Michigan Arbitration Act: Arbitration Agreement Between Architects Enforced
In the recent case, Rouleau v Orchard, Hiltz,& McCliment, Inc. (“OHM”)(October 2012), the Michigan Court of Appeals cheap online viagra enforced an arbitration agreement, even though that agreement did not conform to the exact requirements of the Michigan Arbitration Act.
In Rouleau, two architectural firms (OHM and Hitch, Inc.) entered into an agreement in 2005 to form a third company, called Hitch LLC. Hitch Inc. transferred all of its assets and liabilities to the new entity, Hitch LLC. The parties’ 2005 agreement included provisions for arbitration and indemnity. Later, White Cloud Public Schools sued Hitch Inc. for negligently performed construction work. OHM, the sole shareholder of Hitch Inc., then sued a former shareholder seeking indemnity for the costs OHM incurred in defending the White Cloud lawsuit. OHM sought to arbitrate the dispute with its former shareholder pursuant to the parties’ 2005 agreement.
The question before the court in Rouleau dealt with the interpretation of the arbitration provision. Michigan law distinguishes between statutory arbitration and common law arbitration. Statutory arbitration is governed by Michigan’s Arbitration Act (MAA). To be enforceable under the MAA, the agreement must be in writing and must provide that “a judgment of any circuit court may be rendered upon the award.” If the agreement complies with the MAA, neither party can revoke it. If the agreement does not comply with the MAA, then it is treated as a common law arbitration agreement and either party can revoke it at any time before the arbitrator renders an award.
The arbitration clause in Rouleau did not contain the language required by the MAA; therefore, the trial court refused to compel arbitration. The appellate court, however, reversed finding that the arbitration provision satisfied the MAA because it incorporated the commercial arbitration rules of the American Arbitration Association (AAA). Because the AAA rules contained the language required by the MAA, neither party could revoke their agreement to arbitrate.
Incorporating AAA arbitration rules is a common practice in business transactions and construction contracts. What do YOUR contracts provide regarding arbitration and do your contracts need updating to comply with the MAA?