DeCaminada v. Coopers & Lybrand, L.L.P.

• Decision Date: 17 November 1998
• Docket Number: Docket No. 200089
• Citation: 591 N.W.2d 364,232 Mich.App. 492
• Parties: Joseph E. DeCAMINADA, Plaintiff-Appellee, v. COOPERS & LYBRAND, L.L.P., Jerome R. Wolfe, and Stephen W. McKessy, Defendants-Appellants.
• Court: Court of Appeal of Michigan — District of US

Page 364

591 N.W.2d 364

232 Mich.App. 492

Joseph E. DeCAMINADA, Plaintiff-Appellee, v. COOPERS & LYBRAND, L.L.P., Jerome R. Wolfe, and Stephen W McKessy, Defendants-Appellants.

Docket No. 200089.

Court of Appeals of Michigan.

Submitted June 10, 1998, at Detroit.

Decided Nov. 17, 1998, at 9:00 a.m.

Released for Publication Feb. 16, 1999.

Morris & Doherty, P.C. by E. Michael Morris and Paul F. Doherty, Birmingham, and Morganroth & Morganroth by Mayer Morganroth, Southfield, for the plaintiff.

Honigman Miller Schwartz and Cohn by Ronald S. Longhofer and Amy B. Folbe, Detroit, for the defendants.

Before WAHLS, P.J., and HOLBROOK, Jr., and FITZGERALD, JJ.

WAHLS, P.J.

In this age discrimination and conversion action, defendants appeal by leave granted from an order denying their motion to compel arbitration. We reverse.

The facts of the underlying lawsuit are not at issue on appeal. Essentially, plaintiff worked for defendant Coopers & Lybrand, L.L.P., for over thirty years before he was terminated. Plaintiff then filed suit alleging that his termination was the product of age discrimination and that defendants wrongfully converted his former clients. It is undisputed that plaintiff signed an arbitration agreement in which he agreed to arbitrate certain claims against defendant Coopers & Lybrand. In response to plaintiff's complaint, defendants filed a motion to compel arbitration. The trial court denied defendants' motion without explanation. We granted defendants' subsequent application for leave to appeal.

Before addressing the trial court's decision to deny defendants' motion to compel arbitration, we must address a procedural matter. Defendants did not originally file an answer to plaintiff's complaint. Instead, they filed their motion to compel arbitration, and, when their motion was denied, filed an application for leave to appeal. After defendants filed their application, plaintiff moved for entry of a default and entered a default below. Plaintiff then filed a motion to dismiss defendants' application for leave to appeal, arguing that, after the default, the court rules prohibited defendants from pursuing their appeal. In lieu of deciding plaintiff's motion to dismiss, this Court granted the application for leave to appeal and instructed the parties to address the issue in their appellate briefs. Having reviewed plaintiff's argument, we conclude that he misinterprets the court rules.

Generally, a defendant "must serve and file an answer or take other action permitted by law or these rules within 21 days after being served...." MCR 2.108(A)(1). However,

[w]hen a motion ... is filed, the time for pleading set in [MCR 2.108(A) ] is altered as follows, unless a different time is set by the court:

(1) If a motion under MCR 2.116 made before filing a responsive pleading is denied, the moving party must serve and file a responsive pleading within 21 days after notice of the denial. However, if the moving party, within 21 days, files an application for leave to appeal from the order, the time is extended until 21 days after the denial of the application unless the appellate court orders otherwise. [MCR 2.108(C)(1).]

Here, despite plaintiff's protestations, defendants' motion to compel arbitration was a motion under MCR 2.116. See MCR 2.116(C)(7). ¹ Thus, once defendants filed a timely application for leave to appeal, the time for filing an answer was extended until after the application was resolved. Under these circumstances, plaintiff's entry of a default was improper, and we decline to dismiss defendants' appeal. ²

Defendants raise only one issue on appeal. They argue that plaintiff signed a "Partners and Principals Agreement" containing a valid arbitration clause and, therefore, that the trial court erred in denying their motion to compel arbitration. We agree.

We review a trial court's grant or denial of a motion for summary disposition pursuant to MCR 2.116(C)(7) de novo to determine whether the moving party was entitled to judgment as a matter of law. Limbach v. Oakland Co. Bd. of Co. Rd. Comm'rs, 226 Mich.App. 389, 395, 573 N.W.2d 336 (1997). The Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-15, governs actions in both federal and state courts arising out of contracts involving interstate commerce. Burns v. Olde Discount Corp., 212 Mich.App. 576, 580, 538 N.W.2d 686 (1995). To ascertain the arbitrability of an issue, a court must consider whether there is an arbitration provision in the parties' contract, whether the disputed issue is arguably within the arbitration clause, and whether the dispute is expressly exempt from arbitration by the terms of the contract. Id. Any doubts about the arbitrability of an issue should be resolved in favor of arbitration. Id.

Here, plaintiff signed a Partners and Principals Agreement that included the following arbitration clause:

Any claim or controversy not specifically provided for in Section 12.2 [ ³] arising out of the provisions of this Agreement, the interpretation thereof, or the practice, business or affairs of the Firm shall be settled by arbitration in New York, New York, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered upon the award granted in such arbitration and such award may be enforced in any court having jurisdiction.

Another clause states that the agreement "shall be governed by the laws of the State of New York."

Defendants rely on the FAA for the proposition that the arbitration clause in the Partners and Principals Agreement is enforceable. Specifically, they rely on 9 U.S.C. § 2, which states:

A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.

Plaintiff argues that the FAA does not apply, citing 9 U.S.C. § 1, which defines the term "commerce." That section provides, in part: "[N]othing herein contained shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." Defendants respond that the Partners and Principals Agreement is not an employment contract and that, even if it is, it is not a contract of a "class of workers engaged in foreign or interstate commerce." We believe that defendants have the better argument.

State courts are bound, under the Supremacy Clause, U.S. Const., art. VI, cl. 2, to enforce the FAA's substantive provisions. Kauffman v. Chicago Corp., 187 Mich.App. 284, 286, 466 N.W.2d 726 (1991). While there is some disagreement in the federal courts regarding the scope of the exclusionary language in 9 U.S.C. § 1, it seems clear to us that it does not apply to the Partners and Principals Agreement in this case. Plaintiff simply cannot show that the agreement was a contract of employment of a "class of workers engaged in foreign or interstate commerce."

We have not found any Michigan cases addressing the scope of the exclusionary provision in 9 U.S.C. § 1. However, the Sixth Circuit Court of Appeals has adopted a narrow construction of that clause. Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 600-601 (C.A.6, 1995). After a lengthy review of other cases, the court summarized its analysis:

We conclude that the exclusionary clause of § 1 of the Arbitration Act should be narrowly construed to apply to employment contracts of seamen, railroad workers, and any other class of workers actually engaged in the movement of goods in interstate commerce in the same way that seamen and railroad workers are. We believe this interpretation comports with the actual language of the statute and the apparent intent of the Congress which enacted it. The meaning of the phrase "workers engaged in foreign or interstate commerce" is illustrated by the context in which it is used, particularly the two specific examples given, seamen and railroad employees, those being two classes of employees engaged in the movement of goods in commerce. [Id.]

We find the reasoning in Asplundh persuasive, and we adopt it as our own. Thus, we conclude that the exclusionary provision in 9 U.S.C. § 1 is limited to employees directly engaged in the movement of goods in interstate commerce. Clearly, plaintiff is not such an employee, and the exclusionary provision does not apply to the Partners and Principals Agreement in this case. ⁴

Plaintiff also argues that his claims are outside the scope of the agreement to arbitrate. Plaintiff's argument can succeed only if we adopt a very narrow reading of the arbitration clause. This, we decline to do. As noted above, any doubts about the arbitrability of an issue should be resolved in favor of arbitration. Here, the parties agreed to arbitrate claims "arising out of ... the practice, business or affairs of the Firm...." Plaintiff's claims are arguably covered by this language, and, resolving any doubts in favor of arbitration, the trial court should have granted defendants' motion to compel arbitration.

Plaintiff also asserts that he did not knowingly and voluntarily agree to arbitrate these claims. His argument rests on an opinion from the Ninth Circuit Court of Appeals, Prudential Ins. Co. of America v. Lai 42 F.3d 1299 (C.A.9, 1994), where the court concluded that an arbitration clause is not binding unless the plaintiffs "knowingly contract to forego their statutory remedies in favor of arbitration." Id. at 1305. With due respect to the Ninth Circuit Court of Appeals, there is nothing in the language of the FAA to support a "knowledge" requirement. Under the FAA, an arbitration clause...