Court Opinion

ID: 2812161
Source: CourtListenerOpinion
Date Created: 2015-06-26 12:13:31.840405+00
Date Added: 2024-06-11T11:28:01.507579
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

FREMONT COMMUNITY DIGESTER, L.L.C.,                                  UNPUBLISHED
                                                                     June 25, 2015
               Plaintiff-Appellant,

V                                                                    No. 320336
                                                                     Oakland Circuit Court
DEMARIA BUILDING COMPANY, INC.,                                      LC No. 2013-134997-CZ

               Defendant-Appellee.

Before: METER, P.J., and CAVANAGH and WILDER, JJ.

PER CURIAM.

        Plaintiff, Fremont Community Digester, LLC, appeals as of right the trial court’s order
granting summary disposition in favor of defendant, Demaria Building Company, Inc. We
affirm.

        In December 2010, plaintiff and defendant entered into an engineering procurement and
construction contract for a construction project in Fremont, Michigan. The contract provided
that all disputes were to be submitted to arbitration “in accordance with the Construction
Industry Rules of Arbitration [(‘CIRA’)] of the American Arbitration Association [(‘AAA’)]
(and with the procedural law of the State of Michigan in matters as to which such Rules of
Arbitration are Silent).”

        After various disputes arose, the parties entered into another agreement, referred to as the
“Letter Agreement,” which specifically delineated the manner in which they would address their
disputes through arbitration. The Letter Agreement provided that a single arbitrator, agreed to by
the parties, would decide the parties’ disputes. The “Letter Agreement” provided, in relevant
part:

              This letter will set forth our agreement to arbitrate certain disputes now
       pending between DeMaria Building Company and Fremont Community Digester.

                                              *    *    *

              The parties have agreed that the arbitration will be conducted in
       accordance with the current version of the Construction Industry Arbitration
       Rules promulgated by the American Arbitration Association (the “Rules”) and in
       accordance with Michigan law. . . .

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               The parties have agreed to submit certain defined disputes for resolution
       by the arbitrator and have agreed to be bound by the arbitrator’s decision in
       accordance with the Rules and the applicable law. . . . The arbitrator’s decision
       shall be conclusive only of the matters actually submitted to the arbitrator for
       decision and the parties will not be precluded from raising other issues in the
       future, so long as those issues were not previously presented to the arbitrator.
       Prior to the close of the hearings, the arbitrator shall identify the issues upon
       which he expects to render a decision and such list shall be dispositive of the
       issues actually presented to, and resolved by, this arbitration.

        The arbitrator issued a decision resolving the parties’ disputes, and the award was
satisfied. Defendant thereafter made a demand for arbitration of additional claims that were not
previously decided by the arbitrator. Defendant argued that the newly disputed claims were
subject to the Letter Agreement, whereas plaintiff maintained that the newly disputed claims
were outside the scope of the Letter Agreement and should instead be governed by the terms of
the parties’ original arbitration agreement (which required a three-member arbitration panel).
The arbitrator decided the matter by concluding that the newly disputed claims were subject to
the Letter Agreement.

        Plaintiff filed this action in circuit court, contending that the arbitrator exceeded his
authority, and acted contrary to law, by deciding, as a threshold question of arbitrability, whether
the newly disputed claims were within the scope of the Letter Agreement. Plaintiff requested
that the circuit court vacate the arbitrator’s order and issue a declaratory ruling stating the
parties’ rights and duties under the Letter Agreement and declaring that the newly disputed
claims were not within the scope of arbitration contemplated by the Letter Agreement.

         The parties filed cross-motions for summary disposition. Plaintiff moved for summary
disposition under MCR 2.116(C)(10), arguing that (1) as a matter of law, the arbitrator erred in
ruling that he had jurisdiction to determine the threshold question regarding the scope of the
Letter Agreement, and (2) even if the arbitrator had the authority to decide that question, he erred
in ruling that defendant’s new claims were within the scope of the Letter Agreement. In
response, defendant moved for summary disposition in its favor under MCR 2.116(C)(7), (8),
and (10), arguing that the arbitrator’s June 19, 2013 decision was correct and enforceable, and
that it was entitled to judgment in its favor based on principles of waiver and estoppel.

        The circuit court granted summary disposition in favor of defendant, holding that the
arbitrator acted within his authority to determine the scope and application of the parties’ Letter
Agreement, and that plaintiff failed to demonstrate that the arbitrator legally erred in ruling that
the newly disputed claims were within the scope of the parties’ Letter Agreement. The circuit
court first concluded that plaintiff was not disputing that the new claims were subject to
arbitration, but, instead, was only contesting the procedure for resolving those claims in
arbitration, which the circuit court determined was a matter for the arbitrator to decide. The
circuit court noted that both the parties’ original agreement and the Letter Agreement stated that
arbitration was to be governed by the CIRA, which authorized the arbitrator to decide matters
regarding his jurisdiction and objections regarding the scope or validity of the arbitration
agreement. Second, the circuit court declined to disturb the arbitrator’s substantive decision

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regarding the scope of the Letter Agreement on the basis that plaintiff had not shown that the
arbitrator’s decision was legally erroneous.

        This Court reviews de novo a trial court’s decision regarding a motion for summary
disposition. Jesperson v Auto Club Ins Ass’n, 306 Mich. App. 632, 639; 858 NW2d 105 (2014).
The circuit court did not specify under which subrule it granted summary disposition, but it
appears that it granted summary disposition in favor of defendant under MCR 2.116(C)(7),
which provides that summary disposition is appropriate where a claim is barred because of an
agreement to arbitrate. A motion under MCR 2.116(C)(7) is reviewed under the following
standards:

       A defendant who files a motion for summary disposition under MCR 2.116(C)(7)
       may (but is not required to) file supportive material such as affidavits,
       depositions, admissions, or other documentary evidence. MCR 2.116(G)(3);
       Patterson v Kleiman, 447 Mich. 429, 432; 526 NW2d 879 (1994). If such
       documentation is submitted, the court must consider it. MCR 2.116(G)(5). If no
       such documentation is submitted, the court must review the plaintiff ’s complaint,
       accepting its well-pleaded allegations as true and construing them in a light most
       favorable to the plaintiff. [Turner v Mercy Hosps & Health Servs of Detroit, 210
Mich. App. 345, 348; 533 NW2d 365 (1995); see also Linton v Arenac Co Rd
       Comm, 273 Mich. App. 107, 111-12; 729 NW2d 883 (2006).]

If the pleadings or other documentary evidence reveal that there is no genuine issue of material
fact, the court must decide as a matter of law whether the claim is barred. Linton, 273 Mich. App.
at 111-112. The existence and enforceability of an arbitration agreement is a question of law that
this Court reviews de novo. Michelson v Voison, 254 Mich. App. 691, 693-694; 658 NW2d 188
(2003).

        Plaintiff argues that the arbitrator exceeded his powers by determining whether the newly
disputed claims were subject to the parties’ Letter Agreement. “Arbitrators exceed their powers
whenever they act beyond the material terms of the contract from which they draw their
authority or in contravention of controlling law.” Miller v Miller, 474 Mich. 27, 30; 707 NW2d
341 (2005). Arbitration is a matter of contract, and the terms of the parties’ agreement dictate
the arbitrator’s authority. Id. at 32. “Arbitration agreements are generally interpreted in the
same manner as ordinary contracts.” Bayati v Bayati, 264 Mich. App. 595, 599; 691 NW2d 812
(2004).

        The circuit court and the arbitrator each acknowledged the general rule that the existence
and enforceability of a contract to arbitrate is a judicial question, which may not be decided by
the arbitrator. Arrow Overall Supply Co v Peloquin Enterprises, 414 Mich. 95, 99; 323 NW2d 1
(1982); see also Fromm v Meemic Ins Co, 264 Mich. App. 302, 305-306; 690 NW2d 528 (2004);
Madison Dist Pub Sch v Myers, 247 Mich. App. 583, 590-591; 637 NW2d 526 (2001). However,
as the trial court noted, the dispute in this case does not involve the existence or enforceability of
an arbitration agreement, or whether the parties’ claims are, in fact, arbitrable, as there is no
dispute that the parties’ claims are subject to arbitration. Rather, the dispute in this case pertains
to the procedure for arbitrating the parties’ newly disputed claims. Thus, in our view, the central
question at issue here is whether the newly disputed claims fall within the scope of the Letter

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Agreement. In deciding this question, we find it significant that plaintiff concedes that the Letter
Agreement constitutes a valid contract, and both parties agree that the arbitrator has jurisdiction
to decide claims falling within the scope of the Letter Agreement.

        Significantly, under Michigan law, contract interpretation “is an issue for the arbitrator to
determine.” City of Ann Arbor v Am Federation of State, Co, & Muni Employees (AFSCME)
Local 369, 284 Mich. App. 126, 144; 771 NW2d 843 (2009); Fromm, 264 Mich. App. at 305-307.
“[A]s long as the arbitrator is even arguably construing or applying the contract and acting
within the scope of his authority, a court may not overturn the decision even if convinced that the
arbitrator committed a serious error.” City of Ann Arbor, 284 Mich. App. at 144 (quotation marks
and citation omitted). Likewise, “a court should not interpret a contract’s language beyond
determining whether arbitration applies,” Fromm, 264 Mich. App. at 306 (emphasis added), and a
reviewing court is not permitted to engage in contract interpretation. City of Ann Arbor, 284
Mich. App. at 144. Additionally, “where substantive issues of a dispute are proper subjects for
arbitration[,] procedural matters arising out of the dispute are for the arbitrator and not the courts
to determine.” Bennett v Shearson Lehman-Am Exp, Inc, 168 Mich. App. 80, 83; 423 NW2d 911
(1987).

        Because it is clear that disputes arising between the parties were arbitrable and further,
because the arbitrator had the power to arbitrate claims within the scope of the Letter Agreement
contract, it was the duty of the arbitrator—and not the trial court—to interpret the Letter
Agreement so as to determine whether the newly disputed claims were within the scope of that
agreement. City of Ann Arbor, 284 Mich. App. at 144. Contrary to plaintiff’s argument on
appeal, this conclusion is consistent with the Uniform Arbitration Act, MCL 691.1681 et seq.
MCL 691.1686(2) provides that “[t]he court shall decide whether an agreement to arbitrate exists
or a controversy is subject to an agreement to arbitrate.” As previously discussed, however,
courts have limited review of jurisdictional challenges based on arbitrability, and arbitrability,
i.e., whether a claim is subject to arbitration, is not at issue here. Instead, the issue in this case is
whether the parties’ newly disputed claims were within the scope of the Letter Agreement.
Because the parties agree that the arbitrator has jurisdiction to decide claims falling within the
scope of the Letter Agreement, the arbitrator did not err in deciding whether the newly disputed
claims fell within the scope of the Letter Agreement, and the trial court did not err in holding that
it would not disturb the arbitrator’s findings in this regard.

        We reject as lacking in merit plaintiff’s argument that because the arbitrator issued a final
award after the initial proceedings concluded, he did not have jurisdiction to review any new
claims raised by defendant. Plaintiff cites authority for the proposition that an arbitrator may not
“reopen” or “rehear” proceedings in which a final award was entered. See Beattie v Autostyle
Plastics, Inc, 217 Mich. App. 572, 578-580; 552 NW2d 181 (1996). Here, however, the arbitrator
was not attempting to revisit any claims that were subject to the previous award, but rather to
determine whether newly disputed claims were subject to the Letter Agreement. As stated
above, contract interpretation is within the authority of the arbitrator, City of Ann Arbor, 284
Mich. App. at 144, and this Court may not engage in further review of the arbitrator’s factual
findings or decision on the merits, see id., Washington v Washington, 283 Mich. App. 667, 672;
770 NW2d 908 (2009); Michigan State Employees Ass’n v Dep’t of Mental Health, 178 Mich
App 581, 583; 444 NW2d 207 (1989).

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        Furthermore, plaintiff’s reliance on Oakland-Macomb Interceptor Drain Drainage Dist v
Ric-Man Const, Inc, 304 Mich. App. 46; 850 NW2d 498 (2014), is misplaced. In that case, this
Court held that the plaintiff was entitled to judicially enforce an arbitration provision requiring
an arbitrator with specialized qualifications. However, in the instant case, the parties modified
their original arbitration agreement by adopting the Letter Agreement, in which the parties also
agreed to and selected the sole arbitrator who was to decide the scope of that agreement.

       Affirmed. Defendant, being the prevailing party, may tax costs pursuant to MCR 7.219.

                                                            /s/ Patrick M. Meter
                                                            /s/ Mark J. Cavanagh
                                                            /s/ Kurtis T. Wilder

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