City of Dearborn v. Freeman-Darling, Inc., FREEMAN-DARLIN

• Decision Date: 03 December 1982
• Docket Number: FREEMAN-DARLIN,Docket No. 59791,INC
• Parties: CITY OF DEARBORN, A Michigan Municipal Corporation, Plaintiff-Appellant, v., Defendant-Appellee. 119 Mich.App. 439, 326 N.W.2d 831
• Court: Court of Appeal of Michigan — District of US

Page 831

326 N.W.2d 831

CITY OF DEARBORN, A Michigan Municipal Corporation, Plaintiff-Appellant, v. FREEMAN-DARLING, INC., Defendant-Appellee.

Docket No. 59791.

119 Mich.App. 439, 326 N.W.2d 831

Court of Appeals of Michigan.

Submitted June 16, 1982.

Decided Sept. 9, 1982.

Released for Publication Dec. 3, 1982.

[119 MICHAPP 440] William C. Hultgren and William C. Mulcahy, Dearborn, for plaintiff-appellant.

Federlein & Grylls, P.C., Royal Oak, for defendant-appellee.

Before V.J. BRENNAN, P.J., and RILEY and PAYANT, ^* JJ.

PER CURIAM.

Plaintiff appeals as of right from an order of the trial court denying plaintiff's request for a stay of arbitration and plaintiff's motion to compel discovery in aid of arbitration.

On April 12, 1979, defendant, Freeman-Darling, Inc., and plaintiff, the City of Dearborn, entered into a contract for additions and renovations to the Dearborn City Hall. The contract provided that all claims were to be referred to the architect for decision. A party aggrieved by such a decision could demand arbitration.

In October, 1979, defendant claimed, and the architect denied, delay damages. Defendant alleges that the parties mutually agreed that the dispute would not be submitted to arbitration until substantial completion of the project. Plaintiff has not responded to defendant's allegation.

The project was substantially completed in December, 1980. On January 19, 1981, defendant filed its demand for arbitration.

Thereafter, plaintiff filed an action in circuit [119 MICHAPP 441] court to stay arbitration and to compel discovery. An ex parte temporary order staying the arbitration was granted. Several months later, the stay of arbitration was dissolved after the defendant filed a more definite statement of the facts substantiating its claims. A hearing on plaintiff's motions to reinstate the order staying arbitration and to compel discovery was then held. The court denied the motions.

Plaintiff first claims that the trial court erred in denying its request to dismiss the demand for arbitration. Plaintiff argues that the defendant's demand for arbitration failed to adequately advise it of the nature of the claim and, therefore, violated the due process clause of the Michigan Constitution, Const.1963, art. 1, Sec. 17. Plaintiff contends that the due process clause "should" apply to statutory arbitration proceedings in Michigan.

Plaintiff is playing with words. The notice requirements of GCR 1963, 111.1(1), as well as the procedural rules applicable to arbitration, were fully complied with here.

The contract between the parties provided that all claims between the contractor and owner relating to the contract "shall be decided by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then obtaining". See, Sec. 7.9.1. Section 7 of the Construction Industry Arbitration Rules provides as follows:

"7. Initiation under an Arbitration Provision in a Contract

"Arbitration under an arbitration provision in a contract shall be initiated in the following manner:

"The initiating party shall, within the time specified by the contract, if any, file with the other party a notice of an intention to arbitrate (Demand), which notice [119 MICHAPP 442] shall contain a statement setting forth the nature of the dispute, the amount involved, and the remedy sought; and shall file two copies of said notice with any Regional Office of the AAA, together with two copies of the arbitration provisions of the contract and the appropriate filing fee as provided in Section 48 hereunder." (Emphasis added.)

An examination of the demand for arbitration and defendant's more definite statement discloses that they were sufficient. Together they reasonably informed the plaintiff of the nature of the claim it was called upon to defend. Therefore, plaintiff's due process rights have not been violated.

Moreover, it is doubtful whether the proscriptions of the due process clause are applicable to the case at bar. The proscriptions of the due process clause apply only to actions of the state and not to private conduct. Shelley v. Kraemer, 334 U.S. 1, 68 S.Ct. 836, 92 L.Ed. 1161 (1948). Contract actions between private parties will not invoke the due process clause. Harvey v. Aetna Life Ins. Co., 72 Mich.App. 285, 252 N.W.2d 471 (1976). Nor will the state's mere acquiescence in a private action convert that action into that of the state. Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978); Cole v. Dow Chemical Co., 112 Mich.App. 198, 315 N.W.2d 565 (1982).

Next, plaintiff claims that the trial court erred in denying its motion to compel discovery in aid of arbitration.

At the hearing held on August 21, 1981, plaintiff moved to compel discovery. The trial court denied the request for discovery, ruling that any discovery must be had in accordance with the arbitration rules "that the parties agreed to when they entered into the contract". At the time of the [119 MICHAPP 443] August 21, 1981, hearing, arbitration had begun, but the arbitration panel had not yet been certified.

Several federal courts have allowed discovery in aid of arbitration upon a showing of special need. Bigge Crane & Rigging Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y., 1973); Ferro Union Corp. v. SS Ionic Coast, 43 F.R.D. 11 (S.D.Tex., 1967); International Ass'n of Heat & Frost Insulators & Asbestos Workers, Local 66, AFL-CIO v. Leona Lee Corp., 434 F.2d 192 (C.A.5, 1970); Penn Tanker Co. of Deleware v. C.H.Z. Rolimpex Warszawa, 199 F.Supp. 716 (S.D.N.Y., 1961). Others have allowed limited discovery as to the arbitrability of a particular dispute. H.K. Porter Co., Inc., Connors Steel Div., West Virginia Works v. Local 37, United Steel Workers of America, AFL-CIO, 400 F.2d 691 (C.A.4, 1968); International Union of Electrical, Radio & Machine Workers, AFL-CIO v. Westinghouse Electric Corp., 48 F.R.D. 298 (S.D.N.Y., 1969).

However, in Burton v. Bush, 614 F.2d 389 (C.A.4, 1980), the fourth circuit held that a litigant in arbitration proceedings has no right to discovery. The Burton Court reasoned:

"An arbitration hearing is not a court of law. Walden v. Local 71, International Brotherhood of Teamsters, (4th Cir., 1972) 468 F.2d 196. When contracting parties stipulate that disputes will be submitted to arbitration, they relinquish the...