WEST RAC CONTRACTING CORP. v. SAPTHAGIRI, LLC (L-7918-20, BERGEN COUNTY AND STATEWIDE)

NOT FOR PUBLICATION WITHOUT THE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-2355-20
WEST RAC CONTRACTING
CORP.,
Plaintiff-Respondent,
v.
SAPTHAGIRI, LLC,
Defendant-Appellant.
___________________________
Argued February 28, 2022 – Decided March 28, 2022
Before Judges Vernoia and Firko.
On appeal from the Superior Court of New Jersey, Law
Division, Bergen County, Docket No. L-7918-20.
Scott H. Bernstein argued the cause for appellant
(Skolnick Legal Group, PC, attorneys; Martin P.
Skolnick and Scott H. Bernstein, on the briefs).
Parshhueram T. Misir argued the cause for respondent
(Forchelli Deegan Terrana, LLP, attorneys;
Parshhueram T. Misir, on the brief).
PER CURIAM
Defendant Sapthagiri, LLC appeals from orders dismissing its
counterclaim seeking vacatur of an arbitration award entered in favor of plaintiff
West Rac Contracting Corp. and affirming the award. The arbitration award
resolved plaintiff's claims for compensation for certain costs incurred during
periods of delay in the construction of a hotel. On appeal, defendant argues the
trial court erred by failing to vacate the arbitration award because the arbitrator
manifestly disregarded the law, exceeded his powers, refused to hear relevant
and pertinent evidence, and was evidently partial towards plaintiff.
Unpersuaded, we affirm.
I.
The parties contracted for plaintiff to serve as the construction manager
for the construction of a hotel on defendant's property. The parties executed
four separate agreements (collectively the "Contract Agreements") related to the
construction. Three of the agreements were executed on May 27, 2015, and, on
December 21, 2017, the parties entered into a Rider to the Contract (the GMP
Rider). The Contract Agreements provide that any disputes shall resolved by
the American Arbitration Association (AAA) in accordance with its
"Construction Industry Arbitration Rules."
A-2355-20
2
The Contract Agreements limit plaintiff's compensation to the "Contract
Sum," which is comprised of the "Cost of Work . . . plus the Construction
Manager's Fee." The three May 27, 2015 agreements provide that the "Contract
Sum" would not exceed the Guaranteed Maximum Price (the GMP), and that the
GMP would be agreed upon in a subsequently executed GMP amendment. The
May 27, 2015 agreements further provided that to the extent the "Cost of Work"
exceeded the GMP, plaintiff would "bear such costs in excess of the [GMP]
without reimbursement or additional compensation."
On December 21, 2017, the parties executed the GMP Rider setting a GMP
of $25,900,925.55 and establishing a construction completion date of May 8,
2019. The GMP Rider further included the following provision addressing
plaintiff's entitlement to compensation in the event of construction delays: "[i]n
the event that the [c]onstruction phase is delayed through no fault of [plaintiff],
[plaintiff] shall be entitled to the additional or extended general conditions, if
any, it incurs as a result."
The Contract Agreements provide the GMP is subject to adjustment
through the execution of change orders. A change order is defined as a "written
instrument" in which the parties may agree to a "change in Work," changes to
the "Contract Sum," and changes to the "Contract Time," without invalidating
A-2355-20
3
the Contract Agreements. The agreements provided that a change order may
only be issued in the event of a delay "beyond [plaintiff's] control" or for other
reasons authorized by defendant.
Construction of the hotel was not completed by the GMP Rider's May 8,
2019 completion date. A temporary certificate of occupancy was not issued
until April 16, 2020, and construction was not substantially completed until
April 30, 2020. However, prior to completion of construction, the parties
executed numerous change orders extending the completion date and increasing
the GMP.
In July 2019, plaintiff filed a demand for arbitration asserting it a claim
of "its extended costs due to [seven] months of delay" in the completion of the
hotel "caused by [defendant] and its design professionals." Defendant filed an
answer and counterclaim alleging plaintiff breached the parties' contract and
violated the covenant of good-faith and fair-dealing. There is no verbatim
record or transcription of the ensuing five-day arbitration.
In his December 9, 2020 award, the arbitrator determined plaintiff was
entitled to compensation for some, but not all, of its claimed expenses related to
the construction delays. He concluded that under the GMP Rider plaintiff was
"entitled to recover its proven general conditions and general requirements for
A-2355-20
4
the period of actual delay for which it was granted time extensions in the
executed change orders." 1 More particularly, he found the GMP Rider
"expressly allowed recovery to [plaintiff] for periods of delay for which it bore
no responsibility." The arbitrator also rejected some of plaintiff's claims for
increased costs allegedly caused by the delays, finding one of plaintiff's
requested claims was barred by the Contract Agreements' waiver of
consequential damages.
The arbitrator determined plaintiff was entitled to $1,101,488.71 in
increased costs due to the delays and found defendant had paid plaintiff
$549,970 of the sum under protest prior to the arbitration. The arbitrator
concluded plaintiff was due a total "net award of $551,518.71."
During the arbitration, defendant requested the arbitration award include
a reservation of defendant's right to litigate in separate proceedings any claims
1
The Contract Agreements do not clearly define "general conditions" or
"general requirements." However, the GMP Rider distinguishes between the
two, stating "[t]he GMP includes the [plaintiff's] general conditions which are
intended to compensate [plaintiff] only for its management and associated
burdens." The GMP Rider provides general requirements are not part of
plaintiff's general conditions, but instead are "included in the GMP as a Cost of
Work." It also includes examples of "general requirements such as site trailer,
phones, blueprinting, laborers, temp toilets, temp fencing, etc." Before the trial
court, defendant's counsel offered plaintiff's payment of employees as an
example of a general condition. General requirement costs were broadly
characterized by defendant's counsel as "on-site expenses."
A-2355-20
5
defendant had or might have in the future against plaintiff for indemnification
for subcontractor liens on the construction project and any claims defendant
might have against plaintiff for a claim defendant asserted arose during the
testimony of the final witness, plaintiff's president, concerning a "related party
transaction" that is prohibited under the Contract Agreements. In the award, the
arbitrator expressly declined defendant's request for the reservation of rights
related to those claims.
Following issuance of the arbitration award, plaintiff filed a complaint
pursuant to Rule 4:67-1 to confirm the arbitration award. Defendant filed an
answer and counterclaim to vacate the arbitration award. Defendant argued the
award should be vacated because: the arbitrator manifestly disregarded the law
in his interpretation of the Contract Agreements; the arbitrator exceeded his
authority by ignoring the plain language of the agreements; the arbitrator refused
to consider material evidence related to who was at fault for construction delays;
the arbitrator exceeded his power by refusing to reserve defendant's rights to
pursue certain claims, potentially precluding defendant from asserting them in
the future; and the arbitrator was evidently partial to plaintiff.
After hearing argument, the court rendered a bench opinion first noting
neither party had addressed whether the New Jersey Arbitration Act (NJAA),
A-2355-20
6
N.J.S.A. 2A:23B-1 to -36, or the Federal Arbitration Act (FAA), 9 U.S.C.S. §§1to -16, should be applied in consideration of the parties' arbitration award.
However, under either statute's standard for vacatur, compare N.J.S.A. 2A:23B-
23 with 9 U.S.C.S. § 10, the court found the same conclusion would result.
The court applied the United States Supreme Court's holding in Oxford
Health Plans LLC v. Sutter, 569 U.S. 564 (2013), as the standard for determining
whether the award should be vacated based on defendant's claims the arbitrator
exceeded his authority and the arbitrator's decision was founded on manifest
disregard of the law. The court explained that under the Oxford Health standard,
an award must be confirmed so "long as the arbitrator considered the parties'
contract and issued a ruling based upon his interpretation of the
contract . . . [e]ven if the arbitrator committed a grave error." The court
concluded the arbitrator had done "what he was supposed to do" and the court
declined to vacate the award on those grounds.
The court also rejected defendant's claim the arbitrator was guilty of
misconduct by refusing to hear evidence from defendant's expert and other
witnesses concerning the causes of the construction delays. The court found the
arbitrator had been provided the proffered expert witness' report as a pre-
arbitration submission, and the arbitrator admitted the report as evidence during
A-2355-20
7
the arbitration. The court also found the arbitrator properly exercised his
discretion "not to listen" to the proffered testimony because the arbitrator
determined plaintiff bore no responsibility for the delays as a matter of law under
the Contract Agreements. The court also found the mere fact the arbitrator made
rulings adverse to defendant did not establish he was evidently partial to
plaintiff. Further, the court found the language in the award declining
defendant's requested reservation of rights was merely dicta and not binding on
either party. The court rejected defendant's request it find the arbitrator
exceeded his powers by making a "gratuitous comment" on the reservation of
rights that defendant asked him to address.
The court issued orders confirming the arbitration award and denying
defendant's claim for vacatur of the award. The order confirming the arbitration
award stated the language in the award declining defendant's reservation of
rights was "dicta and . . . premature" and the issues "were not the subject of
submission" to arbitration.
Defendant appeals from the court's orders. On appeal, defendant asserts,
and plaintiff does not dispute, that we should apply the FAA's standard for
A-2355-20
8
vacatur, 9 U.S.C.S. § 10, in our review of the court's orders. The record also
demonstrates the motion court analyzed the issues under the FAA.2
II.
"[T]he decision to vacate an arbitration award is a decision of law [and]
this court reviews the denial of a motion to vacate an arbitration award de novo."
Minkowitz v. Israeli, 433 N.J. Super. 111, 136 (App. Div. 2013) (quoting
Manger v. Manger, 417 N.J. Super. 370, 376 (App. Div. 2010)); see also
Metromedia Energy, Inc. v. Enserch Energy Servs., 409 F.3d 574, 579 (3d Cir.
2005) (applying the de novo standard of review in reviewing an order vacating
an arbitration award under the FAA). In considering whether to reverse or
affirm an order confirming an arbitration award, we must determine whether the
trial court and the arbitrator adhered to the requirements of the controlling
statute. Ibid."Review of arbitration awards under the FAA is 'extremely deferential.'
Vacatur is appropriate only in 'exceedingly narrow' circumstances[.]"
2
We need not address application of the NJAA since the parties' arguments on
appeal rest solely on the standard under the FAA. Additionally, the parties do
not argue the result would be different under the NJAA. See Sklodowsky v.
Lushis, 417 N.J. Super. 648, 657 (App. Div. 2011) (holding an issue not briefed on
appeal is deemed waived); Jefferson Loan Co. v. Session, 397 N.J. Super. 520, 525
n.4 (App. Div. 2008) (same).
A-2355-20
9
Metromedia Energy, Inc., 409 F.3d at 578 (quoting Dluhos v. Strasberg, 321
F.3d 365, 370 (3d Cir. 2003)). The United States Supreme Court has held that
under the FAA, the "exclusive" grounds for vacating an arbitration award are
provided in 9 U.S.C.S. § 10. Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S.
576, 584 (2008). Thus, an award may be vacated only:
(1) where the award was procured by corruption, fraud,
or undue means;
(2) where there was evident partiality or corruption in
the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in
refusing to postpone the hearing, upon sufficient cause
shown, or in refusing to hear evidence pertinent and
material to the controversy; or of any other misbehavior
by which the rights of any party have been prejudiced;
or
(4) where the arbitrators exceeded their powers, or so
imperfectly executed them that a mutual, final, and
definite award upon the subject matter submitted was
not made.
[9 U.S.C.S. § 10(a).]
"Under the FAA, courts may vacate an arbitrator's decision 'only in very
unusual circumstances.'" Oxford Health Plans LLC, 569 U.S. at 568 (quoting
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 942 (1995)). "When an
arbitrator resolves disputes regarding the application of a contract, and no
A-2355-20
10
dishonesty is alleged, the arbitrator's 'improvident, even silly, factfinding' does
not provide a basis for a reviewing court to refuse to enforce the award ." Major
League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001) (quoting
United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 39 (1987)).
In reviewing an application to vacate an arbitration award under the FAA,
"courts . . . have no business weighing the merits of the grievance [or]
considering whether there is equity in a particular claim." Ibid. (alterations in
original) (quoting Misco, Inc., 484 U.S. at 37). "Our role in reviewing the
outcome of the arbitration proceedings is not to correct factual or legal errors
made by an arbitrator." Major League Umpires Ass'n v. Am. League of Pro.
Baseball Clubs, 357 F.3d 272, 279 (3d Cir. 2004). "It is only when the arbitrator
strays from interpretation and application of the agreement and effectively
'dispenses his own brand of industrial justice' that his [or her] decision may be
unenforceable." Garvey, 532 U.S. at 509 (quoting United Steelworkers of Am.
v. Enter. Wheel & Car Corp., 363 U.S. 593, 597 (1960)); see, e.g., Stolt-Nielsen
S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662, 668-69 (2010) (finding
arbitrators exceeded their authority in determining they could decide a class
arbitration where the parties stipulated they did not have an agreement to
arbitrate a class arbitration).
A-2355-20
11
On appeal, defendant argues the trial court erred by affirming the
arbitration award and declining to vacate the award because the arbitrator's
construction of the Contract Agreements manifestly disregarded the law and the
award exceeded the arbitrator's authority under 9 U.S.C.S. § 10(a)(4). It is
unclear whether manifest disregard of the law constitutes a viable ground for
vacatur under the FAA. That ground for vacatur was suggested in Wilko v.
Swan, where the Supreme Court found an arbitrator's erroneous interpretation
of the law did not support vacatur and suggested an arbitrator's manifest
disregard of the law might support vacatur. 346 U.S. 427, 436-37 (1953).
In Hall Street Associates, LLC, the Court seemingly rejected the plaintiff's
claim that Wilko added "'manifest disregard of the law' as a further ground for
vacatur on top of those listed in" 9 U.S.C. § 10, finding "no reason to accord"
Wilko "the significance that [the plaintiff] urge[d]." Hall St. Assocs. LLC, 552
U.S. at 584-85. The Court, however, also noted the "vagueness" in the language
used in Wilko to address manifest disregard of the law as a ground for vacatur
under the FAA, and observed that some courts interpreted Wilko's reference to
"manifest disregard of the law" as a "shorthand for [9 U.S.C.] § 10(a)(3) or §
10(a)(4), the paragraphs authorizing vacatur when the arbitrators were 'guilty of
misconduct' or 'exceeded their powers.'" Id. at 585. In Stolt-Nielsen S.A, the
A-2355-20
12
Court explained it had not decided whether "manifest disregard" as a ground for
vacatur survived Hall Street Associates "as an independent ground for review or
as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U.S.C. §
10." Stolt-Nielsen S.A, 559 U.S. at 672 n.3.
It remains unclear whether manifest disregard of the law constitutes a
viable ground for vacatur under the FAA. For example, the Third Circuit has
observed Hall Street Associates "called into question the viability of manifest
disregard as an independent ground for vacating an arbitration award[,]" Ross
Dress for Less, Inc. v. VIWP, L.P., 750 F. App'x 141, 145 n.1 (3d Cir. 2018),
but the court also explained that "[d]espite an emerging Circuit split[,]" it had
not resolved the issue, ibid.; see also Schwartz v. Merrill Lynch & Co., 665 F.
3d 444, 452 (2d Cir. 2011) (finding "manifest disregard [of the law] remains a
valid ground for vacating arbitration awards" (quoting T.Co Metals, LLC v.
Dempsey Pipe & Supply, Inc., 592 F.3d 329, 340 (2d Cir. 2010))).
We need not decide whether the manifest disregard of the law standard
survived the Court's decision in Hall Street Associates because even if the
standard applied here, the record does not support a finding the arbitrator
manifestly disregarded the law. It has been held the standard of review of the
judicially created manifest disregard of the law standard "is severely limited."
A-2355-20
13
Westerbeke Corp. v. Daihatsu Motor Co., Ltd., 304 F.3d 200, 208 (2d Cir. 2002).
Relief under the standard requires "something beyond and different from a mere
error in the law or failure on the part of the arbitrator[] to understand and apply
the law." Ibid. (quoting Saxis S.S. Co. v. Multifacs Int'l Traders, Inc., 375 F.2d
577, 582 (2d Cir. 1967)); see also Zayas v. Bacardi Corp., 524 F.3d 65, 68 (1st
Cir. 2008) (explaining there is an "exceedingly small window of opportunity for
vacation of arbitral awards that are 'in manifest disregard of the law'").
To establish an arbitrator manifestly disregarded the law in the Second
Circuit, a party challenging an arbitration award must first find the law allegedly
disregarded is "well defined, explicit, and clearly applicable." Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Bobker, 808 F.2d 930, 934 (2d Cir. 1986). It
must also be demonstrated that the arbitrator "appreciate[d] the existence of
[this] clearly governing legal principle but decide[d] to ignore or pay no
attention to it." Westerbeke, 304 F.3d at 209 (quoting Merrill Lynch, Pierce,
Fenner & Smith, Inc., 808 F.2d at 934). In the First Circuit, a manifest disregard
of the law is established where the arbitration award is "(1) unfounded in reason
and fact; (2) based on reasoning so palpably faulty that no judge, or grou p of
judges, ever could conceivably have made such a ruling; or (3) mistakenly based
on a crucial assumption that is concededly a non-fact." Zayas, 524 F.3d at 68
A-2355-20
14
(quoting Teamsters Local Union No. 42 v. Supervalu, Inc., 212 F.3d 59, 66 (1st
Cir. 2000)).
Here, defendant does not make a showing the arbitrator manifestly
disregarded the law under any recognized formulation of the standard.
Defendant claims the GMP acted as a cap on general requirements costs—
"onsite expenses"—incurred by plaintiff beyond the GMP as adjusted by the
change orders, and although the GMP Rider permitted compensation for
additional general conditions costs —"plaintiff's management and associated
burdens"—there is no similar provision in the Contract Agreements providing
compensation for general requirements costs in the event of delays. It also
asserts the change orders unambiguously barred any further compensation
because plaintiff agreed to an extension of time in exchange for no further
compensation. Defendant claims the Contract Agreements' exclusion from the
"Cost of Work" of off-site personnel and costs, as well as the waiver of
consequential damages provision, were ignored by the arbitrator when he
awarded plaintiff certain costs associated with plaintiff's "home office
personnel."
In asserting the arbitrator manifestly disregarded the law, defendant
actually claims only that the arbitrator misinterpreted and misapplied various
A-2355-20
15
contractual provisions. However, as the Court explained in Oxford Health,
"[b]ecause the parties 'bargained for the arbitrator's construction of their
agreement,' an arbitral decision 'even arguably construing or applying the
contract' must stand, regardless of a court's view of its (de)merits." 569 U.S. at
569 (quoting E. Associated Coal Corp. v. Mine Workers, 531 U.S. 57, 62
(2000)). In determining whether an arbitrator exceeded their power in issuing
an award under the FAA, a court does not entertain "full-bore legal and
evidentiary appeals." Id. at 568-69 (quoting Hall St. Assocs., LLC., 552 U.S. at
588). Rather, "the sole question . . . is whether the arbitrator (even arguably)
interpreted the parties' contract, not whether he got its meaning right or wrong."
Id. at 569.
Here, the arbitration award is grounded in the arbitrator's interpretation of
the Contract Agreements. For example, the arbitrator rejected one of plaintiff's
claims for reimbursement of costs based on the waiver of consequential damages
provision in the Contract Agreements. The arbitrator also rejected defendant's
argument the change orders barred plaintiff's entitlement to recovery of
additional costs based on a determination defendant's interpretation of the
contract terms "render[ed] meaningless" language in the GMP Rider entitling
plaintiff to "additional or extended general conditions" in the event of delays not
A-2355-20
16
caused by plaintiff. The arbitrator premised his award of general conditions and
general requirements on the same contractual provision, interpreting the GMP
Rider to "expressly allow[] recovery to [plaintiff] for periods of delay for which
it bore no responsibility." The arbitrator's analysis of the many other issues
presented is similarly grounded in his interpretation of the Contract Agreements.
Defendant makes no showing the arbitrator recognized a clearly governing
legal principle but then decided to ignore it, Westerbeke, 304 F.3d at 209, that
the arbitrator's decision is unfounded in reason and logic, is based on reas oning
so faulty no judge could conceivably have made the same decision, or is based
on a critical assumption of a non-fact, Zayas, 524 F.3d at 68. Thus, defendant
makes no showing the arbitration award is founded on a manifest disregard of
the law, even assuming that standard remains viable following the Court's
decision in Hall Street Associates, LLC.
In tethering his reasoning to his interpretation of the parties' agreements,
the arbitrator's award "draw[s] its essence from the contract." E. Associated
Coal Corp., 531 U.S. at 62 (quoting Misco, Inc., 484 U.S. at 38). A court will
not vacate an arbitration award where the arbitrator "arguably
constru[ed] . . . the contract and act[ed] within the scope of his authority," and,
even where the "court is convinced he committed serious error[, this] does not
A-2355-20
17
suffice to overturn his decision." Ibid. (quoting Misco, Inc., 484 U.S. at 38).
"The potential for . . . mistakes is the price of agreeing to arbitration" as an
"arbitrator's construction [of the contract]" is what is "bargained for; and so far
as the arbitrator's decision concerns construction of the contract, the courts have
no business overruling him [or her] because their interpretation of the contract
is different from his." Oxford Health Plans LLC, 569 U.S. at 572-73 (second
alteration in original) (quoting Enter. Wheel & Car Corp., 363 U.S. at 599). "So
long as the arbitrator was 'arguably construing' the contract . . . a court may not
correct his [or her] mistakes under §10(a)(4)." Id. at 572 (quoting E. Associated
Coal Corp., 531 U.S. at 62).
Defendant next argues the trial court erred in declining to vacate the award
under 9 U.S.C. § 10(a)(3), because the arbitrator did not the testimony of three
witnesses, two of defendant's architects and a "delay expert," who defendant
avers would have testified plaintiff was responsible for the delays and therefore
not entitled to any compensation under the GMP Rider. Defendant concedes the
arbitrator accepted its "delay expert['s]" report as a pre-arbitration submission.
An arbitration award may be vacated under 9 U.S.C. § 10(a)(3) "where
the arbitrators were guilty of misconduct . . . in refusing to hear evidence
pertinent and material to the controversy." However, "Section 10(a)(3) 'cannot
A-2355-20
18
be read, . . . to intend that every failure to receive relevant evidence constitutes
misconduct which will require the vacation of an arbitrator's award.'" Century
Indem. Co. v. Certain Underwriters at Lloyd's, 584 F.3d 513, 557 (3d Cir. 2009)
(quoting Newark Stereotypers' Union No. 18 v. Newark Morning Ledger Co.,
397 F.2d 594, 599 (3d Cir. 1968)). Rather, "misconduct under § 10(a)(3) will
not be found 'unless the aggrieved party was denied a fundamentally fair
hearing.'" Vitarroz Corp. v. G. Willi Food Int'l Ltd., 637 F. Supp. 2d 238, 248
(D.N.J. 2009) (quoting Sherrock Bros. v. DaimlerChrysler Motors Co., LLC,
260 F. App'x 497, 501 (3d Cir. 2008)).
"[I]t is clear that 'in making evidentiary determinations, an arbitrator need
not follow all the niceties observed by the federal courts.'" Century Indem. Co.,
584 F.3d at 557 (quoting Lessin v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
481 F.3d 813, 816 (D.C. Cir. 2007)). "It is well within an arbitrator's authority
to refuse to hear evidence that is cumulative or of little relevance." Lessin, 481
F.3d at 817 (citations omitted).
Our determination of whether defendant was afforded a fundamentally fair
hearing is complicated by the absence of any record of the arbitration
proceedings. It is further complicated by defendant's assertion, made in his
counterclaim to vacate the award, that the arbitrator found plaintiff was not at
A-2355-20
19
fault for delays without hearing testimony from its witnesses, and defendant's
simultaneous but incongruous assertion its "witnesses testified that
[construction] delays were primarily caused by" plaintiff.
In any event, based on the record presented, we are not convinced
defendant was denied a fair hearing by the arbitrator's decision to exclude the
testimony of the witnesses. Defendant proffers that the witnesses would have
testified plaintiff was at fault for the delays resulting from the change orders.
The arbitrator, however, concluded the testimony was unnecessary because fault
for the delays could be determined as a matter of law under the Contract
Agreements. More particularly, the arbitrator determined that, as a matter of
law, defendant was at fault for the delays because under the parties' plain
agreement, as reflected in the Contract Agreements, change orders could only
be granted for delays for which plaintiff was not responsible. Thus, the
arbitrator determined that by the express agreement of the parties, any delays
resulting from change orders were delays for which plaintiff bore no
responsibility.
It is for the arbitrator "to decide issues of relevance [or] . . . admissibility
of evidence," Ass'n of Flight Attendants, AFL-CIO v. USAir, Inc., 960 F.2d 345,
350 (3d Cir. 1992), and it was within the arbitrator's discretion to exclude
A-2355-20
20
testimony that was irrelevant to what he determined to be a legal issue governed
by the parties' agreement concerning delays resulting from change orders ,
Lessin, 481 F.3d at 817. We discern no error in the arbitrator's decision the
proffered testimony was unnecessary; it was based on his reasoned interpretation
of the Contract Agreements.
Moreover, even if the arbitrator erred in not hearing testimony from three
witnesses concerning the fault for the delays, defendant makes no showing
exclusion of the testimony deprived defendant of "a fundamentally fair hearing."
Vitarroz Corp., 637 F. Supp. 2d at 248 (quoting Sherrock Bros., 260 F. App'x at
501). To provide a fair hearing, an arbitrator "must give each of the parties to
the dispute an adequate opportunity to present its evidence and argument."
Tempo Shain Corp. v. Bertek, Inc., 120 F.3d 16, 20 (2d Cir. 1997) (quoting
Hoteles Condado Beach v. Union de Tronquistas Local 901, 763 F.2d 34, 39 (1st
Cir. 1985)).
Here, although there is no transcript of the proceedings, it is clear the
arbitrator was provided with defendant's expert report detailing its position
concerning responsibility for the delays. The report comprehensively addresses
various delays and includes an unequivocal opinion that plaintiff, and not
defendant, caused the delays. In its post-hearing brief, defendant also argued at
A-2355-20
21
length that the parties' agreement to change orders alone did not preclude a
finding plaintiff was responsible for the delays.
Although the arbitrator limited evidence on the delay-fault issue, in
accepting the expert's report and permitting argument as to whether the change
orders amounted to an agreement plaintiff bore no responsibility for the delays,
the arbitrator gave defendant "an adequate opportunity to present its evidence
and arguments" on this issue. Vitarroz Corp., 637 F. Supp. 2d at 250-51 (quoting
Sunshine Mining Co. v. United Steelworkers of Am., AFL-CIO, 823 F.2d 1289,
1295 (9th Cir. 1987)). In the end, however, the arbitrator's decision to limit the
evidence on the issue was within his discretion and was consistent with his legal
conclusion the parties had agreed that change orders would be issued only where
plaintiff was not at fault and, as such, as a matter of law there was no need for
additional evidence on the fault issue. We do not find the decision barring the
testimony constituted misconduct warranting vacatur under 9 U.S.C. § 10(a)(3)
or "deprive[d] defendant[] of a fundamentally fair hearing." Id. at 251. The
trial court did not err in declining to vacate the award on those grounds.
We also find no merit to defendant's argument the trial court erred by
declining to vacate the arbitration award because the arbitrator allegedly
demonstrated evident partiality in plaintiff's favor. Vacatur under 9 U.S.C. §
A-2355-20
22
10(a)(2) is permitted "where there was evident partiality or corruption in the
arbitrator[]." "[T]o show evident partiality, . . . the challenging party must show
a reasonable person would have to conclude that the arbitrator was partial to the
other party to the arbitration." Freeman v. Pittsburgh Glass Works, LLC, 709
F.3d 240, 252 (3d Cir. 2013) (first alteration in original) (quoting Kaplan v. First
Options of Chicago, Inc., 19 F.3d 1503, 1523 n.30 (3d Cir. 1994)). "[E]vident
partiality is strong language and requires proof of circumstances powerfully
suggestive of bias." Ibid. (quoting Kaplan, 19 F.3d at 1523 n.30). The bias must
be "sufficiently obvious that a reasonable person would easily recognize it." Id.
at 253.
Here, defendant's argument is premised on the various determinations
made by the arbitrator in plaintiff's favor that it challenges on appeal. Defendant
simply asserts there is "no colorable" justification for the decisions made by the
arbitrator. As the District of Columbia District Court aptly explained in
considering a similar assertion of an arbitrator's partiality, "[a]lthough a series
of unfavorable rulings by the arbitrator may produce an appearance of bias in
the eyes of the unsuccessful party, it does not justify vacating the arbitration
award." Thian Lok Tio v. Wash. Hosp. Ctr., 753 F. Supp. 2d 9, 18 (D.D.C.
2010). Beyond the arbitrator's unfavorable determinations related to the issues
A-2355-20
23
submitted to arbitration, defendant does not offer any proof of circumstances
that suggest improper bias, let alone any that "powerfully" suggest bias.
Freeman, 709 F.3d at 252. The trial court did not err in concluding there was
no evidence of partiality to support vacating the award under 9 U.S.C. §
10(a)(2).
We also reject defendant's argument the trial court erred in declining to
vacate the award because the arbitrator exceeded his power by failing to include
a reservation of rights in the award and "potentially [and] improperly barred
[d]efendant's [f]uture [i]ndemenification [c]laims" as well as defendant's
potential future claims against plaintiff and its president for claims related to the
alleged interested party transaction under New Jersey's entire controversy
doctrine. At oral argument, plaintiff agreed that no claims by defendant for
indemnification from plaintiff for subcontractor liens on the project, and no
claims by defendant against plaintiff for violation of the related-party-
transaction provision of the Contract Agreements, were presented to the
arbitrator for decision or were decided by the arbitrator in the award. Plaintiff
also agreed that nothing in the arbitration award, in the litigation concerning the
vacatur or affirmance of the award, or in this appeal precludes defendant from
A-2355-20
24
pursuing the subcontractor indemnification or related-party claims in other
proceedings.
Our review of the arbitration record and the arbitration award is consistent
with the parties' representations at oral argument. Although we affirm the
court's orders confirming the arbitration award and denying defendant's request
to vacate the award, neither the arbitration award, the Law Division's orders, nor
this opinion shall be interpreted as barring defendant's right to pursue claims
against plaintiff for indemnification for subcontractor's liens on the project or
defendant's claims for violation of the related-party transaction provision of the
Contract Agreements.
Defendant may therefore prosecute "claims against [p]laintiff for
contractual indemnification and reimbursement of [d]efendant's attorney's fees
and costs that [may be] be incurred in . . . enforcement proceedings involving
[p]laintiff's subcontractor liens against" defendant and its property. Defendant
is similarly free to prosecute claims arising from "[p]laintiff's and [plainti ff's
president] Mr. Gary Krupnick's" alleged "failures to disclose their conflict of
interest when recommending and pushing for [d]efendant's use of the Eco Span
structural support system in which" defendant claims "they had a financial
interest." We do not express an opinion on the merits of any of these claims,
A-2355-20
25
but simply note they are not barred by the arbitration award or any of the ensuing
proceedings through this appeal.
Any arguments asserted on defendant's behalf we have not directly
addressed are without sufficient merit to warrant discussion in a written opinion.
R. 2:11-3(e)(1)(E).
Affirmed.
A-2355-20
26