Claremont Construction Group, Inc. v. Arc Nj, LLC

New Jersey Superior Court Appellate Division·Decided August 15, 2025·No. A-3246-23/A-0457-24·Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION

DOCKET NO. A-3246-23

A-0457-24

CLAREMONT CONSTRUCTION GROUP, INC.,

Plaintiff-Respondent,

v. ARC NJ, LLC,

Defendant-Appellant.

CLAREMONT CONSTRUCTION GROUP, INC.,

Plaintiff-Appellant,

v. ARC NJ, LLC,

Defendant-Respondent.

Argued (A-3246-23) March 18, 2025 and (A-0457-24)

June 3, 2025 – Decided August 15, 2025

Before Judges Susswein and Bergman.

On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, Docket Nos.

C-000011-24 and C-000055-24.

Erin C. Borek (Phillips Lytle, LLP) argued the cause for ARC NJ, LLC.

Frederick W. Alworth and Kevin W. Weber argued the cause for Claremont Construction Group, Inc.

(Gibbons, PC, attorneys; Frederick W. Alworth, Kevin W. Weber and Michael A. Conforti, on the briefs).

PER CURIAM We consolidated these appeals that were argued on two separate dates for purposes of issuing a single opinion. The matters arise from trial court orders entered in two separate Chancery actions both involving an agreement for the sale of plaintiff Claremont Construction Group, Inc.'s construction business to defendant Arc, NJ, LLC.

In A-3246-23, defendant appeals from three orders dated June 12, 2024 which granted plaintiff's motion to confirm an arbitration award (Award) and denied defendant's motion to (1) vacate the Award; (2) modify the Award to correct mathematical and form errors; and (3) grant defendant leave to assert a counterclaim against plaintiff for setoffs.

In A-0457-24, plaintiff appeals from two orders dated August 30, 2024.

The first order denied its request for injunctive relief to bar a second arbitration initiated by defendant and the second order granted defendant's motion to A-3246-23

dismiss plaintiff's complaint and order to show cause (OTSC) with prejudice and to compel arbitration. Plaintiff also appeals the court's order denying reconsideration. Plaintiff's subsequent motion requesting a stay of the second arbitration pending this appeal was granted by the trial court.

Based on our review of the record and application of the relevant legal principles, we affirm the trial court orders with one exception. We modify the orders of August 30, 2024 to permit the arbitrator in the second arbitration to determine what portion, if any, of the $899,051.20 credit provided to defendant in the first arbitration regarding the Hackensack Project was based on monies due from plaintiff to defendant under the subcontractor agreement for that project.

I.

We first address A-3246-23. We presume the parties are familiar with the pertinent facts and procedural history leading to this appeal, which we briefly summarize. The parties' disputes centered around the sale of plaintiff's construction business to defendant pursuant to a "Project Transfer Agreement" (PTA). A principal component of the PTA concerned an "earn-out" process in which plaintiff would transfer its ongoing contracts (Backlog Projects) to defendant without defendant paying "any upfront payment . . . for [plaintiff's] long-standing and successful construction business." The PTA contemplated A-3246-23

earnings for both parties would be based on "Estimated Gross Profit" (EGP). Rather than defendant paying an upfront amount to plaintiff, the parties would agree on the EGP at the outset of the project and defendant would pay plaintiff sixty-five percent of the EGP during the course of the project in quarterly installments. These payments were to be made regardless of what occurred on the actual project or with respect to actual profits. Thereafter, defendant would retain any additional profits or shoulder any losses.

The PTA contemplated the only projects that were subject to the EGP payment obligation were those that achieved the status of a "Backlog Project" under a procedure set forth in the PTA. The PTA also listed other types of projects including "Pipeline Rights," which if satisfied, transformed the project into a Backlog Project subject to EGP sharing.

When disputes arose between the parties concerning the sharing of the EGP, they submitted to arbitration before a single arbitrator from the American Arbitration Association (AAA) as required by the PTA. Plaintiff alleged it was owed $5,209,900.68 for its share of EGP for the ten projects in dispute based on the terms of the payout provisions in the PTA. In its damage calculations, plaintiff included $1,735,500 from the Bayonne 3 project alleging it received no EGP payments from defendant for this project. Plaintiff also included two other projects in the calculation: Pennrose and 81 Orange, which were not yet A-3246-23

awarded to defendant and categorized these projects as "Additional Pipeline Projects." Plaintiff alleged it was entitled to sixty-five percent of EGP if defendant was eventually awarded these projects.

Defendant filed a counterclaim seeking reimbursement of $5,065,184.14 which represented all the EGP paid to plaintiff on the ten disputed projects. Defendant argued because formal amendments to the PTA were never executed to include these projects as Backlog Projects, it had no obligation to pay any EGP to plaintiff. Defendant asserted plaintiff failed to satisfy a six-step process1 set forth in the PTA as a condition precedent, to transform the disputed projects into Backlog Projects in order to be paid its share of the EGP.

Defendant also sought $9,189,250 in anticipated lost profits on nine of the projects which had not moved forward. Defendant claimed these projects should be included under the PTA. Defendant further sought recoupment of business

1 The six conditions defendant asserts must be satisfied under the PTA for a Pipeline Right to become an Additional Backlog Project subject to sharing of EGP are: (1) plaintiff must own and control a right that is subject to transfer to defendant; (2) the parties must come to an agreement as to the price of defendant's work; (3) the Pipeline Right must be embodied in a Construction Contract with defendant for its work; (4) plaintiff and defendant must agree to EGP for the Pipeline Right; (5) the PTA "shall be amended" to remove the Pipeline Right and add such Right as an Additional Backlog Project; and (6) the PTA shall be amended to include such Additional Backlog Projects and the agreed upon EGP.

A-3246-23

losses allegedly sustained from 2020 to 2022 in the amount of $5,481,397. Finally, defendant sought $859,099.90 in "preconstruction costs" it allegedly incurred on projects that it was not awarded. Plaintiff conceded that $162,760.87 was due to defendant for the preconstruction costs claim.

The arbitration hearing took place over eight days. The arbitration process included discovery demands including substantial document productions, depositions, preparation and production of expert reports, motion practice, pre- trial submissions, an arbitration hearing with witness testimony from fourteen individuals, post-hearing written submissions, and post-hearing arguments. Following post-hearing briefing and oral argument, the arbitrator entered the Award on January 19, 2024 finding in favor of plaintiff totaling $4,043,887.27. This amount included interest and was a net amount after the application of credits to defendant from the Hackensack Project.

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