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America's Pride Construction v. Farry

December 19, 2002

AMERICA'S PRIDE CONSTRUCTION, PLAINTIFF,
v.
JOHN FARRY AND EILEEN FARRY, DEFENDANT AND THIRD PARTY PLAINTIFFS- APPELLANTS,
v.
LOU BONI, THIRD PARTY-DEFENDANT, AND. TIMOTHY P. KLESSE AND KLESSE ASSOCIATES, P.A., THIRD PARTY DEFENDANTS- RESPONDENTS.



On certification to the Superior Court, Appellate Division.

SYLLABUS BY THE COURT

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

In this appeal, the Court determines whether a party who receives notice of an arbitration hearing, but does not attend it, is nonetheless entitled to a new hearing when the arbitrator has failed to provide that party with notice that an arbitration award has been entered.

John and Eileen Farry (defendants) contracted with America's Pride Construction, Inc. (plaintiff) to perform renovations on their home. After the work began, defendants became dissatisfied with plaintiff's work, ordered all construction to cease and refused to pay for any costs incurred by plaintiff. In June 1998, plaintiff filed suit against the defendants for breach of contract, and defendants counterclaimed against plaintiff and its principal and filed a third-party complaint against the architect.

In February 1999, the trial court notified the parties that the matter had been selected for mandatory, non-binding arbitration pursuant to Rule 4:21A-1. The original hearing was scheduled for March 1999, but due to four postponements the hearing did not occur until October 1999. Meanwhile, in August 1999, plaintiff's attorneys moved to be relieved as counsel. The trial court granted that motion in September 1999, and directed plaintiff and its principal to obtain substitute counsel within thirty days. The order provided that if plaintiff failed to retain counsel within that time its claims and defenses would be subject to dismissal or default. The order also stated that the principal would be deemed pro se if he failed to timely retain counsel.

In September 1999, the trial court notified defendants' attorney that the arbitration hearing was set for October 27, 1999. On the morning of the hearing, the architect's counsel telephoned defendants' attorney and informed him that the arbitration hearing was to proceed. Defendants' attorney explained to the architect's counsel that he had assumed the hearing would be postponed because plaintiff and its principal had not obtained new counsel as directed by the court. Shortly thereafter, an administrator in the office of the arbitrator telephoned defendants' attorney and asked him why he was not present at the hearing. The administrator informed defendants' attorney that the hearing would proceed "with or without counsel." Defendants' attorney failed to attend the hearing. He assumed that if the arbitrator entered an award adverse to his clients' interest, he would move for trial de novo once he received notice of the award.

The arbitrator entered an award the same day as the hearing, finding "no cause" in respect of the defendants' claims against all parties. However, neither defendants nor their attorney received notice of the arbitration award pursuant to Rule 4:21A-5(a)(1999). In December 1999, the architect filed a motion to confirm the arbitration award. Upon receiving a copy of that motion, defendants' attorney learned for the first time that the arbitrator had entered an award against his clients. In January 2000, the trial court entered an order confirming the award.

In response to the trial court's order, defendants' attorney filed a motion for reconsideration and requested permission nunc pro tunc to file a rejection of the award and to demand a trial de novo. He argued that he did not receive notification of the arbitration award as required by the rule. The trial court held that the attorney's lack of diligence, including his failure to appear at the arbitration hearing, his neglect in inquiring about the status of the hearing, and his failure to timely demand a trial de novo did not constitute extraordinary circumstances warranting the reversal of the arbitration award. The Appellate Division affirmed.

HELD: The arbitrator's failure to provide defendants or their attorney with a copy of the arbitration award as required by Rule 4:21A-5 tolled the filing deadlines set forth in Rule 4:21A-6(b), pursuant to which a party may reject the award and demand a trial de novo.

1. The purpose of a notice requirement is to apprise a party of some fact that he or she has a right to know and that the communicating party has a duty to communicate. When this matter was arbitrated, Rule 4:21A-5(a) required the arbitrator to file the written award with the civil division manager and mail a copy to each of the parties within ten days after the arbitration hearing. Under Rule 4:21-6(b), an order shall be entered dismissing the action unless a party files, within thirty days after the filing of the arbitration award, a notice of rejection of the award and a demand for a trial de novo or takes such other action as provided by the rule. (Pp. 5 to 7).

2. Reading Rules 4:21A-5(a) and -6(b) together, the Court finds that the time periods set out in Rule 4:21A-6(b) do not begin to run until the arbitrator has filed the written award with the civil division manager and the parties. This interpretation of the mailing requirement under Rule 4:21A-5(a) is consonant with other Court Rules that condition a filing deadline on the receipt of notice that a judgment, order, or decision has been entered against a party. (P. 7).

3. Here, it is undisputed that neither the defendants nor their attorney received a copy of the arbitration award. Defendants claim that if they had received notice of the arbitration award they would have rejected it immediately and requested a trial de novo. Defendants' attorney was aware of and relied on the notice requirement under Rule 4:21A-5(a) requiring that he be notified of any award filed with the civil division manager. However, the arbitrator failed to send a copy of the award to defendants or their attorney, and thus the thirty-day period to reject the award and file a demand for a trial de novo did not begin to run. In the circumstances of this case, the arbitrator's failure to send the award to defendants or their attorney rendered timely the late objection to the award. (Pp. 7 to 8).

4. Because both parties indicated during oral argument that they were amenable to re-arbitrating the matter if this Court reversed and remanded the matter, the Court remands for re-arbitration. Defendants' attorney is responsible for all necessary and reasonable costs associated with the first arbitration, excluding attorneys' fees. In future cases, a party's failure to appear at the ...


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