Bienenstock & Associates, Inc v. Lowry

887 N.W.2d 237, 314 Mich. App. 508
CourtMichigan Court of Appeals
DecidedMarch 3, 2016
DocketDocket 323986
StatusPublished
Cited by23 cases

This text of 887 N.W.2d 237 (Bienenstock & Associates, Inc v. Lowry) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Bienenstock & Associates, Inc v. Lowry, 887 N.W.2d 237, 314 Mich. App. 508 (Mich. Ct. App. 2016).

Opinion

MURRAY, J.

In this action for declaratory and injunc-tive relief, plaintiffs Lauren Bienenstock & Associates, Inc. (LBA), Lauren Bienenstock, and Samuel Bienen-stock appeal as of right the order of the Oakland Circuit Court granting in part and denying in part their motion for summary disposition. The question presented is whether a trial court or an arbitrator has the authority under the Federal Arbitration Act (FAA), 9 USC § 1 et seq., to determine whether multiple arbitration cases may be consolidated when the arbitration agreement is silent on that issue. We hold that the arbitrator is the one to decide that issue, and so we affirm the trial court’s order denying plaintiffs’ motion for summary disposition on that issue.

I. FACTS AND PROCEDURAL HISTORY

The factual backdrop to this proceeding arose from a dispute about compensation. All of the defendants worked as independent contractors for LBA at some point in the past. All but two of the defendants in the trial court, Monica Storm and Pamela Worthington, also known as Pamela Jackson, signed independent contractor agreements (ICAs) with LBA for performing their work as licensed court reporters. Each of the ICAs signed by the 22 defendants contained the following clause:

Any dispute relating to this Agreement, or breach thereof, shall be settled by arbitration pursuant to the rules and regulations of the American Arbitration Association *511 (“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.

Initially, defendants filed a lawsuit against plaintiffs in the Macomb Circuit Court seeking what they believed was overdue compensation. However, as a result of the arbitration clause quoted above, plaintiffs moved for, and were granted, summary disposition with regard to 22 defendants in the case—all of whom had signed an ICA with an arbitration agreement—and were denied summary disposition with regard to the four other court reporters for whom no ICA could be found. 1 The 22 defendants appealed that decision to this Court, arguing that because the ICAs were not valid or enforceable, they were not required to resolve their disputes by arbitration. We concluded otherwise. Lowry v Lauren Bienenstock & Assoc, Inc, unpublished opinion per curiam of the Court of Appeals, issued December 23, 2014 (Docket No. 317516).

In any event, while those two cases were pending, defendants (including the 22 individuals with a pending appeal) filed a demand for arbitration against plaintiffs with the American Arbitration Association (AAA). Because their ICAs provided that arbitration would be handled under AAA rules and regulations, and AAA rules permitted class arbitration under certain circumstances, defendants filed their arbitration *512 as a class arbitration. Defendants defined the class as “[a] 11 court reporters who currently provide, or formerly provided, court reporting services as independent contractors for [LBA] pursuant to a written [ICA] that included an arbitration provision.” Defendants asserted that the class numbered in the hundreds, they all shared a common transaction arising out of the same facts and applicable law, joinder of all claimants would be impracticable, and class arbitration was the most convenient and cost-effective way of disposing of the dispute.

Plaintiffs responded by filing the instant suit in the Oakland Circuit Court, requesting declaratory and injunctive relief regarding defendants’ arbitration before the AAA. Specifically, plaintiffs requested that the trial court declare that defendants were not permitted to bring a class arbitration, and that it enjoin their current class arbitration from going forward. Plaintiffs asserted that federal caselaw under the FAA held that it was a court’s duty to decide the “gateway issue” of whether class arbitration is permitted. That question was not, as asserted by defendants, for the arbitrator to decide. Relatedly, plaintiffs also asked for a declaration that defendants were only permitted to proceed with individual arbitration regarding their own individual claims, and that there should not be any consolidation. Soon after filing suit, plaintiffs moved for summary disposition of all their claims pursuant to MCR 2.116(C)(6) and (C)(10), asking the trial court to (1) find that it had the authority to determine whether class arbitration or consolidation was permitted, and (2) decide those issues in plaintiffs’ favor.

Defendants, of course, disagreed with plaintiffs’ arguments. Instead, defendants countered, the arbitrator should determine whether class arbitration (and *513 consolidation) is permitted, principally because the arbitration agreement specifically stated that it would be handled under AAA rules and regulations, and those rules permit class arbitration in certain circumstances and give the arbitrator the authority to decide consolidation issues. Noting that the cases relied on by plaintiffs held only that a trial court should decide whether class arbitration is permitted when the contract does not require otherwise, defendants pointed to the contract’s specific reference to AAA rules, which state that the arbitrator is to make the decision, and argued that the arbitration provision required the trial court to defer to the arbitrator.

At the motion hearing, the trial court ruled from the bench. First, the trial court held that, pursuant to persuasive caselaw, in the face of contractual silence whether class arbitration is permitted is a gateway issue for the trial court to decide. The trial court also held that whether consolidation was permitted was a subsidiary question for the arbitrator to decide and denied plaintiffs’ motion for summary disposition on that question.

The trial court subsequently denied plaintiffs’ motion for reconsideration. In doing so, the trial court ruled that because the question of consolidation of claims that are undoubtedly arbitrable falls into the subsidiary question category, without specific instruction from the contract, it is an issue for the arbitrator to decide. Although the trial court noted the potential for disparate treatment between class arbitration and consolidation decisions and who can decide them, the court reasoned that a decision from the United States Court of Appeals for the Sixth Circuit, Reed Elsevier, Inc v Crockett, 734 F3d 594, 597 (CA 6, 2013), supported the principle that courts should decide the *514 gateway issue of class arbitration. The court noted that no decision supported the theory that consolidation was also a gateway issue, and so it concluded that it was a subsidiary issue.

This appeal followed.

II. ANALYSIS

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Cite This Page — Counsel Stack

Bluebook (online)
887 N.W.2d 237, 314 Mich. App. 508, Counsel Stack Legal Research, https://law.counselstack.com/opinion/bienenstock-associates-inc-v-lowry-michctapp-2016.