NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 12a0554n.06 Nos. 10-2075; 11- 1068 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

EVANSTON INSURANCE COMP ANY, ) ) P laintif f-App ellee, ) ) ON AP P EAL FR OM THE v. ) UNITED STAT ES DIS TRICT ) COURT F OR THE WE STE RN COGSWELL PROP ERTIES , LLC ) DISTRICT OF MICHIG AN ) Defendan t-Appellant. ) )
BEFORE: SUHRHEINRICH, MOORE, and CLAY, Circ uit Jud ges.
SUHRHEINRICH, Circuit Judge. T h i s ca s e i n v o l v es a d i s p ute reg arding fire loss o n

commerc ial proper

ty owned by Def

endant- Appellant Cogswe ll Properties, L .L .C. (“Cog swell
Pro p er t i es”). Cogswe ll Properties appea ls (1) the order of the district court vacating an appra isal

awa rd rea ched by an umpire pursuant to the Michig an appra isal statute, Mich. Comp. L aws § 500.2833(1)( m), on an insurance policy issued by Plaintiff-Appellee , Evanston I nsuranc e Company (“Eva nston I n s u ra n ce” ) (Appe al No. 10-2075); and (2) the order of the district court g ranting
Evanston I nsuranc e’s motion for entry of judgme nt on the second appra isal (Appe al No. 11-1068).
We AF F IRM

.

-1-I. Background A. F acts I n September 2006, Cogswe ll Properties purcha sed the vaca nt “Rock Tenn Paper Mill” site in Otsego, M i chigan, in a tax fore closure sale for $70,000 (the “B uilding” or “Proper ty ”). The Building consists of over twenty interconne cted or adjac ent buildings and cover s approximately 440,700 square fee t. Evanston I nsuranc e issued a first-par ty proper ty insurance policy to Co gs we l l P roper ties eff ective November 16, 2006 to May 6, 2007, insuring Cogswe ll Properties ag ainst cer tain Building loss and damag e (the “Policy ”). The Policy had a Building cover ag e limit of $1,000,000, subject to coinsuranc e at 80%

. The Policy

contains the following pertinent provisions: BU I L DI NG AND PERS ON PROPERTY COVERAGE FORM

. . . . E. L OSS C ONDI TI ONS

. . . . 2. Appra isal
I f we and y ou disag ree on the value of the proper ty or the amount of loss, either may make written demand for an appra isal of the loss. I n this event, eac h party will sel ec t a competent and impartial appra iser[]

. The two appra isers will selec t an umpire. I f they cannot ag ree , either may reque st that selec tion be made by a judge of a court having jurisdiction. The appra isers will state separ ately the value of the proper ty and amount of loss. I f they fail to ag ree , they will submit their differ ence s to the umpire. A decision ag ree d to by any two will be binding . Eac h party

will:

a. Pay

its chosen appr aiser; a

nd b. Be ar the other expenses of the appra isal and umpire equally

.
-2-I f there is an appra isal, we will still retain our rig ht to deny the claim. 1

. . . . 4. L oss Pay

ment

a. I n the event of loss or d am age cover ed by this Coverag e F orm, at our option, we w ill either: (1) Pay the v alue of lost or damaged property ;

. . . . d. We will not pay y ou more than y our financ ial interest in the Covered Prope rty

.

. . . . g . We will pay for cove re d loss or damag e within 30 day s afte r we rec eive the sworn proof of lo ss, if y ou have c omplied with all of the terms of this Coverag e Part and: (1) We have rea ched ag ree men t with y ou on the amount of loss; or (2) An a ppraisal a war d has bee n made.

. . . . 7. Valuation We w ill dete rmine the value of the Covered Property in the event of loss or damag e as f

ollows:

a. At actual cash value as of the time of loss or damage , except as provided in b.,c .,d.,e. and f . below.

. . . . F. AD DI TI ONAL

CONDI TI ONS

Michig an law require s fire insurance policies to contain an appra isal provision. See Mich. 1 Comp. L aws § 500.2833(1)( a) & (m). The Policy ’s appra isal provision mirrors the statute, with the exception that it also contains a clause stating that “[a] decision ag ree d t o by any two will be binding.” But it also states: “I f t here is an appraisal, we [ E v an s t o n I nsuranc e] will still reta in our rig ht to deny

the claim.” -3-. . . .

1. Coinsurance
I f a Coinsurance perc entag e is shown in the Dec lara tions, the foll o wi n g co n dition applies.

a. We will not pay the full amount of any l o s s i f t h e value of the C o vere d Property at the time of loss times the Coinsura n ce perc entag e shown for

it in the Declar ations is gr eate r t han the L imit of I nsuranc e for

the prope rty

. 2

. . . . G. OPTI ONAL

COVERAGES
I f shown in the Dec lara tions, the following Optional Coverag es apply separ ately to eac h item.

. . . . 3. Replace ment Cost

a. Replace ment Cost (without deduction for depre ciation) repla ces Actual Cash Value in the L oss Conditi on, Valuation, of this cover ag e form. (Emphase s added.) On November 16, 2006 (the very first day of coverag e), a section of the Building–roug hly 15,700 square fee t of the total square footag e of 440,700 (or l es s t h an 4% of the Building )–wa s

This section then sets out the steps by which it will deter mine “the most that we will pay .” 2 (1) Multipl y the value of Covered Property at the time of loss by the Coinsurance perc entag e; (2) Divide the L imit of I nsuranc e of the proper ty by the fig ure deter

mined in step (1); (3) Multipl y the total amount of loss, befor e the application of any deductible, by the fig ure de termined in step (2) ; and (4) Subtrac t the deductible f rom the fig ure de termined in step (3)

. We w ill pay

the amount deter

mined in ste p (4) or the limit of insurance , whicheve r is le ss. For the rema inder, y ou will e ither have to r ely on other insurance or absorb the loss y ourself. -4-damag ed by fire (the “L oss”). Cogswe ll Properties submitt ed a claim to E v an ston I nsuranc e for

proper ty losses suffe red in the fire. Evanston I nsuranc e deter mined that the actua l cash value of the Building at the time of the loss was $10,223,384.80. Under the coinsuranc e provision of the Policy , Cogswe ll was require d to car ry i n suranc e on the Building of no less than $8,178,707.84 (80% of $10,223,384.80). Be cause Cogswe ll Properties car ried only $1 milli on in insurance on the Building , Evanston I nsuranc e deter

mined that it was liable for only 12.23% of the loss ($1 milli on divided by $8,178,707.84), making Cogswe ll Properties a coinsurer for 87.7 % of the loss. Evanston I nsuranc e calc ulated the actua l cash value of the loss at $342,836.46. Evanston I nsuranc e there fore deter mined that it was liable to Cogswe ll for only $36,918.27 ($342 , 8 3 6

. 4 6 t i mes 12.23% less the $5,000 deductible) . Evanston I nsuranc e paid this amount to Cogswe ll Properties.
B. Pr ocedural History Cogswe ll Properties did not agr ee with Evanston I nsuranc e’s assessment, and Evanston
I nsuranc e filed a petition in Michig an sta te court to appoint an umpire pursuant to Mich. Comp.
L aws § 500.2833 beca

use t he par

ties were initially

unable to ag ree on the s elec tion of an umpire. The parties ultimately ag ree d on an ump i re, mooting Evanston I nsuranc e’s initial action for the appointment of one. Whil e that action was still pend i n g, Cogswe ll Properties filed a counter claim in the state
court action, alleg ing that Evanston I nsuranc e ca lculated a nd ag ree d that the value of the B uilding

was $1 milli on when it issued the P o licy

. This would have resulted in no coinsuranc e penalty

. Alterna tively , Cogswe ll Properties arg ued that the deter mination of the Buil d i n g’s value for coinsuranc e purposes was a matter for the trier of fac t, not the appra isal panel. Evanston I nsuranc e

-5-remove d the entire action to fe dera l district court on the basis of diver sity jurisdiction. That same day , the par

ties ag ree d to appoint Wi lliam W . J ack, E sq. as the umpire. On J anuar y 23, 2009, the district court ruled that simply beca use Evanston I nsuranc e insured the Building for $1 milli on, Evanston I nsuranc e aff irmed that the Property was actua lly worth that
amount. The district court also held that the respe ctive appra isers and the umpire should deter mine the value of the Building for purposes of apply ing the coinsuranc e provision, and g ave the following instructions. As the Policy does not define actua l cash value, all evidenc e rele vant to an acc urate deter mination of

the Property ’s value must be c onsidered. While repla ceme nt c ost minus depre ciation is one relevant means of determining the Property ’s value, it is not nece ssarily the sole or pref err ed means. Replace ment cost minus depre ciation is one of sever al methods pertinent to an acc urate valuation that may be utiliz ed by the umpire and a

ppraiser s. R. 1-4 at 8. I n explaining how to make this deter mination, the district court instructed the appra isal panel that: Michig an cou rt s re cog nize that no “set method [of valuation] is nece ssary within the appra isal context.” Davis [v. Nat’l Am. Ins. Co] , 259 N.W.2d [433] at 438. I nstead, they

use the “ broad evidenc e rule,” which per mits an appraise r to consider “any evidenc e logic ally tending to the formation of a corr ect estimate of the value of the destroy ed or damag ed proper ty .” Id. Marke t value, repla ceme nt value, and other means of valuation are mere ly g uides, “rather than sh ac k l es compelling strict adher ence .” Id. Where, as i n the instant case , repla ceme nt value minus depre ciation and marke t value y ield vastly disparate valuations, a single method of valuation is less likely to establish a proper ty ’s value acc urate ly

. This is particula rly true of rela tively illiqui d proper

ty such as rea l estate. In the absenc e of a contra ctual definition of “ac tual cash value,” Michig an law favor s the consideration of all evidenc e rele vant to an acc urate deter

mination of the Property ’s value. Id. The appra isers and umpire must consider all rele vant evidenc e as t h ey deter mine the Property ’s actua l cash value. slip. op. at 7-8.

-6-Cogswe ll Properties selec ted Ethan Gross as its appraiser . Gross used a fair ma rket va lue
approa ch to value the Property , and used a repla ceme nt cost less depre ciation approa ch to value the
L oss. Gross valued the Building at $960,000, and the L oss at $958,560.
Evanston I nsuranc e selec ted Dan Dowell as its ap p ra i s er . Dowell felt it illogica l to use differ ent valuation methods to deter mine the value of the Building and the L o s s . He t h er efore proposed three differ ent approa ches, using the same method for deter mining eac h value. Under the “Replac ement Cost L ess Depr eciation” method, Dowell calc ulated the actua l cash value of the L oss
at $704,462.34, and the actua l cas h v alue of the Property at $9,313,997.88. Under the “Mar ket Value” approa ch, Dowell calc ulated the actua l cash value of the L oss at $100,000.00, and the actua l cash value of the B uilding at $1,540,000.00. Unde r the “ Marke t Value B ased on Actual Purchase Price” approa ch, the actua l cash value of the L oss was $4,543.00, and the actua l cash va lue of the Building at $70,000.00. The umpire elec ted to use two differ ent definitions of actua l cash value–mar ket value for the Building , and re place ment cost less depre ciation to assess the L oss. Thus, the um pire determined that the actua l cash value of the proper ty was $1,540,000.00 (using one of Dowell’s marke t values), and the damag e to the proper ty was $736,384.89 (using Gross’s repla ceme nt cost of $1,534,135.28). Gross ag ree d with the appra isal. The umpire’s appra isal awa rd was fo rm alized in writing on September 29, 2009. See Mich. Comp. L aws § 500.2833(1)( m) (stat i n g t h at an appra iser and an umpire must “set the amount of loss” by written ag ree ment). The decide d fig ures, which appea r on the fa ce of

the awa rd, ar e as f

ollows: Bui ldin g–Act ual Cash Value of Proper ty $1,540,000.00 Bui ldin g–Act ual Cash Value of L oss & Dam age $736,384.89

-7-R. 1-6 at 1.

On October 1, 2009, Cogswe ll Properties demande d pay ment in the amount of $554,553.49,
repr esenting the net amount under the appra isal awa rd afte r application of the coinsuranc e provision of the Policy

and the de ductible.
Evanston I nsuranc e filed the prese nt action in fede ral district court on October 2 9 , 2 009, asking the district court to vacate the appra isal awa rd to Cogswe ll Properti es o n t h e g rounds of manifest mistake and bad faith in the awa rd. The parties filed cross-motions for summary judgme nt. On J uly 30, 2010, the district court vacated the appra isal awa rd and rema

nded the matter to the umpire for

deter mination of a newawa

rd. The district court ruled that the appra isal awa rd demonstra ted both a manife st mist ake and

an err or of law. I t held that by using differ ent valuat i o n m ethods for the actua l cash value of the Property as a whole and the actua l cash value of the loss, “the umpire improperly ascr ibed differ ent meaning s to the [actual cash va lue] for ea ch of those de terminations when the Policy calls for one consistent definition of value.” R. 22 at 9. I t rea soned that [t ]he particula

r fa ct s and circ umstances reg arding the use and condition of the P ro p er t y are the same reg ardle ss of whether the whole or only the loss porti o n i s considere d, and under the broa d evidenc e rule the values of both should be deter mined on the same consistent basis to a chieve an acc urate valuation. Be cause there is no support in the Policy for using two differ ent definitions, this was an err or of law tha t substantially

aff ecte d the awa

rd. Id. 3

I n support, the court noted that “under the Policy ’s L oss Conditi ons section, in the event of

3 a loss, Evanston I nsuranc e is obliga ted to ‘[p] ay the value of lost or damag ed proper ty ,’ which it will deter mine ‘[a]t actual cash value as of the time of loss or damag e.’” R. 22 at 9 (quoting the Policy ¶¶ E4.a.(1) , E.7.a.). The court further noted that the appra isal provision “provide s that the appra isers must state the ‘value of the proper ty ’ while the coinsuranc e provision ref ers to ‘the value of Covered proper ty at the time of loss.’” Id. -8-The c ourt adde d that the er ror produce d a result that is both illogica l and contra ry t o t h e purposes of the broad evidenc e rule. As discussed above, the purpose of the rule is to allow a ppraiser s to selec t an appropr iate valuation method, rec og nizi ng that a one-size-fits-a ll approa ch of a single method may not permit an award that ref lec t s t h e true circumstance s of the loss. Requiring a consistent definition of value mere ly ensure s that the value of the loss bear s some logic al rela tionship to the value of the entire Property

. Her e, the umpire’s use of two valuation m et h o d s y ielding “vastly differ ent valuations” produce d an awa

rd substantially at odds with the circ umstances of the loss: althoug h less than four perc ent of the Property was damag ed, the value of the damag ed portion was a lmost half (47.8%) of the value of

the entire Property

. Id. I n addition, the court found that this manifest mistake appea red on the fac e of the awa

rd beca use of the mag nitude of the disparity , which was so substantial as to sug g est an err or of law. Id

. at 10. Next, the district court held that, contra ry to Evanston I nsuranc e’s asser tion, its liability was not limi ted to the amount Cog swell Properties pa id for the Prope rty ($70,000), but the fair ma rket value ($1.5 milli on). Id. at 1 2 -1 6

. Fi n ally , the court denied Cogswe ll Properties’s motion for penalty interest as pr emature

. On Aug ust 6, 2010, Cogswe ll Properties filed a motion for rec onsideration, claiming that the district court failed to consider that the Fe dera l Arbitration Act (“F AA”) , 9 U.S.C. §§ 1 et seq ., rathe r than Michig an law, provided the basis for a district court’s revie w of an appra isal awa rd like the one befor e it. On Aug ust 10, 2010, the district c ourt denied the motion, as well as a rela ted reque st for

ce rt ification for interlocutory appea l. The court found that Cogswe ll Properties never raised t h e issue: Cogswe ll fails t o acknow ledg e, however , t h at it, too, argued that Michig an law g overne d the scope of revie w. For example, in its brief in support of its motion for summary judgme nt, Cogswe ll argued that “Michig an law makes clea r that an awa rd shoul d be af

fi rm ed, unless there is a lega l err or appearing on the face of the

-9-awa rd,” (De f.’s Br

. S u p p . Mot. Summ. J

. at 12 (interna l quotations and footnote omitted)), and that “[t] he Michig an Court of Appea ls has war ned that judicial revie w should not be an appellate para chute in the event of an adver se arbitra tion decision. ( Id. at 13 (interna l quotations and footnote omitted).). Cogswe ll also cited Hartford Insurance Company v. Miller , No. 04-10314, 05-10092, 2006 WL 2844124 (E.D. Mich. Sept. 30, 2006), a decis i o n fr o m the Easter n District of Michig an which applied the standard of revie w under Michig an law for revie w of an appra isal awa rd without ever mentioning the FAA

. Moreove r, in response to the Court’s reque st for additional briefing at oral argument on the issue of whether , under Michig an law, an err or of law by the appra isal pane l co n s titutes manifest mistake, Cogswe ll did not respond that the F AA provide s the proper scope of revie w, but instead ar g ued that Detroit Auto. Inter-I

nsurance Exc hange v. Gavin , 416 Mich. 407, 331 N.W.2d 418 (1982), “ actua lly

supports the enfor ceme nt of the Appra isal Awar d . . . [because] a court may only proper ly revie w an arbitra tion awa rd fo r an err or of law wher e the err or clea rly appea rs on the fac e of the awa rd.” (D ef ’s Supplemental Br

. at 2 (interna l quotations, emphasis, and footnote omitted).)
R. 26 at 2-3. The court ruled that beca use it had alre ady ruled on the i s s u e “a ft er a ful l and sub s t antial round of briefing ,” “conside ration of Cogswe ll’s belated argument would prejudice Evanston, which never had the o p portunity to respond.” R. 26 at 3. Cogswe ll Properties filed a notice of appea l on Aug ust 20, 2010, from the district court’s J uly 30, 2010 order vacating the
appra isal awa

rd. On September 28, 2010, the umpire issued a new valuation per the court order

. He found that the actua l c ash value of the Property was $9,313,997.88, and that the actua l c ash value of the L oss was $958,560.44. The umpire c ommented that he still thought the original valuation was corre ct, but he fe lt constrained to follow the district c ourt’s opinion. R. 28-1. On October 5, 2010, Evanston I nsuranc e’s appra iser executed the umpire’s evalua tion. As stated in the new awa

rd, the actua l cash value of the Property , for coinsuranc e p u rp o s es , wa s $9,313,997.88. Under the coinsuranc e provision, Cogswe ll Properties wa s there fore require d to

car ry insurance on the Property for at l ea s t $ 7 ,451,198.30 (80% of $9,313,997.88). Be cause

-10-Cogswe ll Prope rties car ried only $1 milli on in insurance on the Property , Evanston I nsuranc e was liable for only 13.42% of the loss ($1 milli on divided by $7,451,198.30). Under the new awa rd, the

ac t u al ca s h value of the loss and damag e to the Building was $958,560.44. This made Evanston
I nsuranc e liable to Cogswe ll for $128,645.14 for the loss ($958,560.44 t i m es 1 3.42%). After adjusting for the deductible ($5 , 000) and Cogswe ll Properties’s prior pay ment ($36,918.27),
Evanston I nsuranc e was liable for an additional $86,726.87 ($128,645.14 less $36,918.27 and $5,000). On Dec ember 17, 2010, the district court enter ed judgme nt in the amount of $86,726,87. On J anuar

y 14, 2011, Cogswe ll Properties filed a notice of appea l from the district cour t’s Dec ember

17, 2010 judgme nt on the new a ppraisal a war d. The two a

ppeals we re c onsolidated by this court on Fe bruar

y 8, 2011. II. Analysi s 4

A. Applicabi lity of th e F AA Cogswe ll Properties contends that the district court committed reve rsible err or by failing to apply the FAA to this case beca use Cogswe ll P ro p erties maintains that state law applies and that Michig an law c onsiders appr aisals to be a form of common law arbitration. Cogswe ll Properties 5 continues that the “inver se pree mption” of the McCarr an-F erguson Act does not a pply in this case

I n its J urisdictional Statement sec t ion, Cogswe ll Properties states that this court has 4 jurisdiction over Appea l No. 10-2075, beca use section 16(a) (1)( E) of the FAA provides for a rig ht to app eal to a court with competent jurisdiction from an order vacating an arbitra tion awa rd. Evanston I nsuranc e disputes t h i s o n the g round that the FAA does not apply and thus aff ords no basis for jurisdiction. I n any event, this issue was rende red moot by the notice of appea l Cog swell Properties filed on J anuar y 14, 2011, upon the district co urt’s entry of final judgme nt on Dec ember

17, 2010, from which Cog swell Properties timely appea led (Appe al No. 11-1068)

. Neither party disputes that the appra isal clause is contained in a policy of insurance that 5 involves interstate c ommerce . -11-beca

use the FAA does not invalidate, impair, or s uperse de the Michig an appra isal statute and the Michig an laws and court rules g overning arbitra tion wer e not enac ted for the purpose of regulating insurance

. Evanston I nsuranc e responds that Cogswe ll Properties forf eited any argument that the FAA applies. Evanston I nsuranc e maintains that the district court applied the corr ect standard of judicial revie w under

Michig an law a

nd corr ectly

held that the aw ard r efle cted a manifest mistake. 1. F orfeiture of the F AA Claim First we consider whether Cogswe ll Properties forf eited the argument that the FAA applies rathe r than state law. The district court ref used to apply the FAA beca use Cogswe ll Properties did not claim that the FA A g overne d until it filed its motion for rec onsideration. We revie w the district court’s denial of a motion for rec onsideration for abuse of discretion. Jones v . Caruso , 569 F.3d 258, 265 ( 6th Cir. 2009).
L ocal Rule 7.4(a) for the United States District Court for the Western District of Michig an provides that in moving for rec onsideration, the movant must “not only demonstrate a p al pable d ef ec t by which the Court and the parties have been misled, but [m ust] also show a differ ent dispositi on of the case must result from a corr ection there of.” “[A] motion for rec onsideration may
not be used to raise issues that could have been raised in the previous motion.

. . .” Aero-M otive Co. Great Am. I

ns. , 302 F. Supp.2d 738, 740 (W.D. Mich. 2003). The district court did not abuse its discretion. As the d i s t rict court detailed in its order denying rec onsideration, Cogswe ll Pro p e r ti e s h a d s e v e r a l o p p o r

tu n it ie s to invoke the FAA , including in the decla

ratory judgme nt it filed, or in connec tion with Evanston I nsuranc e’s action to vacate the
appra isal awa

rd, as part of its summary judgme nt motion. Yet it consistently maintained that state

-12-law applied, and did not introduce t h e co n ce pt until afte r the district court had g rante d summary

judgme nt to E v an s t o n I nsuranc e. Fur thermore , as the district court noted, enter taining the new arg ument afte r “a full and substantial round of briefing ” would prejudice Evanston I nsuranc e, which would be re quired to re spond to an entirely new a nd complex lega l theory

under the FAA

. Arg uments raised for the first time in a motion for rec onsideration are untimely and forf eited

on app ea l

. See Morgan v. FBI , 509 F.3d 273, 277 (6th Cir. 2007) (and case s cited there in); Am. Meat Inst.v. Pridgeon , 724 F.2d 45, 47 (6th Cir. 1984). See also Scottsdale Ins. Co. v. Flowers , 513 F.3d 546, 553- 54 (6th Cir. 2008) (holding t hat t he defenda nt failed to prese rve for appe al issue of whether the dis trict court had abused its discretion by exercising jurisdiction in a decla ratory judgme nt action since it was not raised until the reply to the opposing party ’s response to party ’s motion to amend the orig inal decla ratory judgme nt action). Althou gh t h i s rule is prudential, not j u risdictional, Official Comm. of Unsec ured Creditors of Color Tile, Inc. v. Coopers & Lybr a n d , LLP , 322 F.3d 147, 159 (2d Cir. 2003); Coffee Beane ry, Ltd. v. W W , L.L.C

. , 300 F. App’x 415, 419 (6th Cir. 2008) (citing Coopers & Lybrand ), we find no rea son to deviate from the rule in this case . See Scottsdale, 513 F.3d at 552 (noting that this court has, “on occa sion, deviated from the g ener al rule in ‘exceptional case s or particula r ci rc umstances’ or when the rule would produce a plain miscarr iag e of justice’ ”) ( quoting Foster v. Barilous , 6 F.3d 405, 407 ( 6th Cir. 1993)). 6
As a result, we need not consi d er it here

. Notwithstanding, for t he reasons provided next,

we c onclude that the a

rg ument would fail any

way .

Cogswe ll Properties’ relianc e on Atlantic Aviation, Inc. v. EBM Group, Inc. , 11 F.3d 1276 6 (5th Cir. 1994), is misplaced. That case is limit ed to the prop o sition that the parties cannot use a choice -of- law provision to divest fede ral courts of jurisdiction. See Ford v. NY LCare Health Plans of the Gulf Coast, Inc. , 141 F.3d 243, 248 n.6 ( 5th Cir. 1998). -13-B. App lication of the F AA The FAA provides in rele vant part that: “A written provision in

. . . a contra ct evidenc ing a
transac tion involving commerc e to settle by arbitra tion a controve rsy there afte r arising out of such
contra ct or transac tion,

. . . shall be valid, irrevoc able, and enfor cea ble, save upon such g rounds as exis t at law or in equity for the revoc ation of any contra ct.” 9 U.S.C. § 2. The q u es t i o n t h en i s whether the appr aisal re medy

in this case wa s an arbitra tion under the F AA. See F it Tech, Inc., v

. Bally Total Fitness Holding Corp. , 374 F.3 d 1 , 6 -7 (1st Cir. 2004) (addr essing whether an

acc ounting reme dy under a purcha se agr ee m en t constituted “ar bitration” under FAA ). The FAA

cre ates “a body of federa l substantive law of arbitra bility , applicable to any arbit ra t i o n agr eeme nt within the cover ag e of the Act.” Moses H. Cone H osp. v. Me rcury Contstr. Corp. , 460 U.S. 1, 24 (1983). I ssues of arbitra

bility are questions of fede ral substantive law. Southland Corp. v. Keating , 465 U.S. 1, 12 (1984). But the FAA does not define “ar bitration,” Fit Tech , 374 F.3d at 6, so we
must also decide which source of law provides that definition. The circ uits are split on this question. Compare Hart

ford Lloyd’s Ins. C o. v. Teachworth , 898 F.2d 1058, 1061-63 (5th Cir. 1990) (state law); W asyl, Inc., v . First Boston C orp. , 813 F.2d 1579,1582 (9th Cir. 1987) (state la w), with Sal t Lake Tribune Publ. Co. v

. Mgmt. Planning, Inc. 390 F.3d 684, 689 ( 10th Cir. 2004) (fe dera l law);
Fit Tech , 374 F.3d at 6-7 (feder al l aw)

. See also Portland Gen. Elec. C o. v. U.S. Bank T

rust Nat. Ass’n as Tr. For Trust No. 1 , 218 F.3d 1085, 1091 (9th Cir. 2000) (Tashima, J ., concur ring ) (fe dera l law should apply

); id. at 1091-92 (McKe own, J ., specia lly concur ring ) (same)

. We a g ree with the First and Tenth Circuits that fede ral law should control the definition, basica lly beca use “[i] t seems
counter -intuitive to look to state law to define a term i n a fe d er al s tatute on a subject as to which Congr ess has d ec l ared the need for national uniformity .” Portland Gen. Elect. , 218 F.3d at 1091

-14-(Tashima & L ay , J J ., concur ring ); id. at 1091-92 (McKe own, J

. , specia lly concur ring ). Howeve r, for rea sons to be discussed below, the result would be the same in this case under both f eder al and state law. 1. F ederal Law Under fede ral law, whether the appra isal provision in this case is “ar bitration” under the FAA depends upon how closely it rese mbles classic arbitra tion. Salt Lake Tribune , 390 F.3d at 689; Fit Tech , 374 F.3d at 7. “Centra l to any conce ption of classic arbitra tion is that t h e d i s p u tants
empower ed a third party to rende r a decision settling their dispute.” Salt Lake Tribune , 390 F.3d at 689. See also Fit Tech , 374 F.3d at 7 (holding that “common incidents” of classic arbitra tion include

a final, binding reme dy by a third party , “an independe nt adjudicator , substantive standards,

. . . and

an opportunity for eac h side to prese nt its case ”); Harrison v. Nissan Motor Corp. , 111 F.3d 343, 350 (3d C ir. 1997) (s t at i n g t hat “the essenc e of arbitra tion, we think, is that, when the parties ag ree to submit their disputes to it, they have ag ree d to arbitra te these disputes throug h to completion, i.e. to

an awa rd made by a third-par

ty arbitra tor”). Bla ck’s L aw Dictionary define s arbitra tion as “a method of dispute resolution involving one or m o re neutra l third parties who are usu. ag ree d to by the disputing parties and whose decision is binding. — Also termed (re dundantly ) binding arbitra tion.” Bla ck’s L aw Dic tionary

(9th ed. 2009) ( emphasis omitted). Under this definition, the appra isal provision does not constitute arbitra tion for purposes of the FAA

. Her e the parties ag ree d in the Policy to submit the deter mination of the amount of loss and the value of the Building to appra isal. Although the app ra i s al provision states that “A decision
ag ree d to by any two [um pire and appra isers] will be binding,” it also states that “[i] f there is an appra isal, we [Evanston I nsuranc e] will still reta in our rig ht to deny the claim.” The Policy , like the

-15-statute “does not sug g est that a hear ing- ty pe appra isal proce ss is require d.” Hartford Ins. Co. v. Miller , Nos. 04-10314, 05-10092, 2006 WL 2844124, at *15 (E.D. Mich. Sept. 30, 2006) (discussing Mich. C o m p . L aw s § 500.2833(1)( m) and holding that althoug h the umpire could have held a hear ing, he was not re quired to). The Policy does not provide for a fina l and binding r emedy by a
neutra l third party

. 7
2. State Law The Michig an Supreme Court has held that an appra isal clause “constitutes a common-law arbi tration ag ree ment.” Davis v. Nat’l Am. Ins. Co. , 259 N.W.2d 433, 437 (Mich. App. 1977) (citing Manausa v. St. Paul Fire and Marine Ins. Co. , 97 N.W.2d 708 (1959))

. Be cause Michig an considers appra isals to be the equivalent of common-law arbitra tion, Cogswe ll Properties maintains that the appra isal here is in essenc e an arbitra tion provision and t h ere fore g overne d by FAA standards. This is not a corr ect char acte rization of Michig an law. Although the state case law likens
appra isals to common-law arbitratio n , it does so for the limit ed purposes of deter mining the
appropr iate standa

rd of judicial r eview of

appra isal awa

rds. The Michig an I nsuranc e Code mandates the inclusion of an appra i s al provision in fire i n s uranc e policies, Mich. Comp. L aws § 500.2806; § 500.2833(1)( a), and one will be judiciall y applied to an insurance contra ct even wher e omitted by the parties. Davis , 259 N.W.2d at 436. The
M i chigan Court of Appea ls has char acte rized this require ment as a “substitute for judic i al deter mination of a dispute conce rning the amount of loss , ” wh i ch is “a simple and inexpensive

Be cause the FAA claim has been forf eited, we need not addre ss Evanston I nsuranc e’s 7 arg ument that the McCarr an-F erguson Act inversely pree mpts the FAA ’s application in this case. -16-method for the prompt adjustment and settlement of claims.” Id. at 437 (interna l quotation marks and

citation omitted). The Michig an L eg islature has also cre ated a g ener al statutory scheme g overning contra ctual arbitra tion provisions that is entirely separ ate and distinct fr o m t h e I nsuranc e Code. See Mich. Comp. L aws § § 600.5001 et seq. The Michig an Ar bitration Act (MAA) , require s in ke y part that the ag ree ment to arbitrate be in writing and must provide that “a judgme nt of any circ uit court may be rende red upon the awa rd made pursuant to such ag ree ment.” Mich. Comp. L aws § 600.5001(2).
To qualify as a statutory arbitration ag ree ment, the contra ct must meet the require ments set forth in the statute. W

old Architects & Eng’rs v. Strat , 713 N.W.2d 750, 754 (Mich. 2006).
I f the parties’ contra ct does not comply with the require ments of the MAA, “the parties are said t o h av e agr eed to a common-law arbitra tion.” Id. at 755. Common-law arbitra tion is char acte rized by its unilatera l revoc ation rule, which “allows one party to terminate arbitra tion at any time befor e the arbitrator rende rs an awa rd.” Id. I n W

old , the Michig an Supreme Court rea ffirme d
t hat “Michig an has long rec og nized that a distinction exis ts betwee n statutory and com m o n -l aw arbitra tion,” id. at 754, and held that common-law arbitration coex ists with, and is not pre em p t ed by , the MAA. Id. at 756-59. See generally Jacobs v. Schmidt , 203 N.W. 845, 846 (Mich. App. 1925) (citing Noble v. Grandin , 125 Mich. 383, 84 N. W. 465 (1900)) (d i s cu s s i n g differ ence s betwee n ar b i t ra t i on as “a substitut ion, by consent of parties, of another tribunal for the tribunals provided by the ordinary proce sses of law,” and appra isal as “[a] valuation of, or an e stimation of the value of

, proper ty ”). The Michig an courts in turn have trea ted appra isals differ ently th a n c o mm o n - la

w a rbitration.
I n Frans v. Harleysv ille Lake States Ins. C o
. , 7 14 N.W.2d 671 (Mich. App. 2006), the court

-17-considere d whether an appra isal provision in a fire insurance policy was subject to unilatera l

revoc ation like other common-law arbitratio n cl au s es. Id. at 672. There , a fire damag ed the insured’s business proper ty

. Id. The parties wer e unable to ag ree on the amount of the loss, so the insurance company made a written demand for appra isal pursuant to the appra isal provision in the policy

. Id. The insured ref us ed t o p ar ticipate in the appra isal, arguing that the policy was a common-law arbitration clause subject to unilatera l revoc ation. Id. The trial court ag ree d. Id. Upon

rec onsideration, the Michig an Court of Appea ls held t h at beca use the appra isal provision in the pol icy was mandated by Mich. Comp. L aws § 500.2833(1)( m), and the statute “dictate s that the
appra isal proce ss shall proce ed on the demand of one party ,” the statute overr ode the common-law principle of unilatera l re v o ca t i o n . Id. See also Y aldo v. Allstate Prop. & Cas. Ins. Co. , 641 F. Supp.2d 644, 652 (E.D. Mich. 2009) (“The Frans decision, that parties cannot unilatera lly withdraw from appra isal, also makes sense g iven the Michig an statutory require ment that s u ch ap p raisal provisions be included in all fire insurance policies, beca use requiring parties to submit to appra isal would be hollow if either party wer e able to unilaterally

withdraw f

rom appra isal.”). An appra isal is equate d with common-ar bitration (but not statutory arbitra tion), for purposes of judicial re view. As the Michig an Court of Appe als explained:

This Court has ref

err ed to the appraisal proce ss mandated by statute and contained in d efe ndant' s homeowner ' s policy as a “substitute for judicial deter mination of a dispute conce rning the amount of a loss,” which is “a simple and inexpensive method for the prompt adjustment an d settlement of claims.” Thermo-Plastics R & D, Inc. v. Gene ral Acc ident Fire & Life Assurance Corp., Ltd. , 42 Mich.App. 418, 422, 202 N.W.2 d 703 (1972). This appra isal proce ss has been held to be the product of a common-law arbitra tion ag ree ment rathe r than statutorily mandated arbitration, and thus is not subject t o as s t ri ct a standard of revie w as statutorily mandated arbitration. Davis v. National American Ins. Co. , 78 Mich.App. 225, 232, 259 N.W.2d 433 (1977). J udicial revie w of the awa rd i s l i mited to instances of

bad fa ith, fraud, misconduc t, or manifest mistake. Port Huron & N.R.

-18-Co. v. Callanan , 61 Mich. 22, 26, 34 N.W. 678 (1887); Davis, supra , 78 Mich.App.

at 232, 259 N.W.2d 433. Auto-Owners Ins. Co. v. Kwais er , 476 N.W.2d 467, 469 (Mich. App. 1991) (footnote omitted). See also Frans , 714 N.W.2d at 673 (noting that the Michig an case s discussing appra isals and commonlaw arbitra tion do so “mainly in the contex t of an analy sis rela tive to the appropr iate standard of revie w applica

ble to common-law a

rbitration as opposed to statutory arbitra tion”). This r eading of Michig an law is consistent with the holdings of numerous other courts that have held that an ap p raisal provision in a proper ty insurance policy is not controlled by the FAA beca use appr aisal diffe rs sig nificantly from ar bitration. See, e .g., Dywer v . Fidelity Nat’l Prop. & Cas. Ins. Co. , 565 F.3d 284, 286-87 (5th Cir. 2009) (holding that an appra isal under a standard flood insurance policy was not an arbitration subject to the FAA ); Prien Props., LLC v. Allstate Ins. Co. , No. 07-CV-845, 2008 WL 1733591, at *2 (W.D. L a. Apr. 14, 2008) (holding that the app ra i s al
proce ss i n a co m m ercial proper ty policy was not g overne d under the FAA or the L ouisiana Arbitration L aw “beca

use appraisal i s separ ate an d distinct from arbitration”); Rastelli Bros., Inc.

v. Netherlands Ins. Co. , 68 F. Supp. 2d 451, 453-54 (D. N.J

. 1999) (holding that an appra isal clause

was not enfor cea

ble under the FAA , bec au s e s u ch an appra isal proce ss is not reg arde d as an “ar bitration” under New J erse y law; denying the plain ti f f ’ s motion to amend its complaint under Fe d.
R. Civ. P. 60(b)) ; Teachworth , 898 F.2d at 1062 (holding that appra isal was not arbitra tion g overne d by the FAA beca

use under Texas law an insurance appra isal only deter mines the value of the loss).

-19-I n short, even if the FAA claim had been proper ly raised and prese rved, and even if state law

applied to de termine the definition of “ar bitration” under the FAA , the appra isal provision at issue is not akin to an arbitra tion clause. The FAAdoes not g overn the parties’ dispute. 8 We now turn to the issue which is prope rly befor e us. C. Judicial Review of

the Appraisal Be cause the appra i s al provision at issue is just that, we have come full circ le back to the standard used by the district c ourt. That is, “ [ j]udicial r eview of the awa rd is limit ed to instanc es of bad f aith, fra ud, misconduct, or manife st mist ake.” Kwais er , 476 N.W.2d at 486. 9 The umpire’s char g e was to cho o s e an ap p ropriate measure of value and to provide an
accurate deter

mination of the true value of the Property and the L oss under the broad evidenc e rule. The g ross disparity betwee n the Actual Cash Value of the Property and the Actual Cash Value of the
L oss on thi s re co rd clearly evidenc ed a manifest mistake beca use it did not result in an acc urate estimate of the tr

ue value of the L oss. As the district court held, “ the loss portion comprising le ss than four perc ent of the entire square footag e of the Property was valued at approximately 48 perc ent of the whole.” R. 22-9. I f, as Cogswe ll Pro p er t i es s u g g ested in the district court, the destroy ed
proper ty was worth more than the rema inder, use of t wo separ ate valuation methods might have resulted in an acc urate est i m at e o f the value of the loss. Howeve r, as the district court found,

Cogswe ll Properties argues that none of the g rounds for vacating an arbitra tion awa rd under 8 § 10(a ) ex i s t i n this case . See 9 U.S.C. § 10(a)

. Be cause the FAA claim was forfeited below, we need not c onsider this arg ument. Cogswe ll Properties argues that the district court err ed in rely ing upon Detroit-Automobile 9 Inter-I nsurance Exc hange v. Gavin , 331 N.W.2d 418 (Mich. 1982), b ec au se its holding is specific ally limit ed to statutory arbitration case s, and the district court im proper l y applied several leg al principles de rived fr om Gavin . We ag ree that Gavin does not control. -20-C o gs well Properties failed to prese nt any proof to support that claim. Fur thermore , C o gs we l l Properties did not pay

for the optional c overa g e providing repla ceme nt cost. By using differ ent valuation methods for the actua l cash value of the Property as a whole and the actual cash value of the L oss, the um pire not only “improper l y as cribe d differ ent m eaning s of the [act u al ca s h value] for eac h of those deter minations when the Policy calls for one consistent definition of value,” R. 22 at 9, it rende red an “illogic al” result that contra vened the purpose of the broad evidenc e ru l e t o formulate “a corr ect estimate of the value of the destroy ed or damag ed
proper ty .” Davis , 259 N.W.2d at 438. III. Conclusi on Cogswe ll Properties’s attempt to rec ast the appra isal provision as an arbitra tion provision is understanda

ble beca use the FAA might have aff orded a more defe rential standard of revie w to the arbitra tor’s decision. Howeve r, the parties ag ree d under Michig an law to the appra isal proce ss. The district court applied the appropr iate standard of judicial revie w and applied it corr ec t l y . For the fore g oing r easons, the judg ment of the district cour t is AF F IRMED.

-21-