Arbitration Awards Nearly Unassailable (NJ)

New Jersey’s public policy favors the settlement of disputes through arbitration.  Typically, contracts include a provision memorializing the parties’ intentions to resolve disputes out of court and may even designate an arbitration association such as the American Arbitration Association (“AAA”) in the contract.  The arbitrator’s award is usually brief, one page, and typically only lists the amount awarded to the prevailing party without mentioning the basis for the award.  The NJ Arbitration Act of 2003 governs the conduct of the arbitration.  An award  cannot be modified or vacated unless it meets one of six criteria specified in the Arbitration Act.

Recently, the New Jersey Appellate Division vacated a trial court modification of an arbitration award in Merion Construction Management LLC v. Kemron Environmental Services, Inc.  Kemron, a subcontractor, brought Merion, a general contractor, to arbitration seeking recovery of  fees Merion allegedly owed.  After the arbitration, Kemron’s attorney contacted the Arbitrator to rectify “an oversight” in the award because $200,000 owed to the subcontractor was omitted qualifying as a computation or technical error under The Act.  Merion’s attorney argued that the arbitrator’s award precluded any modification when it stated, “The award is in full settlement of all claims and counterclaims submitted to this Arbitration.  All claims not expressly granted herein are hereby denied.”

On appeal, the court reversed the trial court emphasizing the party seeking to modify or vacate an arbitration award bears a heavy burden.  In this case, the prevailing party was not permitted to amend the award to add claims not specifically included, and attempt characterize the omitted claims as “computational errors.”  This ruling makes clear that in arbitrations the parties are obligated to specify all their claims in detail, and confirm the arbitrator understands those claims and the amount of damages associated with each claim, prior to the written award.  If not, once the award is issued, it is likely the ship has sailed.

Thanks to Ann-Marie M. Andrews for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.