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Associated Building Maintenance Corporation, Inc., A New Jersey v. Bassam Captan


September 11, 2012


On appeal from the Superior Court of New Jersey, Law Division, Burlington County, Docket No. L-1793-06.

Per curiam.


Submitted August 27, 2012

Before Judges Alvarez, Nugent and Ostrer.

Defendant David Hutchings, d/b/a United Check Cashing (United), appeals from a July 8, 2011 judgment confirming an arbitration award in favor of plaintiff Associated Building Maintenance Corporation, Inc. (ABMC). In its multi-count complaint ABMC had sought, among other things, lost profits and other damages on theories of conversion, tortious interference with business relationships, tortious interference with prospective economic advantage, and the like. The parties agreed to submit to binding arbitration, which agreement resulted in a March 26, 2007 order dismissing the pending litigation without prejudice. The arbitration award from which appeal is taken totaled $335,346.40 inclusive of interest. For the reasons set forth below, we affirm.

ABMC alleged that United's failure to comply with the Check Cashers Regulatory Act of 1993 (the Act), N.J.S.A. 17:15A-30 to -52, as well as its own internal policies and procedures, contributed to the claimed harm. The arbitrator agreed, concluding that as a result, ABMC's trusted operations manager, defendant Bassam Captan,*fn1 over several years conducted a shadow janitorial business of his own, Understanding Services, Inc. (USI), using ABMC's employees, supplies, and equipment. Captan also cashed payroll checks for phantom employees, for payment of fictitious overtime, and for work that was not performed.

The arbitrator determined that ABMC "was negligent[,]" while "[t]he conduct of United was intentional." He made the following findings:

(1) No cancelled checks were received by ABMC with their monthly statements. The statement only contained names and amounts. Accordingly, there was no way for [ABMC owners or staff] to see the documents.

(2) [Captan] created the payroll by submitting a list of names, hours and amounts to the payroll service, Paychecks, who in turn computed and deducted taxes and sent net checks to ABMC.

(3) No testimony was offered showing that ABMC even compared checks to employee applications or even conducted random audits of employees' pay or questioned them about where they worked, how many hours they worked or how much they received.

(4) When checks were received from Paychecks they were given to [Captan] to distribute.

(5) [ABMC] knew that payroll checks were being cashed at United because when they were cashed, bounced and United contacted ABMC to make good for the sums paid to employees plus expenses incurred, ABMC sent the amounts requested to United. ABMC never requested that United send ABMC the bounced checks. Had this been done, the alleged forgeries could have been discovered.

(6) [Captan] had the authority to use Zenon Rotuski's [ABMC's principal] signature stamp which was used to sign checks.

(7) No employee ever complained about receiving insufficient funds in their pay.

(8) Certain employees authorized [Captan] or his subordinate McFadden to endorse their payroll checks.

(9) Some employees cashed their own checks. The others did not object to [Captan] endorsing their checks.

(10) Employees found the practice of [Captan's] endorsement, cashing checks and delivering their pay to them a convenient way to receive their pay.

(11) There was some evidence that certain checks were issued that exceeded the amounts employees normally earned, (i.e.), the hours they actually worked didn't justify the amount of the check.

(12) In certain instances [Captan] physically signed Zenon's [Rotuski, ABMC's principal] name as opposed to using the stamp.

(13) People appeared on the payroll while [Captan] was employed by ABMC who never appeared on the payroll after [Captan] was terminated and were apparently fictitious. [ABMC's vice-president] identified persons for whom there were no applications for employment on file or who never worked for ABMC and were also apparently fictitious.

(14) Checks were identified that were deposited into [Captan's] own bank account that were funds to which he was not entitled or were made out to presumed fictitious employees.

(15) [ABMC's vice-president] further identified persons who got paid by ABMC when they worked at Ocean Spray and Senior Care and other locations while these were USI accounts.

In his initial decision, the arbitrator created three categories of additional potential damages, resulting specifically from the improper check cashing practices. He directed that ABMC resubmit some specified proofs reorganized in line with these categories. The arbitrator also stated United might be entitled to a credit on its counterclaim, conditioned upon ABMC being unable to "prove that one or more of the 27 checks that was subject to the stop payment order falls into one of the three categories . . . ." After reviewing these submissions, the arbitrator ultimately granted ABMC $9190.50 of additional damages in a supplemental decision.

On appeal, United asserts that the arbitrator exceeded the scope of his authority by awarding consequential damages which were not reasonably foreseeable, not making sufficient factual findings in support of the award (which award it contends should shock our conscience), and that the award itself violates public policy embodied in the Uniform Commercial Code, N.J.S.A. 12A:1- 101 to -209 (UCC). United also contends that the arbitrator's award should be modified because it never received credit for its counterclaim.

An arbitrator's factual determinations are not reviewable. Ukrainian Nat'l Urban Renewal Corp. v. Joseph L. Muscarelle, Inc., 151 N.J. Super. 386, 396 (App. Div.), certif. denied, 75 N.J. 529 (1977). In any event, as United concedes, the facts are not in dispute in this case. And it is well-established that "arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators." Tretina Printing, Inc. v. Fitzpatrick & Assocs., 135 N.J. 349, 358 (1994) (quoting Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479, 548 (1992) (Stein, J., concurring)). The principle can be traced to the statute, which states that a "court shall vacate" an arbitration award if: (1) the award was procured by corruption, fraud, or other undue means; (2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this act, so as to substantially prejudice the rights of a party to the arbitration proceeding;

(4) an arbitrator exceeded the arbitrator's powers;

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; or

(6) the arbitration was conducted without proper notice of the initiation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding.

[N.J.S.A. 2A:23B-23(a).]

Addressing United's arguments in the order presented, we first note that the arbitrator did not exceed his authority. By consenting to submit their dispute to arbitration, the parties effectively agreed that the arbitrator could resolve all the issues asserted in their pleadings. This included ABMC's complaint seeking lost profits under the several theories raised in multiple counts.

The scope of an arbitrator's powers is delineated by the parties' agreement. Block v. Plosia, 390 N.J. Super. 543, 555 (App. Div. 2007). If there is no agreement, the arbitrator's power is to resolve the dispute. Ibid. In this case, the parties consented to have the arbitrator resolve their dispute, the boundaries of the dispute were defined by the pleadings, hence the arbitrator did not exceed his authority.

Additionally, United argues that the arbitrator's award of "consequential" damages was erroneous because they "are only recoverable where they are reasonably foreseeable." United knew the extent of the damages sought by ABMC, the legal theories from which the claims arose, and nonetheless agreed to arbitration. Given our limited review of an arbitrator's decision, we do not address the point further as it challenges the award on an impermissible basis, not on any of the statutory grounds. See N.J.S.A. 2A:23B-23; Tretina, supra, 135 N.J. at 358.

United asserts that the comprehensiveness of the UCC means that the award violated public policy because it exceeded the UCC's scope. It is only in "rare circumstances" that arbitration awards are vacated for public policy reasons. Tretina, supra, 135 N.J. at 364. Such principles are established "by statute, regulation or otherwise for the protection of the public." Weiss v. Carpenter, Bennett & Morrissey, 143 N.J. 420, 443 (1996).

But N.J.S.A. 12A:1-103 states that unless specifically displaced by a statutory provision, "principles of law and equity . . . shall supplement" the provisions of the UCC. The UCC does not, therefore, embody a public policy which would be violated if in resolving commercial disputes, courts and arbitrators stepped outside its limits. The UCC anticipates that those who resolve disputes will rely upon existing law, as the arbitrator did here, to fashion a remedy traditionally associated with commercial disputes. Hence the arbitrator did not violate public policy by awarding damages for lost profits to ABMC.

Lastly, we address United's contention that the arbitrator's award should be modified because of a purported error in his calculations. In the initial arbitration award, the arbitrator indicated "defendant will be allowed a credit for its counterclaim unless plaintiff can prove that one or more of the 27 checks that was subject of the stop payment order falls into one of . . . three categories . . . ." The arbitrator ultimately found that sixteen checks fell into each of the three categories. Accordingly, his contingency was satisfied, and United is not entitled to a credit on its counterclaim. To summarize, United has not demonstrated any fraud, corruption, or similar wrongdoing which would vitiate this award. Nothing in the arbitrator's award violates public policy. Since none of the statutory grounds for vacating the award have been established, United is not entitled to relief from the court's order. See N.J.S.A. 2A:23B-23.


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