A. PFLUGH, INC v. BONLAND INDUSTRIES INC

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

 

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-0

A. PFLUGH, INC.,

Plaintiff-Respondent,

v.

BONLAND INDUSTRIES, INC.;

BLOOMFIELD BOARD OF EDUCATION;

and LIBERTY MUTUAL INSURANCE

CO.,

Defendants.

_________________________________

HALL CONSTRUCTON CO., INC. and

BONLAND INDUSTRIES, INC.,

Plaintiffs-Appellants/

Cross-Respondents,

v.

BLOOMFIELD BOARD OF EDUCATION,

Defendant-Respondent/

Cross-Appellant,

and

SPARTA STEEL CORP.,

Defendant,

and

BLOOMFIELD BOARD OF EDUCATION,

Third Party Plaintiff,

v.

ST. PAUL FIRE & MARINE INS. CO.;

LIBERTY MUTUAL INSURANCE CO.;

and CONTRACTOR'S BONDING

INSURANCE CO.,

Third Party Defendants.

__________________________________

BLOOMFIELD BOARD OF EDUCATION,

Plaintiff,

v.

ST. PAUL FIRE & MARINE INS. CO.,

Defendant.

____________________________________

June 19, 2014

 

Argued May 19, 2014 Decided

 

Before Judges Harris, Kennedy, and Sumners.

 

On appeal from the Superior Court of New Jersey, Law Division, Essex County, Docket No. L-2131-08.

 

Edgar Alden Dunham, IV, argued the cause for appellants/cross-respondents Hall ConstructionCo., Inc. and Bonland Industries, Inc. (Eckert Seamans Cherin & Mellott, LLC., attorneys; Robert P. Zoller and Mr. Dunham, on the brief).

 

Aaron Mizrahi argued the cause for respondent/cross-appellant Bloomfield Board of Education (Mizrahi & Associates, Inc., attorneys; Mr. Mizrahi and Andrew W. Li, on the brief).

Greenbaum Rowe Smith & Davis, LLP, attorneys for respondent A. Pflugh, Inc., rely on the brief of appellant/cross-respondent Bonland Industries, Inc.

 

PER CURIAM

This appeal finds its genesis in a school construction project that began more than ten years ago. Plaintiffs Hall Construction Co., Inc. (Hall) and Bonland Industries, Inc. (Bonland) appeal from the Law Division's March 21, 2013 order staying enforcement of, and accrual of interest upon, an arbitration award entered against defendant Bloomfield Board of Education (the Board). Hall and Bonland also seek review of the June 21, 2013 order denying reconsideration. The Board cross-appeals from the March 21, 2013 order's confirmation of the arbitration award. We affirm in part and reverse in part.

I.

In 2001, the Board retained non-party MRM Architecture (MRM) to provide architectural and engineering services with respect to additions and renovations of the Bloomfield High School. In 2002, the Board engaged the services of non-party Vincentsen Thompson Meade, Inc. (Vincentsen) to provide construction management services for the same project.

Separate construction contracts were signed by the Board in 2004. Hall received the contract for general construction; Bonland was awarded the contract for heating, ventilation, and air conditioning. The estimated cost of the project was approximately $58 million.

The project was plagued with problems, which included the discovery of contaminated soil on the site. Delays were incurred, which generated many of the present disputes. After the project was completed, the Board withheld final payment to Hall and Bonland. This litigation ensued.

In May 2008, Hall and Bonland filed a complaint against the Board for breach of contract.1 Almost eighteen months later, in November 2009, the Board sought third-party remedies against MRM and Vincentsen, claiming that the architect and construction manager were responsible for project delays. The third-party claims were dismissed by the Law Division in April 2010, due to arbitration clauses in the architect's and construction manager's separate contracts. Although arbitration proceedings between the Board and MRM and Vincentsen were initiated, they have still not concluded.

Meanwhile, the litigation involving Hall and Bonland continued. However, on February 24, 2011, a consent order was entered staying the litigation to allow for mediation followed by binding arbitration. Mediation did not result in a resolution, prompting the parties to commence arbitration proceedings, which took place in several hearings conducted by arbitrator Robert J. MacPherson, Esq.

During the arbitration, three primary claims were disputed by the parties: (1) contract balance claims; (2) change order claims; and (3) delay/loss of productivity claims. According to MacPherson, the Board denied any liability to Hall or Bonland and, "with the exception of Bonland and Hall's loss of productivity claims, Bonland and Hall's calculation of damages, or the figures underlying those damage calculations," the Board "failed to present any evidence."

The Board argued that any delay/loss of productivity award was contrary to public policy because the arbitrator cannot impute negligent conduct of the architect or construction manager to the Board. It asserted immunity from liability under N.J.S.A.18A:18A-41, and the New Jersey Tort Claims Act, N.J.S.A.59:1-1 to 12-3.

MacPherson made the following findings regarding these contentions:

The argument that a Board of Education enjoys a "broad immunity to any claim for damages which arises under the '[Public School Contract Law, N.J.S.A. 18A:18A-1 et seq.'] . . . does not merit discussion. Perhaps understanding the tenuous nature of itsposition, the [Board] limits its argument on the next page, writing that the immunity appliesto "non-contractual"damages. [] While equally groundless, for the purposes of this matterthat argumentis irrelevant. The claims at issue are based on the contracts between the parties and arise in contract not tort.

 

The statute relevant to a determination of the viability of the delay claims asserted by Bonland and Hall is N.J.S.A. 18A:18A-41. The [Board]argues thatthis statutelimits thecircumstances under [which] a contractor can recover delay damages from a Board of Education. The statute does no such thing. What the statute does do is limit the reach of a contractual no damage for delay clause.. .. TheBoard carriesits argumentfurther, contending that because [N.J.S.A.]18A:18A-41 requiresa demonstration that the public entity acted negligently, the Tort Claim Act applies and would bar a finding the [Board] is liable for acts of MRM and [Vincentsen]. The Tort Claims Act has no application to thiscontract dispute. Nor, is there anything in the Public School Contracts Law limiting the claimsagainst theBoard []that ariseout of the acts of those who provide services to a Board.

 

Unlike N.J.S.A. 2A:58d-3(c), which limits the application of a no damage for delay clause in certain contracts between the State and State agencies, there is nothing in N.J.S.A. 18A:18A-41 that prohibits imputing the negligence of others to a Board. In this case the [Board's] own expert . . . testified that MRM and to a lesser extent [Vincentsen] were responsible for many of the delays and other issues on the project . . . . Under N.J.S.A. 18A:18A-41[,] the no damage for delay clause in the [c]ontracts between the [Board] and its Contractors does not shield the [Board] from claims arising out of the negligence, i.e. the failure to meet the standard of care of like professionals, of MRM or [Vincentsen]. Based on the evidence submitted[,] I find that the [Board] is liable for most, but not all delays claimed by Bonland and Hall.

On November 26, 2012, MacPherson issued a comprehensive twenty-one-page written decision analyzing all of the claims. Hall was awarded $2,123,372.05 plus pre-award and post-award interest; Bonland was awarded $706,971.53, plus pre-award and post-award interest.

On December 3, 2012, Hall and Bonland filed a motion in the Law Division to confirm the award and to enter a final judgment against the Board. On January 3, 2013, the Board filed a cross-motion to vacate portions of the award, and to stay all portions that were not vacated.

After considering oral argument, the motion court entered an order in February 2013, which confirmed the arbitration award, stayed further accrual of interest and execution on the judgment pending final resolution of the Board's separate arbitration with its architect and construction manager. On March 21, 2013, the court filed an amended order that again confirmed the award and stayed further accrual of interest

and execution proceedings pending resolution of the other

arbitration.2 A written statement of reasons was attached to this order:

This court after carefully examining the submissions of the parties and their arguments, finds the arguments advanced by [the Board] persuasive as to staying the enforcement of the confirmation of the award until such time as the final resolution of the [MRM/Vincentsen] arbitration. The issues present in the [MRM/Vincentsen] arbitration have a direct impact on the [Board's] ability to pay costs associated with the Project. This factor coupled with arbitrator MacPherson's discussion, in the context of the Delay Award, that certain conduct of MRM and/or [Vincentsen] present issues of imputed liability and of indemnification, render a stay of the enforcement of the [a]ward necessary and appropriate.

 

This court does not find any basis in fact or law that would warrant the vacation of the arbitrator's award. Although, [the Board] makes some compelling arguments grounded in public policy considerations, they lack consequence giv[en] the findings of arbitrator MacPherson. Additionally [it is] important to note that the arbitrator specifically recited that with respect to the change order claims[,] "[I]n those cases and in the absence of any evidence presented by the [Board] that the amounts sought were not fair and reasonable I have accepted the amount approved, or not objected to by MRM or [Vincentsen]."

 

On June 21, 2013, Hall and Bonland's motion for reconsideration was denied.3 This appeal followed.

II.

We first address the cross-appeal, which challenges the Law Division's confirmation of the arbitration award. "[T]he scope of review of an arbitration award is narrow. Otherwise, the purpose of the arbitration contract, which is to provide an effective, expedient, and fair resolution of disputes, would be severely undermined." Fawzy v. Fawzy, 199 N.J. 456, 470 (2009). Because the motion court's decision to confirm the arbitrator's award is a decision of law, our review of that confirmation is de novo. See Minkowitz v. Israeli, 433 N.J. Super. 111, 136 (App. Div. 2013).

Furthermore, in reviewing a motion court's award confirmation, we owe no special deference to the court's interpretation of the law and the legal consequences that flow from established facts. Town of Kearny v. Brandt, 214 N.J. 76, 92 (2013). Accordingly, we are not bound by the motion court's application of law to the facts or its evaluation of the legal implications of facts where credibility is not in issue. State v. Harris, 211 N.J. 566, 578-79 (2012) (citing State v. Handy, 206 N.J. 39, 45 (2011)).

Notwithstanding the foregoing, deferential review is applied when a party seeks to vacate an arbitrator's award. Policemen's Benevolent Ass'n Local No. 11 v. City of Trenton, 205 N.J. 422, 428 (2011). The well-established standard is that "an arbitrator's award will be confirmed 'so long as the award is reasonably debatable.'" Id. at 428-29 (quoting Linden Bd. of Educ. v. Linden Educ. Ass'n ex rel. Mizichko, 202 N.J. 268, 276 (2010)). Under that standard, a reviewing court 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. Twp. of Wyckoff v. PBA Local 261, 409 N.J. Super. 344, 355 (App. Div. 2009) (citation omitted). The policy of strictly limiting judicial interference with arbitration is intended to promote arbitration as an end to litigation. Ibid. Because arbitration is so highly favored, the presumed validity of the arbitration award is entitled to every indulgence, and the party opposing confirmation has the burden of establishing statutory grounds for vacation. Id. at 354.

The Board argues that the appropriate standard of review here is "heightened judicial scrutiny" because the award implicates public policy concerns. It cites Tretina Printing v. Fitzpatrick & Assocs., 135 N.J. 349, 364-65 (1994), and Weiss v. Carpenter, 143 N.J. 420, 429 (1996), for the proposition that a court "should refuse to confirm an arbitration award when that award would be against public policy." See Tretina, supra, 135 N.J. at 364 ("in rare circumstances a court may vacate an arbitration award for public-policy reasons."); Weiss, supra, 143 N.J. at 429 ("heightened judicial scrutiny may be required for certain arbitration awards that sufficiently implicate public policy concerns[.]").

Under N.J.S.A. 2A:23B-23, a court will vacate an arbitration award only if:

(1) the award was procured by corruption, fraud, or other undue means;

 

(2) the court finds evident partiality by an arbitrator; corruption by an arbitrator; or misconduct by an arbitrator prejudicing the rights of a party to the arbitration proceeding;

 

(3) an arbitrator refused to postpone the hearing upon showing of sufficient cause for postponement, refused to consider evidence material to the controversy, or otherwise conducted the hearing contrary to section 15 of this act, so as to substantially prejudice the rights of a party to the arbitration proceeding;

 

(4) an arbitrator exceeded the arbitrator's powers;

 

(5) there was no agreement to arbitrate, unless the person participated in the arbitration proceeding without raising the objection pursuant to subsection c. of section 15 of this act not later than the beginning of the arbitration hearing; or

 

(6) the arbitration was conducted without proper notice of the imitation of an arbitration as required in section 9 of this act so as to substantially prejudice the rights of a party to the arbitration proceeding.

 

[N.J.S.A. 2A:23B-23(a)(1) to (6).]

 

In Tretina, the Court held that "[b]asically, arbitration awards may be vacated only for fraud, corruption, or similar wrongdoing on the part of the arbitrators." Tretina, supra, 135 N.J. at 358 (citation omitted). A review of the arbitration award here reveals that none of the enumerated circumstances warranting vacation is present.

The Board relies on N.J.S.A. 18A:18A-41 and 18A:18A-46, as well as N.J.S.A. 59:2-3, to establish that it cannot be held liable without violating mandates of public policy. It essentially contends that it cannot be responsible for the gaffes of its agents the architect and construction manager even if the errors visit contractual havoc upon its contract partners Hall and Bonland. We find no provenance in the law for such a contention, and observe that the arbitrator's conclusion to the contrary is, at least, reasonably debatable and does not require our intervention.

The appellants' claims are based entirely in contract and contract law, and the arbitrator found that the Board breached its contractual obligations and its duty of good faith. The award is not based upon the Board's breach of a common law duty or commission of a tort. The arbitrator's treatment of the parties' claims was fully compatible with reason, and did not result in an exercise of mistaken discretion. Nothing in the record supports a conclusion that the award was the product of whimsy or irrationality. Rather, even if reasonable persons might come to a different conclusion than did the arbitrator, it only confirms that his decision was reasonably debatable, and the award was properly confirmable.

In its simplest terms, this was a construction project that faced challenges, several of which were a result of the plans approved by the Board, and its lack of oversight. The Law Division properly analyzed the circumstances, correctly refused to vacate the award, and prudently confirmed the arbitrator's decision.

We now turn to Hall and Bonland's appeal of the motion court's stay. Our scope of review of this issue is equally narrow. On appeal, we will reverse a decision to grant a stay only if the court abused its discretion. Avila v. Retailers & Mfrs. Distrib., 355 N.J. Super.350, 354 (App. Div. 2002), certif. denied, 176 N.J.74 (2003). "'The granting of a stay is discretionary with the trial court, limited only by special equities showing abuse of discretion in that injustice would be perpetrated on the one seeking the stay, and no hardship, prejudice or inconvenience would result to the one against whom it is sought.'" Ibid.(quoting Gosschalk v. Gosschalk, 48 N.J. Super.566, 579 (App. Div.), aff d, 28 N.J.73 (1958)).

The standard for granting a stay by a trial court is discretionary and dependent upon the equities of the case at hand. Ibid. Equities are measured by the same standard as with preliminary injunctions: (1) will irreparable harm occur from the enforcement of the judgment; (2) whether a meritorious issue is presented; and (3) the likelihood of success on appeal. Ibid.(citing Crowe v. De Gioia, 90 N.J.126, 133 (1982)); see alsoGarden State Equal. v. Dow, 216 N.J.314, 320 (2013).

The record in this case reveals that none of these equities was considered by the motion court. Instead, because the court believed that the Board might prevail in its arbitration with MRM and Vincentsen, and would be able to pass along any award it recovered to Hall and Bonland, it was prudent to stay the collection on the newly minted judgment. This is not an adequate reason to defer collection of a rightfully obtained judgment. Moreover, the court failed to explain why suspension of the accrual of interest was appropriate.

The collateral arbitration between the Board and MRM and Vincentsen, although initiated several years ago, has languished without a completion date in sight. Beyond the uncertainty of when that separate proceeding might end and when any appeals therefrom would be exhausted it is entirely conclusory and speculative to believe that the Board will inevitably succeed against the architect and construction manager. Moreover, the record does not reveal whether the amounts in controversy in the still-pending arbitration are aligned with the amounts already awarded to Hall and Bonland.

Hall and Bonland performed the renovations and new construction to the Bloomfield High School with a clear expectation of payment as set forth in their contracts with the Board. They did not bargain for a deferred payment based upon the outcome of a separate dispute with third parties. We detect nothing inequitable about allowing their hard fought success-in-the-arbitration to be rewarded by collection of the judgment, with interest. The status of the Board as a fiduciary for taxpayers and students does not relieve it (or its beneficiaries) from the duty to fulfill its contractual obligations. If the Board wanted a reprieve in payment of justly owed debts, it could have negotiated such a provision in the 2004 construction contracts. The Board is not paying its bills, yet it enjoys the unfettered use and occupancy of the high school facilities constructed by the labor and talent of Hall and Bonland. The stay was improvidently entered, and must be vacated.

In summary, we affirm the Law Division's confirmation of the arbitration award. We reverse and vacate the stay on enforcement of, and accrual of interest upon, the arbitration award.

Affirmed in part and reversed in part.

 

 

 

1 The complaint also sought remedies, some sounding in tort, against Sparta Steel Corporation, which had a separate contract with the Board to provide structural steel for the project.

2 The March 21, 2013 order specifically provided the following:

[E]nforcement of the entire Arbitration Award entered by Arbitrator MacPherson on November 26, 2012[,] and the accrual of pre- and post-judgment interest thereon is STAYED pending resolution of the separate arbitration between the Board, MRM [], and [Vincentsen] currently before the American Arbitration Association under Case No. 181100134811.

3 The order recited, "No new fact or no new law presented to warrant reconsideration."