September 10, 2013
By Bob Incollingo
Until it was folded into the Builders League of South Jersey a couple of years ago, I represented the well-regarded New Jersey Remodelers Association. As a benefit and a condition of membership, NJRA members agreed with their customers to submit contract disputes to the NJRA Consumer/Contractor Arbitration Board, known by its sort-of acronym, the CAB. The CAB enjoyed a stellar reputation with consumers, in that throughout its history no complaint had gone unresolved.
As the rules of procedure for the CAB evolved, they dovetailed into the New Jersey Alternative Procedure for Dispute Resolution Act (the “APDRA”), N.J.S.A. 2A:23A-1 to-19, an absolutely terrific but largely ignored statute with enormous practical benefits for the residential construction business. The APDRA was enacted in 1987 to:
|create a new procedure for dispute resolution which would be an alternative to the present civil justice system and arbitration system of settling disputes. It is intended to provide a speedier and less expensive process for resolution of disputes than traditional civil litigation and would provide parties with rights that are not currently available under New Jersey’s Arbitration Act.|
[Governor’s Reconsideration and Recommendation Statement to Assembly Bill No. 296, at 1 (Jan. 7, 1987), reprinted at N.J.S.A. 2A:23A-1.]
The provisions of APDRA were tested in litigation and upheld by the New Jersey Supreme Court in the case of Mt. Hope Dev. v. Mt. Hope Waterpower, 154 N.J. 141, 712 A.2d 180 (1998). The description by the Supreme Court of the procedural aspects of the statute would be difficult to improve upon:
|“The APDRA is a voluntary procedure for alternative dispute resolution that is only operative when parties to a contract agree to be governed by it. N.J.S.A. 2A:23A-2. Parties to an APDRA proceeding are entitled to discovery. N.J.S.A. 2A:23A-10. The dispute is heard by an umpire, N.J.S.A. 2A:23A-9, who is required to make an “award on all issues submitted for alternative resolution in accordance with applicable principles of substantive law.” N.J.S.A. 2A:23A-12(e). That award must be acknowledged and in writing, and must “state findings of all relevant material facts, and make all applicable determinations of law.” N.J.S.A. 2A:23A-12(a). Within twenty days after delivery of the award, the umpire may modify the award for certain enumerated errors. N.J.S.A. 2A:23A-12(d).|
“After the award is delivered by the umpire, the parties have forty-five days (thirty days if the award is modified) to commence a summary action in the Chancery Division of the Superior Court to vacate, correct, or modify the award. N.J.S.A. 2A:23A-13(a). The APDRA further provides that once a court grants an order confirming, modifying, or correcting an award, “a judgment or decree shall be entered by the court in conformity therewith and be enforced as any other judgment or decree. There shall be no further review of the judgment or decree.” N.J.S.A. 2A:23A-18(b) …”
The beauty of the CAB procedure was that it was more limited than the APDRA, and was specifically tailored to collapse a residential construction dispute in its earliest stage. The NJRA CAB procedure required appointment of a single umpire who was expert in residential construction, to investigate and determine two narrow Permitted Factual Issues in contention between homeowner and contractor:
|i. the respects in which the home improvement work was substandard and/or unfinished, if at all, and
ii. the likely associated cost to complete unfinished work and/or to correct substandard work.
All matters outside the Permitted Factual Issues, such as design defects, delay, or liquidated damages, were received by the umpire for informational purposes only, and were reserved by the parties for such other and further procedures as they deemed appropriate for the subsequent resolution of such claims. All issues not determined by CAB inquiry and resolution were reserved by the parties for further procedure in accordance with the balance of the home improvement contract terms and the parties’ respective legal rights and remedies. The CAB process was a necessary precondition to the filing or further prosecution of any lawsuit or arbitration arising from or ancillary to the parties’ home improvement contract.
In distinction to the raw statute, the CAB process avoided extra-contractual claims (such as consumer fraud) and did without discovery, except for one crucial item. The expert umpire was required to schedule an inspection/interview (the “inquiry”) for onsite review of documentary, testimonial and physical evidence at the homeowner’s residence. Each party and its witnesses were to appear at the inquiry and answer questions posed by the umpire. Each party was to bring to the inquiry all contract documents in the possession or under the control of that party, and make available those contract documents to inspection by the umpire and any other party. The parties were entitled to be heard, to present evidence material to the controversy with due regard for its limited scope and, in the discretion of the umpire, to cross-examine witnesses appearing at the inquiry.
The inquiry proceeded without formal regard to the rules of evidence, and all matters of admissibility, credibility, weight, and appropriate inferences were resolved in the sole discretion of the umpire. The umpire had no obligation to receive or to review any evidence submitted after the inquiry. The model of the inquiry was not debate, but investigation, and the umpire had no obligation to answer any questions or to explain the private processes of his inquiry except as revealed in the award. The inquiry was to be conducted by the umpire in any manner which would permit full and expeditious presentation of the case by all parties so that the Permitted Factual Issues were fairly investigated.
The result was an award which finally resolved the chief factual issues in contention in almost every dispute over a home improvement contract: the question of breach of the implied standard of workmanship and the measure of resulting damages. These two issues, when otherwise dragged into court for necessary adjudication, result in a costly and protracted “battle of the experts” which usually does not take shape until very late in the discovery process, after lay witness testimony has been developed. With findings of fact binding them from the outset, the litigants and court need not compare and evaluate competing expert opinions. With the measure of contract damages at the heart of nearly all related extra-contractual claims, the result of the pre-litigation award by the umpire is predisposition to settlement, and a far less expensive court battle at the very least.
The New Jersey Remodelers Association is gone now, a victim of the Great Recession. It would be a shame if the good ideas of the CAB passed away as well. If you’d like a copy of the CAB Rules, send me an email, to RJI@RJILAW.com.
Cherry Hill construction lawyer Robert J. Incollingo is a Director of the Remodelers Council of the Builders League of South Jersey.