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MacCartney v. Meyer

A-3471-99T1 (N.J. Super. App. Div. 2001) (Unpublished)

ARBITRATION—Partiality by an arbitrator means a demonstrable conflict of interest; an allegedly one-sided award is not evidence of partiality.

After their new home was constructed, the owners prepared a punch list of items which they deemed to require repair or replacement. Some were corrected to their satisfaction, others were not. The unresolved disputes were submitted to arbitration in accordance with the construction contract. An extremely experienced arbitrator who had never represented developers, builders or contractors conducted hearings over ten sessions. Both sides were represented by counsel. Fourteen witnesses testified. Approximately 160 exhibits were submitted. The arbitrator made a site visit. The homeowners were disappointed with what they considered to be a paltry award. They then sought to have the Chancery Division vacate the award, arguing that the award was based on fraud and undue means on the part of the contractor to procure the award. They also argued that the arbitrator was not impartial and refused to hear evidence pertinent and material to the controversy. If true, any of those three grounds would constitute a basis to vacate the award. The first complaint was based on a belief that the contractor had presented untruthful testimony, thereby constituting an intent to deceive. This, the homeowners argued, was the basis for “fraud” and “undue means.” They argued that since the testimony of the contractor’s witnesses was untruthful, it could not be the basis for establishing facts. The Court rejected this “circular argument” as unpersuasive. It felt that an arbitrator is charged with the responsibility of finding facts, “which necessarily involves credibility determinations when conflicting testimony is presented.” The homeowners also contended “that the arbitrator demonstrated partiality because the award was so one-sided in favor” of the contractor. The Court found this to be, in effect, a restatement of the homeowner’s “fraud and undue means” contention. “To equate an adverse ruling with ‘evident partiality’ would entitle every losing party to have the award vacated.” In this context, partiality means a demonstrable conflict of interest, “arising, for example, out of a relationship with one of the parties.” This not being the case, the Court rejected the claim of partiality. The homeowners also argued that the arbitrator demonstrated partiality by, for example, cutting off cross-examination by plaintiffs’ attorney of defendants’ expert. The Court disagreed, holding that a hearing officer “has broad discretion in managing and limiting the scope of testimony.” Consequently, the award was upheld.

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