PER CURIAM.
These appeals involve disputes between the developer of a large shopping complex in Watchung and contractors involved in the project. The trial court denied without prejudice motions for partial summary judgment, and we granted leave to appeal from the resultant orders. The appeals were argued before us back-to-back, and we now consolidate them for purposes of this opinion.
The appeals have a complex factual and procedural history that must be set forth in some detail to properly analyze the contentions the parties advance on appeal. Defendant Watchung Square Associates, L.L.C., (Watchung Square) purchased the site previously occupied by Lockheed Electronics with the intent to convert it into a large shopping center.
In August 1999, Watchung Square contracted with Joseph A. Natoli Construction Corporation (Natoli) to serve as the general contractor for the project, and Natoli, in turn, subcontracted with defendant Vollers Excavating & Construction, Inc. (Vollers) for the site work for the project. Watchung Square's contract with Natoli and Natoli's subcontract with Vollers required the arbitration of disputes that arose between the parties.
Part of the necessary preparatory work to development of the site was relocation of an existing water main owned by plaintiff Elizabethtown Water Company. The main had to be rerouted because in its existing configuration, it ran under the proposed location of a building to be occupied by Target. In addition to the relocation of the main, it was proposed to run the water line up to a tank on the top of the Watchung Mountain. Watchung Square signed two contracts with Elizabethtown Water for this work, and Elizabethtown contracted with Vollers to do the necessary site work. The contracts between Watchung Square and Elizabethtown and Vollers did not contain an arbitration clause.
The project ran into significant delays and incurred significant extra expenses. Who was responsible for those delays, and who was responsible for those expenses are strongly disputed by the parties.
During the development of the project, there were several slope failures from the abutting Watchung Mountain. The first of these occurred on February 10, 2000, in the area in which Vollers was doing work in connection with the Elizabethtown water line; a portion of the slope collapsed onto the area in which the proposed Target store was to be located. This is referred to generally as the Elizabethtown failure. The parties dispute who was responsible for this failure and whether this failure led to several subsequent slope failures that occurred in July, October, and November 2000.
After the February 2000 slope failure, Watchung Square directed Natoli to contract with Moretrench American Corporation (Moretrench) to dewater the site. Moretrench installed a series of wells and pumps, but this proved not to be a permanent solution, and additional slope failures occurred through April 2001.
The parties point to several causes for these failures, including the underlying soil conditions, which involved significant ground water; the manner in which Vollers was excavating for the water main and for the retaining wall; the original design of the retaining wall; and the manner in which Vollers initially began its construction of that wall. Watchung Square asserted that Vollers began its work in this area without making proper preparation for the ground water conditions, while Vollers asserted that Watchung Square was aware of the ground water conditions but failed to disclose them to Natoli or to Vollers. Watchung Square asserted that Vollers was excavating at too steep a grade without proper shoring while Vollers asserted it was following the plans provided to it. Watchung Square asserted that Vollers was responsible for the original design of the retaining wall, and Vollers denied that. Watchung Square said that Vollers was to build the retaining wall in a "top-down" fashion to proceed safely; Vollers said that it was doing so.
After the November 2000 slope failure, Watchung Square contracted directly with Moretrench. This did not prevent another slope failure, which occurred in April 2001.
These slope failures led ultimately to the redesign and extension of the retaining wall. The process of redesigning the wall, and its ultimate construction, involved both delays in completion of the overall project and increased expense. The parties dispute responsibility for the delays and liability for those costs.
In an effort to resolve certain of their disputes, Watchung Square, Natoli and Vollers entered into an agreement in February 2001 that the parties refer to as the "Florida Accord." Under this agreement, the parties agreed that the north retaining wall, abutting the mountain, had to be redesigned and extended and that the projected cost for this work was $1,884,027, of which Watchung Square would contribute $1,284,027, with the balance divided equally between Natoli and Vollers and any extra costs or savings to be divided among them in the same proportion. The agreement included the following paragraph:
The parties to this Accord dispute whether it has been breached by the others.
The execution of this agreement did not resolve all the problems with completing this development, and in January 2002, Watchung Square terminated Natoli as the project's general contractor. A variety of actions followed. In February 2002, Watchung Square filed a demand with the American Arbitration Association for arbitration against Natoli, seeking various categories of damages. In March 2002, Vollers filed a complaint in Superior Court, Somerset County, seeking damages from Watchung Square and Natoli. These damage claims were ultimately joined with, and heard as part of, the arbitration proceedings initiated by Watchung Square.
Prior to these actions, Elizabethtown filed this action against Watchung Square, alleging that it was owed approximately $130,000 in connection with the relocation of its water main. Watchung Square counterclaimed, alleging that the work performed by Vollers for Elizabethtown in connection with this relocation caused the February 10, 2000, slope failure, and Watchung Square sought damages of nearly $12 million. Elizabethtown then impleaded Vollers, and Watchung Square later asserted a professional malpractice claim against the engineer from Vollers who was involved in this portion of the project. Vollers later filed a fourth-party complaint, including as fourth-party defendants Watchung Square's principal, Salvatore Davino; its architect, Edward D. Maceiko; two engineering firms; another architectural firm; and Moretrench. The only party who has successfully obtained summary judgment is Moretrench.
In light of the arbitration proceedings, Elizabethtown sought to stay this action until conclusion of the arbitration, and Watchung Square sought to compel Vollers to proceed in arbitration with respect to the issue asserted in its third-party complaint. The trial court denied both motions; we granted leave to appeal. We reversed as to the first and affirmed as to the second. With respect to the first, we noted in part:
With respect to the second motion, we affirmed the trial court, noting that those claims arose out of the contract between Elizabethtown and Watchung Square, which did not include an arbitration clause.
As we have noted, Watchung Square filed its demand for arbitration in February 2002. More than one hundred days of hearings were held. The arbitration did not conclude until August 2007, when the arbitrators issued their award. In Watchung Square's final brief book to the arbitrators it sought damages in excess of $18 million. The arbitrators' award to Watchung Square, however, was less than $600,000. The arbitrators, on the other hand, awarded Natoli and Vollers each in excess of $4 million. The arbitrators did not include in their award any statement of reasons or findings. They simply listed the various categories of damages claimed, indicated those that were denied in their entirety and for the balance, listed the amount awarded. Watchung Square's attempts to set aside this award were unsuccessful, and it was confirmed by order entered February 11, 2008. The trial court's order confirming this award was affirmed on appeal.
Following conclusion of the arbitration proceedings, this litigation was reactivated. Elizabethtown and Vollers sought partial summary judgment with respect to Watchung Square's claim for damages based upon the Elizabethtown failure, contending that the arbitration had resolved this issue against Watchung Square and that it was precluded from attempting to relitigate the matter in another forum. Watchung Square opposed these motions, contending that it had not presented to the arbitrators its claims with respect to the Elizabethtown failure because those claims were based on a contract that did not have an arbitration clause. It noted that the arbitrators had repeatedly stated their intention not to become involved in deciding issues that were presented in this litigation. After extensive briefing and argument, the trial court denied the motions, and we subsequently granted leave to appeal. Having reviewed the extensive briefs submitted by the parties, heard the arguments of the attorneys, and reviewed the exhaustive appendices filed in connection with this appeal, we are satisfied the trial court's orders should be affirmed.
Elizabethtown argues on appeal that Watchung Square is collaterally estopped from proceeding in this action to seek damages in connection with the Elizabethtown failure. We disagree.
"Collateral estoppel . . . `bars relitigation of any issue which was actually determined in a prior action, generally between the same parties, involving a different claim or cause of action.'"
In deciding whether the issues sought to be precluded are identical to the issues decided in the first proceeding, the relevant factors are "whether there is substantial overlap of evidence or argument in the second proceeding; whether the evidence involves application of the same rule of law; whether discovery in the first proceeding could have encompassed discovery in the second; and whether the claims asserted in the two actions are closely related."
Moreover, "in appropriate circumstances an arbitration award can have . . . collateral estoppel effect in subsequent litigation."
Regarding whether an arbitration award should have issue-preclusive effect in favor of a non-party to the arbitration proceedings, "the question to be decided is whether a party has had his day in court on an issue, rather than whether he has had his day in court on that issue against a particular litigant."
Here, the parties dispute whether there is an identity of issues, whether the arbitration in fact decided the question of responsibility for the Elizabethtown failure, and whether a decision on that issue was an essential part of the arbitrators' decision. The record before us does not indicate that Watchung Square presented to the arbitrators the question of any responsibility on the part of Elizabethtown for the February 2000 slope failure. Nor do we perceive that a decision with respect to responsibility for the initial February 2000 slope failure was an essential ingredient to the arbitrator's evident conclusion that Natoli and Vollers were not responsible for the failures that occurred subsequently. From the record presented to us, it is apparent that the parties dispute the causes of the subsequent failures, and that there is not agreement as to whether those subsequent failures are causally related to that of February 10, 2000.
If it is not apparent from the arbitration proceedings precisely which issues the arbitrators decided, we consider it inappropriate to invoke collateral estoppel upon the basis of the ultimate arbitration award.
Elizabethtown argues that the damages claimed by Watchung Square in this litigation overlap with the damages it claimed in the arbitration, and thus the issues are identical for purposes of collateral estoppel. We have reviewed the final brief book submitted to the arbitrators by Watchung Square, and we are unable to agree with Elizabethtown. Watchung Square asserts in this litigation damage claims that it did not include in its brief book and that it noted it was reserving for litigation.
Vollers presents a separate argument on appeal — that Watchung Square is barred by res judicata from seeking damages in this litigation based upon the Elizabethtown failure. Again, we disagree.
Res judicata restricts a litigant's ability to bring claims in a subsequent civil action that were or could have been adjudicated in an earlier lawsuit involving the same parties.
Res judicata "precludes parties from relitigating substantially the same cause of action."
"The application of res judicata is a question of law. . . ."
Here, elements one and three of the res judicata test are satisfied. The arbitration award was a valid, final judgment on the merits, and both Watchung Square and Vollers were parties to the arbitration.
As to element two, whether there is an identity of issues, we have already noted our conclusion that such identity does not exist because Watchung Square did not submit to arbitration the issues of whether Elizabethtown and Vollers breached their contractual obligation to extend the water main and were negligent in their efforts to do so, causing the February 2000 slope failure. Although evidence used in the arbitration proceeding may be used in the litigation, such as Watchung Square's expert report, that factor alone does not preclude its third-party complaint against Vollers.
Nor is there an identity of the causes of action. In the arbitration, Watchung Square alleged that Vollers failed to adequately perform its obligations pursuant to its subcontract with Natoli in that it excavated knowing that there was potential for subsequent slope failures after the initial February 2000 slope failure. In the litigation, in contrast, Watchung Square alleges that Elizabethtown "and/or" Vollers breached their contractual obligation to extend the water main and were negligent in their efforts to do so, causing the initial slope failure in February 2000.
The trial court correctly denied summary judgment to Vollers.
We also reject so much of Vollers' argument that rests upon the entire controversy doctrine. The entire controversy doctrine requires litigants in a civil action to raise all affirmative claims arising from a single controversy that each party might have against another party, including counterclaims and crossclaims. R. 4:30A.
"In essence, it is the factual circumstances giving rise to the controversy itself, rather than a commonality of claims, issues or parties, that triggers the requirement of joinder to create a cohesive and complete litigation."
"[B]ecause the entire controversy doctrine is an equitable principle, its applicability is left to judicial discretion based on the particular circumstances inherent in a given case."
Vollers contends that Watchung Square expanded the scope of the arbitration to include its claims in the third-party complaint, and thus failed to exempt those claims from the arbitration.
"[O]nly those issues may be arbitrated which the parties have agreed shall be. Stated another way, the arbitrator's authority is circumscribed by whatever provisions and conditions have been mutually agreed upon."
To submit additional claims to arbitration beyond those provided for by the arbitration clause in the contract between the parties, the parties must mutually assent.
Here, there was no arbitration clause in Watchung Square's contracts with Elizabethtown or in Elizabethtown's contract with Vollers. Therefore, Watchung Square was not compelled under the entire controversy doctrine to pursue its claims against Elizabethtown and Vollers pursuant to those contracts in arbitration unless it consented to their resolution through arbitration. And, in contrast to
The entire controversy doctrine is not a bar to this action.
Vollers' final argument relates to whether Watchung Square's third-party complaint against it should have been dismissed on the basis of the Comparative Negligence Act,
The orders under review are affirmed, and the matter is remanded to the trial court for further proceedings.