TBI Sols. v. Gall
| Decision Date | 24 February 2022 |
| Docket Number | 356747 |
| Parties | TBI SOLUTIONS, LLC, Plaintiff/Counterdefendant-Appellee, v. JAMES A. GALL, Defendant/Counterplaintiff-Appellant. |
| Court | Court of Appeal of Michigan — District of US |
UNPUBLISHED
Macomb Circuit Court LC No. 2021-000399-CK
Before: Rick, P.J., and Murray and Shapiro, JJ.
Defendant James A. Gall appeals as of right from the trial court's order confirming an arbitration award in favor of plaintiff TBI Solutions, LLC, and denying defendant's motion to modify or correct the award. Defendant does not challenge the $11, 000 in damages awarded by the arbitrator, but objects to the $50, 000 award of attorney fees and costs. For the reasons stated in this opinion, we affirm.
Defendant was the clinical director for plaintiff medical provider for approximately 10 years. After defendant resigned from that position plaintiff filed a demand for arbitration relying on the employment contract that mandated arbitration for any employment-related dispute. Defendant then brought an action to permanently stay the arbitration proceedings. Defendant did not assert that there was some specific defect in the arbitration provision, but argued that because he never signed the employment agreement he could not be bound by its arbitration provision. The trial court determined that despite the lack of signature, defendant had assented to the terms of the employment agreement by his continued employment with plaintiff. Accordingly, the court ruled that the parties had entered into a binding arbitration agreement and dismissed defendant's action.
In the arbitration proceedings, defendant argued that because he did not sign the employment contract he could not be bound by the substantive terms that plaintiff asserted he violated. He sought to narrow the scope of the trial court's ruling arguing that the court had merely determined that there was a binding arbitration agreement, not that the employment agreement as a whole was binding. The arbitrator disagreed and held that the doctrines of res judicata and collateral estoppel precluded defendant from relitigating the existence of an employment agreement. The arbitrator reasoned that an enforceable arbitration agreement could only arise out of the larger employment agreement presented to the trial court and that the enforceability of the entire agreement was the basis for the holding regarding arbitration.
In her opinion captioned "final award," the arbitrator rejected several of plaintiff's claims but ruled that defendant had not performed his contractual duties regarding oversight of medical records and accreditation compliance and awarded plaintiff $11, 000 in damages. Pursuant to the arbitration provision, the arbitrator also awarded $50, 000 in attorney fees and costs to plaintiff as the prevailing party.
Plaintiff then filed this action in the trial court to confirm the arbitration award, and defendant moved the court to modify or correct the final arbitration award. Defendant objected to the award of attorney fees and costs, arguing that the arbitrator made an error of law when she determined that defendant was bound to all terms of the unsigned employment contract under the doctrines of res judicata and collateral estoppel.
After hearing oral argument, the trial court denied defendant's motion to modify or correct the award, concluding that the principles of res judicata and collateral estoppel did apply to its prior ruling that there was an enforceable contract. The court entered judgment in favor of plaintiff confirming the arbitration award.
On appeal, defendant argues that the arbitrator erroneously relied on the doctrines of res judicata and collateral estoppel to bind defendant to the entire unsigned employment contract.[1]
We agree with defendant that res judicata is not applicable to the facts of this case.[2] Rather, collateral estoppel is the relevant preclusion doctrine. "The doctrine of collateral estoppel precludes relitigation of an issue in a subsequent, different cause of action between the same parties when the prior proceeding culminated in a valid final judgment and the issue was actually and necessarily determined in that prior proceeding." King v Munro, 329 Mich.App. 594, 599; 944 N.W.2d 198 (2019) (quotation marks and citation omitted).
Defendant maintains that collateral estoppel does not apply because the trial court in the motion to stay proceedings did not decide that the entire unsigned employment agreement was enforceable, but only that the parties were bound by the arbitration provision contained within the employment agreement. Defendant further argues that under the Uniform Arbitration Act (UAA), MCL 691.1681 et seq., the trial court could not have decided whether the entire contract was enforceable. MCL 691.1686 provides in relevant part:
Thus, under the UAA, "[t]he existence of an arbitration agreement and the enforceability of its terms are judicial questions for the court rather than for the arbitrators." Watts v Polaczyk, 242 Mich.App. 600, 603; 619 N.W.2d 714 (2000). Then, if the court determines that "the dispute is arbitrable, the merits of the dispute are for the arbitrator." Altobelli v Hartmann, 499 Mich. 284, 296; 884 N.W.2d 537 (2016) (quotation marks and citation omitted).
Defendant's point is well taken that, in a typical case, the trial court would have decided only whether an arbitration agreement existed, not whether the larger contract was enforceable. In this case, however, defendant did not make a specific challenge to the arbitration provision in his argument to the trial court that the case was not subject to arbitration. Rather, defendant argued that the contract, as a whole, was not enforceable because he did not sign the employment agreement and did not otherwise agree to the terms therein. Thus, defendant's argument that there was not an agreement to arbitrate necessarily required the trial court to determine whether the contract, as a whole, was binding.
We are not aware of published Michigan caselaw addressing whether the trial court or the arbitrator should decide a blanket challenge to the enforceability of a contract containing an arbitration provision.[3] Regardless, in his motion to stay arbitration, defendant effectively asked the trial court to decide the enforceability of the contract, and "a party may not claim as error on appeal an issue that the party deemed proper in the trial court . . . ." In re Conservatorship of Brody, 321 Mich.App. 332, 347; 909 N.W.2d 849 (2017) (quotation marks, brackets, and citation omitted). Given defendant's argument, the trial court necessarily had to decide as a threshold matter that defendant had assented to the terms of the employment agreement. Defendant also fails to appreciate that a subsequent ruling by the arbitrator that the employment agreement was not enforceable would have been inconsistent with the basis for the trial court's ruling that the arbitration provision was enforceable. See Wells Fargo Bank, NA v Null, 304 Mich.App. 508, 521; 847 N.W.2d 657 (2014) () (quotation marks and citations omitted). Thus, in holding that an arbitration agreement...
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