimate award reflects his determination that $5,070,517.03
represented the work and services provided by Litana, minus PMP's payment to
Litana in the amount of $4,395,264.81, minus the total credit due to PMP in the
amount of $123,050.
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to re-determine the merits of this matter even if I had the power to do so." In a
May 15, 2018 decision, the arbitrator affirmed his prior award.
On June 26, 2018, Litana filed a motion to confirm the arbitration award
and for other relief. PMP filed a cross-motion for modification, correction, or
vacation of the award.
The motion judge heard argument on the parties' motions in October 2018.
At the conclusion of the argument, the judge requested the parties provide
additional information.
After receiving the parties' supplemental submissions, the judge asked
counsel to reargue the motions on February 22, 2019. In a decision placed on
the record on that date, the judge denied Litana's motion to confirm the
arbitration award. In orders dated March 1 and March 8, 2019, the judge vacated
the arbitration award and ordered re-arbitration before the same arbitrator.
The judge explained he read the arbitrator's decision "probably five or six
times" and stated, "quite frankly, I can't follow it." He found the arbitrator "was
required to provide a reasoned decision" and did not "give a well-reasoned
second opinion." The judge indicated the arbitrator needed "to opine with more
specificity . . . . And while [the arbitrator] put a lot of information in, I don't
find that it particularly was well reasoned or reasoned at all . . . . "
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On appeal, Litana argues the judge erred by declining to confirm the
arbitrator's award, vacating the arbitration award, and ordering re-arbitration.
"[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., Inc. 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
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)).
"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.
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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 (emphasis added).]
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 parties;
(4) the arbitrator exceeded his or her powers; (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).
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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
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, PMP's request to discharge the construction lien and Litana's claim
for monies owed by PMP were decided by the arbitrator. The judge's inability
to follow the arbitrator's decision is not one of the enumerated statutory grounds
to vacate, modify, or correct an arbitration award.
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The judge cited no statutory basis for vacating the arbitration award. The
judge's failure to understand how the arbitrator arrived at the award is not
sufficient ground to vacate the award. The arbitrator considered the evidence
and testimony presented, and then articulated his findings in support of the
award. Having reviewed the record, we discern no basis to vacate the arbitration
award or compel re-arbitration.
Therefore, we reverse the judge's orders denying Litana's motion to
confirm the arbitration award and compelling re-arbitration. We remand the
matter to the trial court to enter an order reinstating and confirming the
arbitration award. Because the motion judge did not consider Litana's
application to enforce the construction lien or award attorney's fees, interest, and
costs, the judge shall consider these issues on remand. We take no position on
the disposition of these issues.
Reversed and remanded. We do not retain jurisdiction.
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