UNITED SERVICES AUTOMOBILE ASSOCIATION v. USA CHIROPRACTIC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0904-11T2

UNITED SERVICES AUTOMOBILE

ASSOCIATION,

Plaintiff-Respondent,

v.

USA CHIROPRACTIC a/s/o

ADRIANA GUZMAN, MICHAEL

HADDAD a/s/o ADRIANA

GUZMAN, SURGICARE OF

ENGLEWOOD CLIFFS, a/s/o

ADRIANA GUZMAN, and AMBULATORY

ANESTHESIA a/s/o ADRIANA

GUZMAN,

Defendants-Respondents,

________________________________

FORTHRIGHT,

Intervenor-Appellant.

________________________________

December 13, 2012

Argued May 21, 2012 Decided

Before Judges A. A. Rodr guez, Sabatino and Fasciale.

On appeal from the Superior Court of New Jersey, Law Division, Somerset County, Docket No. L-618-11.

Arthur J. Timins argued the cause for appellant (Shiriak & Timins, attorneys; Mr. Timins, on the brief).

John B. Krug argued the cause for respondent USA Chiropractic a/s/o Adriana Guzman (Law Offices of Fano & Krug, attorneys; Mr. Krug,on the brief).

Joseph A. Massood argued the cause for respondents Surgicare of Englewood Cliffs and Ambulatory Anesthesia (Massood & Bronsnick, attorneys; Allison T. Kurtz, on the brief).

Law Offices of Fredson & Statmore, attorneys for respondent Michael Haddad (Susan Madar, on the brief).

Gutterman, Markowitz & Klinger, attorneys for respondent United Services Automobile Association (David J. Klinger and Frank W. Farrell, on the brief).

PER CURIAM

Intervenor Forthright1 appeals from a June 24, 2011 order remanding to Forthright four consolidated PIP awards, and paragraph two of an ensuing October 6, 2011 order denying Forthright's motion to vacate the June 2011 remand order. The primary question is whether N.J.S.A. 2A:23A-14 authorized the judge to remand the PIP arbitrations to Forthright because the parties were prejudiced by the arbitrator's conflict of interest bearing upon an appearance of partiality. We hold that it does and affirm.

Adriana Guzman sustained injuries in a motor vehicle accident and sought medical treatment with defendants. When plaintiff, Guzman's PIP carrier, refused to pay for her medical treatment, defendants filed separate demands for PIP arbitration seeking unpaid PIP benefits for the health care services that they rendered. The NAF consolidated the arbitration proceedings and an arbitrator conducted oral argument at which counsel for each defendant participated. Thereafter, before issuing his decision in these cases, the arbitrator accepted a job at the law firm that represented defendant USA Chiropractic. The arbitrator followed NAF's procedure and notified NAF about his conflict of interest. Other than the law firm that represented USA Chiropractic, none of the other parties apparently were informed about the pending employment. NAF informed him that no conflict existed and instructed him to proceed with the matters.2 In March 2011, the arbitrator issued four separate awards in favor of defendants.3

In or around June 2011, plaintiff filed a complaint and order to show cause seeking to vacate each award pursuant to N.J.S.A. 2A:23A-13c. Plaintiff argued that all four awards were invalid because the arbitrator had a conflict of interest. In June 2011, the judge conducted oral argument, issued an oral opinion vacating the awards, and remanded all four arbitrations to Forthright for a rehearing. In July 2011, Forthright filed a motion to intervene and vacate that part of the order remanding the matters. The judge permitted Forthright to intervene but denied its motion to vacate her remand order. This appeal followed.

On appeal, Forthright contends that the judge erred by (1) misapplying N.J.S.A. 2A:23A-13; (2) remanding the matter to Forthright contrary to the public policy of prompt and efficient PIP arbitrations; (3) failing to consider the underlying disputes de novo; and (4) improperly "bridging the gap between the judiciary and arbitration process."

We reject plaintiff's contention that the judge vacated the awards erroneously by misapplying N.J.S.A. 2A:23A-13. A pertinent regulation on point, N.J.A.C. 11:3-5.6(f) provides that "[t]he final determination of the dispute resolution professional shall be binding upon the parties, but subject to vacation, modification[,] or correction by the Superior Court in an action filed pursuant to N.J.S.A. 2A:23A-13." (Emphasis added). N.J.S.A. 2A:23A-13c(2) provides in part that

[t]he award shall be vacated on the application of a party who either participated in the alternative resolution proceeding or was served with a notice of intention to have alternative resolution if the court finds that the rights of that party were prejudiced by:

. . . .

(2) Partiality of an umpire appointed as a neutral.

Here, the judge determined that the parties were prejudiced by the arbitrator's conflict-generated appearance of partiality, and the judge acted within her authority to vacate the awards.

We are not persuaded by Forthright's argument that by failing to consider the PIP disputes de novo the judge contravened the public policy of prompt and efficient PIP arbitrations. PIP arbitration disputes are to be resolved pursuant to the New Jersey Alternative Procedure for Dispute Resolution Act (APDRA), N.J.S.A. 2A:23A-1 to -35. N.J.S.A. 2A:23A-13b provides that

[i]n considering an application for vacation, modification or correction, a decision of the umpire on the facts shall be final if there is substantial evidence to support that decision; provided, however, that when the application to the court is to vacate the award pursuant to paragraph (1), (2), (3), or (4) of subsection c., the court shall make an independent determination of any facts relevant thereto de novo, upon such record as may exist or as it may determine in a summary expedited proceeding as provided for by rules adopted by the Supreme Court for the purpose of acting on such applications.

Here, the judge determined expeditiously that the parties were prejudiced by the arbitrator's apparent partiality, pursuant to N.J.S.A. 2A:23A-13c(2). Having reached that determination de novo, the judge remanded the arbitrations pursuant to N.J.S.A. 2A:23A-14 which provides that

[u]pon vacating an award pursuant to section 13, . . . the court may order a rehearing and determination of all or any of the issues, either before the same umpire, having due regard for whether the award was vacated by reason of the actions of the umpire which were violative of paragraph (1), (2), (3), or (4) of subsection c. of section 13 or before a new umpire appointed in accordance with the alternative resolution agreement of this act.

[(Emphasis added).]

Thus, the plain language of N.J.S.A. 2A:23A-14 authorized the judge to properly remand the PIP matters.

Finally, in support of Forthright's contention that the Department of Banking and Insurance does not authorize remands for PIP arbitration, Forthright relies primarily on our decision in Allstate New Jersey Insurance Co. v. Neurology Pain Associates, 418 N.J. Super. 246 (App. Div. 2011). In Allstate, we focused on whether the parties were permitted to file an interlocutory appeal from a NAF order concerning the timeliness of a brief. Id. at 258-62. We noted that the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1.1 to -35, "substantially revised the prior system for arbitration of disputes concerning the payment of [PIP] benefits under the Automobile Reparation Reform Act (No Fault Act), N.J.S.A. 39:6A-1 to -35." Id. at 250. Allstate contended that a court's intermediate review of a NAF ruling was authorized by N.J.A.C. 11:3-5.1(a), which states that "[t]his subchapter also implements provisions of N.J.S.A. 2A:23A-1 et seq. [(providing for limited intermediate review 'when it clearly appears that a party will suffer irreparable harm')], as applicable to PIP dispute resolution." Id. at 260. We concluded that judicial review of NAF intermediate rulings pursuant to N.J.S.A. 2A:23A-7a "is not one of the [No Fault Act] procedures the Commissioner has made 'applicable' to PIP arbitration proceedings." Id. at 261. In rejecting Allstate's contention, we said that

[i]f the Commissioner had intended the procedure set forth in N.J.S.A. 2A:23A-7(a) for judicial review of an "intermediate ruling" to also apply to PIP arbitration proceedings, the Commissioner could have adopted a rule comparable to N.J.A.C. 11:3-5.6(f) to express that intent. In the absence of such a rule, we conclude the judicial review of an intermediate ruling is not one of the APDRA procedures the Commissioner has made "applicable" to PIP arbitration proceedings.

[Id. at 260-61.]

Here, unlike N.J.A.C. 11:3-5.1(a), the pertinent regulation in Allstate, N.J.A.C. 11:3-5.6(f) authorizes the "vacation, modification[,] or correction by the Superior Court" pursuant to N.J.S.A. 2A:23-13. And, N.J.S.A. 2A:23A-14 allows for a rehearing before a new arbitrator to replace a partial umpire. Forthright's reliance on Allstate is therefore misplaced.

Furthermore, the discrete question of interlocutory review in Allstate does not, as here, go to the integrity of the PIP proceedings. In other words, this is not a case where plaintiff has challenged the merits of the PIP awards or a procedural mater such as the timeliness of a brief; rather, plaintiff correctly asserts that the entire proceeding has been impaired. Even if we accepted Forthright's argument that the judge had no authority to remand the matter, the judge would be unable to conduct a fair de novo review from a record established by an arbitrator with a conflict of interest. As a result, under the circumstances of this case, remanding the matters would not undermine the public policy of prompt and efficient PIP arbitrations. The judge surely was not powerless to address the conflict of interest.

After a thorough review of the record, we find insufficient merit in Forthright's remaining arguments to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).

1 Forthright succeeded the National Arbitration Forum (NAF) as the arbitration tribunal for such matters after the underlying personal injury awards (PIP) in this case were entered.

2 We do not endorse the NAF's procedure, particularly its failure to require that the parties be alerted to the fact that the arbitrator had accepted employment with a law firm for one of the parties who had appeared before him in the pending case. Nor do we agree with the NAF's determination that the arbitrator's pending employment did not create a conflict of interest or at least the appearance of partiality. Cf. DeNike v. Cupo, 196 N.J. 502, 522 (2008) (holding employment discussions between trial judge and plaintiff's lawyer created an appearance of impropriety entitling defendant to a new trial).

3 Pursuant to the arbitration awards, plaintiff was required to pay $10,750 to USA Chiropractic; $720 to Michael Haddad, M.D.; $1,000 to Ambulatory Anesthesia Group; and $5,000 to Surgicare of Englewood Cliffs. We do not reach whether the amounts are appropriate.