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Zel Design, Inc. v. Joseph

A-1466-03T5 (N.J. Super. App. Div. 2004) (Unpublished)

ARBITRATION; AWARDS—Under New Jersey law, a court may vacate an arbitration award when an arbitrator refuses to postpone a hearing in the presence of sufficient cause for the postponement or when an arbitrator refuses to hear evidence that is material to the controversy.

A dispute between a contractor and its customer led to arbitration. The contractor was awarded $46,000 more than what was budgeted for the job. The customer’s primary witness was unable to participate in the arbitration because of a serious illness. The witness was a Section 203(k) rehab consultant who oversaw the job and had been at the work site several times. The consultant acted as the person whose inspections resulted in the payment draws and helped deal with on-site problems between the contractor and the customer. The customer contended that the consultant repeatedly spoke to the contractor concerning the deficiencies of his work, the costs and expenses it was running up, and the problems it would cause because of the built-in budgetary constraints of a Section 203(k) rehab. The customer claimed that had the consultant been available, the consultant would have testified to the contractor’s poor workmanship.

The customer arranged for adjournment of the initial arbitration date so that its consultant would be well enough to attend. When the new date was set, the customer arranged for a subpoena to be served on the consultant so that he would attend the hearing. However, the customer then learned that the consultant could not attend the hearing because of a health problem. The customer asked for a further adjournment of the hearing, but by the arbitrator denied the request.

On appeal, the customer claimed that the decision not to postpone the arbitration was arbitrary and capricious and severely prejudiced him in the presentation of his claims and defenses. He argued that the construction consultant was a critical witness. The customer’s motion contained the consultant’s certification stating that the arbitration award given to the contractor was a “travesty.” The consultant certified that he had no personal interest in the matter. Conversely, he noted that he would probably be losing future business because of his statements.

The lower court held that the arbitrator violated N.J.S.A. 2A:24-7 by not allowing the second postponement for a crucial witness who had a medical condition that required him to miss both appearances. It set aside the arbitration award and remanded the matter to the American Arbitration Association for the appointment of a new arbitrator. The Appellate Division affirmed because N.J.S.A. 2A:24-8 provides that a court may vacate an arbitration award when an arbitrator refuses to postpone a hearing in the presence of sufficient cause for the postponement or when an arbitrator refuses to hear evidence that its material to the controversy. The Court also stated that even though the consultant’s certification did not detail his medical condition, and there was no showing that a medical certification was presented to the arbitrator, the record developed no factual dispute regarding the consultant’s medical condition. The Court also noted that the consultant was a critical non-party witness who was fully familiar with, and involved in, the underlying transaction. Thus, given his involvement in the transaction and the lack of record contesting his medical condition, the Court found no basis for overturning the lower court’s vacation of the award.


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