PER CURIAM.
Plaintiff Risco, Inc. (Risco) appeals from the trial court's order confirming an arbitration award of $21,446.65 to defendant New Jersey Natural Gas Company (NJNG). Risco argues the court should have vacated the award for two principal reasons.
First, Risco claims the arbitrator exceeded his powers,
Second, Risco claims the arbitrator was partial, and engaged in prejudicial misconduct,
Having reviewed Risco's arguments in light of the record and the applicable legal principles, we affirm.
The dispute between the parties arose when NJNG, pursuant to an administrative consent order with the New Jersey Department of Environmental Protection, sought to enter Risco's property to perform remediation. Risco repairs and refurbishes motor homes on property leased from Sodon Realty, LLC (Sodon). The property was once the site of a coal gasification facility operated by a NJNG predecessor.
Risco refused to let NJNG proceed until it satisfied certain conditions. NJNG argued Risco lacked authority to bar entry because NJNG was empowered by a prior court order — entered in a case involving NJNG and Sodon — to enter the property to perform the remediation.
NJNG ultimately gained access to perform its work, but claimed it suffered damages as a result of delays Risco caused. On the other hand, Risco claimed it suffered damages when it was forced to relocate during the remediation. Risco filed a complaint against NJNG in late 2010, and, according to Risco, reached a settlement that NJNG thereafter breached. Risco filed an amended complaint in early 2011, asserting various tort and contract claims. NJNG filed an answer and a counterclaim.
The parties eventually proceeded to mediation. In the course of mediation, the parties opted to submit their claims to binding arbitration, pursuant to a November 12, 2012 agreement. They dismissed the pending lawsuit without prejudice, subject to reinstatement for the purpose of confirming or vacating the arbitration award. They selected the mediator to serve as arbitrator.
Relevant to Risco's argument that the arbitrator exceeded his powers, the parties agreed the arbitrator would render his decision based on the parties' previously tendered mediation submissions, optional simultaneous supplemental submissions, and oral argument if the arbitrator requested it. The agreement stated:
Consistent with the agreement, the parties exchanged the Mediation Submissions and served Supplemental Submissions on the arbitrator.
On February 15, 2013, the arbitrator issued a detailed opinion. Relying on the access order issued in the related litigation pursuant to
The arbitrator determined Risco was entitled to the cost of renting a van to shuttle employees and customers from its shop on the remediation site to the lot where operations were relocated. The arbitrator concluded NJNG was liable to Risco for $13,000, as the fair rental cost of a van for thirteen months. NJNG was also responsible for $5000 in Risco's lost revenue when Risco shut down its operations for most of one day because NJNG's equipment caused excessive noise and vibration. The arbitrator also awarded Risco $23,920 to reimburse it for the roughly twenty hours a month that its executive spent attending to administrative tasks associated with the remediation. The arbitrator used an hourly rate amounting to less than half of what Risco proposed.
The arbitrator recognized that "Risco's largest claim is for the additional time spent by its technicians in traveling back and forth from the relocation [site] to the Risco office," which Risco calculated as five hours per day per employee. Risco sought $110,624.36 based on 1202.33 hours and an hourly rate of $92, which is the rate Risco billed its customers for technicians' time.
The arbitrator concluded, "[T]here is no competent evidence to support the assertion that NJNG should pay Risco 92 dollars per hour for this lost time." The arbitrator determined that Risco was, instead, entitled to reimbursement at the rate it paid its technicians. Notwithstanding that the arbitration agreement apparently limited the record to the Mediation Submissions and Supplemental Submissions, the arbitrator ordered, "NJNG shall pay Risco the technician's hourly wage and not the billable hourly rate Risco charges its customers. Risco shall submit its invoice to NJNG for this claim within (30) days of the date of this decision."
The arbitrator also determined that Risco was entitled to partial reimbursement of its attorney's fees for a defined time period. Consistent with its partial award, the arbitrator ordered Risco to submit "a certification to the Arbitrator and opposing counsel for legal services rendered to Risco during the relevant time period within 30 days of the date of this decision."
Turning to NJNG's counterclaim, the arbitrator found that Risco delayed remediation work by NJNG's contractors when Risco failed to remove its vehicles from the site from December 17, 2010 until January 7, 2011, when the initial settlement agreement was reached. NJNG contended it was entitled to recover $125,858.10 in additional charges imposed by its contractor, Enviro-Air Technologies, Inc. (EAT); and $13,500 that it paid to another firm, Master Shipwrights, Inc., because remediation was not completed.
The arbitrator concluded that the $13,500 claim was undisputed. Risco was also required to pay $25,000 to reimburse NJNG for administrative charges at $1250 a day. However, regarding delay charges related to the cost of idle workers and equipment, the arbitrator analyzed argument from Risco's expert; considered weather, holidays and other independent reasons for suspension of work; expressly rejected reimbursement for four identified days; and concluded EAT was entitled to a total of twelve workdays of delay-related costs. The arbitrator did not calculate the amount due for the reduced period, and instead noted it was "[t]o be determined." The arbitrator also concluded that NJNG was entitled to counsel fees for the period from December 17, 2010 to January 7, 2011.
Thus, the arbitrator granted Risco: $13,000 for van use; $5000 for one day's shut down; and $23,920 for its administrator's time; and listed "[t]echnicians' time" and attorney's fees as "[t]o be determined." The arbitrator granted NJNG $25,000 in administrative costs; $13,500 for payments to Master Shipwrights, Inc.; and listed as "[t]o be determined" "12 days of delay costs," "12 days for equipment and personnel on site," and attorney's fees.
On March 6, 2013, Risco submitted to the arbitrator a document entitled "Request for Clarification of Arbitrator's Opinion or, Alternatively, for Reconsideration and Supplementation of the Record" (Reconsideration Request). Risco raised four issues. First, regarding technicians' time, Risco argued that the arbitrator should have awarded the billable rates of its technicians, to compensate it for its lost revenue. Risco inquired whether the arbitrator intended that Risco only invoice NJNG for its labor costs. Risco argued that the arbitrator's final award should include that amount. Second, Risco asked the arbitrator to reconsider its partial denial of attorney's fees. Third, regarding NJNG's claim for reimbursement of EAT's delay-related costs, Risco "request[ed] the opportunity to supplement the record either before or after NJNG's submission to show the correct amount of those costs." Alternatively, Risco sought a brief evidentiary hearing — in person or by telephone — to offer testimony from the parties' experts. Lastly, Risco argued the arbitrator completely overlooked its claim for $6221.04 for insurance costs related to the relocation lot.
Risco later filed its papers on April 18, 2013 — pursuant to a deadline extension — to respond to the open issues of its technicians' hourly rates, and its attorney's fees (Third Submission). NJNG did not file any papers before a May 31, 2013 conference call initiated by the arbitrator.
The call was preceded by an ex parte telephone conversation between the arbitrator and NJNG's counsel. After Risco's counsel learned of the ex parte conversation — based on comments made in the May 31 conference call — he sought an explanation from NJNG's counsel, and the arbitrator.
NJNG's counsel asserted in an email to Risco's counsel that the arbitrator called him to inquire about his late submissions. However, the arbitrator explained in a separate email that it was NJNG's counsel who initiated a call, to object to Risco's Reconsideration Request, and the arbitrator said he told NJNG's counsel to include any objection in his submission responsive to the opinion. The arbitrator added that he scheduled the May 31, conference call after NJNG failed to submit papers. In oral argument before the trial court, NJNG's counsel conceded that he addressed Risco's Reconsideration Request in the conversation, but only to discuss procedure. He also admitted he engaged in other conversations with the arbitrator. He stated, "[I]t was my understanding throughout that there was not a problem with either one of us speaking on nonsubstantive matters to the arbitrator."
After the May 31 conference call,
A week after the conference, NJNG finally provided supplemental information to the arbitrator in response to his opinion, in the form of a certification and supporting documents from an executive in the purchasing department of NJNG's corporate parent (Third Submission). NJNG also responded to Risco's Reconsideration Request. NJNG did not object to reimbursement of Risco's insurance costs, but asserted they were not adequately proven. In addition to submitting documentation to enable the court to calculate the delay charges for the reduced period of twelve days, NJNG essentially sought reconsideration, suggesting the arbitrator erred and should have awarded compensation for sixteen days. NJNG provided a certification of services in support of its attorney's fees claim, but contended that attorney-client privilege shielded explanations of time spent, which were not disclosed to Risco. NJNG also opposed Risco's Reconsideration Request, arguing that an additional round of submissions would contravene the parties' arbitration agreement, which was designed to control litigation costs.
In a letter dated June 17, 2013, Risco formally requested the arbitrator recuse himself based on the ex parte communications with NJNG's counsel. He also objected to NJNG's assertion of privilege over its time entries.
On June 27, 2013, the arbitrator issued a "Decision on Motions" (Motions Decision), which addressed the various issues that arose since the February 2013 decision. The arbitrator denied Risco's request for reconsideration of the technician pay issue. Although he stated he was unaware of "any process through which a party to binding arbitration may request reconsideration of the arbitrator's decision," the arbitrator nonetheless addressed the merits of his decision and reaffirmed it. Based on Risco's Third Submission, the arbitrator awarded Risco $26,796.01 for technicians' hourly wages; $2935 for attorney's fees; and $6221.04 for increased insurance costs.
As for NJNG's claim, the arbitrator concluded that NJNG waived its attorney's fees claim by failing to disclose its explanation of time entries, which the arbitrator found were not privileged. The arbitrator also rejected NJNG's argument that it was entitled to sixteen days of delay damages, finding that a report from Risco's expert was persuasive. The arbitrator then rejected some, and approved other cost items, set forth in NJNG's Third Submission, and determined that NJNG was entitled to $60,998.70. The arbitrator then summarized his award to each party, including the specific amounts previously determined in February, plus the newly established amounts set forth in his Motions Decision.
NJNG thereafter applied to the trial court for an order confirming the arbitration award. Risco opposed, and sought an order vacating the award for the reasons we set forth at the outset of our opinion.
In orders entered on April 25, 2014, the trial court confirmed the arbitration award, denied vacatur, and entered a judgment of $21,446.65, in favor of NJNG. The court held that its authority to set aside an arbitration award was limited, relying on
With respect to the ex parte communications, the court noted "[t]here is nothing in the record . . . which even remotely suggests that [the arbitrator's] decision was influenced in any way by such a conversation." The court also rejected Risco's argument that the arbitrator favored NJNG in the manner in which it permitted the Third Submission by NJNG.
This appeal followed.
We begin by restating fundamental principles governing our review of an arbitration award. We review the trial court's decision to confirm or vacate an arbitration award de novo as a question of law.
Arbitration is a favored means of resolving disputes.
On the other hand, the scope of an arbitrator's powers, as well as the scope of arbitration, is defined in the arbitration agreement.
We consider first Risco's argument that the trial court should have vacated the arbitration award because the arbitrator considered submissions in addition to those described in the arbitration agreement, refused to permit Risco to respond to NJNG's Third Submission, and the arbitrator amended what Risco claims was a final award. Risco relies on
An arbitrator is granted broad discretion to determine the appropriate procedure for resolving a dispute, including determining the admissibility of evidence.
Parties to an arbitration agreement reached at arm's length are empowered to agree to the nature of the process that the arbitrator shall follow.
Here, the parties agreed to limit the proofs provided to the arbitrator. They agreed that the arbitrator would decide the dispute based on the Mediation Submissions, Supplemental Submissions, and oral argument if the arbitrator decided to request it. The apparent purpose of these agreed upon limitations was to control litigation costs, and perhaps avoid delay. We question whether an arbitrator is free to ignore explicit agreements on procedure.
Nonetheless, vacatur is inappropriate in this case because Risco did not object to the expansion of the record. Rather, contrary to the limitation in the arbitration agreement, Risco filed its Reconsideration Request, in which it presented additional arguments in support of its position; raised the issue of the omission of its insurance costs; sought the opportunity to provide a response to NJNG's anticipated Third Submission; and proposed a telephonic evidentiary hearing. In apparent reliance on the Reconsideration Request, the arbitrator then added insurance costs to Risco's award. Risco also responded without objection to the arbitrator's request for additional information by providing its Third Submission regarding technicians' pay and attorney's fees.
In sum, Risco is barred from contending that the arbitrator exceeded its powers by requesting additional submissions from the parties, inasmuch as it secured relief — the insurance costs award — based on the arbitrator's reliance on Risco's own additional submission.
Moreover, given the arbitrator's broad authority over procedure,
Third Submission.
We are also unpersuaded by Risco's argument that vacatur was mandated because the arbitrator inappropriately amended his award. We recognize that "arbitrators exhaust their power when they make a final determination on the matters submitted to them. They have no power after having made an award to alter it; the authority conferred on them is then at an end."
However, it is apparent the arbitrator's February 2013 decision was not a final determination of all issues. Also, an arbitrator may "adjudicate an issue which has been submitted but not decided."
Risco also argues the trial court should have vacated the arbitration award because the arbitrator demonstrated "evident partiality" and engaged in "misconduct." Risco relies on
Risco's argument that the arbitrator's procedural ruling demonstrated "evident partiality" lacks sufficient merit to warrant discussion in a written opinion.
More problematic is the admitted ex parte contacts between NJNG's counsel and the arbitrator. Our Court has recognized the necessity for impartiality on the part of arbitrators. "A necessary corollary of the fact that arbitrators function with the support, encouragement and enforcement power of the state is the requirement that they adhere to high standards of honesty, fairness and impartiality."
Ex parte communications between one party's attorney and the arbitrator may undermine confidence in the arbitrator's neutrality, and the fairness of the process. Rules governing attorney ethics generally prohibit ex parte communications with judicial officers. "A lawyer shall not . . . communicate ex parte with" "a judge, juror, prospective juror
The prohibition "applies to communications about the merits of the cause and to communications about a procedural matter the resolution of which will provide the party making the communication substantial tactical or strategic advantage."
Nonetheless, we believe it is incumbent upon both the attorney and the arbitrator to notify the non-participating party of an ex parte conversation regarding a routine scheduling or administrative matter.
As noted, the statute provides for vacatur in the case of "evident partiality" or misconduct. Proof of prejudice is required in the latter instance:
The mere appearance of impartiality does not suffice as "evident partiality."
Other jurisdictions have apparently viewed ex parte communications as a form of alleged misconduct, and consequently have required a showing of prejudice.
Applying these principles, we are satisfied that Risco has failed to make a sufficient showing to justify vacating the arbitration award. We recognize that participation in ex parte communications, even on administrative matters, can undermine parties' confidence in the arbitration process, particularly where neither counsel nor the arbitrator provides prompt notice of the conversation and an opportunity to respond. That is the case here, where NJNG's counsel conceded that he conducted numerous ex parte conversations concerning what he characterized as "non-substantive matters," and NJNG's counsel and the arbitrator provided different versions of the conversation that preceded the May 31 conference.
Nonetheless, the record before us does not establish that the communications influenced the outcome of the arbitration or deprived Risco of a fair resolution. The arbitrator's detailed opinions evidence an in-depth review of the parties' submissions. The arbitrator approved in part and rejected in part claims of both parties, demonstrating apparent even-handedness in his approach to the case. Therefore, Risco has failed to meet its burden to demonstrate "misconduct by [the] arbitrator prejudicing [its] rights" as required by
Affirmed.