Whether to consolidate multiple
arbitration claims is a decision for the arbitrator, and not the trial court,
unless the arbitration agreement specifically addresses the issue, the Michigan
Court of Appeals has ruled in a published decision.
The ruling in Lauren
Bienenstock & Associates, Inc v Lowry, et al
(Docket No. 323986) solidifies
that, when there is no contractual language indicating otherwise, an arbitrator
will determine the procedural question of whether numerous arbitration claims should
be combined.
The Bienenstock case began when
the defendants sued the plaintiff, claiming they were owed more than $1 million
for court reporting services they had provided as independent contractors. The
independent contractor agreements included the following arbitration provision:
“Any
dispute relating to this Agreement, or breach thereof, shall be settled
pursuant to the rules and regulations of the American Arbitration Association
(‘AAA’). Either Party requesting arbitration under this Agreement shall make a
demand on the other party by registered or certified mail, with a copy to the
AAA’s Southfield, Michigan office, which shall be the location of any
arbitration hearing. The arbitration shall then take place as noticed by the
AAA, and the outcome thereof shall be binding regardless of whether one of the
parties fails or refuses to participate.”
Based on this clause, the trial court granted summary disposition to the
plaintiff. The defendants appealed, claiming the agreements were unenforceable.
The Court of Appeals disagreed in a December 2014 unpublished ruling, Lowry
v Lauren Bienentock & Associates, Inc (Docket No. 317516).
When the defendants filed a demand for arbitration with the AAA, the
plaintiff brought a declaratory judgment action, asserting the defendants could
not pursue a class arbitration. The plaintiff argued a trial court must determine
the “gateway issue” of whether class arbitration is allowed, and not an
arbitrator.
The Court of Appeals rejected this argument, finding
that an arbitrator has the authority under the Federal Arbitration Act, 9 USC § 1, et seq., to determine whether a class arbitration should proceed.
According to the court, there are two scenarios where a trial court can
determine whether consolidation is permissible:
·
if
the contract explicitly states the court should decide the issue (i.e., the
intent is clear); and
·
if the
parties’ intent in unclear from the face of the contract, the court must make
presumptions regarding the parties’ intent, and should only decide an issue if
it is a gateway issue involving whether a contract to arbitrate exists, or
whether a particular type of claim falls under the arbitration agreement.
In this case, the Court of Appeals noted the arbitration clause did not
mention consolidation. Therefore, the court turned to making presumptions about
the parties’ intent, and whether a gateway issue existed.
Looking at the arbitration clause at issue, the Court of Appeals pointed
out the defendants’ underlying claim for past-due payments fell within the contract’s
terms. “Consequently, the issue of who decides whether to consolidate
arbitration claims does not fall within the general purview of a gateway issue
… and is instead a procedural or subsidiary issue for the arbitrator to
decide,” the court said. “Under the facts presented, the issue of consolidation
is a procedural one.”
According to the Court of Appeals, an arbitrator is in the best position
to decide whether arbitrations should be consolidated. In making this ruling,
the court relied on authority from the federal circuit courts and the U.S.
Supreme Court, including its decision in Stolt-Nielsen
SA v Animal Feeds Int’l Corp, 559 US 662 (2010).
In conclusion, the Court of Appeals held: “The virtual unanimity amongst
the federal courts prior to (and after) Stolt-Nielson,
holding that consolidation decisions are subsidiary ones left to the arbitrator
to decide under the contract (when the contract does not provide for a
different venue or otherwise address consolidation), remain persuasive
authority, and nothing in the case law since then requires a different
conclusion. We therefore agree with and follow the rationale of those cases and
hold that, absent any contractual language addressing the issue, whether
multiple arbitrations should be consolidated is a procedural or subsidiary
issue for the arbitrator to decide.”
Labels: American Arbitration Association, arbitration, Court Reporters, Court Reporting, Federal Arbitration Act, Lauren Bienenstock & Associates, michigan court of appeals
