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Withum, Smith & Brown v. Coast Automotive Group

February 16, 2012


Per curiam.


Argued January 23, 2012

Before Judges Parrillo, Grall and Skillman.

On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-4301-10. Geoffrey J. Hill argued the cause for appellants. Michael J. Canning argued the cause for respondent (Giordano, Halleran & Ciesla, attorneys; Mr. Canning, of counsel and on the brief; Matthew N. Fiorovanti, on the brief).

Defendants, Coast Automotive Group, Ltd. (Coast) and Tamim Shansab (Shansab), appeal from a December 17, 2010 order of the Law Division confirming the entry of an arbitration award dated September 3, 2010, and a denial of a request to modify that award dated September 27, 2010, in favor of plaintiff Withum Smith & Brown (WSB). We affirm.

By agreement executed on July 12, 2005, Coast retained WSB, a professional group of certified public accountants and consultants, as an expert in connection with its litigation against Universal Underwriters, the insurer of one of Coast's dealerships in Toms River. The dealership was located on premises leased from Shansab, and was damaged in a March 11, 2001 fire. Pursuant to the agreement, WSB was to examine documents and pleadings to determine the appropriate level of coverage by Universal; analyze the progression of damages resulting from the fire; and respond to various questions raised by the litigation, including Universal's alleged deviation from standard insurance practices.

WSB also agreed to bill on a monthly basis, "keep detailed records of time and expenses[,]" and make those records available for Coast's inspection upon request and reasonable notice. Coast, in turn, acknowledged that WSB would rely on its acceptance of the bill as "fair and reasonable" and of its obligation to pay if it did not object within twenty days of receipt of the bill. Bills were to be paid within thirty days of receipt, and WSB reserved the right to terminate or discontinue services if they were not paid pursuant to the terms of the agreement. The parties also provided that all outstanding "fees" were to be paid in full prior to WSB's preparation for testifying at depositions. Lastly, the parties agreed "to participate in mediation and binding arbitration to resolve any and all fee-related disputes."

A dispute arose over fees when WSB submitted its first bill for payment after issuing its formal written report on July 29, 2005. Failing to resolve the matter, Coast filed suit in July 2006, asserting causes of action sounding in tort, breach of contract and the covenant of good faith and fair dealing. Its complaint alleged that the first bill included a total, "with no breakdown of hours"; WSB refused to provide documentation describing each hour billed; WSB failed to keep hourly billing records; the invoices WSB provided for its services were fraudulent in that they included double billings and billings for work that was not necessary or was not done; WSB wrongly accused Coast of being in breach of their retainer agreement; WSB wrongly demanded payment in an attempt to extract payment of a compromise amount, which WSB then wrongfully declined to accept; and WSB's conduct "placed [Coast's] litigation [with] [its] insurance carrier in great jeopardy."

WSB then sought an order compelling arbitration pursuant to the retainer agreement. The Law Division judge determined that the parties' agreement to arbitrate applied to the fee dispute and that "any breach of contract or any breach of duty of good faith and fair dealing -- is part and parcel of the fee dispute." Thus, the judge's order of October 26, 2006, compelled arbitration in accordance with his decision.*fn1

The next day, WSB filed its answer and a counterclaim against Coast, alleging breach of contract for non-payment, fraud and unjust enrichment. Thereafter, on motion by WSB, the judge dismissed Coast's claims for fraud, tortious interference with prospective economic advantage, estoppel, declaratory relief, breach of fiduciary duty and violations of the Consumer Fraud Act. The judge also determined, in orders dated May 4 and May 7, 2007, that Coast's claims for "damages flowing from the breach of the contract"*fn2 are "to be resolved through [arbitration,]" as should the claims asserted by WSB. By subsequent order of August 1, 2008, the judge compelled arbitration and appointed an arbitrator.

Coast appealed and we affirmed save for exempting from arbitration Coast's affirmative claims for consequential damages incurred as a consequence of the quality of WSB's performance or the lack of good faith and fair dealing, Coast Automotive Group, Ltd. v. Withum Smith & Brown, 413 N.J. Super. 363, 365, 371 (App. Div. 2010).*fn3 We concluded that "any dispute related to fees earned, billed and owed under the terms of the agreement as well as all defenses to payment based on WSB's breach of its contractual duties" was to be arbitrated based on the ordinary meaning of the language employed. Id. at 370.

Consequently, the matter proceeded to arbitration in August 2010, after which the arbitrator awarded WSB the full amount of its invoice plus costs and attorney's fees totaling $49,096.55. He reasoned that Coast knew or should have known that WSB would review the significant amount of material provided to it and that such review would take a significant amount of time, and also that WSB knew or should have known that the July 31, 2005 invoice was unsatisfactory "without any backup and breakdown of hours worked." Notwithstanding this, the arbitrator concluded that WSB "performed work that had to be done; it delivered the product; its client got the benefit of that product" and that "[i]ts lapses did not constitute a breach of its contract."

Shortly thereafter, WSB moved for modification and correction of the award under N.J.S.A. 2A:23B-20, claiming that the arbitrator had inadvertently failed to rule on WSB's claim for contractual interest under the retainer agreement and had failed to include the cost of the court reporting services and transcripts. The arbitrator denied WSB's request, concluding that the award was "reaffirmed and remains in full force and effect." Finding no basis for a challenge and clarifying solely for the purpose of addressing the limited issue raised, the arbitrator stated that the "[a]ward was based on the theory of quantum meruit" because "Coast had the benefit of the bargain in accepting and using the expert report[,]" and that it was "reaffirmed and remains in full force and effect[.]"

WSB moved to confirm the award in the Law Division and Coast opposed the relief, arguing the award should be vacated or, in the alternative, modified. The judge confirmed the ...

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