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A New Jersey appellate court held that an arbitrator exceeded his powers by awarding treble damages where the claimant never requested treble damages and the opposing party was thus denied notice of the full extent of his potential liability.
In Block v. Plosia, 2007 WL 542615 (N.J. Super. Ct. App. Div. Feb. 23, 2007), the Blocks hired Plosia to construct an addition to their home. The Blocks were dissatisfied with Plosia's work and thus hired another contractor to complete the project.
When Plosia refused to compensate the Blocks for his deficient work, the parties agreed to submit the dispute to arbitration. In accordance with the arbitration agreement, the Blocks submitted a statement of the issues prior to the hearing. The Blocks' statement of the issues itemized damages totaling $40,227.90.
Neither party was represented by an attorney at arbitration. Following the hearing, the arbitrator issued an award finding Plosia liable for breach of contract and for violating the Consumer Fraud Act (CFA). Pursuant to the CFA, the arbitrator tripled the Blocks' actual damages and awarded them $94,373.73.
Plosia filed a motion to vacate the award, arguing that the arbitrator exceeded his powers by awarding treble damages under the CFA because the parties never submitted the issue of CFA liability to the arbitrator. The trial court denied the motion.
The issue on appeal was whether the treble damages award should be vacated on the ground that the arbitrator exceeded his powers. N.J. Stat. Ann. § 2A:23B-23(a)(4).
In arguing against vacatur, the Blocks relied heavily on Caruso v. Ravenswood Developers, Inc., 767 A.2d 979 (N.J. Super. Ct. App. Div. 2001), in which the court ordered arbitration of a CFA claim arising from a residential construction dispute. The Court found that Caruso was distinguishable because unlike the homeowner in that case, "[t]he Blocks never filed a court pleading or any arbitration statement notifying Plosia that they were invoking the [CFA] and its remedies of treble damages and fee-shifting."
The Court found that the lack of notice was significant because the New Jersey Arbitration Act contains a written notice requirement that "serves as the functional equivalent of notice pleading in a court action." The lack of notice also had practical significance as the Court found "merit in Plosia's contention that he would have hired a lawyer, or otherwise would have approached the arbitration differently, had he been on notice of a treble damages claim."
Having determined that "Plosia was entitled to reasonable notice that he was facing the statutory punch of the [CFA] before he stepped into the arbitration ring," the Court vacated the treble damages award.
Notice of the relief sought not only promotes fairness but efficiency as well because it allows parties to discuss settlement with full appreciation of their prospective liability. In fact, Plosia claimed that he would have "more seriously attempted to settle the dispute" if he had known about the possibility of a treble damages award.
Rule 12A of the National Arbitration Forum Code of Procedure (the Code) ensures that parties are given fair notice by requiring the claimant to state "the specific relief requested" and "the specific amount and computation of any money or damages." Moreover, under Rule 37B of the Code, an award cannot "exceed the money or relief requested."
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