McLaughlin & Nardi’s New Jersey construction attorneys recently completed a construction arbitration in the American Arbitration Association. After hearing the evidence, the arbitrator awarded our clients $289,918. Maurice McLaughlin was the lead trial attorney. He was assisted throughout by Pauline Young and Robert Chewning, who second chaired the hearings.
The case involved Essex County homeowners who had contracted for extensive renovations to their kitchen. The total cost of the kitchen renovations was $152,725. The homeowners paid $126,362.50. However, the contractor never completed the job.
The first issue was delay – New Jersey’s Consumer Fraud Act requires that construction contracts for home improvements must be in writing and contain certain terms, including a start and stop date. In this case, the contract only had a “delivery date.” However, the work, estimated to last less that two weeks, was still going on more than six months after the delivery date. Even if the “delivery date” was to be the “completion date,” the contract contained no start date, and the work did not begin until after the “delivery” date. This was significant, because the New Jersey Consumer Fraud Act allows a successful claimant to recover triple damages plus their attorneys fees.
Next, the workmanship was poor. There were many construction defects. Our construction attorneys presented two experts for the homeowners who stated based on the magnitude and prevalence of the poor workmanship, the entire project would need to be ripped out and replaced.
A significant portion of the extensive defects was because of the contractor had used improper particle board which could not hold the weight of shelving, etc., and which was not appropriate for areas with moisture. It was also not what was called for in the contract. This was significant because the contract is required to list the materials, and substitution of materials is an illegal practice known as “bait and switch,” which is also a violation of the New Jersey Consumer Fraud Act.
The homeowners withheld the last payment because the contractor had not completed the job. This was appropriate because retainage, which was allowed in the contract. Finally, instead of completing the job, the contractor filed a construction lien on the homeowners’ property. Our construction attorneys were successful in obtaining a discharge of the construction lien.
At this point the homeowners might still have walked away, but the contractor insisted on payment even though it had not finished the job. The homeowners therefore pursued their claim for the cost of replacing the contractor’s work, and for its consumer fraud violations. The construction contract for the project had a clause requiring arbitration of contract disputes, and chose the American Arbitration Association as the venue with the AAA’s Construction Arbitration Rules governing arbitration procedures. New Jersey construction law applied to the underlying claims.
The Arbitration & The Arbitrator’s Decision
The arbitration took ten full trial days over eleven months, which included a trip to the home for inspection. There were six fact witnesses and two expert witnesses, and over five hundred exhibits.
The arbitrator found in favor of our clients, and denied the contractor’s claims entirely.
The arbitrator awarded $289,918 our clients in total. This included the cost of remediate and/or replace the kitchen. He also found that a portion of the cost of remediation and/or replacement was attributable to the contractor’s violations of New Jersey’s Consumer Fraud Act and tripled this portion. The arbitrator also ordered that the contractor reimburse our clients for their expenses, including their attorneys fees (in other words, the arbitrator ordered that the contractor reimburse our clients for everything they paid to us).
There are several takeaways from this arbitration.
- Takeaway 1: The Contract is king. A well-written construction contract is ever so important. In this case the contract had multiple violations of the New Jersey Consumer Fraud Act and its home improvement contract regulations. A significant portion of the contractor’s damages resulted from simply not including what the regulations require to be in home improvement contracts, and this could have been so easily avoided having an attorney prepare this contract, or at lease review it. We regularly counsel contractors and homeowners, and help them draft their contracts. It is such an easy way for a contractor to avoid the Consumer Fraud Act’s harsh remedies, and to ensure that owners have remedies for poor or dishonest services.
- Takeaway 2. Evidence is also king. We were fortunate that we had extremely organized clients who documented and took photographs of everything. These documents and photographs allowed us to put together a great “paper” case, which showed that the homeowners’ claims were true, and the contractor’s claims were false. So even when things are going well, both homeowners and contractors should save every document and photograph all work.
- Takeaway 3. If evidence is king, credibility is queen. In the litigation we never claimed anything that we couldn’t support with the evidence. On the other hand, the contractors stuck with stories that were clearly not true – the photographs and documents clearly showed that what they said had not happened. Not every fact has to go your way. The most important thing that a witness or an attorney has is their credibility. As attorneys we always strive to preserve this by being honest with courts, our clients, – and the other side.
- Takeaway 4. It appeared that the other side tried to present their case “on the cheap.” This backfired. They didn’t know what evidence contradicted their story because they didn’t put the work in. In short, being “a penny wise and a pound foolish” usually backfires, and it did here. We always put the work in to present the best case possible, and it paid off.
- Takeaway 5. Document your losses. It’s possible to win a case but still lose. The homeowners could have proved that the contractor breached their contract, but if they could not prove their damages they would got through the whole process and not be able to recover anything. So this takeaway is to always document your losses. Save every receipt. Get repair estimates. Photograph every defective item. The homeowners’ documentation up front paid off in the long run.
Our New Jersey construction attorneys have extensive experience and have attained considerable success in construction litigation, construction arbitration and construction mediation, representing both contractors and owners. Please call us at (973) 890-0004 or e-mail us if we can be of assistance in any construction law issue you may have. We can help.