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Toll Brothers, Inc. v. Fields

2011 WL 463090, (U.S. Dist. Ct. D. N.J. 2011) (Unpublished)

ARBITRATION; VEIL PIERCING — An arbitrator can pierce a corporate veil when the arbitrator’s decision draws its essence from a review of the terms of the party’s agreements and the arbitrator’s consideration of the relationship between the parties, and the arbitrator is not required to list his or her reasons for such an award.

A home buyer paid a cash deposit to its seller and executed a note in favor of the seller in connection with her execution of the purchase agreement. The purchase agreement had a mortgage contingency clause; however, the agreement contained a rider with a clause expressly replacing the mortgage contingency. The replacement clause stated that the agreement was not contingent on financing. Also, the agreement contained a provision giving the seller the right to retain all cash deposits upon an uncured default by the buyer.

The buyer was unable to secure financing to complete the transaction and the seller notified the buyer that she was in default. The two parties reconfirmed the agreement, and the buyer provided an additional, non-refundable $10,000 cash deposit. The buyer was again unable to obtain financing. As a result, there was no closing.

The buyer filed for arbitration, successfully arguing that her deposits should be returned. The seller filed an action asking the Court to vacate the arbitration award, arguing that the award directly contradicted the express language of the purchase agreement. Additionally, the seller argued for vacation because the award was entered against the non-party parent company of the seller.

The Court believed that the arbitrator was apparently convinced that the circumstances surrounding the execution of the cash sale endorsement by the seller resulted in the creation of an unconscionable contract. Even if the Court might have come to a different conclusion, it was bound to enforce the arbitration award. The award was based on a thorough review of the terms of the purchase agreement and the factual circumstances surrounding the execution. According to the Court, the arbitration award was deserving of deference because it drew its essence from a review of the terms of the purchase agreement and factual determinations surrounding the execution of the cash sale endorsement.

Further, it appeared that the arbitrator had pierced the corporate veil in entering judgment against the parent company. Again, the Court was constrained to enforce the determination because the decision drew its essence from a review of the terms of the purchase agreement and the arbitrator’s consideration of the relationship between the parties. An arbitrator is not required to list his or her reasons for an award. Thus, the motion was denied.


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