(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
IN THE MATTER OF THE ARBITRATION BETWEEN: TRETINA PRINTING, INC., ET AL. V.
FITZPATRICK AND ASSOCIATES, INC. (A-30-93)
Argued October 12, 1993 -- Decided May 4, 1994
PER CURIAM
Fitzpatrick and Associates, Inc. (Fitzpatrick) entered into a contract with Tretina Printing
Corporation (Tretina) to design and construct a printing plant and office building. As part of the contract,
the parties agreed to a "guaranteed maximum price" of $2,566,050, including any corrective work and a
$200,000 construction-management fee to Fitzpatrick. The contract also contained a provision for
"retainage," under which Tretina could withhold payment to Fitzpatrick of an amount equal to 150" of the
estimated cost of completing any unfinished or unsatisfactory work. On completion of the work, Tretina
would pay Fitzpatrick the amount it had retained to cover the potential cost. The contract also provided that
all contract disputes would be decided through binding arbitration.
When Tretina failed to pay one of Fitzpatrick's requisitions, Fitzpatrick filed a claim for arbitration;
Tretina cross-claimed because of Fitzpatrick's allegedly deficient and incomplete work. At the time the
parties began arbitration, Tretina owed up to $446,231 of the remaining construction costs, including the cost
of corrective work and the construction-management fee of $200,000. After complex and lengthy arbitration
proceedings, the arbitrator awarded Tretina $260,267.66.
Tretina moved for an order confirming the award and Fitzpatrick moved for an order vacating or
modifying it. In a written decision, the Chancery Division modified the award and confirmed it as modified
on the strength of Section 9c of the Arbitration Act, N.J.S.A. 2A:24-1 to -11 (the Act), which requires a
reviewing court to modify or correct an award that is "imperfect in a matter of form not affecting the merits
of the controversy." The court found that the construction-management fee was entirely different from
retainage and that, after the arbitrator had calculated the damages that Fitzpatrick owed Tretina, the
arbitrator should have treated the retainage as a credit against those damages because Tretina had never
paid over the retained money. Thus, the court reduced the award by $201,148, the "accumulated retainage"
claim by Fitzpatrick, bringing Tretina's award down to $61,369.66.
Tretina appealed to the Appellate Division, contending that the trial court had mistakenly exercised
its discretion in modifying the award and in not requiring the arbitrator to clarify his award. Fitzpatrick
cross-appealed, arguing that the award was so defective that the Chancery court should have vacated it. The
Appellate Division reversed and vacated the award pursuant to the Act and the Supreme Court Court's
decision in Perini Corporation v. Great Bay Hotel and Casino, Inc. The Appellate Division relied on the
Sections 8a and 8d of the Act under which a court may vacate an award that was procured by "corruption,
fraud, or undue means," or in which the arbitrator so exceeded or improperly executed his powers that his
award on the matter submitted was not "mutual, final, and definite." The Appellate Division also relied on
Perini, in which a plurality of the Court concluded that the "undue means" and "exceeded their powers"
provisions of the Act embraced egregious mistakes of law and an arbitrator's award can be vacated on that
basis. The plurality concluded that in private-sector arbitration, an arbitrator's determination of a legal issue
should be sustained as long as the determination is reasonably debatable and that an award can be vacated
only when an arbitrator makes errors that are undebatable, unmistakable, gross or in manifest disregard of
the applicable law.
The Supreme Court granted certification.
HELD: Arbitration awards may be vacated only for fraud, corruption or similar wrongdoing by the
arbitrator. Here, there are no grounds to vacate or modify the arbitrator's award. Moreover, the
ambiguity in how the arbitrator calculated one part of this multi-claim, complex contract dispute
provides no basis for resubmitting the award to the arbitrator for clarification.
1. In his concurring opinion in Perini, the Chief Justice argued that arbitration awards should be final
and not subject to judicial review absent fraud, corruption or similar wrongdoing on the part of the
arbitrator. A majority of the Court now rejects the standard for judicial review of private-sector arbitration
awards set forth in the plurality opinion in Perini. The correct standard is that set forth in the Chief Justice's
concurring opinion in Perini. Thus, arbitration awards may be vacated only for fraud, corruption or similar
wrongdoing by the arbitrator. Moreover, an award can be corrected only for very specifically defined
mistakes as set forth in Section 9 of the Act. Here, there was no hint of misconduct by the arbitrator.
Because no statutory grounds exist for invalidating or modifying the award, the arbitrator's award is upheld.
(pp. 6-13)
2. The dissent's reliance on Section 9 of the Act as a basis for a remand is misplaced. That section
encompasses cases in which the award contains "an evident miscalculation of figures or an evident mistake in
the description of a person, thing or property referred to therein." The clear purpose of that section is to
enable the court to correct simple mathematical errors. The retainage error does not constitute a mere
"miscalculation" and is not "evident." Further, Section 9 directs a court to correct errors; it does not provide
for a remand to the arbitrator. Thus, even if the alleged error did constitute an "evident miscalculation," the
proper action would be to correct it, not remand it to the arbitrator.
(pp. 13-15)
3. In the absence of a statutory provision or an authorization in the arbitration agreement, a court that
is asked to vacate, modify, or confirm an award usually has no power, except by the consent of the parties, to
resubmit the matter to the arbitrator. Thus, a court's power to resubmit an ambiguous award for
clarification is not well-settled as the dissent suggests. Here, the arbitrator settled all the disputed issues.
Asking the arbitrator to explain his reasoning would not only contradict the goals of arbitration but would
threaten the reliability of the arbitration award. (pp. 15-20)
Judgment of the Appellate Division is REVERSED. The matter is REMANDED to the Chancery
Division for entry there of a judgment confirming the arbitration award in all respects.
JUSTICE CLIFFORD, concurring, writes separately to note that upon reconsideration he has come
to agree with the Chief Justice's concurring opinion in Perini in respect of the standard of judicial review that
courts should apply to private-contract arbitration awards.
JUSTICE STEIN, dissenting, in which JUSTICES HANDLER and O'HERN join, is of the view
courts have the power to modify arbitration awards to correct evident mistakes, which includes the power to
remand to the arbitrator in order to obtain clarification of the award. There is no inconsistency between the
deferential standard for sustaining arbitration awards adopted by the Court and the settled and accepted
practice of resubmission of ambiguous awards to arbitrators for clarification. Moreover, Justice Stein sees no
reason to revisit the holding in Perini. Nonetheless, he adheres to the views expressed in the Perini plurality
opinion concerning the appropriate standard for judicial review of arbitration awards as well as with the view
expressed in Perini that the reliability of arbitration as an alternative method of dispute resolution mandates
judicial intervention in extreme cases in which a settled legal principle and industry practice have been
repudiated by the arbitrator's award.
CHIEF JUSTICE WILENTZ and JUSTICES POLLOCK and GARIBALDI join in this opinion.
JUSTICE CLIFFORD filed a separate concurring opinion. JUSTICE STEIN filed a separate dissenting
opinion in which JUSTICES HANDLER and O'HERN join.
SUPREME COURT OF NEW JERSEY
A-
30 September Term 1993
IN THE MATTER OF THE ARBITRATION
BETWEEN:
TRETINA PRINTING, INC., and
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Plaintiffs-Appellants,
v.
FITZPATRICK & ASSOCIATES, INC.,
Defendant-Respondent.
-----------------------------------
FITZPATRICK & ASSOCIATES, INC.,
Plaintiff-Respondent,
v.
TRETINA PRINTING CO., INC.,
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Defendants-Appellants.
Argued October 12, 1993 -- Decided May 4, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
262 N.J. Super. 45 (1993).
George Foster Mackey argued the cause for
appellants (Mackey & Moore, attorneys; Mr.
Mackey and Gary J. Mueller, of counsel).
Robert Hedinger argued the cause for
respondent (Peckar & Abramson, attorneys; Mr.
Hedinger and Caroline M. Rossi, on the
brief).
PER CURIAM
This appeal and cross-appeal arise out of an arbitrator's
award in a construction-management-contract dispute. The
Chancery Division modified and confirmed the award. The
Appellate Division reversed and vacated the award. In re
Arbitration Between Tretina Printing, Inc. v. Fitzpatrick &
Assocs., Inc.,
262 N.J. Super. 45, 55 (1993). We granted
certification,
133 N.J. 442 (1993), and now reverse the judgment
of the Appellate Division and reinstate the arbitrator's award.
Moreover, the Court adopts as a rule governing judicial review of
private-contract arbitration awards the standard set forth in the
Chief Justice's concurring opinion in Perini v. Greate Bay Hotel
& Casino, Inc.,
129 N.J. 479 (1992) .
Fitzpatrick & Associates, Inc. (Fitzpatrick) entered into a contract with Tretina Printing Corporation (Tretina) for the design and construction of a printing plant and office building. The parties agreed to a "guaranteed maximum price" (GMP) of $2,566,050, which reflected a guarantee by Fitzpatrick that the total cost of the project, including any corrective work and a construction-management fee, would not exceed that sum. The contract provided that Tretina would pay Fitzpatrick a $200,000 construction-manager's fee (provided that Fitzpatrick did not
breach the contract) as part of the total cost. If the cost of
the completed project exceeded the GMP, Fitzpatrick would absorb
those costs itself. If the total cost turned out to be less than
the GMP, then Tretina would turn over to Fitzpatrick thirty
percent of the savings as well as the construction-management
fee.
In addition, the contract contained a provision for
"retainage," under which Tretina was entitled to withhold payment
to Fitzpatrick of a sum equal to 150" of the estimated cost of
completing any unfinished or unsatisfactory work. On completion
of that work, Tretina would become obligated to pay Fitzpatrick
the amount it had retained to cover the potential cost. Lastly,
the contract specifically provided that "all claims, disputes,
and other matters * * * arising out of, or relating to, this
Agreement or the breach thereof * * * shall be decided by
arbitration" and that the arbitrator's decision "shall be final
* * *."
When Tretina failed to pay one of Fitzpatrick's requisitions, Fitzpatrick filed a claim for arbitration; Tretina cross-claimed because of Fitzpatrick's allegedly deficient and incomplete work in several areas of the construction. By that time, Tretina had paid Fitzpatrick $2,119,819. Thus, under the contract terms, at the time that the parties began arbitration, Tretina was liable for up to $446,231 of all of the remaining
construction costs, including the cost of corrective work and
Fitzpatrick's construction-management fee of $200,000.
The arbitrator, appointed by the American Arbitration
Association, conducted twenty-two arbitration sessions over a
one-year period, heard twenty-one witnesses, and reviewed 222
exhibits before issuing his written award. The award contained
two lists consisting of Fitzpatrick's claims and Tretina's
claims. Next to each item on the list the arbitrator either
assigned a dollar amount, directed Fitzpatrick to complete or to
pay for the cost of completing the claimed deficiency, or denied
the claim. The "TOTAL AWARD TO FITZPATRICK" was $269,912.34 and
the "TOTAL AWARD TO TRETINA" was $520,180.00, leaving a "TOTAL
NET AWARD TO TRETINA" of $260,267.66.
Tretina moved for an order confirming the award and
Fitzpatrick moved for an order vacating or modifying it. In a
written decision, the Chancery Division modified the award and
confirmed it as modified. Although the trial court made a few
minor changes, it deferred to the arbitrator's judgment on all
but one issue, namely, retainage. The arbitrator had listed
Fitzpatrick's fourth claim as:
4. Retainage
Construction management fee $100,000.00
(interest at 10" for 33
months) 27,500.00
TOTAL $127,500.00
As the trial court observed, the construction-management fee is
entirely different from retainage. In addition, the court
explained that retainage was not a separate claim; rather, it was
a fund held by Tretina, who was required to pay it to Fitzpatrick
"only if [Fitzpatrick] did not breach its contract and only to
the extent that approved work did not require repair or redoing."
Thus, according to the court, after the arbitrator calculated the
damages that Fitzpatrick owed Tretina, he should have treated the
retainage as a credit against those damages because Tretina has
never paid over the retained money. The court reasoned that the
arbitrator had either overlooked the retainage claim or had
assumed that Tretina's award would be offset by the retainage
amount to which Fitzpatrick was entitled. Thus, after reducing
somewhat the arbitrator's net award to Tretina, the trial court
reduced that award by $201,148, the "accumulated retainage"
claimed by Fitzpatrick, bringing Tretina's net award down to
$61,369.66.
Tretina appealed to the Appellate Division, claiming that the trial court had mistakenly exercised its discretion in modifying the award and in not requiring the arbitrator to clarify his award. Fitzpatrick cross-appealed, arguing that the
award was so defective that the Chancery Division should have
vacated it. The Appellate Division, after conducting a detailed
analysis of the contract and of the arbitration proceedings,
concluded that of the two judicial remedies, modification or
vacation of the award, provided by the Arbitration Act, N.J.S.A.
2A:24-1 to -11 (the Act), modification was not available because
"the award ignores the basic contours of the parties' contract,
decides some submitted disputes contrary to the evidence, and
completely fails to decide others." 262 N.J. Super. at 52-53.
The court therefore vacated the award. Id. at 53. In reaching
that decision the Appellate Division relied on Perini Corp v.
Greate Bay Hotel & Casino, Inc.,
129 N.J. 479 (1992), and on
N.J.S.A. 2A:24-8.
The Act provides that once an arbitrator issues an award,
any party to the arbitration may seek confirmation of that award
in the Superior Court within three months of the arbitrator's
decision. N.J.S.A. 2A:24-7. If the trial court does not confirm
the award, it can either vacate the award, N.J.S.A. 2A:24-8, or
modify or correct it. N.J.S.A. 2A:24-9. However, the statute
narrowly defines the circumstances under which a court may resort
to those remedies.
Under the Act a court shall vacate an arbitration award:
a. Where the award was procured by
corruption, fraud or undue means;
b. Where there was either evident
partiality or corruption in the arbitrators,
or any thereof;
c. Where the arbitrators were guilty of
misconduct in refusing to postpone the
hearing, upon sufficient cause being shown
therefor, or in refusing to hear evidence,
pertinent and material to the controversy, or
of any other misbehaviors prejudicial to the
rights of any party;
d. Where the arbitrators exceeded or so
imperfectly executed their powers that a
mutual, final and definite award upon the
subject matter submitted was not made.
When an award is vacated and the time within
which the agreement required the award to be
made has not expired, the court may, in its
discretion, direct a rehearing by the
arbitrators.
The Act also provides that a court shall modify or correct an
award:
a. Where there was an evident
miscalculation of figures or an evident
mistake in the description of a person, thing
or property referred to therein;
b. Where the arbitrators awarded upon a
matter not submitted to them unless it
affects the merits of the decision upon the
matter submitted; and
c. Where the award is imperfect in a matter
of form not affecting the merits of the
controversy.
The court shall modify and correct the award,
to effect the intent thereof and promote
justice between the parties.
The Chancery Division confirmed and modified this
arbitrator's award on the strength of N.J.S.A. 2A:24-9c, which
requires a reviewing court to modify or correct an award that is
"imperfect in a matter of form not affecting the merits of the
controversy." In reversing, the Appellate Division relied on
N.J.S.A. 2A:24-8a and d, under which a court must vacate any
award that has been procured by "corruption, fraud, or undue
means," or in which the arbitrator "so exceeded or imperfectly
executed [his] powers" that his award on the matter submitted was
not "mutual, final, and definite."
In this Court the litigants, as did the Appellate Division,
perceive the essential question to be the extent to which, and
the standard under which, an arbitrator's award can tolerate
judicial review. The Appellate Division vacated the award under
what it termed "the Perini standard," see 262 N.J. Super. at 49,
and the parties' arguments revolve around whether that
"standard," which today we reject, has been met in this case.
Perini involved a contract dispute between Perini Corporation as construction manager and Greate Bay Hotel & Casino as owner. Perini contended that the arbitrators had failed to observe "settled principles of contract law" in the calculation
of the owner's lost profits from its hotel and casino business.
129 N.J. at 484. Perini alleged that the arbitrators had erred
by including delay damages in the owner's award. It argued that
the damages had not been contemplated by the parties, that they
included lost profits based on delays that had been experienced
after substantial completion of the project, and that the damages
were speculative and disproportionate. Id. at 488-89. It urged
that those mistakes of law constituted a sufficient basis on
which to vacate the award. Id. at 484. Although the plurality
opinion acknowledged the persuasiveness of Perini's arguments, it
nevertheless concluded that the arbitrators' calculation of the
award could find a basis in the evidence. Id. at 500, 509, 509-10, 515, 517. Even though the plurality members were troubled by
the magnitude of the award, they were satisfied that the
arbitrators had not manifestly disregarded any undebatable
principle of law, and thus they upheld the award. Id. at 517-18.
In reviewing the narrow circumstances in which a court can vacate an arbitration award, the Perini plurality concluded that the "undue means" and "exceeded their powers" provisions of the statute embraced egregious mistakes of law; thus, a court could vacate an arbitrator's award on that basis. Id. at 496. The plurality members emphasized, however, that they did not intend "that the arbitrators be judges or that their decisions be subject to the same appellate supervision as those of judges." Id. at 493. Rather, the scope of judicial review should be
limited. "Thus, in private-sector arbitration an arbitrator's
determination of a legal issue should be sustained as long as the
determination is reasonably debatable." Ibid. The plurality
opinion concluded that the purpose of a court's review is to
guard against arbitrator errors that on their face are
undebatable, unmistakable, gross, or in manifest disregard of the
applicable law. Id. at 496. Thus, the plurality in Perini would
allow a court to vacate an award when an arbitrator makes a
mistake in respect of an undebatable point of law. The plurality
opinion articulated the appropriate standard of judicial review
as follows:
Whether the arbitrators are viewed as
having acted with "undue means" or having
"exceeded their powers," the judicial inquiry
must go beyond a search for mere mistakes of
law. Were we to decide otherwise,
arbitration would simply become another form
of private non-jury trial. A scope of review
that allows an arbitration decision to stand
when the interpretation of law is reasonably
debatable is consistent with the earlier
formulation set forth in Held [v. Comfort Bus
Line,
136 N.J.L. 640 (Sup. Ct. 1948)]. That
formulation requires that the arbitrators
must have clearly intended to decide
according to law, must have clearly mistaken
the legal rule, and that mistake must appear
on the face of the award. In addition, the
error, to be fatal, must result in a failure
of intent or be so gross as to suggest fraud
or misconduct.
The Chief Justice, concurring in the judgment in Perini,
would have even further restricted the courts' role in reviewing
voluntary private-sector arbitration awards. Id. at 519
(Wilentz, C.J., concurring). His concurring opinion argued that
"[a]rbitration awards should be what they were always intended to
be: final, not subject to judicial review absent fraud,
corruption, or similar wrongdoing on the part of the
arbitrators." Ibid. Thus in most cases the Chief Justice would
not vacate an award even though it might be based on a mistake of
law. The concurrence urged that the statute, N.J.S.A. 2A:24-8,
reflected that interpretation of the law, id. at 540, and that
the Court should overturn precedent that was inconsistent with
the rule that the Chief Justice advocated. Id. at 519.
Finally, the dissenters in Perini agreed with the
plurality's standard but disagreed with the result that should be
reached by applying that standard to the parties' claims. See
id. at 549-56 (Stein, J., concurring in part and dissenting in
part).
Therefore, although a majority of those who sat in Perini agreed on the controlling standard, they could not agree on its application to the circumstances of that case. In this case as well we do not achieve unanimity in respect of the correct standard of review or in the result; but a majority of the Court now agrees that the correct standard of review is not that adopted by five members who sat in Perini (Justices Clifford, Handler, O'Hern, and Stein, and Judge Keefe, temporarily assigned), but rather the standard set forth in the Chief
Justice's opinion concurring in the judgment in Perini, in which
Judge Arnold Stein, temporarily assigned, joined. That standard
is as follows:
Basically, arbitration awards may be vacated
only for fraud, corruption, or similar
wrongdoing on the part of the arbitrators.
[They] can be corrected or modified only for
very specifically defined mistakes as set
forth in [N.J.S.A. 2A:24-9]. If the
arbitrators decide a matter not even
submitted to them, that matter can be
excluded from the award. For those who think
the parties are entitled to a greater share
of justice, and that such justice exists only
in the care of the court, I would hold that
the parties are free to expand the scope of
judicial review by providing for such
expansion in their contract; that they may,
for example, specifically provide that the
arbitrators shall render their decision only
in conformance with New Jersey law, and that
such awards may be reversed either for mere
errors of New Jersey law, substantial errors,
or gross errors of New Jersey law and define
therein what they mean by that. I doubt if
many will. And if they do, they should
abandon arbitration and go directly to the
law courts.
Because the record before us contains not even a hint of misconduct by the arbitrator, and because no statutory ground exists for invalidating or modifying the award, we uphold the arbitrator's award. In doing so, we need not confront the parties' arguments that focus on Perini's plurality opinion, given our rejection of the standard announced therein. Nor need we rehash the extensive treatment that the pertinent authorities were given in the contesting opinions in Perini, for we cannot
improve on the arguments included therein. Three members now
join the Chief Justice in the views expressed in his Perini
concurrence, which therefore requires reinstatement of the
arbitrator's award. We announce our adoption of the new standard
governing review of arbitration awards so that parties who resort
to private-party arbitration may be guided accordingly, not
because the outcome in this appeal turns on which standard we
apply. It does not. We are satisfied that under either standard
the result would be the same.
Which brings us to the dissent. A decent respect for our
dissenting colleague's thoughtful opinion, which would lead to a
remand to the arbitrator for clarification (a result both parties
resisted at oral argument before us), impels us to explicate our
differing view in some detail.
The dissent's reliance on N.J.S.A. 2A:24-9 as a basis for a remand is misplaced. That section of the Act requires a court to modify or correct an arbitration award in only three types of cases. Subsection a, on which the dissent relies, covers cases in which the award contains "an evident miscalculation of figures or an evident mistake in the description of a person, thing or property referred to therein." The clear purpose of that section is to enable the court to correct simple arithmetical errors,
such as 2 + 2 = 5, or obvious mistakes in identification, such as
14 Hill Street instead of 41 Hill Street. See, e.g., Creter v.
Davies,
30 N.J. Super. 60, 62 (Ch. Div.) (applying N.J.S.A.
2A:24-9a to correct arithmetical error on face of award), aff'd,
31 N.J. Super. 402 (App. Div. 1954).
The dissent argues that the arbitration award in this case
is ambiguous. Post at ___ (slip op. at 10). We agree. The
perceived ambiguity in the award arises from the arbitrator's
allocation of the retainage sum allegedly due Fitzpatrick. Our
dissenting colleague suggests that the retainage issue presents
an "evident miscalculation of figures" requiring judicial action.
Yet as the dissent explains, the arbitrator did not make a simple
mistake in his addition or subtraction; rather the contention is
that he omitted entirely one of the party's claims. Although we
cannot determine from the face of the award whether the
arbitrator erred in his dealing with the retainage, we are
confident that any such error does not constitute a mere
"miscalculation" and is by no means "evident." We refuse to
shoehorn this case into a category in which it clearly does not
fit simply because we discern either an absence of specificity in
the arbitrator's analysis or an ambiguity in the arbitrator's
treatment of that claim.
Moreover, N.J.S.A. 2A:24-9 directs a court to correct errors; it does not provide for a remand to the arbitrator. In
addition, both N.J.S.A. 2A:24-9b and -9c direct a court to modify
an award only if those changes will not affect the merits of the
controversy. The clear implication from N.J.S.A. 2A:24-9 is that
the Legislature intended that courts correct mistakes that are
obvious and simple -- errors that can be fixed without a remand
and without the services of an experienced arbitrator. Thus,
even if the alleged error in this case did constitute an "evident
miscalculation," the proper action for the court would be to
correct it, not to remand to the arbitrator. Because we conclude
that N.J.S.A. 2A:24-9 is inapplicable to this case, we find no
statutory basis for a remand.
Beyond that, we disagree as well with the dissent's
contention that the power of courts to resubmit ambiguous awards
to arbitrators for clarification is "well-settled." Post at ___
(slip op. at 7). On the contrary, in the absence of a statutory
provision or an authorization in the arbitration agreement, a
court that is asked to vacate, modify, or confirm an award
usually has no power, except by the consent of the parties, to
recommit the matter to the arbitrator. Held v. Comfort Bus
Lines, Inc.,
136 N.J.L. 640 (Sup. Ct. 1948). Resubmission is
foreclosed because with the rendering of an award, an arbitrator
exhausts his or her commission. Id. at 641. In fact, our
research discloses only one case in which a court relied
exclusively on its inherent power to resubmit an ambiguous award
to the arbitrator, La Vale Plaza, Inc. v. R. S. Noonan, Inc.,
378 F.2d 569 (3d Cir. 1967), and that case is readily distinguishable
from the one before us.
La Vale Plaza, on which the dissent primarily relies,
concerned a construction-contract arbitration award that left
uncertainty about how the arbitrator had dealt with an
outstanding balance owed to one party. Although the Third
Circuit decided that the common law and not the Pennsylvania
arbitration statute governed the case, it noted that the
arbitration statute explicitly authorized a court to modify or
resubmit an award to the arbitrator for clarification. 378 F.
2d
at 570-72. In determining that the court had the power under the
common law to resubmit the question of the outstanding balance to
the arbitrator, the court relied on the Pennsylvania statute's
clear expression of public policy favoring resubmission of
awards. Id. 573-74.
We differentiate La Vale Plaza from our case on two bases. First, this case, unlike La Vale Plaza, involves statutory arbitration, not common-law arbitration. The parties moved to confirm the award in court under N.J.S.A. 2A:24-7, and the record shows that the parties and the court assumed that N.J.S.A. 2A:24-8 and -9 controlled the proceedings. Therefore, we review this arbitration under the arbitration statute, which does not authorize resubmission, and not under some other set of principles. Second, the New Jersey statute does not reflect a
public-policy determination similar to Pennsylvania's. In fact,
our Act suggests a contrary policy favoring finality and limited
judicial involvement. Because the New Jersey arbitration statute
governs this case, the Third Circuit's reasoning in La Vale Plaza
to justify resubmission is inapplicable.
Nor are the federal labor-law cases persuasive authority
here. As did the Illinois Supreme Court in Rauh v. Rockford
Products Corp.,
574 N.E.2d 636 (1991), we decline to follow those
cases on review of a commercial arbitration award. Id. at 643.
The Illinois court looked instead to the Illinois Uniform
Arbitration Act, which specifies the grounds for vacating or
modifying an award. Ibid.
Moreover, the federal labor-law cases address the federal courts' authority under § 301 of the Labor-Management Relations Act, 29 U.S.C.A. §185, to enforce collective-bargaining agreements that contain arbitration clauses. The United States Supreme Court has interpreted that section as conferring on the federal courts broad latitude for fashioning a body of substantive law from the policy of the national labor laws. United States v. American Mfg. Co., 363 U.S. 564, 567-68, 80 S. Ct. 1343, 1346, 4 L. Ed.2d 1403, 1406-07 (1960); Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S. Ct. 912, 918, 1 L. Ed.2d 972, 980-81 (1957). The fundamental goal of those labor laws is to curtail industrial strife and work stoppages
through the arbitration of grievances. United Steelworkers v.
Warrior & Gulf Navigation Co.,
363 U.S. 574, 577-78, 585,
80 S.
Ct. 1347, 1350-51, 1354,
4 L. Ed.2d 1409, 1414-15, 1419 (1960);
Textile Workers Union, supra, 353 U.S. at 454-55, 77 S. Ct. at
917, 1 L. Ed.
2d at 979.
Arbitration in the context of a labor dispute differs from private-contract arbitration in important ways. Parties enter commercial contracts voluntarily. They act without any compulsion to deal with each other instead of with some other party. The arbitration clause in their contracts represents a way to settle disputes informally should any arise. In a labor agreement, however, the parties must deal with each other. They have no choice. In that circumstance the agreement to arbitrate is vital to keeping the relationship between the parties afloat and guided by a set of agreed-to rules. Warrior & Gulf Navigation, supra, 363 U.S. at 580, 80 S. Ct. at 1351-52, 4 L. Ed. 2d at 1416. In a commercial contract, arbitration is produced by a breakdown in the parties' agreement. The parties use it as a last resort. In the labor arena, arbitration serves as the machinery under a collective-bargaining agreement that is "at the very heart of the system of industrial self-government." Id. at 584, 80 S. Ct. at 1352, 4 L. Ed. 2d at 1416. Accordingly, the decisions of the federal courts reflect a strong preference for settling all aspects of labor disputes through the arbitration process. American Mfg., supra, 363 U.S. at 568-69,
80 S. Ct. at 1346-47, 4 L. Ed.
2d at 1407; Warrior & Gulf
Navigation, supra, 363 U.S. at 582, 585, 80 S. Ct. at 1353, 1354,
4 L. Ed.
2d at 1417, 1419; United Steelworkers v. Enterprise
Wheel & Car Corp.,
363 U.S. 593, 595-599,
80 S. Ct. 1358, 1360-62,
4 L. Ed. 1424, 1427-29 (1960); Textile Workers Union, supra,
353 U.S. at 455, 77 S. Ct. at 454-55, 1 L. Ed.
2d at 979.
Therefore, if a union and management cannot agree on the scope of
an arbitration award or on the method of enforcing the award,
courts, seeking to defer to the arbitration process, may resubmit
the issue to the arbitrator for clarification. Resubmission is
based not on any explicit provision in a federal statute but
rather on the underlying policy of advancing industrial peace.
J. A. Bryant, Annotation, Comment Note.--Power of Court to
Resubmit Matter to Arbitrators for Correction or Clarification,
Because of Ambiguity or Error in, or Omission from, Arbitration
Award,
37 A.L.R.3d 200, 220 (1971).
We acknowledge that in limited circumstances a court can remand to an arbitrator for reconsideration or clarification. For example, in Jersey City Police Officers Benevolent Ass'n v. City of Jersey City, 257 N.J. Super. 6 (1992), the Appellate Division properly directed the trial court to resubmit one issue to the arbitrator where it "had been neither submitted to nor decided by the arbitrator" in the initial proceedings. Id. at 11. The arbitrator had not exercised his powers relating to that issue, so his authority had never expired. Likewise, if the
obligations under an award are unclear to the parties, a court
may resubmit the question to the arbitrator for clarification.
The purpose of those types of resubmissions is to allow the
arbitrator to settle all the issues without judicial encroachment
on the arbitration process, not to explain how the arbitrator
arrived at the conclusions contained in the award.
In the case before us, however, the arbitrator has settled
all the disputed issues. We may remain uncertain about the
analysis that led to the stated result on one discrete issue, the
retainage question; but asking an arbitrator to explain his or
her reasoning works against the very goals of arbitration:
finality and expedition. Remands for reconsideration or further
explanation threaten the reliability of arbitration awards.
Moreover, requiring an arbitrator to justify a decision reflects
a lack of faith in the arbitration process and is inconsistent
with our commitment to maintaining arbitration as an alternative
to litigation in the courts.
In this case, the parties' obligations could not be clearer:
one owes the other a sum of money. No one contends that the
arbitrator never considered retainage. The parties presented
evidence on that issue and the award has a retainage section. We
conclude that an ambiguity in how the arbitrator calculated one
part of a multi-claim, complex contract dispute provides no basis
for resubmitting the award to the arbitrator for clarification.
Finally, and but distantly related to the foregoing
discussion, we add our recognition that in rare circumstances a
court may vacate an arbitration award for public- policy reasons.
For example, in Faherty v. Faherty,
97 N.J. 99 (1984), we held
that "whenever the validity of an arbitration award affecting
child support is questioned on the grounds that it does not
provide adequate protection for the child, the trial court should
conduct a special review of the award." Id. at 109. That
heightened judicial scrutiny is required because of the courts'
traditional role as parens patria. Id. at 111. Similarly, in a
public-sector arbitration setting, a court can properly vacate an
award because of a mistake of law. Communications Workers v.
Monmouth County Bd. of Social Servs.,
96 N.J. 442 (1984). That
exception is necessary because public policy demands that a
public-sector arbitrator, who must consider the effect of a
decision on the public interest and welfare, issue a decision in
accordance with the law. Kearny PBA Local #21 v. Town of Kearny,
81 N.J. 208, 217 (1979).
Additionally, in Faherty, supra, we concluded that a combination of public-policy reasons and a mistake of law warranted judicial vacation of the arbitration award. We vacated a portion of the arbitration award because it granted one spouse alimony after she had remarried, and because, unlike the contract
in this case, the parties in Faherty had agreed that the
arbitrator would decide legal issues in accordance with New
Jersey law. 97 N.J. at 112. Because the alimony allowance in
Faherty represented a fundamental error of New Jersey law, the
court properly vacated that portion of the award.
The judgment of the Appellate Division is reversed.
The cause is remanded to the Chancery Division for entry there of
a judgment confirming the arbitration award in all respects.
Chief Justice Wilentz and Justices Pollock and
Garibaldi join in this opinion. Justice Clifford has filed a
separate concurring opinion. Justice Stein has filed a separate
dissenting opinion in which Justices Handler and O'Hern join.
SUPREME COURT OF NEW JERSEY
A-
30 September Term 1993
IN THE MATTER OF THE ARBITRATION
BETWEEN:
TRETINA PRINTING, INC., and
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Plaintiffs-Appellants,
v.
FITZPATRICK & ASSOCIATES, INC.,
Defendant-Respondent.
-----------------------------------
FITZPATRICK & ASSOCIATES, INC.,
Plaintiff-Respondent,
v.
TRETINA PRINTING CO., INC.,
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Defendants-Appellants.
CLIFFORD, J., concurring.
In Perini Corp. v. Greate Bay Hotel & Casino, Inc.,
129 N.J. 479 (1992), I voted with the plurality opinion and agreed with a
majority of the members on the standard of judicial review that
courts should apply to private-contract arbitration awards.
Today I provide the fourth vote for the quite different test set
forth in the Chief Justice's opinion concurring in the judgment
in that case, id. at 518-49, having succumbed to the persuasive
force of that opinion. Unlike me, the others in today's majority
have no explaining to do, being either already on record as
favoring the Perini concurrence (the Chief Justice) or not
hitherto committed to any position on the subject (Justices
Pollock and Garibaldi) because they did not participate in the
Perini deliberations or decision. Although this new alignment of
the Court on the Perini issue does not affect the result of this
appeal -- nor would it have produced a different result in Perini
-- I have emerged from the closet only so that those who count
heads can keep an accurate score and be guided henceforth
accordingly.
Given the tenuous nature of Perini as precedent, I prefer to view my defection more as a demi-pirouette -- not particularly graceful or elegant, I admit, but something less than a full-fledged about-face. As the majority opinion today points out, this Court was sharply divided in Perini, three members of the Court as then constituted adopting one rule of judicial review; two members agreeing with the judgment confirming the arbitration award but applying a much stricter standard of review, see 129 N.J. 518-49 (Wilentz, C.J., concurring in judgment); and two members apparently agreeing with the plurality's standard but disagreeing with the result that application of that standard
should have produced, see id. at 549-56 (Stein, J., concurring in
part and dissenting in part).
The general rule is that "[w]hen a fragmented Court decides
a case and no single rationale explaining the result enjoys the
assent of [a majority of the members], 'the holding of the Court
may be viewed as that position taken by those Members who
concurred in the judgments on the narrowest grounds * * * .'"
Marks v. United States,
430 U.S. 188, 193,
97 S. Ct. 990, 993,
51 L. Ed.2d 260, 266 (1977) (quoting Gregg v. Georgia,
428 U.S. 153, 169 n.15,
96 S. Ct. 2909, 2923 n.15,
59 L. Ed.2d 859, 872
n.15 (1976)); cf. Mark A. Thurman, Note, When The Court Divides:
Reconsidering Precedential Value of Supreme Court Plurality
Decisions,
42 Duke L.J. 419 (1992) (analyzing and criticizing the
Marks doctrine). On that basis the holding of Perini may be
taken to be that on the facts of that case the arbitration award
had not been procured by undue means -- not, one would think, a
powerful statement of law on which to rely as conclusive
precedent.
Much as I would prefer to announce that my change of position is attributable to some epiphany, to some deeply moving event that produced a sudden startling cerebral awakening, to some lightning bolt of cognitive awareness and intellectual enrichment, the plain truth of the matter is that I have thought more about it and have changed my mind. My awakening, however
belated, puts me squarely in the Chief Justice's camp. For
whatever ambivalence that progression demonstrates I refuse to
commit myself to the psychiatrist's couch, content instead to
resurrect -- as apparently I must every couple of decades -- that
reassuring old turkey, "The matter does not appear to me now as
it appears to have appeared to me then." Bramwell, B., in
Andrews v. Styrap, 26 L.T.R. (n.s.) 704, 706 (Ex. 1872), quoted
in Moraca v. Ford Motor Co.,
66 N.J. 454, 466 (1975) (Clifford,
J., dissenting).
SUPREME COURT OF NEW JERSEY
A-
30 September Term 1993
IN THE MATTER OF THE ARBITRATION
BETWEEN:
TRETINA PRINTING, INC., and
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Plaintiffs-Appellants,
v.
FITZPATRICK & ASSOCIATES, INC.,
Defendant-Respondent.
-----------------------------------
FITZPATRICK & ASSOCIATES, INC.,
Plaintiff-Respondent,
v.
TRETINA PRINTING CO., INC.,
HI-TECH PROPERTIES, a General
Partnership, and JAN TRETINA
and OLGA TRETINA, Individually,
Defendants-Appellants.
STEIN, J., dissenting.
Acknowledging that resolution of this appeal does not depend on the standard by which courts should review errors of law in private-contract arbitration awards, ante at ___ (slip op. at 13), the Court nevertheless overrules Perini Corp. v. Greate Bay Hotel & Casino, Inc., 129 N.J. 479 (1992), and "adopts as a rule governing judicial review of private-contract arbitration awards
the standard set forth in the Chief Justice's concurring opinion
in [Perini]." Ante at ___ (slip op. at 2). Although the
difference between the standard now adopted by the majority and
the standard adhered to by the plurality in Perini is of enormous
importance to parties contemplating the use of private-contract
arbitration, the distinction is entirely irrelevant to the only
issue that divides the Court in this case: whether we should
confirm or remand for clarification an arbitration award that
appears to have disregarded or overlooked an item of "retainage"
in the amount of $201,148.
The source of law that authorizes modification of
arbitration awards to correct miscalculations or mistakes is
statutory, not judicial. N.J.S.A. 2A:24-9 provides:
The court shall modify or correct the
award in any of the following cases:
a. Where there was an evident miscalculation
of figures or an evident mistake in the
description of a person, thing or property
referred to therein;
b. Where the arbitrators awarded upon a
matter not submitted to them unless it
affects the merit of the decision upon the
matter submitted; and
c. Where the award is imperfect in a matter
of form not affecting the merits of the
controversy.
The court shall modify and correct the
award, to effect the intent thereof and
promote justice between the parties.
Thus, the critical inquiry before us turns on the meaning of the award and requires an essentially factual determination whether "there was an evident miscalculation of figures or an evident
mistake in the description of a person, thing or property" in the
award itself. The standard of review of arbitration awards
advocated by the plurality in Perini, as well as that advanced in
the Chief Justice's concurrence, are simply beside the point.
Other than its resolution of the issue of the arbitrator's treatment of the retainage item, I agree with the majority's conclusion that what the Appellate Division identified as flaws and omissions in the award do not constitute a basis adequate to justify disturbance of the award. For example, the Appellate Division noted that the arbitrator made no award with respect to various claims by the contractor for delay damages and interest. 262 N.J. Super. at 50-51. In addition, the Appellate Division concluded that the arbitrator's award to the owner was excessive in respect of a concrete loading dock and was inconsistent with the contract in respect of awards for replacement of glass and repair of cables. Id. at 51. The Appellate Division concluded that the defects in the award it had identified were "'gross, unmistakable, undebatable, or in manifest disregard of the applicable law and leading to an unjust result.'" Id. at 52 (quoting Perini, supra, 129 N.J. at 496). The majority concludes that, notwithstanding the defects identified by the Appellate Division, "no statutory ground exists for invalidating or modifying the award." Ante at ___ (slip op. at 12). Except for the retainage item, I concur with the majority's disposition.
That the arbitrator may have decided to ignore certain
claims or decided others in a manner different from the way a
court would have resolved them ordinarily does not justify
invalidating an award. That conclusion is consistent with both
the Perini plurality opinion, 129 N.J. at 494-97, as well as the
Chief Justice's concurring opinion in Perini. Id. at 548-49.
The retainage item, however, has nothing to do with errors
of law on the part of the arbitrator. The arbitrator's award was
divided into two sections. The first summarized the claims of
Fitzpatrick & Associates, Inc. (Fitzpatrick), the contractor.
The second summarized the claims of Tretina Printing Corporation
(Tretina), the owner. Under the heading "Fitzpatrick Claims,"
the arbitrator had designated "Retainage" as the fourth numbered
category of claims. The contract authorized the owner to retain
an amount equal to 150" of the cost of completion of unfinished
items; as each unfinished item was completed, the owner was to
pay the related amount of retainage to the contractor.
Fitzpatrick claimed that the retainage withheld was $201,148, a
figure disputed by Tretina but characterized as an "uncontested
fact" by the Chancery Division.
Under the heading "Retainage" in the arbitration award, the
arbitrator inserted the following language and amounts,
constituting a portion of the funds credited to Fitzpatrick:
"Construction management fee $ 100,000.00
(interest at 10" for 33 months) 27,500.00
TOTAL $ 127,500.00"
In determining to modify the award, the Chancery Division
noted that the arbitrator's inclusion of an award for part of the
construction-management fee under the heading "Retainage" is a
non sequitur. The contract provided in Article 7 for a
Construction Manager's Fee of $200,000, a provision separate from
the retainage provision in Article 11. The arbitrator's award of
$100,000, plus interest, as a construction manager's fee under
the heading of "Retainage" affords no explanation for the
arbitrator's apparent mistake in failing to account for the
retainage either under that heading or elsewhere in the award.
As the Chancery Judge observed:
It is unclear how the arbitrator handled
the item of retainage. During the course of
Fitzpatrick's work some $201,148 had been
retained by Tretina in accordance with the
terms of the contract. These were monies
held out of payments authorized as a reserve
to cover any deficiencies which later turned
up regarding that approved work. Had the
contract been satisfactorily completed,
Fitzpatrick would have been entitled to the
retainage - in whole or in part. However,
the monies have always been, and are today,
held by Tretina. The arbitrator in making
his net award of $260,267.66 in favor of
Tretina either overlooked or assumed that the
parties would recognize the offset that
Fitzpatrick was entitled to for the
retainage. It is clear as one reads the
award that the retainage did not enter into
his computation. Under his disposition of
the Fitzpatrick claims the arbitrator lists
as #4 "Retainage" but then proceeds to
discuss the construction management fee (an
entirely different matter) under that
heading. Retainage was not a separate claim.
It was a liquidated fund to be turned over to
Fitzpatrick in whole or in part only if it
did not breach its contract and only to the
extent that approved work did not require
repair or redoing. Tretina prevailed on its
claim of breach by Fitzpatrick. The
arbitrator liquidated all of its damage
claims (save the ones involving the sewer
pipe, sprinklers, clip meters and loading
dock clearance). The retainage then must be
treated as a credit on the amount due, since
Tretina has never paid over that money. I
will modify the arbitrator's award in that
regard as I am permitted to do. N.J.S.A.
2A:24-9(c).
Following the Chancery Division's modification of the award
to credit Fitzpatrick with the omitted amount of retainage,
Tretina sought reconsideration of that determination, relying on
its attorney's certification to support its contention that a
remand to the arbitrator was the appropriate and authorized
mechanism for resolving any ambiguity in the award. Noting that
the Chancery Court had characterized as "unclear" the
arbitrator's handling of the retainage, the certification of
Tretina's attorney states:
If this be so, then the matter should have
been remanded to the arbitrator for a
clarification as to how, if at all, he
handled the issue of retainage. At the oral
argument * * * the [c]ourt indicated it was
inclined to send the parties back to the
arbitrator for just that purpose. Both
parties agreed that, if the [c]ourt thought
the award to be ambiguous, they would not
object to such a procedure.
* * * I believe it is unlikely that
Klausner overlooked that figure in his award.
Rather, it is just as likely, if not more
probable, that the arbitrator combined the
construction management fee being withheld
with the retainage and made a lump-sum
adjusted award for the two items of $100,000.
* * *
[] Tretina believes the only way to know fully what the arbitrator intended, specifically if he took the retainage into
account and how, is to ask him. Therefore,
Tretina is concurrently preparing a subpoena
which will be served on the arbitrator * * *
commanding Mr. Klausner's presence at court
for oral testimony only for the limited
purpose of ascertaining what he did with the
retainage claim. Note that Tretina is not
requesting the arbitrator to re-evaluate the
award, or even to inquire into the merits,
but simply tell us what he did in forming the
award on the issue raised by Judge McGann.
* * * If the arbitrator['s] testimony
reveals that he did include the retainage in
the award, the court could then withdraw and
modify its decision in line with his true
intent. On the other hand, if he testifies
[that] he did overlook the retainage claim,
then the [c]ourt's decision is absolutely
correct and Tretina must live with the
result.
[] At this time, however, the
arbitrator's true intent and what he
considered in making the award is unknown.
Until his true intention is known, Tretina
has been deprived of the vast majority of its
award based upon this [c]ourt's own sense of
what is a proper award herein. * * * If the
modification truly reflects the arbitrator's
intent or it is clear that the arbitrator
overlooked a portion of the claim, the
[c]ourt's action is both proper and
necessary. However, to the extent there is
an ambiguity in the award, this [c]ourt
should not substitute its own judgment for
that of the arbitrator. It will only be upon
the arbitrator's sworn testimony that this
determination can be made. Otherwise, the
[c]ourt's decision is based only upon
speculation.
[Emphasis added.]
The principle is well-settled that the power of courts to modify arbitration awards to correct evident mistakes includes the power to remand to the arbitrator in order to obtain clarification of the award. In La Vale Plaza, Inc. v. R. S.
Noonan, Inc.,
378 F.2d 569 (1967), the Third Circuit addressed
the inherent power of federal courts to remand an arbitration
award to the arbitrator to clarify its meaning, under
circumstances strikingly similar to those before us. Noonan, a
general contractor, had demanded arbitration concerning the
amount due it in respect of a contract to construct a shopping
center. The arbitrators rendered an award in favor of Noonan for
$30,861.64. Shortly thereafter La Vale filed suit to recover the
difference between the amount of the award and the sum of
$56,429.66 that it had paid to Noonan while the arbitration was
pending. Noonan asserted that that payment was overdue and had
been taken into account by the arbitration award. The district
court remanded the matter to the arbitrator to clarify whether
the arbitrator had taken into account the payment made by La Vale
while the arbitration was pending. In affirming the District
Court's order, the Third Circuit explained that the remand did
not have the effect of reopening the arbitration:
Where the award, although seemingly
complete, leaves doubt whether the submission
has been fully executed, an ambiguity arises
which the arbitrator is entitled to clarify.
The resolution of such an ambiguity is not
within the policy which forbids an arbitrator
to redetermine an issue which he has already
decided, for there is no opportunity for
redetermination on the merits of what has
already been decided. Instead, the
clarification of an ambiguity closely
resembles the correction of a mistake
apparent on the face of the award and the
determination of an issue which the
arbitrators had failed to decide. Thus, in
the present case the arbitrators will act
only to remove the cloud of doubt as to
whether they considered the payment of
$56,429.66 in making their award and will in
no way reopen the merits of the controversy.
[Id. at 573.]
Other courts similarly have recognized the appropriateness of a remand to the arbitrators in order to clarify an apparent ambiguity in the award. See, e.g., Local 719, American Bakery & Confectionery Workers v. National Biscuit Co., 378 F.2d 918, 926 (3rd Cir. 1967); Hanford Atomic Metal Trades Council v. General Electric Co., 353 F.2d 302, 307-08 (9th Cir. 1966); United Steelworkers v. Timken Roller Bearing Co., 324 F.2d 738, 741 (6th Cir. 1963); United Steelworkers v. Interpace Corp., 447 F. Supp. 387, 391 (W.D. Pa. 1978); Todd Shipyards Corp. v. Industrial Union of Marine & Shipbuilding Workers, 242 F. Supp. 606, 611 (D.N.J. 1965); Transport Workers Union v. Philadelphia Transportation Co., 228 F. Supp. 423, 426 (E.D. Pa. 1964); Jersey City Police Officers Benevolent Ass'n v. Jersey City, 257 N.J. Super. 6, 11 (App. Div. 1992). In ex