SHELDON PEPPER EMMA PEPPER v. CURTIS SADLEY

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Superior Court of New Jersey, Appellate Division.

SHELDON PEPPER, by Power of Attorney for EMMA E. PEPPER, Plaintiff–Appellant, v. CURTIS SADLEY, Defendant–Respondent.

PEPPER CONSTRUCTION COMPANY, INC. and SHELDON PEPPER, by Power of Attorney for EMMA E. PEPPER, Plaintiffs–Appellants, v. CURTIS SADLEY, Defendant–Respondent.

DOCKET NO. A–3459–11T2A–5656–11T2

Decided: May 24, 2013

Before Judges Sapp–Peterson and Happas. Buonadonna & Benson, P.C., attorneys for appellants (Alan G. Giebner, on the brief). Grimes & Grimes, L.L.C., attorneys for respondent (Joseph P. Grimes, on the brief).

These consolidated appeals involve a boundary dispute arising out of property purchased by Emma and Milton Pepper in 1957 and property purchased by Curtis Sadley in 2003.   The parties in the current dispute entered into a consent order to submit the matter to binding arbitration.   A provision in the order stated that the parties would submit expert reports in lieu of testimony from their experts.   An additional provision permitted the parties to supplement the record with additional evidence and testimony.   At the time of the hearing, defendant, over the objection of plaintiffs, produced his expert.   A panel of three arbitrators issued an award favorable to defendant.   The arbitrators submitted their bill to the court for approval.   Following a hearing, the court ordered plaintiffs to pay 100% of the arbitrators' fees on the basis that defendant was the prevailing party.   Because there were other pending claims, the court certified its fee award as final.   The present appeal followed.

On appeal, under Docket No. A–3459–11, plaintiff raises the following points:

POINT I

THE ARBITRATORS EXCEEDED THEIR POWER BY FAILING TO ARBITRATE THE MATTER IN ACCORDANCE WITH THE AGREEMENT OF THE PARTIES AND BY ALLOWING AN INDIVIDUAL NOT AGREED TO BY THE PARTIES TO PARTICIPATE IN THE ARBITRATION.

POINT II

THERE WAS EVIDENT PARTIALITY BY THE ARBITRATORS, OR MISCONDUCT PREJUDICING THE RIGHTS OF A PARTY TO THE ARBITRATION PROCEEDING.

POINT III

THE APPROPRIATE REMEDY IS TO REVERSE THE TRIAL COURT [']S DECISION AND REMAND THE MATTER TO A NEW PANEL OF ARBITRATORS TO BE ARBITRATED IN ACCORDANCE WITH THE AGREEMENT OF THE PARTIES.

POINT IV

THE TRIAL COURT ERRED WHEN IT SHIFTED 100% OF THE ARBITRATOR[S'] FEES TO THE PLAINTIFF[S].

On appeal, under Docket No. A–5656–11, plaintiffs contend:

THE TRIAL COURT ERRED WHEN IT SHIFTED 100% OF THE ARBITRATOR[S'] FEES TO THE PLAINTIFF.

We have considered the points raised in light of the record and arguments advanced in the briefs and conclude there is no merit to plaintiffs' claims that the arbitrators exceeded their powers and exhibited partiality.   We agree, however, the trial court erred when it shifted 100% of the arbitrators' fees to plaintiff.   We therefore reverse the order directing plaintiff to pay the arbitrators' fees.

Arbitration, as a vehicle through which parties may resolve disputes, is favored in New Jersey.  Malik v. Ruttenberg, 398 N.J.Super. 489, 494–95 (App.Div.2008).   Arbitration is “ ‘meant to be a substitute for and not a springboard for litigation.’ ”  N.J. Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007) (quoting Local No. 153, Office & Prof'l Emp. Int'l Union v. Trust Co. of N.J., 105 N.J. 442, 449 (1987)).   Therefore, where the parties elect arbitration as the forum for resolution of a dispute, it “operates as a trial court, and [j]udicial review of [the awards rendered by it] is extremely narrow, generally confined to matters of corruption or errors appearing on the face of the award.”  Ukranian Nat'l Urban Renewal Corp. v. Joseph L. Muscarelle, Inc., 151 N.J.Super. 386, 396 (App.Div.), certif. denied, 75 N.J. 529 (1977) (internal quotations omitted).

Because arbitration is a favored remedy in New Jersey, a court will vacate an arbitration award only under limited circumstances.  Fawzy v. Fawzy, 199 N.J. 456, 470 (2009).   To do otherwise, would be to severely undermine its purpose, which is to provide an “effective, expedient, and fair resolution of disputes.”  Ibid. The limited circumstances upon which a court may vacate an arbitration award include, as alleged here, “evident partiality by an arbitrator” and if an arbitrator exceeded the arbitrator's powers.  N.J.S.A. 2A:23B–23(a)(2) and (4).

Arbitrators exceed the scope of their powers when they disregard the terms of the parties' contract or rewrite the contract for the parties.  Cnty. Coll. of Morris Staff Assoc. v. Cnty. Coll. of Morris, 100 N.J. 383, 391 (1985).   See also Commc'ns Workers of Am. v. Monmouth Cnty. Bd. of Soc. Servs., 96 N.J. 442, 448 (1984) (noting that when contractual limits on arbitral authority are not heeded, arbitrator exceeds his powers).   To be enforced, an arbitration award must draw its essence from the terms of the agreement executed between the parties.  Cnty. Coll. of Morris Staff Assoc., supra, 100 N.J. at 392.   “When the arbitrator[s'] words manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the award.”  Policemen's Benevolent Ass'n v. City of Trenton, 205 N.J. 422, 429 (2011).

Here, plaintiffs contend the arbitrators exceeded their powers when they permitted defendant to produce the live testimony of his expert after the parties agreed the experts' reports would be submitted in lieu of their testimony.   We disagree.

The consent order submitting the matter to binding arbitration expressly provided:

[T]he parties shall rely on the reports of their experts, James Cowan for defendant, and Thomas Darcy for the plaintiffs, in lieu of presenting expert testimony at the time of the Arbitration.   The parties are not foreclosed from submitting supplemental evidence to the arbitrators, or providing supplemental testimony at the arbitration hearing.

Thus, despite plaintiffs' objection to live testimony from defendant's expert, both parties expressly agreed that each side could supplement the record with live testimony.   Moreover, the arbitration award noted that “[b]oth parties [,] at the conclusion of the hearing[,] were asked whether any other witnesses were necessary[,] to which the answer was no from both sides, i.e. [p]laintiff and [d]efendant.”

The remaining substantive challenges to the award relate to plaintiffs' disagreement with the arbitrators' findings.   We emphasize that an arbitrator's factual determinations are not reviewable by a court.  Ukrainian Nat'l, supra, 151 N.J.Super. at 396.   Furthermore, a court reviewing an arbitrator's decision may not substitute its own judgment for that of the arbitrator, “regardless of the court's view of the correctness of the arbitrator's interpretation.”  N.J. Transit Bus Operations, Inc. v. Amalgamated Transit Union, 187 N.J. 546, 554 (2006).

Finally, plaintiffs urge the arbitrators created and relied upon evidence not included in the hearing, namely a 1987 New Jersey Department of Environmental Protection (DEP) map and a reprint of a 1930 map, which plaintiffs claim were used to prepare a deed plot prepared by a member of one of the arbitrator's staff.   The motion judge noted there was no prohibition against an arbitrator utilizing support staff to assist an arbitrator in “get[ting] the report done.”

We observe, there is no indication the data used to prepare the deed plot were not part of the record or that the two maps were inaccurate.   Plaintiffs have not presented any evidence of partiality, corruption or misconduct.   There has been no showing that the arbitration was conducted in a corrupt manner.   In short, we discern no legal grounds to question the ultimate viability of the award.   Plaintiffs have not met the high statutory burden established by the Legislature to vacate an arbitration award.   Mere dissatisfaction with the outcome of arbitration is insufficient to disturb an arbitration award.

As for the award of counsel fees, we reach a different conclusion.   Defendant argued that plaintiffs' claims were frivolous.   Yet, in seeking to shift payment of the arbitrators' fees to plaintiffs, defendant did not comply with the procedural requirements for fee shifting.   R. 1:4–8(f).  “One of the obligations of a party who intends to seek an award based on frivolous litigation is service of a written notice and demand that, among other things, sets forth ‘with specificity’ the basis for his or her belief that the pleading is frivolous.”  Ferolito v. Park Hill Ass'n, Inc., 408 N.J.Super. 401, 408 (App.Div.), certif. denied, 200 N.J. 502 (2009).

The form of the notice must be sufficiently specific and detailed to provide the noticed party with an opportunity to timely withdraw the allegedly frivolous pleadings.  Ibid.;  see also Trocki Plastic Surgery Ctr. v. Bartkowski, 344 N.J.Super. 399, 406 (App.Div.2001) (quoting Pressler, Current N.J. Court Rules, comment on R. 1:4–8(b)(2002)), certif. denied, 171 N.J. 338 (2002).   That was not done here.

More importantly, the trial judge's decision to shift payment of the arbitrators' fees entirely to plaintiff was not based upon the frivolous nature of the action, as urged by defendant.   Rather, the judge first inquired whether the consent order provided for the allocation of the arbitrators' fees and, after learning it contained no such provision, ordered plaintiffs to pay “100 percent of the fees” because defendant was the prevailing party.

There is no statutory or other authority for shifting arbitrators' fees to the non-prevailing party.   It is well-settled that the administration of justice is best served when parties to litigation are responsible for payment of their own litigation costs.  In re Estate of Vayda, 184 N.J. 115, 120–21 (2005).   This reasoning applies to the payment of fees in arbitration proceedings:

It is well settled in arbitration matters that in the absence of an express provision in the agreement, there is an implied agreement to pay such sums as will fairly and reasonably compensate the arbitrators for expenses incurred and services rendered, and all parties to the agreement in that case are equally liable for the payment of the fees.

[In re Janssen Dairy Corp., 2 N.J.Super. 580, 588 (Law Div.1949)(citing 3 Am.Jur. Arbitration and Award, §§ 94 and 98, and cases cited).]

Section 98 reads, in part:

The liability of the parties to pay this compensation is at least a joint one, and because of the peculiar relationship of the arbitrators to the parties, is ordinarily considered to be joint and several.   As between the parties, however, it is generally held that a party who is compelled to pay more than his share of the arbitrator's fees may enforce contributions from the others.'

[3 Am.Jur. Arbitration and Award, § 98.]

This record provides no basis by statute, rule, or otherwise to depart from this principle.

The order confirming the arbitration is affirmed.   The order directing plaintiffs to pay 100% of the arbitrators' fees is reversed and the matter remanded to the trial court for the entry of an order directing the parties to share the arbitrators' fees equally.   We do not retain jurisdiction.

PER CURIAM

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