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Voorhees Office Center, LLC v. Target Building Construction

October 4, 2010

VOORHEES OFFICE CENTER, LLC AND EYE PHYSICIANS, P.C., PLAINTIFFS-APPELLANTS,
v.
TARGET BUILDING CONSTRUCTION, INC., DEFENDANT-RESPONDENT.



On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-764-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 15, 2010

Before Judges Axelrad, R. B. Coleman, and J. N. Harris.

Affiliated plaintiffs Voorhees Office Center, LLC (VOC) and Eye Physicians, P.C. (Eye), appeal from the Law Division's final order vacating a portion of an arbitration award of $602,499 relating to a construction contract, and remanding for a new proceeding before a different arbitrator. Because we conclude that the Law Division erred in its application of the New Jersey Arbitration Act of 2003 (the Act), N.J.S.A. 2A:23B-1 to -32, we reverse and remand for the entry of a judgment confirming the arbitrator's award.

I.

The parties' dispute originally revolved around competing claims for breach of contract between (1) Target Building Construction, Inc. (Target) on one side and (2) VOC and Eye*fn1 on the other. Initially, the parties drew their battle lines in a civil action commenced in the Law Division. As part of that lawsuit, VOC served an offer of judgment pursuant to Rule 4:58-1 upon Target to allow judgment to be taken against VOC in the amount of $20,000. Target did not accept VOC's offer of judgment. Subsequently, the parties agreed to resolve their entire dispute through arbitration instead of a bench trial, and to have the arbitrator rule on the offer of judgment, if necessary, after the underlying controversy was resolved. To facilitate the arbitrator's autonomy, the parties arranged not to advise him of the offer of judgment until after he ruled on the underlying contractual disputes.

Shortly before the arbitration hearings were scheduled to begin, VOC and its counsel agreed that no further attorneys' fees would be charged by the law firm to the client for the services rendered, and that the firm would attempt to recover reallocated attorneys' fees pursuant to a proceeding for the offer of judgment. In a letter dated October 10, 2007, VOC's attorney wrote to his client's representative:

This will confirm our agreement that, based upon the fact that you are a valued client of this firm and further due to your significant relationship with Wills Eye Hospital, we will agree that no further invoices for legal fees will be rendered in this matter. The firm's sole recourse for recovery of fees will be by way of award of same by the court and/or arbitrator, as the case may be. We will, however, require that you continue to reimburse the firm for all costs incurred in this matter.

A plenary hearing spanned nine days from January to May, 2008, which was limited to construction-related issues only. Thereafter, in September 2008, the arbitrator issued a thirty-three page opinion awarding $178,583 to VOC, $100,605 to Target, and nothing to Eye. From this, a net award of $77,978 was distilled in VOC's favor. This award triggered the requirement to decide the unresolved issue of reallocation of attorneys' fees and expenses pursuant to the offer of judgment. It was at this time that the arbitrator was informed of his continued responsibilities to now consider and decide those offer of judgment issues.

In pursuance of resolution of the offer of judgment issues, Target sought (on several occasions) permission from the arbitrator to engage in extensive discovery and requested a plenary hearing. Target asserted, among other things, that there were several examples of unreasonable billing by its adversaries' attorneys requiring testimonial examination. The arbitrator permitted limited discovery of documents and billing records, but no depositions were allowed.

The arbitrator denied the requests for a plenary hearing and elected to making a ruling on the extensive written submissions and oral argument provided by the parties. The arbitrator ultimately reduced the amount of attorneys' fees that had been sought, agreeing that there were instances of unreasonable billing. He also determined that Eye was not entitled to attorneys' fees because it did not prevail in the arbitration. Finding it extremely burdensome to identify the precise legal work performed solely for VOC, and to separate out the legal services performed for Eye, the arbitrator further reduced the attorneys' fee request by twenty-five percent. The ultimate award in favor of VOC, however, included attorneys' fees and expenses of $511,259 plus interest of $13,262.

Appellants subsequently sought to confirm the award in the Law Division by means of a summary action, and Target counterclaimed for vacation of the award. The trial court -- itself relying upon documentary submissions and oral argument from the parties -- concluded that the arbitrator's denial of an evidentiary hearing to address the offer of judgment issues did not amount to arbitral misconduct but nevertheless constituted a refusal to consider evidence material to the controversy and, therefore, merited a vacation of the offer of judgment award pursuant to N.J.S.A. 2A:23B-23(a)(3). The court entered a final judgment: (1) confirming "the award in favor of [VOC] as to all issues other than the issues of [VOC's and Eye's] entitlement to counsel fees under R[ule] 4:58-1 and the amount of counsel fees to be awarded to VOC," (2) vacating "that portion of the ...


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