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Peters v. Marriott Corp.

Decided: May 12, 1994.


Lenox, A.j.s.c.




This interesting motion arises from the unanticipated consequence of a well-intentioned award entered by two arbitrators following a hearing under the Mercer County Non-Binding Personal Injury Arbitration Program. R. 4:21A-1 et seq. The arbitrators found in favor of defendant, plaintiffs did not file a rejection of the award and demand for trial de novo within 30 days, R. 4:21A-6(b)(1), and defendant now seeks to confirm the award. The effort of the arbitrators to render a decision which would bring about a settlement of plaintiffs' claims is now the basis for a challenge by plaintiffs to the award's validity.

On this contested motion by defendant for confirmation, IL 4:21A-6(b)(3), a plenary hearing was conducted to resolve conflicting versions by the attorneys for the parties as to what transpired at the arbitration hearing. The Supreme Court addressed the necessity for conducting an evidential hearing under such circumstances in Nolan v. Lee Ho, 120 N.J. 465, 479, 577 A.2d 143 (1990), involving contested facts with respect to the setting aside of a settlement agreement. The arbitrators and the attorneys for the parties testified and documentary evidence was offered. This opinion denies defendant's motion and grants plaintiffs a trial de novo.

Plaintiffs, husband and wife, have asserted personal injury and per quod claims arising from a fall by the wife on defendant's premises during the course of her employment. The claim of the female plaintiff for personal injuries was a questionable one. At the arbitration hearing, liability was vigorously contested both factually and legally. The damage claim was equally disputed, as plaintiff had an extensive past medical history, including a prior workers' compensation claim involving injuries similar to those allegedly sustained in the subject accident. Plaintiff was also paid workers' compensation benefits by her employer's insurance carrier in this case, and defendant contended that most of the expenses paid by the carrier were attributable to injuries and conditions which pre-existed her fall on defendant's premises. Thus, the

high amount of the carrier's lien on the proceeds of any settlement or award in plaintiff's favor was recognized by counsel for both parties and the arbitrators as an impediment to a resolution of the case.

The events at the arbitration hearing which gave rise to this contested motion were unusual. The hearing began with the testimony of the female plaintiff. During cross-examination by defendant's counsel, one of the arbitrators terminated the questioning. Plaintiff left the room and a Discussion followed between the arbitrators and the attorneys for the parties. At that time, defendant had produced its only evidence in the form of documents which had been reviewed by the arbitrators. However, the hearing was never reconvened to complete cross-examination and re-direct examination of plaintiff or for the presentation of any other evidence in plaintiffs' case. No opportunity for summations was provided, and when award was entered, plaintiffs did not return to the room to hear the decision and reasons of the arbitrators. The award determined that plaintiff was 100% responsible for the happening of the accident.

The attorneys for the parties apparently did not leave the hearing with the same understanding as to what had occurred. The testimony, however, leaves no doubt as to what actually transpired. It is beyond question that all parties recognized that the workers' compensation lien was so large that, whether the case was concluded by settlement, arbitration award or even a subsequent jury verdict, it was unlikely that there would be any recovery sufficient to satisfy the entire lien, much less provide plaintiffs with compensation. It is equally true that, regardless of how the award was entered, there was no specific waiver by defendant of the 30 day time limit for filing a demand for a trial de novo. The dispute which has brought the parties to court has focused upon what occurred during the conference between the attorneys and the arbitrators, as well as the intent and legal effect of the award which was entered. It arises in the context of a motion to confirm the award because, for reasons which plaintiffs

assert constitute good cause, a timely demand for trial de novo was not filed.

Defendant's position is straightforward; that is, that the arbitrators entered a valid and enforceable award following a full and fair hearing. Plaintiffs oppose the motion to confirm contending that the parties and arbitrators did not intend the award to result in a dismissal of their complaint, but rather that it was entered in the hope that it would assist in effecting a justifiable compromise of the compensation lien, thereby facilitating settlement Discussions which were to occur later. Thus, plaintiffs contend that there was no intention that they be bound by the 30 day limitation for rejection of the award, and that there is good cause for granting a trial de novo.

The arbitrators expressed no doubt in their testimony that the award they entered was generated in whole, or at least in part, by the understanding that it would be used as a tool to effect a settlement. They saw that plaintiffs' claims were questionable. One testified that he favored an award dismissing plaintiffs' case; whereas, the other described the case as "hotly contested" and believed that the decision was a "close call." He also said that had he decided in favor of plaintiffs, it would have been "a substantial verdict." During the Discussion between the attorneys and arbitrators, they agreed that the case had a settlement value and that, if the arbitrators entered an award on the merits, it would accomplish nothing by way of a Disposition of the case. They knew that defendant would demand a trial de novo in the event of a substantial monetary award, that plaintiffs would file a similar demand if they lost, and that in any event, any reasonable award on behalf of the plaintiffs would not satisfy the entire workers' compensation lien. The testimony of one of the arbitrators summed up their intent. He said that he perceived his role to be to get the case resolved, that the award was an attempt to do so by settlement, that he thought the case would be settled after the entry of the award, and that he did not think about what would occur if it did not settle. Accordingly, the award was entered

without any deliberations by the arbitrators as to who should prevail and what their award should be.

The validity of the award is not of the essence of the issue before the court. However, the reasonable belief of plaintiffs' attorney following the hearing is very material. Whether or not a fair trial was conducted and a valid award was entered, if plaintiffs' counsel reasonably believed there had been no full trial as such, and that the arbitrators and his adversary did not intend that an enforceable award be entered, that would support a finding under R. 4:50-1 justifying an order vacating the award. The focus here must be upon plaintiffs and their attorney, and the reasonableness of their belief that it was unnecessary to file a timely demand for a trial de novo under the circumstances.

The testimony of the arbitrators establishes that the primary motivation for the award was to provide a vehicle with which plaintiffs' attorney could obtain a compromise of the compensation lien in order to bring about a settlement of plaintiffs' claims against defendant. Whether defendant's attorney so understood is beside the point. It is clear that plaintiffs' attorney was himself justified in coming to that Conclusion. It is inconceivable that in the absence of such an understanding on his part, he would have permitted the hearing to be discontinued during the course of his client's testimony with no opportunity to rehabilitate her, produce other evidence and make closing remarks to the arbitrators. He understood that defendant's attorney would obtain ...

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