RONALD RYBA v. BEYNON SPORTS SURFACES INC (2010)

Defendant, Beynon Sports Surfaces, Inc., appeals from the Law Division's October 23, 2009 order that denied defendant's motion to vacate final judgment entered pursuant to an arbitration award in favor of plaintiff, Ronald S. Ryba. The arbitrator awarded plaintiff commissions he alleged were due and owing from defendant, together with attorney's fees and costs.   We have considered the arguments raised on appeal in light of the record and applicable legal standards.   We affirm in part, reverse in part, and remand for the entry of an amended final judgment in plaintiff's favor.

Plaintiff initiated this action in the Law Division alleging that he was employed by defendant as “a commissioned sales representative” “selling athletic surfaces, flooring and related products on [d]efendant's behalf.”   Plaintiff further alleged that when terminated in 2006, he was owed $103,082 in earned commissions.   In addition to claims for breach of contract, unjust enrichment, and quantum meruit, plaintiff alleged a cause of action pursuant to “the New Jersey Wage Payment Statute, N.J.S.A. Section 34:11-4.1 to 4.14” and “N.J.S.A. Section 34:11-56(a)(1).” ¹  In that count, plaintiff also sought counsel fees and costs.   Defendant's answer generally denied the claims.²

The parties agreed to submit the dispute to binding arbitration before a retired judge of the Superior Court.   An arbitration agreement was executed on June 30, 2008, and an order was entered by the Law Division judge on the same day, dismissing the pleadings “with exception of those judgment and enforcement rights reserved” pursuant to the “Rules of Court and Statutes.”   Arbitration took place over two days after which the arbitrator issued a written award.

The arbitrator found that defendant owed plaintiff certain commissions.   He further concluded:

[Defendant] admitted owing [plaintiff] $2500 at the arbitration hearing.   This admission, in addition to my finding, entitles [plaintiff] to counsel fees.

Accordingly, I award [plaintiff] $89,566.82 plus counsel fees and costs pursuant to the statute referred to․

The “statute referred to” was N.J.S.A. 34:11-56(a)(25), cited by the arbitrator earlier in the award.   Plaintiff's counsel subsequently submitted an affidavit of services, and the arbitrator's final award included $15,297.79 in attorney's fees and costs.

On July 27, 2009, the Law Division judge entered an order for final judgment in the amount of $104,864.61.   On October 9, defendant moved to vacate the judgment pursuant to Rule 4:50, and to “vacat[e] and/or modify[ ] the arbitration award ․ in accordance with N.J.S.A. 2A:23B-23/24.”   The motion was supported by a certification from John Beynon, defendant's president.   It suffices to say that the certification reiterated defendant's position advanced at the arbitration.   In particular, Beynon took issue with the arbitrator's interpretation of a December 30, 2003 letter he sent to plaintiff which he contended outlined “the terms of the commission structure” (the December 2003 letter).   Additionally, Beynon's certification noted that “[n]one of the documentation submitted at the arbitration hearing indicated any agreement between the parties for an award of counsel fees in the event of a dispute.”   As a result, “the parties never agreed to have attorney fees included as part of any award․”

After oral argument on defendant's motion, the Law Division judge concluded that defendant had failed to demonstrate any “criteria enunciated by ․ statute[ ],” to support vacation or modification of the arbitrator's award.   Regarding the award of counsel fees and costs, the judge simply concluded it was “within [the arbitrator's] power to enter a total award, including fees and costs.”   The judge entered an order on October 23 denying the motion, and this appeal followed.

We state some well-recognized principles regarding arbitration and the court's review of an arbitral decision.   The 2003 Arbitration Act, N.J.S.A. 2A:23B-1 to -32 (the Arbitration Act), “continues our state's long-standing policy to favor voluntary arbitration as a means of dispute resolution.”  Block v. Plosia, 390 N.J.Super. 543, 551 (App.Div.2007).

To ensure that finality, as well as to secure arbitration's speedy and inexpensive nature, there exists a strong preference for judicial confirmation of arbitration awards.   Indeed, the role of the courts in reviewing arbitration awards is extremely limited and an arbitrator's award is not to be set aside lightly.

[N.J. Tpk. Auth. v. Local 196, I.F.P.T.E., 190 N.J. 283, 292 (2007) (quotations omitted) (emphasis added).]

And See Block, supra, 390 N.J.Super. at 552.   Regarding defendant's claim pursuant to the Arbitration Act, “[b]ecause the matter at issue is legal in nature, our review of the motion judge's decision is plenary.”  Del Piano v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 372 N.J.Super. 503, 507 (App.Div.2004), appeal dismissed, 195 N.J. 512 (2005);  Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995).

Before us, defendant argues that the arbitrator's award should have been vacated because it was procured through “undue means,” N.J.S.A. 2A:23B-23(a)(1);  alternatively, defendant argues that the award should have been modified because it contained an “evident mathematical miscalculation,” and/or it was made on a “claim not submitted to the arbitrator,” and/or the award was “imperfect in a matter of form not affecting the merits of the decision on the claims submitted,” N.J.S.A. 2A:23B-24(a)(1), (2), and (3);  as a result, defendant's motion brought pursuant to Rule 4:50-1 should have been granted, and “a new Final Judgment entered ․ based upon a reduced arbitration award.”

Defendant's arguments that the award should be vacated because it was procured by “undue means,” or that it should be modified because of “an evident mathematical miscalculation,” or because it was “imperfect in a matter of form,” rest wholly on interpretation of the December 2003 letter.   We note initially that defendant had already paid plaintiff $97,000 in disputed commissions before the arbitration took place.   Therefore, the disputed issues were quite narrow-what percentage applied to plaintiff's commission agreement, and whether certain jobs upon which plaintiff claimed a commission were included in the agreement.

The arbitrator accepted plaintiff's position that the commission agreement was an oral agreement providing for him to receive 5% on gross sales in his sales territory whenever defendant's profit margin for the job was at least 20%.³  The December 2003 letter was a faxed response from Beynon to plaintiff's previous request for his commission payments, and it presented both a more-nuanced commission structure, and specifically contested plaintiff's entitlement to commissions on certain jobs.   In that fax, to which plaintiff never responded, Beynon asserted that the commission was “3%-5% based on project size, margin, and [the] competitive nature of the project.”   Beynon also took issue with plaintiff's entitlement to commissions from a project at Syracuse University, claiming it was negotiated by himself and another employee, and several other projects that were as yet incomplete.

The arbitrator concluded the December 2003 letter was “a failed attempt to change the deal two years later,” and that it “was prepared for th[e] litigation and did not exist prior to it․”  He reached this conclusion after assessing the credibility of plaintiff, Beynon, and other employees, who contradicted Beynon's testimony regarding the Syracuse University and other installations, and additional documentary evidence.

Defendant notes that plaintiff's version of the commission agreement is contradicted by his complaint, which alleged defendant agreed to pay him “3%-5%” in commissions, and plaintiff's interrogatory answers, in which he noted his intended reliance upon the December 2003 letter.   However, it would appear from the record that this information was before the arbitrator, and if it was not, defendant offers no explanation for why it was not furnished to the arbitrator.   Moreover, the arbitrator, in judging credibility, was free to accept plaintiff's testimony as true, even if it was not totally consistent with his pleadings or discovery responses.

We initially reject defendant's claim that the award should have been vacated because it was procured through “undue means.”   In In re Arbitration between Grover and Universal Underwriters Ins. Co., 80 N.J. 221, 231 (1979), the Court cited with approval the definition of “undue means” used in Held v. Comfort Bus Line, Inc., 136 N.J.L. 640 (Sup.Ct.1948).   In Held, the court defined “undue means” as follows:

The phrase “undue means” comprehends two ․ distinct classes of cases-i.e., (1) where the arbitrator meant to decide according to law, and clearly had mistaken the legal rule, and the mistake appears on the face of the award or by the statement of the arbitrator;  and (2) where the arbitrator has mistaken a fact, and the mistake is apparent on the face of the award itself, or is admitted by the arbitrator himself.

[Held, supra, 136 N.J.L. at 641-642.]

Applying this standard to the case at hand, it is clear that the award was not procured through “undue means.”   The arbitrator made no mistake of law in determining what the commission structure was and to which installations it applied.   Contrary to defendant's argument that the arbitrator re-wrote the existing contract between the parties, the arbitrator simply decided the December letter was not the contract between plaintiff and defendant.

Nor did the arbitrator commit a mistake of fact “apparent on the face of the award itself, or ․ admitted by the arbitrator himself.”   Rather, he decided the essential facts disputed in the case and resolved the dispute based upon the evidence submitted at the arbitration.

We also find no merit to defendant's argument that the decision should have been modified because it contained “an evident mathematical miscalculation,” or was “imperfect in a matter of form.”   Interpreting a prior version of the Arbitration Act that permitted modification of an award “[w]here there was an evident miscalculation of figures,” N.J.S.A. 2A:24-9, the Court noted that “[t]he clear purpose of th[e] section [wa]s 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.”  Tretina Printing, Inc., v. Fitzpatrick & Assocs., Inc., 135 N.J. 349, 359 (1994).

In this case, there was no “evident mathematical miscalculation” in the award.   The arbitrator computed the award based upon his factual determination that plaintiff was entitled to commissions on certain disputed installations at the rate of 5%. Defendant does not contest the accuracy of the calculation, only the factual determination made by the arbitrator in the first instance.

Defendant's claim that the award should have been modified because “the arbitrator made an award on a claim not submitted to” him, however, requires more discussion.   Essentially, defendant contends that any award of counsel fees and costs was improper because that issue was never before the arbitrator, or, alternatively, that any award under the Wage Payment Law, N.J.S.A. 34:11-4.1 to -4.14 (the WPL), or the MWA, was erroneous because plaintiff was an independent contractor, not an employee of defendant.

We disagree with defendant's contention that the issue was not submitted to the arbitrator.   In Block, supra, 390 N.J.Super. at 553-556, we set aside an arbitrator's award of treble damages under the Consumer Fraud Act, finding that the plaintiffs had failed to place the defendant on notice of the statutory claim.   We noted the lack of notice provided in the plaintiffs' arbitration submission and the lack of any explicit mention of the statutory claim in the parties' broadly-worded arbitration agreement.  Id. at 554.   We also recognized that the plaintiffs had “never filed a court pleading” before the arbitration took place, id. at 553, thereby distinguishing the case from our decision in Caruso v. Ravenswood Developers, Inc., 337 N.J.Super. 499, 503-08 (App.Div.2001) (finding that despite a broadly-worded arbitration agreement, the plaintiff's statutory claims alleged in the pleading were subsumed within the arbitration).

As noted above, plaintiff's complaint expressly pled a cause of action under the WPL, with a prayer for relief that included attorney's fees and costs pursuant to that statute and the MWA. Also, while the executed arbitration agreement did not set forth the specific claims submitted, it stated that “the objective of the [a]rbitration [wa]s to conclude th[e] matter․”  The order of the Law Division, consented to by defendant, clearly provides that the parties “shall dispose of their respective Complaint and Counter Claim through Binding Arbitration.”   Thus, under the facts presented, we conclude defendant was on notice of plaintiff's statutory claims under the WPL and the MWA and the requested relief of counsel fees and costs.   In short, the claims were subsumed within the arbitration.

Defendant contends that plaintiff was not entitled to any relief available under the cited statutes because he was an independent contractor, not an employee.   It is true that the WPL does not apply to independent contractors and subcontractors.  N.J.S.A. 34:11-4.1(b).  The MWA also only applies to employees.   See N.J.S.A. 34:11-56a1(h) (defining employee for purposes of the MWA);  and see N.J.S.A. 34:11-56a4 (requiring every employer to pay the minimum hourly wage to its employees).   Defendant further notes that when deposed, plaintiff admitted he was not an employee of defendant.   Plaintiff counters by arguing that defendant never raised the issue of whether he was an employee or independent contractor before the arbitrator.   Perhaps more importantly, plaintiff notes that in the certification supporting defendant's motion, Beynon admitted that plaintiff was an employee.   He further contends an award of counsel fees was “consistent with [the WPL], and the case of Mulford v. Computer Leasing, Inc., 334 N.J.Super.   385 (Law Div.1999).”

As noted above, there is no transcript of the arbitration proceedings.   In the written award, the arbitrator did not address the issue of whether plaintiff was an employee or independent contractor.   He did conclude, however, that plaintiff was entitled to fees pursuant to N.J.S.A. 34:11-56a25, which we presume implicitly meant he concluded plaintiff was an employee of defendant.

The Arbitration Act, however, specifically limits the circumstances under which an arbitrator may make an award of attorney's fees.  “An arbitrator may award reasonable attorney's fees and other reasonable expenses of arbitration if such an award is authorized by law in a civil action involving the same claim or by the agreement of the parties to the arbitration proceeding.”   N.J.S.A. 2A:23B-21(b);  Block, supra, 390 N.J.Super. at 556;  and see Rock Work, Inc. v. Pulaski Const.   Co., Inc., 396 N.J.Super. 344, 355-56 (App.Div.2007), certif. denied, 194 N.J. 272 (2008) (noting that the Arbitration Act follows the American Rule regarding counsel fees, unless the provisions of N.J.S.A. 2A:23B-21(b) apply).

Here, the parties did not agree that the prevailing party at arbitration was entitled to an award of attorney's fees.   Thus, the arbitrator's award of counsel fees was only sustainable “if ․ authorized by law in a civil action involving” plaintiff's claims.

The arbitrator cited N.J.S.A. 34:11-56a25 as the basis for the award of counsel fees.   That statute provides in pertinent part,

If any employee is paid by an employer less than the minimum fair wage to which such employee is entitled under the provisions of this act or by virtue of a minimum fair wage order such employee may recover in a civil action the full amount of such minimum wage less any amount actually paid to him or her by the employer together with costs and such reasonable attorney's fees as may be allowed by the court․

However, the MWA does not apply “to persons employed as outside salesmen as such term[ ] shall be defined and delimited in regulations․”  N.J.S.A. 34:11-56a4.   The regulations provide that an “[o]utside sales person” is “any employee ․ who is customarily and regularly engaged away from his or her employer's place or places of business ․ [m]aking sales ․ or ․ [o]btaining orders or contracts ․ for which a consideration will be paid by the client or customer” and whose other work assignments “do not exceed 20 percent of hours worked in the workweek․”  N.J.A.C. 12:56-7.4(a).   There is nothing in the record to suggest that even if he was an employee of defendant, plaintiff was anything other than an outside salesman, a position specifically exempted from the provisions of the MWA.

The two reasons offered by plaintiff as justification of the award of counsel fees are also unpersuasive.   The WPL, which plaintiff generally cites, provides that “every employee ․ shall have a right of civil action against any ․ employer for the full amount of his wages in any court of competent jurisdiction in this State.”  N.J.S.A. 34:11-4.7;  and see Winslow v. Corporate Express, Inc., 364 N.J.Super. 128, 136 (App.Div.2003).   However, there is no fee shifting provision in the WPL. Mulford, supra, 334 N.J.Super. at 398-99, which plaintiff cites, provides no authority whatsoever for the award of counsel fees to an employee prevailing under the WPL, and we are unaware of any reported decision that holds a prevailing employee under the WPL may recover counsel fees.

Under the Arbitration Act, an arbitral award must be vacated if “an arbitrator exceeded [his] powers.”  N.J.S.A. 2A:23B-23(a)(4).   Since the award of fees and costs in this case was neither specifically part of the arbitration agreement, nor otherwise permitted “by law in a civil action” encompassing plaintiff's claims, such an award exceeded the powers of the arbitrator and should have been vacated.

The record is void of any explanation why defendant did not interpose objections to the arbitral award prior to confirmation and instead waited to seek relief via Rule 4:50-1 after judgment was entered.   However, the judge below considered the merits of defendant's application, and before us, plaintiff simply argues that because the arbitral decision was proper, the judge did not mistakenly exercise his discretion by denying the motion to vacate the judgment.   See e.g., Hous. Auth. of Town of Morristown v. Little, 135 N.J. 274, 283-84 (1994) (noting that a motion seeking relief under Rule 4:50-1 is addressed to the motion judge's sound discretion, and we will not disturb that decision unless it resulted from a clear abuse of discretion).

However, under subsection (f) of Rule 4:50-1, the court may set aside a judgment “for any other reason justifying relief.”   While this subsection's broad equitable reach is reserved for “exceptional cases,” we have repeatedly utilized it, along with general notions of fairness, to “achieve equity and justice.”  Court Inv. Co. v. Perillo, 48 N.J. 334, 341 (1966);  T & S Painting and Maint., Inc. v. Baker Residential, 333 N.J.Super. 189, 193 (App.Div.2000).

Under the circumstances presented, we conclude equity and justice require that the arbitral award of attorney's fees and costs, $15,297.79, must be vacated.   The matter is remanded so that the Law Division judge may enter an amended final judgment deducting this amount from the arbitral award.

Affirmed in part, reversed in part, and remanded.   We do not retain jurisdiction.

FOOTNOTES

FN1. We presume this was a reference to New Jersey's Minimum Wage Act, N.J.S.A. 34:11-56a to -56a30 (the MWA)..  FN1. We presume this was a reference to New Jersey's Minimum Wage Act, N.J.S.A. 34:11-56a to -56a30 (the MWA).

FN2. Defendant asserted a counterclaim in its original answer to plaintiff's complaint.   The arbitrator dismissed the counterclaim since no evidence was produced to support it.   Defendant sought neither vacation nor modification of that part of the award, and the issue is not raised on appeal..  FN2. Defendant asserted a counterclaim in its original answer to plaintiff's complaint.   The arbitrator dismissed the counterclaim since no evidence was produced to support it.   Defendant sought neither vacation nor modification of that part of the award, and the issue is not raised on appeal.

FN3. There is no transcript of the testimony before the arbitrator.   To the extent the arbitrator's findings are contested by defendant, we note them by reference to documents which were furnished as part of its motion and are contained in the appendix to its appellate brief..  FN3. There is no transcript of the testimony before the arbitrator.   To the extent the arbitrator's findings are contested by defendant, we note them by reference to documents which were furnished as part of its motion and are contained in the appendix to its appellate brief.

PER CURIAM