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Cashan v. Malik Construction, Inc.

A-1598-06T3 (N.J. Super. App. Div. 2007) (Unpublished)

ARBITRATION — An arbitration award can only be vacated for fraud, corruption or similar wrongdoing on the part of an arbitrator.

A dispute over the performance of a construction contract between a contractor and homeowner went before an arbitrator pursuant to an arbitration clause. The homeowner had become dissatisfied with the progress and quality of the contractor’s work, and terminated the agreement. In response, the contractor filed a construction lien. The arbitration was administered by the American Arbitration Association (AAA) under its Construction Industry Arbitration Rules. The arbitration was contentious, such that the contractor’s principal and the homeowner’s attorney had a physical altercation. The principal’s personal attorney made an application to exclude the homeowner’s attorney from future hearings; however, the arbitrator ruled that only a party’s attorney could make that motion. The arbitrator rejected the contractor’s request to record the proceedings. The arbitrator concluded that the homeowner’s termination of the contract was justified, and awarded damages to the owners. The owners filed for a court order confirming the award and discharging the construction lien. The application was granted.

The lower court failed to find that the arbitrator permitted a lawless and unrestrained atmosphere such as to interfere with fair proceedings. The court likewise found no due process violation just because the contractor had been barred from tape recording the proceedings. It refused to allow the contractor, by his personal attorney, to discuss the altercation, or to bar the homeowner’s attorney from the proceedings.

On appeal, the Appellate Division noted that an arbitration award can only be vacated for fraud, corruption or similar wrongdoing on the part of an arbitrator. The Court also noted that, under the New Jersey Arbitration Act, a party has a right to be heard, to present evidence material to the controversy, and to cross-examine witnesses appearing at the hearing. The Court found that the evidence was credible for the lower court to conclude that the arbitrator observed these standards. The Court held that the contractor’s attorney could have pursued the principal’s complaint, and that neither party to the arbitration, pursuant to arbitration rule, agreed that stenographers were necessary. For that reason, it concluded that the arbitrator had not abuse discretion by rejecting the contractor’s request to tape record the proceedings. The Court also concluded that the arbitrator did not violate any clear mandate of public policy by refusing to cure the attorney’s alleged physical transgressions, as it did not implicate any ethical concern in the award itself.

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