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N.J. SUPREME COURT UPHOLDS AWARD OF $14 MILLION IN LOST PROFITS TO SANDS CASINO -- CLARIFIES STANDARD FOR JUDICIAL REVIEW OF ARBITRATION AWARDS

N.J. SUPREME COURT UPHOLDS AWARD OF $14 MILLION IN LOST PROFITS TO SANDS CASINO -- CLARIFIES STANDARD FOR JUDICIAL REVIEW OF ARBITRATION AWARDS
 PHILADELPHIA, Aug. 10 /PRNewswire/ -- In a decision of major importance to New Jersey's construction industry and arbitration system, the N.J. Supreme Court, in Perini Corporation v. Greate Bay Hotel & Casino, Inc. (Sands Hotel & Casino) has upheld an award of $14 million in lost profits to the Sands Casino and has clarified the standard for judicial review of arbitration awards.
 The Sands Casino is represented by Steven A. Arbittier, the chairman of the Litigation Department of Wolf, Block, Schorr & Solis-Cohen.
 "This decision is important to the construction industry," said Arbittier, "particularly in regard to the calculation of lost profit damages resulting from a construction manager's failure to complete work on schedule and the scope of judicial review of arbitration awards."
 "Prior to this decision, construction companies that failed to complete projects on time could only be sued for the lost profits incurred from the completion date in the contract to the time when the construction project was 'substantially complete,'" said Arbittier. "However, in 'Perini,' the court upheld an arbitration decision which included $9 million in lost profits incurred prior to 'substantial completion,' plus an award of $5 million in lost profits which Perini contended were incurred after substantial completion."
 "The construction industry needs to take note of this decision," said Arbittier. "Since it is now possible for construction companies to be liable for consequential damages incurred after a project is 'substantially complete,' the parties to a construction contract will have to address the issue of delay damages very carefully if they want to avoid this result."
 In seeking to clarify the standard for judicial review of arbitration decisions, the majority in "Perini" held that New Jersey courts can overturn arbitration decisions for a mistake of law only if the mistake is "gross and non-debatable." Although the majority claimed its decision "did not threaten the arbitration process," Chief Justice Wilentz, in a strongly critical concurring opinion, stated that the decision in this case "evinces this court's continued history of anti- arbitration bias."
 "For years, courts across the land have been struggling with the proper scope of judicial review of arbitration awards for mistakes of law," said Arbittier, a leading construction litigator who also serves as an arbitrator for the American Arbitration Association. "As you can see from this decision, New Jersey is still struggling with the question. Some members of the court believe that there should be no judicial review of arbitration decisions for legal errors, while others believe there should be review only if gross errors have been committed. One thing is for sure: the court has abandoned the rule applied by some New Jersey courts that arbitration awards can be set aside for any mistake of law," said Arbittier.
 The ruling also sustained the Sands' calculation of lost profits by comparing actual gaming revenues earned in the year following completion of the project. This resulted in more than $14 million in delay damages against Perini on a project in which Perini's entire fee was only $600,000. Although Perini contended that the award was grossly disproportionate to its fee, the N.J. Supreme Court held that this was a risk Perini took in contracting to renovate a casino in Atlantic City.
 /delval/
 -0- 8/10/92
 /CONTACT: Scott Allocco of Earle Palmer Brown & Spiro, 215-851-9525, for Wolf, Block, Schorr & Solis-Cohen, or Steven Artbittier, attorney, of Wolf, Block, Schorr & Solis-Cohen, 215-977-2006/ CO: Sands Casino; Perini Corporation; Wolf, Block, Schorr & Solis-Cohen ST: New Jersey IN: CST SU:


MK-CC -- PH016 -- 8578 08/10/92 14:22 EDT
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Date:Aug 10, 1992
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