On appeal from the Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-239-10.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, Baxter and Nugent.
Plaintiff, Integrated Construction Enterprises, Inc. (ICE), appeals from a Chancery Division order that denied its motion to vacate an arbitration award and granted defendants Bradley Sciocchetti, Inc. (BSI) and International Fidelity Insurance Company's (IFIC) cross-motion to confirm the award. ICE contends the court should have vacated the arbitration award because the arbitrator exceeded his powers by failing to render a "reasoned award" as required by the parties' modified arbitration agreement, and by requiring ICE to pay the American Arbitration Association's administrative fees, as well as the arbitrator's compensation and expenses. ICE argues in the alternative that the court should have modified the arbitrator's award to correct an evident mathematical error.
Having reviewed the record in light of ICE's arguments, we conclude the arbitrator did not exceed his powers. We further conclude that ICE's disagreement with the arbitrator's damage award is more than a disagreement about an evident mathematical error. Accordingly, we affirm.
The parties' dispute stems from a construction subcontract agreement. In May 2004, ICE, a general contractor, was awarded the construction contract for improvements to a high school, including the installation of a new geothermal heating and cooling system. ICE entered into a subcontract agreement with BSI in which BSI agreed to install a control system that complied with the project plans and specifications. IFIC bonded BSI's performance. During the course of construction, ICE and BSI became embroiled in several disputes and ICE terminated BSI's subcontract.
Five months after terminating BSI's subcontract, ICE filed a complaint against BSI and IFIC in Superior Court, seeking damages it allegedly sustained as a result of BSI's breach of the subcontract agreement. BSI filed an answer and counterclaim, seeking the money ICE allegedly owed BSI for work BSI performed before ICE terminated the subcontract agreement. IFIC answered and denied ICE's claim under the performance bond on the ground that BSI had not breached its subcontract with ICE.
The parties never went to trial. Instead, they agreed to submit their dispute to binding arbitration before an arbitrator appointed by the American Arbitration Association (AAA). Before signing the arbitration agreement, the parties' attorneys exchanged e-mails about the arbitration forum and the form of the arbitration award. ICE preferred not to use the AAA because of the cost and because the "AAA doesn't generally provide reasons for its decisions." ICE insisted that they "must have any arbitrator, who decides this case, explain its findings in writing." BSI and IFIC disagreed and responded:
AAA is an approved vendor for IFIC, and they also want the procedural safeguards provided by AAA's well established and judicially recognized rules . . . . As for a written decision, AAA generally does not provide them because their decisions are final and non appealable. BSI does not want to participate in any proceeding that will not fully and finally resolve the matter. I believe that AAA will provide a written opinion at the expense of the party requesting it if it is needed for their own purposes, such as for taxes or a later claim involving other parties. Please let me know if you would like to go forward with arbitration before AAA.
The parties subsequently signed an arbitration agreement that provided:
All claims and controversies arising out [of] a June 14, 2004 contract between [ICE] and [BSI], the subject of which was presented to the Essex County Superior Court, Law Division, . . . including all claims by [ICE] against [BSI] and IFIC and all claims by [BSI] against [ICE] shall be settled by binding arbitration administered by the [AAA] under its Construction Industry Arbitration Rules, and judgments on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. A copy of the construction industry arbitration rules and mediation procedures amended and effective September 1, 2007 are made part of this agreement and shall be followed by the parties.
The arbitration agreement was dated April 1, 2009. Although the agreement did not address the form of award, the September 1, 2007 AAA Construction Industry Arbitration Rules and Mediation Procedures (2007 CIAR) referenced in the arbitration agreement did. The 2007 CIAR, Rule R-43(b), required the arbitrator to "provide a concise, written breakdown of the award" (standard award) unless the parties timely requested in writing, "prior to the appointment of the arbitrator, . . . a written explanation of the award" (written explanation); or the arbitrator believed that a written explanation was appropriate. The parties did not timely request in writing that the arbitrator provide a written explanation.
The arbitrator conducted a preliminary telephone conference with the parties on August 17, 2009. During the conference, ICE requested that the arbitrator provide a "reasoned award" for his decision. BSI and IFIC's counsel objected due to the extra expense of such an award. ICE agreed to pay for the extra cost. The arbitrator reserved his decision on the issue and directed the parties -- BSI and IFIC by September 4, 2009, ICE by September 19, 2009 -- to submit their positions in writing.
In their September 4, 2009 letter, BSI and IFIC requested "that the form of Order . . . be AAA's Standard Award." They informed the arbitrator that "BSI and [IFIC] specifically agreed to submit this matter to arbitration on the condition that they be financially responsible only for the cost of a Standard Award[,]" and that they had "no objection to ICE privately retaining [the arbitrator] to prepare either a Reasoned Award or Findings of Fact and Conclusions of Law at its sole expense" if ICE desired to do so.*fn1 BSI and IFIC also maintained that their insistence on a standard award was "a material condition on which [they] agreed to submit this matter to arbitration, and they would not have done so if ICE insisted on receiving a written decision at the expense of both parties." They explained that a standard award would obviate the expense of transcripts and would "minimize the risk of a party making an improper objection to confirmation of the award based on the merits of the award." ICE did not submit a letter by its September 19, 2009 deadline.
The arbitration hearings took place during seventeen days that spanned six months, the last hearing taking place on May 18, 2010. After the hearings began, ICE wrote to the AAA administrator on January 26, 2010, regarding its "earlier request that the arbitrator provide a 'written explanation' for his decision when it is rendered." ICE's attorney recalled that defense counsel "had no objection provided that BSI did not get charged ...