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Township of Jefferson v. Toro Development Corp.

Decided: March 14, 1985.


On appeal from Superior Court of New Jersey, Chancery Division, Morris County.

McElroy and Dreier. The opinion of the court was delivered by Dreier, J.A.D.


Plaintiff appeals from a judgment entered by the trial judge in the Chancery Division confirming an arbitration award against plaintiff. The total payments under the contract, as initially amended, were $584,252.75. The one acknowledged change order removing certain pavement items reduced the final contract price to $467,247.35. Defendant claimed entitlement to $395,403.58 in additional compensation described in detail in the brief and written summation presented to the arbitrators. The Township in its letter brief to the arbitrators claimed liquidated damages and additional costs and offsets in the total amount of $129,567.97. After 19 days of hearings, the arbitrators, having the benefit of the parties' written briefs and summations, made a net award to defendant in the amount of $280,000. This award was confirmed by the trial court in an order dated May 1, 1984.

The trial judge in his oral opinion of February 24, 1984 expressed dismay over the lack of factual findings by the arbitrators, but noted that the arbitrators were under no statutory or regulatory direction to provide such information at the time of their award. The trial judge found specifically that the award was "within the broad parameters of what one might expect as a sensible result from this kind of a factual context." Although the contractual language might have indicated a different result from that reached by the arbitrators, the trial court found that the arbitrators could have determined that the contract had been modified by the conduct of the parties.

The trial judge was correct in his conclusion that arbitrators are not required to articulate the reasons for their award. N.J.S.A. 2A:24-7 requires only that the award be made in writing. An award may not be vacated merely because "the arbitrators gave no details in the award." Tave Construction Co. Inc. v. Wiesenfeld, 82 N.J. Super. 562, 566 (Ch.Div.1964), aff'd o.b. 90 N.J. Super. 244 (App.Div.1966). Judge Stanton applied the correct standard for examining an unexplained

arbitration award as enunciated in Fred W. Donnelly, Inc. v. Unit One Lawrence, 171 N.J. Super. 30, 33-34 (App.Div.1979), certif. den. 82 N.J. 298 (1980).

In Donnelly, the issue was whether a contractor had improperly constructed a roof. The arbitrator awarded $41,160 against the contractor, without findings of fact. The contractor attempted to vacate the award, claiming that the arbitrator had ignored the parties' written contract, a lease. On appeal from the Law Division's confirmation of the arbitration award, the contractor complained that the Law Division should have ordered the arbitrator to make factual findings. The Appellate Division first found that it had the power under certain circumstances to order an arbitrator to set forth factual findings and legal conclusions, citing Kearny PBA Local #21 v. Kearny, 81 N.J. 208, 219-220 (1979). It noted, however, that in close cases the court should follow a "policy of indulgent treatment of arbitrators and their awards." Donnelly, 171 N.J. Super. at 33 (quoting LaStella v. Garcia Estates, 66 N.J. 297, 303 (1975)). The court further stated that before a court may consider extrinsic evidence affecting an arbitration award the

[c]ourt must first conclude that the potential for the arbitrator's error is greater than the potential for a correct result. Where a court finds legal and factual conclusions that could sustain the award, there is no justification for examination of extrinsic evidence and no justification to compel an arbitrator, who is not otherwise required, to set forth his findings of fact and conclusions of law. Kearny PBA Local #21 v. Kearny, 81 N.J. at 219-220. [ Id., 171 N.J. Super., at 33-34].

The Donnelly court found that the arbitrator there could have interpreted the lease to show that the parties did not intend to exclude damages caused by defendant, and thus the award could be considered unimpeachable.

The trial court in reviewing the arbitrator's award in this case analyzed the parties' agreement and found that notwithstanding the requirement for change orders in the contract,

[p]arties more often than not do not follow the contractual provisions with respect to change orders and modifications of the job once the job has been undertaken . . . [G]iven the gross circumstances of this case, it is fairly

arguable that the result achieved in this case is a sensible result. Experience is such that we know that it is implicit in the circumstances that there could have been a course of conduct which amply justified departure from the strict terms of the contract. . . .

We have reviewed the trial judge's decision, bearing in mind that "[a]rbitration is viewed favorably by our courts, and every doubt is resolved in favor of the validity of the award." Ukrainian Nat. Urban Renewal v. Muscarelle, Inc., 151 N.J. Super. 386, 396 (App.Div.), certif. den., 75 N.J. 529 (1977). We may vacate an arbitration award only if we find that one of the grounds set forth in N.J.S.A. 2A:24-8 applies:

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 ...

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