Walton & Adams LLC v. Service Station Installation ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
WALTON & ADAMS, LLC, AND HEATHER UNPUBLISHED
ENTERPRISES, INC., doing business as A-STAR December 18, 2018
CONVENIENCE,
Plaintiffs-Appellants,
v No. 340758
Oakland Circuit Court
SERVICE STATION INSTALLATION LC No. 2015-150119-CB
BUILDING & CAR WASH EQUIPMENT, INC.,
Defendant-Appellee.
Before: CAVANAGH, P.J., and SERVITTO and CAMERON, JJ.
PER CURIAM.
Plaintiffs appeal as of right an order confirming an arbitration award and entering
judgment in favor of defendant, and denying plaintiffs’ countermotion to vacate the arbitration
award. We affirm.
This action arises out of a contract whereby defendant was to perform demolition and
construction services related to a gas station operated by A-Star and owned by Walton & Adams,
LCC (W&A). When the project was not completed in the expected time frame, the contract was
terminated for default. Defendant filed a claim of lien against both plaintiffs in the amount of
$355,778.84. Plaintiffs then filed this lawsuit, challenging the claim of lien. Defendant filed a
counterclaim, alleging that the contract was wrongfully terminated. Subsequently, the parties
agreed to arbitration and the arbitrator determined that plaintiffs were jointly and severally liable
to defendant in the amount of $80,733.68. Defendant requested that the trial court confirm the
award and enter judgment in its favor, and plaintiffs filed a countermotion to vacate the
arbitration award. The trial court ultimately found that it was unable to conclude that the
arbitrator exceeded his authority and entered judgment in favor of defendant and against
plaintiffs, jointly and severally, in the amount of $80,733.68. This appeal followed.
Plaintiffs argue that the trial court erred in confirming the arbitration award and entering
judgment in defendant’s favor because the arbitrator made an error of law by ruling that
plaintiffs were jointly and severally liable to defendant for damages, and exceeded his authority
by entering an arbitration award based on insufficient evidence. We disagree.
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“This Court reviews de novo a trial court’s decision to enforce, vacate, or modify an
arbitration award.” City of Ann Arbor v American Federation of State, Co, & Muni Employees
(AFSCME) Local 369, 284 Mich App 126, 144; 771 NW2d 843 (2009).
This Court’s ability to review an arbitration award is extremely limited. Fette v Peters
Const Co, 310 Mich App 535, 541; 871 NW2d 877 (2015). A reviewing court can only act on a
written record but “ ‘[t]here is no requirement that a verbatim record be made of private
arbitration proceedings, there are no formal requirements of procedure and practice beyond those
assuring impartiality, and no findings of fact or conclusions of law are required.’ ” Hope-
Jackson v Washington, 311 Mich App 602, 613-614; 877 NW2d 736 (2015), quoting Detroit
Auto Inter-Ins Exch (DAIIE) v Gavin, 416 Mich 407, 428; 331 NW2d 418 (1982). Thus,
reviewing courts are generally hesitant to modify or vacate an award because “ ‘[t]he informal
and sometimes unorthodox procedures of the arbitration hearings, combined with the absence of
a verbatim record and formal findings of fact and conclusions of law, make it virtually
impossible to discern the mental path leading to an award.’ ” Saveski v Tiseo Architects, Inc, 261
Mich App 553, 555; 682 NW2d 542 (2004), quoting DAIIE, 416 Mich at 429.
Generally, this Court’s review of an arbitration award is “ ‘restricted to cases in which an
error of law appears from the face of the award, or the terms of the contract of submission, or
such documentation as the parties agree will constitute the record.’ ” Hope-Jackson, 311 Mich
App at 614, quoting DAIIE, 416 Mich at 428-429. “By ‘on its face’ [this Court] mean[s] that
only a legal error ‘that is evident without scrutiny of intermediate mental indicia’ will suffice to
overturn an arbitration award,” because this Court is not permitted to review “an ‘arbitrator’s
mental path leading to [the] award.’ ” Washington v Washington, 283 Mich App 667, 672; 770
NW2d 908 (2009) (quotation marks and citations omitted). Further, in order for this Court to
vacate or otherwise modify an arbitration award, the error of law must be so egregious that it “
‘materially affect[s] the outcome of the arbitration . . . [and] plainly demonstrate[s] a disregard of
principles fundamental to a fair resolution of the dispute[.]’ ” Hope-Jackson, 311 Mich App at
614, quoting DAIIE, 416 Mich at 430.
Plaintiffs first contend that the trial court erred in confirming the award and entering
judgment in favor of defendant because the arbitrator assessed joint and several liability against
plaintiffs based on an incorrect finding of fact, namely, that plaintiff W&A was a party to the
contract between plaintiff A-Star and defendant. In support of their argument, plaintiffs allege
that the parties stipulated to the fact that W&A was not a party to the contract between A-Star
and defendant. However, no evidence of such a stipulation was ever given on the record in the
trial court, and this Court does not have access to a verbatim record of the proceedings that took
place in the arbitration hearing. The only documentation available to this Court that gives any
indication of what occurred in the arbitration hearing is the arbitration award. The arbitration
award states that “[t]he arbitrator finds that plaintiffs/counter-defendants and defendant/counter-
plaintiff . . . entered into an enforceable contract on or about July 30, 2015,” indicating that,
based on the evidence proffered by the parties at the arbitration hearing, the arbitrator found that
both plaintiffs entered into a contract with defendant. No further factual findings are included in
the text of the arbitration award, but the arbitrator is not required to make a record of its findings
of fact or conclusions of law. See Hope-Jackson, 311 Mich App at 614.
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We reiterate that this Court is only able to review an award if an error of law appears on
the face of the award. Id. This Court’s review of an arbitrator’s award cannot be expanded to
include speculation regarding “mental indicia,” or legal and factual conclusions that the
arbitrator was required to make in order to reach its ruling. Saveski, 261 Mich App at 558. “[A]
trial court may not hunt for errors in an arbitrator’s explanation of how it determined who is
liable under the arbitrated contract, and who owes what damages to whom.” Id. This arbitration
award lacks the type of obvious facial error that would allow this Court to vacate or modify it.
To do so would require an analysis of the facts of the case and speculation regarding the
arbitrator’s factual conclusions, which this Court is not authorized to review. Id. Ultimately, an
arbitrator’s award must be upheld by this Court if the arbitration award indicates that the
arbitrator considered controlling law and the evidence presented by the parties. Washington, 283
Mich App at 674. The arbitrator’s award states:
With respect to [defendant]’s counterclaim against plaintiffs/counterdefendants,
after reviewing the briefs and evidence presented at the hearing the arbitrator
finds that plaintiffs/counterdefendants materially breached the contract by
improperly terminating the contract with [defendant]. [Defendant] presented
evidence that [it] incurred damages in the amount of $80,733.68 as a result of the
breach.
It is apparent that the arbitrator considered controlling law regarding breach of contract and
examined the evidence presented by the parties. “[O]nce we have recognized that the arbitrator
utilized controlling law, we cannot review the legal soundness of the arbitrator’s application of
Michigan law.” Id. Accordingly, plaintiffs’ claim is without merit.
Plaintiffs also argue that the trial court erred in confirming the arbitration award and
entering judgment in defendant’s favor because the arbitrator exceeded his authority by assessing
$80,778.68 in damages based on insufficient evidence. Plaintiffs allege that only one
spreadsheet of calculations was submitted to the arbitrator, which allegedly showed that
defendant was entitled to $80,778.68 in damages. Plaintiffs’ argument presents a question
regarding the procedures used in arbitration proceedings. The stipulated order referring the case
to arbitration directed the parties to participate in statutory arbitration. The Uniform Arbitration
Act (UAA), MCL 691.1681 et seq., currently governs statutory arbitration. Fette, 310 Mich App
at 542. The UAA “ ‘governs an agreement to arbitrate whenever made[.]’ ” Id., quoting MCL
691.1683(1).
MCL 691.1695, which specifically governs the arbitration process, provides as follows:
(1) An arbitrator may conduct an arbitration in the manner that the arbitrator
considers appropriate for a fair and expeditious disposition of the proceeding.
The authority conferred on the arbitrator includes the power to . . . determine the
admissibility, relevance, materiality, and weight of any evidence. [MCL
691.1695(1).]
Plaintiffs do not dispute that defendant presented a spreadsheet that indicated the amount of its
damages. Further, there is evidence that defendant presented Hassan Houmani, who acted as an
agent of defendant, as a witness to testify regarding the damages incurred by defendant. Thus,
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the record suggests that evidence was submitted to the arbitrator for his consideration in making
a determination regarding the award of damages to defendant. However, this Court has
previously stated that reviewing courts may not “engage in a fact-intensive review of how an
arbitrator calculated values, and whether the evidence he relied on was the most reliable or
credible evidence presented.” Washington, 283 Mich App at 675. Thus, “even if the award was
against the great weight of the evidence or was not supported by substantial evidence, this Court
would be precluded from vacating the award.” Fette, 310 Mich App at 544-545. Accordingly,
plaintiffs’ claim must fail.
Affirmed. Defendant is entitled to costs as the prevailing party. See MCR 7.219(A).
/s/ Mark J. Cavanagh
/s/ Deborah A. Servitto
/s/ Thomas C. Cameron
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