Appellate Division Rules Arbitrator Exceeds Powers by Modifying Award to Add Unaddressed Claims

In a recent unpublished opinion, the Appellate Division ruled that, although an arbitrator may modify an award to fix technical errors, he cannot include relief for claims not addressed in the original award, even if the failure to address those claims was due to an oversight by the arbitrator. In Merion Construction Management, LLC v. Kemron Environmental Services, Inc., subcontractor Kemron commenced arbitration alleging that although Kemron had substantially performed its obligations, contractor Merion had not paid its invoices. The arbitrator agreed with Kemron and awarded $873,758.56.

Not satisfied, Kemron requested that the arbitrator reconsider his award to compensate for what it called “two unaddressed items”: (1) a 5% retainage of $198,006.43 and (2) $46,497.00 for an eighth invoice. Over Merion’s objection, the arbitrator modified his award on the ground that he had made two “computational errors.” Upon the parties’ consolidated motions to confirm and partially vacate, the Superior Court determined that the arbitrator was authorized to make these “computational” modifications.

The Appellate Division, however, disagreed, noting the original award had stated that “[a]ny other claims in this matter not specifically mentioned above are denied[]” and that “[a]ll claims not expressly granted herein are hereby, denied.” Given these statements, coupled with the award’s silence on the issues of the retainage amount and eighth invoice, the Court held that the arbitrator exceeded his powers, thus entitling Merion to have the award vacated in part under the Uniform Arbitration Act, N.J.S.A. 2A:23B-23(a)(4). The Court did not agree that the modifications addressed “computational errors” because the award did not reference the underlying claims at all. Citing Wein v. Morris, 194 N.J. 364, 385 (2006), the Court ruled that “[a]n arbitrator exceeds his powers when under the guise of computational or technical errors he modifies an award to include claims not addressed in the original award, even if the failure to do so was due to inadvertence, where the award expressly denied all claims for relief not otherwise mentioned.”

This opinion is yet one more illustration of the deference courts give final arbitration awards, even awards that the arbitrator acknowledges are mistaken. To avoid a fate similar to Kemron’s here, practitioners would be well-served to break out requested claims for relief severally in their post-hearing briefs and/or proposed award.