NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A- 0576-20
PAMI REALTY, LLC,
APPROVED FOR PUBLICATION
Plaintiff-Respondent/
July 15, 2021
Cross-Appellant,
APPELLATE DIVISION
v.
LOCATIONS XIX INC. d/b/a
LOCATIONS CONSTRUCTION,
Defendant-Appellant/
Cross-Respondent.
____________________________
Argued May 11, 2021 – Decided July 15, 2021
Before Judges Fisher,1 Gilson, and Gummer.
On appeal from Superior Court of New Jersey, Law
Division, Middlesex County, Docket No. L-5845-18.
Gregory M. Gennaro argued the cause for
appellant/cross-respondent.
Ralph P. Ferrara argued the cause for
respondent/cross-appellant (Ferrara Law Group, PC,
attorneys; Ralph P. Ferrara and Kevin J. Kotch of
counsel and on the briefs).
1
Judge Fisher did not participate in oral argument. He joins the opinion with
counsel's consent. R. 2:13-2(b).
The opinion of the court was delivered by
GUMMER, J.S.C., (temporarily assigned).
The issue on this appeal is whether the parties agreed to involve the
arbitrator in settlement discussions and, if so, whether that agreement had to be
in writing. Plaintiff Pami Realty LLC (Pami) and defendant Locations XIX
Inc. d/b/a Locations Construction (Locations) participated in an arbitration of a
construction-contract dispute. During the arbitration, the arbitrator discussed
settlement with the parties and counsel. When those discussions were not
fruitful, the arbitration resumed. After the arbitration hearings had been
completed and the arbitrator had advised counsel in an email that he would be
issuing an opinion in defendant's favor, plaintiff's counsel, having not objected
previously, complained for the first time that the arbitrator had exceeded his
authority by participating in settlement discussions. Defendant asserts the
parties agreed that the arbitrator could participate in settlement discussions and
continue his role as arbitrator.
After the arbitrator issued a decision in favor of defendant, a series of
motions and cross-motions ensued in the Law Division. Without conducting
an evidentiary hearing, the motion judge ultimately denied defendant's motion
to confirm the arbitration award, granted plaintiff's motion to vacate the award,
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and ordered the parties to arbitrate their dispute while the funds in di spute
remained held in escrow.
Because the parties' agreement, if any, to permit the arbitrator to
participate in settlement discussions did not have to be in writing and because
the motion judge failed to conduct an evidentiary hearing to resolve the parties'
factual disputes regarding the existence of an agreement, we reverse the orders
denying defendant's motion to confirm the arbitration award, granting
plaintiff's motion to vacate it and denying defendant's motion for
reconsideration of those issues. We remand, directing the motion judge to
conduct an evidentiary hearing. We affirm the order denying plaintiff's cross -
motion to release the escrowed funds.
I.
On August 30, 2015, the parties entered into a contract in which plaintiff
agreed to pay defendant $1,559,100 for "site work, shell building" on property
owned by plaintiff. Section 6.2 of the contract provided: "[f]or any [c]laim
subject to, but not resolved by, mediation pursuant to Section 15.3 of
[American Institute of Architects] (AIA) Document A201-2007, the method of
binding dispute resolution shall be as follows: . . . Arbitration pursuant to
Section 15.4 of AIA Document A201-2007."
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About three years later, defendant filed a construction lien claim,
asserting entitlement to a $125,000 payment and later filed an amended
construction lien claim, asserting entitlement to a total of $219,939.50.
Plaintiff filed a lawsuit, seeking removal of defendant's lien claim, a judgment
preventing defendant from reasserting any lien based on currently-claimed
amounts, and an award of damages, costs of suit, and attorney's fees.
After defendant answered plaintiff's lawsuit, plaintiff moved for an order
to proceed summarily, to discharge the lien, and to require defendant to return
the project plans and permits. During a break in the oral argument of that
motion, the parties agreed to resolve the lien claim and plaintiff's lawsuit, with
plaintiff posting a bond for 125% of the amount stated in defendant's amended
lien claim and defendant discharging its lien claim on the posting of the bond.
The parties also agreed defendant would institute arbitration proceedings to
resolve their disputes. When plaintiff did not obtain the bond, the parties
entered into a consent order permitting plaintiff to place $274,924.37, which
was the agreed-on bond amount, in its attorney's trust account in lieu of
obtaining a bond. The consent order provided the funds "shall remain in
escrow in the trust account . . . pending the completion of the arbitration
proceeding between the parties and the issuance of an arbitration award."
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The parties retained a retired judge as the arbitrator. The agreement
between the parties and the arbitrator provided that "[e]xcept on basic
procedural matters, the parties (and their representatives) shall have no ex
parte communications with the Arbitrator concerning the arbitration."
Although the agreement did not reference mediation, it contained the following
provisions regarding settlement:
4. Your client(s) and/or representative(s) of your
client(s) with authority to settle must be either
present at the arbitration or immediately available
by phone to facilitate any settlement discussions
and decisions.
5. The parties agree that all discussions, if any,
concerning settlement remain confidential, and
that no party shall subpoena the Arbitrator to
testify concerning statements made by anyone
during the arbitration or during settlement
discussions. Nor will any party subpoena
documents generated by or during the arbitration.
The parties will defend the Arbitrator from any
subpoena(s) issued by third parties, or reimburse
the Arbitrator for such defense, at the Arbitrator's
discretion.
In its arbitration complaint, defendant sought $358,194.50 in
compensatory damages. In its "Claim for Damages," plaintiff asserted
damages exceeding $200,000.
On the afternoon of the second day of the arbitration, the parties
discussed settlement. The parties disagree as to what lead to those discussions.
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According to defense counsel, the arbitrator "offered to assist the parties in
discussing settlement if they were so inclined to do so, and provided they
waived any conflict of interest and agreed that he would continue as arbitrator
if a settlement was not reached" and neither counsel nor the parties "expressed
any objection or reservation whatsoever to [the arbitrator's] proposed
assistance. On the contrary, everyone in the room was in agreement."
According to plaintiff's counsel, after having an ex parte communication
with defense counsel in a separate office, the arbitrator "came into our break -
out room and stated that the case needs to settle as soon as possible and
directed that we would be using the remainder of the day to conduct settlement
negotiations. This wasn't a question posed by [the arbitrator]; it was an
instruction." Plaintiff's counsel denied there was any "discussion of any
conflict of interest or waiving any conflict or waiving the mediation privilege."
The parties also disagree about what happened when the settlement
discussions ended that afternoon. According to defense counsel, when the
settlement discussions were not successful, the "parties reconvened in the
arbitration room to schedule the next (and final) hearing date." According to
plaintiff's counsel, the settlement negotiations continued the next day with the
arbitrator contacting him by telephone.
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The arbitration subsequently resumed for a final day of testimony.
About six weeks after the parties had submitted their post-hearing briefs, the
arbitrator emailed counsel, advising them he had finished his opinion but that
it would "take some time to fine tune and send out the finished copy." "In
order to provide some information," he told counsel he had found in favor of
defendant and had rejected plaintiff's counterclaim, with a "net award" of
$342,494.50 to defendant.
Plaintiff's counsel responded with a letter two days later, stating, even
though he had not yet seen it, the decision appeared to be "inconsistent with
what we discussed during the mediation" and for the first time objecting to the
arbitrator's participation in settlement discussions, citing Minkowitz v. Israeli,
433 N.J. Super. 111, 142-47 (App. Div. 2013). He asserted, "[a]fter receiving
your email, it became apparent that the mediation presented a host of
problems." He argued the arbitrator "had no authority to act as mediator in
this matter and then re-assume the role of arbitrator" and his "decision to act as
mediator created a conflict of interest that neither party waived through the
arbitration agreement." He suggested the arbitrator "cease drafting whatever
reasoned award you may be preparing and direct the parties to go to mediation
with a separate mediator to try to resolve this case." Counsel stated that if the
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arbitrator failed to follow that suggestion, plaintiff would move to vacate any
award he entered. 2
The arbitrator emailed the parties two days later, referencing plaintiff's
counsel's "belated objection to my continuing role as arbitrator" and rejecting
plaintiff's counsel's interpretation of the Minkowitz case. The arbitrator stated:
At the same time as I raised the issue of settlement
during the arbitration, I simultaneously raised the
issue [of] my potential conflict of interest, if I was
going to continue as arbitrator if the matter did not
settle. Both attorneys discussed the conflict issue with
their clients and enthusiastically waived the conflict.
Once it was determined that the matter was not going
to settle, [plaintiff] for a second time waived the
conflict and continued to voluntarily participate in the
remainder of the arbitration. At no time did I compel
the parties to mediate and at no time after the
abbreviated settlement discussions did [plaintiff] raise
the issue of conflict. In fact, I was the only one who
raised the issue at the appropriate time, which
[plaintiff] clearly waived. It seems rather
disingenuous for [plaintiff] to now raise the conflict
issue for the first time, after I have ruled against them.
Accordingly, I reject [plaintiff's] attempt to invalidate
my award. I will continue to complete my written
opinion and will supply it to the parties shortly.
Plaintiff's counsel responded in a letter, faulting the arbitrator for participating
in ex parte communications, accusing him of breaching the arbitration
agreement or inducing the parties to breach it, and again asking he cease
2
Defense counsel apparently responded. We were not provided with a copy
of that letter.
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"drafting of the award" and refer the parties to an outside mediator. Plaintiff's
counsel also sent an email, disagreeing with the arbitrator's "historical
recitation" and expressing his belief that issuing an award was not "the most
efficient [road] in bringing about a final resolution in this matter."
According to plaintiff's counsel, the arbitrator contacted him and asked
him about how the parties could resolve the matter. Although by then he had
complained about the arbitrator participating in settlement discussions,
plaintiff's counsel agreed to speak to his client and respond to the arbitrator's
proposal by the end of the week. He responded to the arbitrator "a few days
later . . . and emailed him and [defense counsel] what the terms would be for
us to go back to the negotiation table." Defense counsel declined to participate
in any further settlement negotiations and asked the arbitrator to issue his
report.
Approximately six weeks later, the arbitrator issued an opinion finding
in favor of defendant with an award of $282,494.50. About an hour late r, he
had an email sent to counsel, advising them a "revised decision" was attached
because "[i]n reviewing the opinion, it appears that the award amount . . .
($282,494.50) isn't accurate. The total award amount is $342,494.50." In both
decisions, the arbitrator stated: "with the consent of both parties the Arbitrator
spent a short amount of time trying to settle this claim. Both sides agreed that
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they would waive any potential conflict of interest, caused by the brief
settlement discussion."
II.
Defendant moved to confirm the arbitration award. Plaintiff cross-
moved to vacate the arbitration award, asserting the arbitrator had "exceeded
his powers when he resumed the role of arbitrator after acting as a mediator
mid-arbitration" and that any agreement to have him act as a mediator had to
be in writing. Defendant opposed plaintiff's cross-motion, contending the
arbitration agreement referenced and anticipated the arbitrator's involvement in
settlement discussions, plaintiff's reliance on Minkowitz was misplaced
because its holding was limited to family-court cases, and plaintiff had waived
any right to object to the arbitrator's involvement in settlement discussions by
failing to object initially and by participating in the remaining arbitration
proceedings.
The motion judge entered an order denying defendant's motion to
confirm the arbitration award and an order granting plaintiff's cross-motion to
vacate the arbitration award. In a one-page statement of reasons attached to
the cross-motion order, the motion judge found the arbitrator had exceeded his
authority by acting as both the mediator and arbitrator, citing Minkowitz, 433
N.J. Super. at 148. The motion judge held the "arbitration retainer does not
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support the notion that the parties had agreed to his potential role as both
mediator and arbitrator" and "absent an agreement between the parties to
permit [the arbitrator] to act in the dual-capacity as mediator and arbitrator, the
Court finds that [the arbitrator] had exceeded his powers of arbitration." The
motion judge did not address defendant's waiver argument.
Defendant moved for reconsideration of those orders, asking the motion
judge to vacate the orders and grant its motion to confirm the arbitration award
or, alternatively, to "schedule an evidentiary hearing for the parties to present
evidence and testimony with respect to the issue of waiver/estoppel" or to
"order the parties to arbitrate their disputes . . . until a binding award is entered
. . . ." Plaintiff moved to modify the consent order to permit the release of
funds being held in escrow by plaintiff's counsel and for a determination that
plaintiff had "satisfied its obligation to participate in an arbitration" and the
parties could pursue "any claims . . . by filing a new lawsuit."
After conducting oral argument, the motion judge issued two orders. In
the order on defendant's motion, the judge denied all of the relief requested by
defendant, except he ordered the parties to "arbitrate their disputes . . . until a
binding award is entered . . . ." In the other order, the motion judge denied
plaintiff's motion and ordered that the funds remain in plaintiff's counsel's trust
account.
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III.
Defendant appeals the order denying its motion to confirm the
arbitration award, the order granting plaintiff's cross-motion to vacate the
award, and the aspects of the reconsideration-motion order denying defendant's
requested relief. Defendant argues the motion judge erred in (1) his
interpretation and application of Minkowitz; (2) failing to "consider and apply
principles of waiver and estoppel to preclude [plaintiff] from complaining after
the fact about [the arbitrator's] handling of the proceedings"; and (3) failing to
hold an evidentiary hearing to resolve disputed facts. 3 Defendant asks us to
exercise original jurisdiction to confirm the arbitration award if "there are no
genuine issue[s] of material fact regarding the parties' agreement [concerning
the arbitrator's participation in settlement discussions] and the parties '
voluntary participation in the remainder of the arbitration proceedings without
objection."
Plaintiff cross-appeals the order denying its motion to modify the
consent order and the aspect of the reconsideration-motion order requiring the
parties to arbitrate their claims. Plaintiff argues the motion judge correctly
3
Defendant also argues the motion judge erred to the extent he considered
plaintiff's complaints about the arbitrator's "handling of the evidence or his
decisions on the merits." We do not address that argument because we see no
indication the motion judge considered evidential or ultimate decisions.
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applied Minkowitz in holding any agreement regarding the arbitrator's
participation in settlement discussions had to be in writing and did not err in
failing to consider waiver or estoppel or to hold an evidentiary hearing. In its
cross-appeal, plaintiff faults the motion judge for not allowing its attorney to
return the escrowed funds and for requiring the parties to continue to arbitrate,
arguing "the arbitration is complete," "circumstances surrounding entry of the
initial consent order have changed," and plaintiff "has satisfied its obligation to
participate in an arbitration."
A.
We review de novo a trial court's legal conclusions, Clark v. Nenna, 465
N.J. Super. 505, 511 (App. Div. 2020), including decisions to affirm or vacate
arbitration awards, Yarborough v. State Operated Sch. Dist. of City of Newark,
455 N.J. Super. 136, 139 (App. Div. 2018). We give deference to a trial
court's factual findings if they are supported by substantial, credible evidence
in the record but not to the application of law to those findings. Lee v. Brown,
232 N.J. 114, 126-27 (2018); Zaman v. Felton, 219 N.J. 199, 215 (2014).
The New Jersey Arbitration Act, N.J.S.A. 2A:23B-1 to -36 (the Act),
authorizes a party to file a summary action to confirm an arbitration award.
N.J.S.A. 2A:23B-22. A court may vacate an award for very limited and
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specific enumerated reasons, including the only reason 4 cited by plaintiff: "an
arbitrator exceeded the arbitrator's powers." N.J.S.A. 2A:23B-23(a)(4); see
also Kearny PBA Local # 21 v. Town of Kearny, 81 N.J. 208, 221 (1979) ("An
arbitrator's award is not to be cast aside lightly. It is subject to being vacated
only when it has been shown that a statutory basis justifies that action.").
We address first the motion judge's interpretation and application of
Minkowitz because it appears to be the basis of the decision to deny
defendant's motion to confirm and grant plaintiff's motion to vacate the
arbitration award. We agree Minkowitz applies5 and that it stands for the
concept that "parties engaged in arbitration must explicitly agree to permit [an]
4
In its motion to vacate the award, plaintiff did not assert the arbitrator was
partial or corrupt or had engaged in misconduct, N.J.S.A. 2A:23B-23(a)(2), or
that the arbitration decision was "procured by corruption, fraud, or other undue
means," N.J.S.A. 2A:23B-23(a)(1), or was based on "confidential
communications gained in mediation," Minkowitz, 433 N.J. Super. at 145.
5
We are unpersuaded by defendant's argument that Minkowitz applies only to
family cases. The legal analysis concerning the roles of arbitrator and
mediator applies in both family and non-family matters. It's just, as we stated
in Minkowitz, the concern about the parties' belief in the arbitrator's
objectivity "becomes even more problematic when arbitrating matrimonial
disputes between already suspicious adverse parties." Id. at 146-47. And
saying "[i]n the family law context, we could envision parties agreeing in
writing" isn't establishing a requirement that all parties in all cases place their
agreements in writing. Id. at 147. It is a recognition that given the heightened
emotions in family-law disputes, it makes even more practical sense for the
parties to place their agreement in writing.
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arbitrator [to] continue hearings as arbitrator after conducting a mediation."
We disagree that Minkowitz held the agreement must be in writing.
In Minkowitz, considering the public policy favoring settlement of
litigation and the language of the Act, we held the Act did not foreclose
settlement negotiations in an arbitration. Id. at 138-39. And we recognized
that using one person to both arbitrate and mediate "should be the parties'
choice." Id. at 147. Because of the differences in the roles of arbitrator and
mediator and because a mediator may "become privy to party confidences," we
found an arbitrator could not act as a mediator and then return to the role of
arbitrator "absent the parties' agreement." Id. at 142. We held an arbitrator
who acted as a mediator could not then assume the role of arbitrator "absent
the parties' contract to the contrary." Id. at 147-48. We did not say absent the
parties' written agreement or contract. 6 Canon IV of The Code of Ethics for
Arbitrators in Commercial Disputes, which we quoted in Minkowitz, requires a
request from all parties, not a written agreement, for an arbitrator to participate
in settlement discussion. Id. at 146 ("an arbitrator should not be present or
6
Kernahan v. Home Warranty Administrator of Florida Inc., 236 N.J. 301
(2019), is the only other published opinion plaintiff cites to support the
argument that an agreement for an arbitrator to participate in settlement
discussions must be in writing. Kernahan does not support that argument and
does not address that issue but instead addresses whether the parties' contract
contained an enforceable agreement to arbitrate.
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otherwise participate in the settlement discussions unless requested to do so by
all parties") (quoting The American Arbitration Association & The American
Bar Association, The Code of Ethics for Arbitrators in Commercial Disputes 8
(2004), https://www.americanbar.org/content/dam/aba/administrative/dispute_
resolution/dispute_resolution/commercial_disputes.pdf.).
No doubt, the better course is to put the agreement in writing. Litigants
could avoid the imbroglio in which these parties now find themselves. But we
see nothing in the Act or in Minkowitz requiring the agreement to be in writing
or that would cause us to set aside bedrock contract law establishing th e
validity of oral contracts and agreements. See Leodori v. Cigna Corp., 175
N.J. 293, 304-05 (2003) ("[u]nless required by the Statute of Frauds, N.J.S.A.
25:1-5 to -16, or as otherwise provided by law, contracts do not need to be in
writing to be enforceable"); Williams v. Vito, 365 N.J. Super. 225, 232 (Law
Div. 2003) (finding that "absent a statute to the contrary," the enforceability of
an oral contract was "central to American contract law").
In sum, parties can agree to have an arbitrator participate in settlement
discussions and continue as arbitrator. That agreement does not have to be in
writing. We reverse and vacate the motion judge's order denying defendant's
motion to confirm the arbitration award, the order granting plaintiff's cross -
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motion to vacate the award, and the related aspects of the reconsideration-
motion order.
B.
A determination as to whether parties agreed to an arbitrator
participating in settlement discussions during an arbitration is inherently fact
sensitive and cannot be resolved based on conflicting certifications from
counsel. See R. 4:67-5 (where "there may be a genuine issue as to a material
fact, the court shall hear the evidence as to those matters which may be
genuinely in issue . . . ."); Courier News v. Hunterdon Cnty. Prosecutor's Off.,
358 N.J. Super. 373, 378-79 (App. Div. 2003) (finding a court in a summary
action must conduct an evidentiary hearing if genuine issues of material fact
are in dispute); see also Bruno v. Gale, Wentworth & Dillon Realty, 371 N.J.
Super. 69, 76-77 (App. Div. 2004) (reversing and remanding for an evidentiary
hearing to resolve conflicting factual contentions in certifications). And that is
what we have here. As plaintiff acknowledged in its main brief, the "record
below consisted of dueling certifications." Accordingly, we reverse the aspect
of the reconsideration-motion order denying defendant's request for an
evidentiary hearing and remand this matter for an evidentiary hearing for the
motion judge to resolve the parties' conflicting factual contentions and
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determine whether the parties agreed the arbitrator could participate in
settlement discussions and resume his role as arbitrator.
We are, and the motion judge should be, mindful that the agreement
retaining the arbitrator provided "no party shall subpoena the Arbitrator to
testify concerning statements made by anyone during the arbitration or during
settlement discussions." We leave it to the motion judge to determine the
meaning and application of that provision under the present circumstances and
the structure and scope of the evidentiary hearing, with the understanding that
the point of the hearing is to resolve the parties' conflicting factual contentions
regarding whether they agreed the arbitrator could participate in settlement
discussions and resume his role as arbitrator. After resolving those factual
disputes, the motion judge can then determine whether the parties had an
agreement and, ultimately, the issue raised in plaintiff's motion to vacate the
arbitration award: whether the arbitrator "exceeded" his powers. See N.J.S.A.
2A:23B-23(a)(4).
Because that is the issue the motion judge ultimately must decide, we do
not see this case as involving waiver, estoppel, or laches. For an arbitrator to
have had authority to participate in settlement discussions and then resume his
role as arbitrator, the parties would have had to agree to give him that
authority. If that agreement existed, the arbitrator did not exceed his powers.
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If that agreement did not exist, then he engaged in "unauthorized action,"
Minkowitz, 433 N.J. Super. at 153, and exceeded his powers.
C.
To resolve defendant's lien claim and plaintiff's lawsuit to remove the
lien claim, the parties agreed plaintiff would post a bond and defendant would
discharge its lien claim on the posting of the bond and institute arbitration
proceedings. The parties agreed "to submit all of their disputes arising out of
the subject construction project to arbitration . . . ." 7 That agreement was
consistent with the parties' contract.
When plaintiff failed to obtain the bond, the parties entered into a
consent order allowing and requiring plaintiff to deposit funds in its attorney's
trust account in lieu of obtaining a bond. The consent order provided the funds
"shall remain in escrow in the trust account . . . pending the completion of the
arbitration proceeding between the parties and the issuance of an arbitration
award."
7
Our remand renders moot the aspect of the reconsideration-motion order
directing the parties to arbitrate their disputes. Nevertheless, we note that that
ruling was consistent with the parties' agreement "to submit all of their
disputes arising out of the subject construction project to arbitration " and with
Minkowitz. 433 N.J. Super. at 153 (remanding for consideration by a new
arbitrator).
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No arbitration award has been issued. Neither party has been issued the
funds it seeks. Nor can we say the arbitration has been completed given the
current status of the case. Based on the clear and simple terms of the consent
order, the motion judge correctly denied plaintiff's request for the releas e of
the funds and did not err in declining to amend the consent order to provide for
the release of the funds. See Quinn v. Quinn, 225 N.J. 34, 45 (2016) (finding
"a court should not rewrite a contract or grant a better deal than that for which
the parties expressly bargained").
IV.
In sum, we reverse and vacate the motion judge's order denying
defendant's motion to confirm the arbitration award, the order granting
plaintiff's cross-motion to vacate the award, and the related aspects of the
reconsideration-motion order. We reverse the aspect of the reconsideration-
motion order denying defendant's request for an evidentiary hearing and
remand with instructions to conduct an evidentiary hearing. We affirm the
order denying plaintiff's motion to modify the consent order.
Affirmed in part; reversed in part; and remanded for proceedings
consistent with this opinion. We do not retain jurisdiction.
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