A New Jersey appellate court has ruled that a state arbitration statute requiring arbitrators to explain treble damages awards is procedural, rather than substantive. Accordingly, the statute applied to an award confirmation proceeding despite a Pennsylvania choice of law provision in the underlying contract.

In Preferred Warranties, Inc. v. Fialkowski, L-6958-05, 2007 WL 4270361 (N.J. Super. Ct. App. Div. Dec. 7, 2007), Fialkowski bought a used car from Mario Lomedico Exotic Motor Sales (Lomedico). When buying the car, Fialkowski also bought a service contract naming Preferred Warranties, Inc. (PWI) as the service provider.

When PWI refused to make certain repairs, Fialkowski filed an arbitration claims against Lomedico and PWI. The arbitrator dismissed the claim against PWI but awarded $8,559 in damages and $5,000 in attorney fees on Fialkowski's claim against Lomedico.

Lomedico filed a motion to vacate the award, arguing that (1) Fialkowski failed to prove the amount of his attorney fees, (2) the damages awarded exceeded the damages claimed, and (3) there was no rationale for awarding treble damages. The trial court vacated the award and remanded the matter for hearing by a different arbitrator.

On appeal, the Court affirmed the lower court ruling that New Jersey's arbitration law governed the vacatur proceeding despite a Pennsylvania choice of law provision in the service contract. According to the Court, choice of law provisions dictate only substantive law, and New Jersey's arbitration statute – specifically, its requirement that an arbitrator explain a treble damages award – is merely procedural.

However, the Court determined that instead of vacating the award and remanding the matter to a different arbitrator, the lower court should have remanded the matter to the same arbitrator with instructions to explain the treble damages award. In reaching this decision, the Court explained that there was no "misconduct" which would necessitate a hearing before a different arbitrator.

The Court also reversed the lower court order vacating the attorney fees award. As the Court explained, there was no evidence that the arbitrator even considered the post-hearing submission that formed the basis of Lomedico's objection. Moreover, the arbitrator was in the best position to determine a reasonable expenditure of time and reasonable hourly rate.