Tbi Solutions LLC v. James a Gall ( 2022 )

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
TBI SOLUTIONS, LLC, UNPUBLISHED
February 24, 2022
Plaintiff/Counterdefendant-Appellee,
v No. 356747
Macomb Circuit Court
JAMES A. GALL, LC No. 2021-000399-CK
Defendant/Counterplaintiff-Appellant.
Before: RICK, P.J., and MURRAY and SHAPIRO, JJ.
PER CURIAM.
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.
I. BACKGROUND
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
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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.
II. ANALYSIS
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
1
We review de novo a trial court’s ruling on a motion to vacate or modify an arbitration award.
Washington v Washington, 283 Mich App 667, 671; 770 NW2d 908 (2009). Judicial review of an
arbitration award is limited. TPS Servs, Inc v Nat’l-Std, LLC, 329 Mich App 615, 619; 944 NW2d
148 (2019). In order to vacate an arbitration award based on an error of law, the error “must be so
substantial that, but for the error, the award would have been substantially different.” Washington,
283 Mich App at 672 (quotation marks and citations omitted). Questions concerning the
applicability of res judicata and collateral estoppel are reviewed de novo. TCBI, PC v State Farm
Mut Auto Ins Co, 289 Mich App 39, 42; 795 NW2d 229 (2010); Estes v Titus, 481 Mich 573, 578-
579; 751 NW2d 493 (2008). We also review de novo questions of statutory interpretation. White
v Taylor Distrib Co, Inc, 275 Mich App 615, 620; 739 NW2d 132 (2007).
2
“The doctrine of res judicata is employed to prevent multiple suits litigating the same cause of
action.” Adair v State, 470 Mich 105, 121; 680 NW2d 386 (2004). In the arbitration proceedings,
defendant was not attempting to relitigate a claim that was or could have been resolved in the
initial action filed before the trial court. Rather, the question is whether he sought to relitigate an
issue that was necessarily decided by the trial court. Accordingly, collateral estoppel is the more
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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
NW2d 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:
(2) The court shall decide whether an agreement to arbitrate exists or a
controversy is subject to an agreement to arbitrate.
(3) An arbitrator shall decide . . . whether a contract containing a valid
agreement to arbitrate is enforceable.
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 NW2d 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 NW2d 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
applicable doctrine. See People v Gates, 434 Mich 146, 155 n 10; 452 NW2d 627 (1990); Ditmore
v Michalik, 244 Mich App 569, 577; 625 NW2d 462 (2001).
3
Under the Federal Arbitration Act, 9 USC 1, et seq., the United States Supreme Court has held
that “unless the challenge is to the arbitration clause itself, the issue of the contract’s validity is
considered by the arbitrator in the first instance.” Buckeye Check Cashing, Inc v Cardegna, 546
US 440, 445; 126 S Ct 1204; 163 L Ed 2d 1038 (2006). However, the Court declined to address
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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 NW2d 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 NW2d 657 (2014) (collateral estoppel serves to “prevent[] inconsistent decisions”) (quotation
marks and citations omitted). Thus, in holding that an arbitration agreement existed, the trial court
necessarily decided defendant’s broader challenge to whether there was an agreement at all.
Accordingly, the arbitrator correctly held that defendant was precluded by collateral estoppel from
relitigating that issue.
Further, while the arbitrator initially relied on the preclusion doctrines in holding that the
employment agreement was enforceable, the arbitrator stated in the final award that she also
concluded based on the evidence presented at the hearings that defendant was bound by the terms
of the employment contract. Thus, the arbitrator provided a basis for the award separate from the
doctrine of collateral estoppel. Defendant does not address this alternative ruling, let alone argue
that it was erroneous. Accordingly, even if collateral estoppel did not apply, we would nonetheless
affirm.
Finally, we note that defendant’s request for relief is not supported by his underlying legal
argument. Again, defendant objects only to the award of attorney fees and costs. He does not
argue, however, that the trial court erred by holding that there was an enforceable arbitration
provision, which mandated an award of attorney fees and costs to the prevailing party. Rather,
defendant’s position is that the arbitrator was not precluded from deciding whether he was bound
by the other provisions in the employment agreement, which were the basis for the substantive
breach of contract claims. For the reasons discussed, we reject that argument. But even if we were
to agree with defendant, that would not provide a basis for modifying the award of attorney fees
or costs,4 which were awarded pursuant to by the arbitration provision that defendant is no longer
challenging. In short, defendant challenges the award of attorney fees or costs, but he does not
explain why the arbitrator should not have applied the attorney fee provision.
Affirmed.
/s/ Michelle M. Rick
/s/ Christopher M. Murray
/s/ Douglas B. Shapiro
whether the court or the arbitrator should decide the issue of whether an agreement between the
parties “was ever concluded,” id. at 444 n 1, which was the question in this case.
4
Given our ruling, we need not address plaintiff’s argument that defendant could not seek to
modify or correct the arbitration award under MCR 3.602(K) on the basis of an alleged error of
law by the arbitrator.
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