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City of Union City v. AC Construction Corp.

August 30, 2010

CITY OF UNION CITY, PLAINTIFF-APPELLANT,
v.
AC CONSTRUCTION CORP., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-2761-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued June 2, 2010

Before Judges Wefing, Messano and LeWinn.

Union City contracted with AC Construction Corporation (AC) to construct an amphitheater. After embarking on the project, AC encountered the need to remove contaminated soil at the construction site. The contract provided that any such contamination remediation costs would not exceed $50,000; however, AC's costs far exceeded that amount. A dispute thereupon arose between the parties. On or about October 22, 2008, AC ceased working on the project.

On April 21, 2009, AC filed a Demand for Arbitration with the American Arbitration Association (AAA). The "Demand request[ed] that the AAA attempt to arrange for mediation before the arbitration is initiated." At oral argument, plaintiff's counsel advised us that a one-day mediation did occur but was unsuccessful.

Article XV of the parties' contract, captioned "Mandatory Contract Dispute Procedures," provides:

The Contractor agrees to Mandatory Contract Dispute Procedures required by N.J.S.A. 40A:11-50, as described below.

In an effort to resolve any disputes that arise during the construction of the project... the Bidder and Owner agree that all disputes between them arising out of or relating to the performance of the work described in the Contract Documents shall be submitted to non-binding mediation in accordance with the Construction Industry Mediation Rules of the American Arbitration Association currently in effect. Request for mediation shall be filed in writing with the other party to the Contract and with the American Arbitration Association.

The parties shall share the mediator's fee and any filing fees equally. The mediation shall be held in the place where the Project is located, unless another location is mutually agreed upon. Agreements reached in mediation shall be enforceable as settlement agreements in any court having jurisdiction thereof.

The Bidder further agrees to include a similar mediation provision in all agreements with independent contractors and consultants retained for the project and to require all independent contractors and consultants also to include a similar mediation provision in all agreements with subcontractors, subconsultants, suppliers or fabricators so retained, thereby providing for mediation as the primary method for dispute resolution between the parties to those agreements.

Nothing in this section shall prevent the Owner from seeking injunctive or declaratory relief in court at any time. The alternative dispute resolution practices required by this section shall not apply to disputes concerning the bid solicitation or award process or to the formation of contracts or subcontracts to be entered into pursuant to P.L. 1971, c. 198 (C:40A:11-1 et seq.).

Article XV is silent as to what shall occur in the event mediation is unsuccessful.

AC takes the position that because Article XV is silent as to post-mediation procedures, the provisions of Article IV control, and that those provisions mandate arbitration if mediation is unsuccessful. Article IV, ...


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