Review of Michigan Appellate Decisions Concerning Arbitration Part 2 of 2

By Lee Hornberger,
Arbitrator and Mediator

Introduction

This article is the second of two parts reviewing selected Michigan appellate cases concerning arbitration.

MICHIGAN COURT OF APPEALS–PUBLISHED DECISIONS

Pre-award lawsuit concerning arbitrator selection

Oakland-Macomb Interceptor Drain Drainage Dist v Ric-Man Constr, Inc., reflects viewpoint no part of arbitration more important than selecting arbitrator. AAA did not appoint panel member who had specialized qualifications required in agreement. Plaintiff sued to enforce requirements. Circuit Court ruled in favor of defendant and AAA. COA in split decision reversed. Issue was whether plaintiff could bring pre-award lawsuit concerning arbitrator selection. Majority said courts usually will not entertain pre-award objections to selection. But, when suit is brought to enforce essential provisions of agreement concerning selection, courts will enforce mandates. When such provision is central, Federal Arbitration Act^[ii] provides it should be enforced by courts prior to arbitration hearing. Party may petition court before award if (1) arbitration agreement specifies qualifications arbitrator must possess and (2) arbitration administrator fails to appoint arbitrator who meets these qualifications. Court may issue order requiring arbitration proceedings conform to arbitration agreement. Majority awarded plaintiff Circuit Court and COA costs and attorney fees.

Judge Jansen dissents stating party cannot obtain judicial review of qualifications of arbitrators pre-award.

Offsetting decision-maker biases can arguably create neutral tribunal

White v State Farm Fire and Cas Co.^[iii] discussed whether MCL 500.2833(1)(m) appraiser who receives contingency fee for appraisal is sufficiently neutral. COA said courts have upheld agreements for arbitration conducted by party-chosen, non-neutral arbitrators, particularly when neutral arbitrator is also involved. These cases implicitly recognize it is not necessarily unfair or unconscionable to create effectively neutral tribunal by building in offsetting biases.

Complaint must be filed to obtain award confirmation

Jaguar Trading Limited Partnership v Presler.^[iv] Complaint must be filed to obtain confirmation of award. Having failed to invoke Circuit Court jurisdiction under Michigan Arbitration Act by filing complaint, plaintiff not entitled to confirmation. Issue was whether plaintiff, as party seeking confirmation under MCR 3.602(I) and MAA was required to file complaint to invoke Circuit Court jurisdiction. COA held, because no action pending, plaintiff required to file complaint. Since plaintiff timely filed award with court clerk, matter remanded so plaintiff could file complaint in Circuit Court.

COA affirms Circuit Court that motion to vacate not timely filed

Vyletel-Rivard v Rivard.^[v] Defendant challenged Circuit Court denying motion to vacate DRAA award. COA affirmed because motion to vacate not timely filed. On March 28, 2008, defendant filed motion to vacate “awards” of November 13 and December 7, 2007. Party has 21 days to file motion to vacate in DRAA case. Lesson: Time periods are important. Ramifications of filing second post-award errors and omissions motion.

COA approves probate arbitration

In split decision, In re Nestorovski Estate^[vi] held probate proceedings are not inherently unarbitrable.

Michigan Court of Appeals–Unpublished Decisions

COA affirms Circuit Court confirmation

Carmen v Factory Steel and Metal Supply Co, LLC.[vii] Standard applied to arbitration decisions is not clear error. Legal correctness is not standard because arbitrators not necessarily trained in law and are individuals of varying ability and expertise. Reviewing court cannot engage in contract interpretation, which is issue for arbitrator to determine.

COA affirms Circuit Court confirmation of DRAA award

Gomaa v Sharafeldin.[viii] H challenged “piecemeal” approach used by arbitrator. Circuit Court held arbitrator did not commit any errors permitting court to invade award, and entered JOD consistent with arbitrator’s orders. COA affirmed.

COA affirms Circuit Court confirmation of award

Garza v Estate of Gutierrez.[ix] COA affirmed Circuit Court order confirming award giving plaintiff seven days to cure his $150,000 default on parcel of property he was buying from defendant, or to surrender property to defendant.

COA affirms Circuit Court confirmation of DRAA award

Mann v Whitefield.[x] COA affirmed Circuit Court confirmation of DRAA award. Domestic violence protocol was not done and appellant argued this invalidated award. COA stated “… MCR 3.216(H)(2) indicates [domestic violence protocol] applies to mediators during mediation, not arbitrators during arbitration. … We found no authority applying the domestic violence screening requirement of a mediator under MCR 3.216(H)(2) to arbitrators.”

COA affirms Circuit Court confirmation

UHG Boca, LLC v Medical Mgt Partners, Inc.[xi] Plaintiff moved to vacate award arguing arbitrator improperly applied wrongful conduct rule. Plaintiff also argued arbitrator improperly applied adverse inference rule when arbitrated concluded, on basis of adverse inference, parties were conducting illegal enterprise. Circuit Court disagreed and confirmed award. COA affirmed Circuit Court.

COA affirms Circuit Court confirmation of DRAA award

Maczik v Maczik.[xii] COA affirmed Circuit Court denial of motion to vacate DRAA award because motion to vacate filed late even though arbitrator did not meet requirements to be DRAA arbitrator.

COA affirms Circuit Court denying arbitration in dentist non-compete case

Paine v Godzina.[xiii] Appellants argued Circuit Court erred because plain language of contractual agreement required arbitration of dispute regarding non-compete clause. Based on word “and” in arbitration agreement, COA affirmed Circuit Court’s denial of motion to compel arbitration. COA agreed with Circuit Court that language, “[a]ny dispute, controversy or claim between the Associate and the Employer concerning questions of fact arising under this Agreement and concerning issues related to wrongful termination … shall be submitted … [AAA],” means arbitration is required for cases that involve both questions of fact arising under Agreement and issues related to wrongful termination.

COA affirms Circuit Court confirming award

Clancy v Entertainment Managers, LLC.[xiv] Advance for wedding reception. AAA administered arbitration under expedited proceedings pursuant to its Commercial Arbitration Rules. According to COA, defendant did not explain how it was prejudiced by use of expedited procedures such that award would have been “substantially otherwise” had arbitration been conducted differently.

COA affirms Circuit Court denial of motion to vacate DRAA award

Pascoe v Pascoe.[xv] COA affirmed Circuit Court denial of motion to vacate DRAA award. COA said review of awards extremely limited. Review of award by court one of narrowest standards of judicial review in jurisprudence. Award may be vacated in DRAA case when arbitrator exceeded powers. Party seeking to prove arbitrator exceeded authority must show arbitrator (1) acted beyond material terms of arbitration agreement or (2) acted contrary to controlling law. Reviewing court may not review arbitrator’s findings of fact, and any error of law must be discernible on face of award. Powerful outline of law concerning deference to arbitration awards.

About the Author

Lee Hornberger is a member of the National Academy of Arbitrators, the Professional Resolution Experts of Michigan (PREMi), and a Diplomate Member of The National Academy of Distinguished Neutrals. He is a former Chair of the Alternative Dispute Resolution Section of the State Bar of Michigan, Editor Emeritus of The Michigan Dispute Resolution Journal, a former member the SBM Representative Assembly, a former President of the Grand Traverse-Leelanau-Antrim Bar Association, and a former Chair of the Traverse City Human Rights Commission. He has received the Distinguished Service Award, the George N. Bashara, Jr. Award, and Hero of ADR Awards from the SBM ADR Section.

[i] 304 Mich App 46; 850 NW2d 408 (2014). This case discussed at Esshaki, “Judicial Intervention in Arbitration Proceedings Pre-Award,” Michigan Bar Journal (June 2023), p. 30.

http://www.michbar.org/file/barjournal/article/documents/pdf4article2627.pdf?_gl=1*3ciwoh*_ga*MTUyMDE4NjA3OC4xNjA0NjE0ODY2*_ga_JVJ5HJZB9V*MTY4MzgxNTY0MC43NzAuMS4xNjgzODE1NjU1LjAuMC4w

[ii] 9 USC 1, et seq.

[iii] 293 Mich App 419; 809 NW2d 637 (2011).

[iv] 289 Mich App 319; 808 NW2d 495 (2010).

[v] 286 Mich App 13; 777 NW2d 722 (2009); lv gtd 486 Mich 938; 782 NW2d 502 (2010), stip dism ___ Mich ___ (2010).

[vi] 283 Mich App 177; 769 NW2d 720 (2009).

[vii] 368034 (Sep 9, 2024).

[viii] 363218 (July 18, 2024).

[ix] 365633 (April 11, 2024).

[x] 359342 (Jan 25, 2024), lv den.

[xi] 361539 (Jan 18, 2024), lv den.

[xii] 363954 (Sep 14, 2023).