Mastech Inc v. Bleichert Inc ( 2014 )

STATE OF MICHIGAN
COURT OF APPEALS
MASTECH, INC, UNPUBLISHED
November 13, 2014
Plaintiff/Counterdefendant-
Appellant,
v No. 317467
Macomb Circuit Court
BLEICHERT, INC, LC No. 2011-001220-CK
Defendant/Third-Party Plaintiff/
Counterplaintiff-Appellee,
and
MASTECH MANUFACTURING, LLC and
MICHAEL O’BRIEN,
Third-Party Defendants.
Before: RIORDAN, P.J., and SAAD and TALBOT, JJ.
PER CURIAM.
MasTech, Inc. (MasTech) appeals as of right the trial court’s judgment of no cause of
action with respect to MasTech’s claims against Bleichert, Inc. (Bleichert). The judgment also
ordered MasTech to pay Bleichert $90,000 in attorney fees. The judgment reflected an
arbitration award issued after all parties agreed to submit their claims to arbitration.1 We affirm.
MasTech contends that the trial court erred in denying its motion to vacate the arbitrator’s
award. We disagree.
1
The trial court entered a judgment of zero with respect to Bleichert’s counterclaims against
MasTech and Bleichert’s third-party claims against MasTech Manufacturing, L.L.C. (MML) and
Michael O’Brien. These judgments also reflected the arbitrator’s award. These claims are not at
issue, as MasTech was the only party to appeal.
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“This Court reviews de novo a trial court’s decision to enforce, vacate, or modify an
arbitration award.”2 Because the parties’ agreement to arbitrate provided that a judgment could
be entered on the arbitration award, the agreement was for statutory arbitration.3 The court rule
pertaining to judicial review and enforcement of statutory arbitration agreements4 provides, in
relevant part, that a trial court may vacate an arbitration award on the following grounds:
(a) the award was procured by corruption, fraud, or other undue means;
(b) there was evident partiality by an arbitrator appointed as a neutral, corruption
of an arbitrator, or misconduct prejudicing a party’s rights;
(c) the arbitrator exceeded his or her powers; or
(d) the arbitrator refused to postpone the hearing on a showing of sufficient cause,
refused to hear evidence material to the controversy, or otherwise conducted the
hearing to prejudice substantially a party’s rights.
The fact that the relief could not or would not be granted by a court of law or
equity is not ground for vacating or refusing to confirm the award.[5]
An arbitrator exceeds his powers when he “act[s] beyond the material terms of the
contract from which [he] primarily draw[s] [his] authority, or in contravention of controlling
principles of law.”6
[W]here it clearly appears on the face of the award or the reasons for the decision
as stated, being substantially a part of the award, that the arbitrators through an
error in law have been led to a wrong conclusion, and that, but for such error, a
substantially different award must have been made, the award and decision will
be set aside.[7]
2
City of Ann Arbor v American Federation of State, Co, & Muni Employees (AFSCME) Local
369, 284 Mich. App. 126, 144; 771 NW2d 843 (2009).
3
See Nordlund & Assoc, Inc v Village of Hesperia, 288 Mich. App. 222, 226-227; 792 NW2d 59
(2010).
4
Id. at 227.
5
MCR 3.602(J)(2).
6
Nordlund, 288 Mich. App. at 228 (citation and quotation marks omitted).
7
Saveski v Tiseo Architects, Inc, 261 Mich. App. 553, 555; 682 NW2d 542 (2004) (citation and
quotation marks omitted; alteration in original).
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“There 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.”8
Arbitration, by its very nature, restricts meaningful legal review in the
traditional sense. As a general observation, courts will be reluctant to modify or
vacate an award because of the difficulty or impossibility, without speculation, of
determining what caused an arbitrator to rule as he did. The 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.
Reviewing courts are usually left without a plainly recognizable basis for finding
substantial legal error. It is only the kind of legal error that is evident without
scrutiny of intermediate mental indicia which remains reviewable . . . . In many
cases the arbitrator’s alleged error will be as equally attributable to alleged
“unwarranted” factfinding as to asserted “error of law”. In such cases the award
should be upheld since the alleged error of law cannot be shown with the requisite
certainty to have been the essential basis for the challenged award and the
arbitrator’s findings of fact are unreviewable.[9]
First, MasTech argues that the arbitrator’s award should be vacated because the
arbitrator’s findings of fact were inconsistent. MasTech, however, provides no legal support for
the proposition that a trial court can vacate an arbitrator’s award based on inconsistencies in the
arbitrator’s findings of fact. An appellant must support his argument with citation to an
appropriate authority.10 “An appellant may not merely announce his position and leave it to this
Court to discover and rationalize the basis for his claims, nor may he give only cursory treatment
with little or no citation of supporting authority.”11 The existence of inconsistent factual findings
is not a listed ground to vacate an arbitration award12 and, in fact, findings of fact are not
reviewable.13 Thus, MasTech’s claim must fail.
Moreover, MasTech’s claims of alleged inconsistencies are without merit. MasTech
argues that the arbitrator did not provide specific examples to support his findings that MasTech
breached the sales representative agreement and did not establish when MasTech first breached
8
Detroit Auto Inter-Ins Exch v Gavin, 416 Mich. 407, 428; 331 NW2d 418 (1982).
9
Id. at 429.
10
MCR 7.212(C)(7); Woods v SLB Prop Mgt, LLC, 277 Mich. App. 622, 626; 750 NW2d 228
(2008).
11
Bronson Methodist Hosp v Mich Assigned Claims Facility, 298 Mich. App. 192, 199; 826
NW2d 197 (2012) (citation and quotation marks omitted).
12
MCR 3.602(J)(2).
13
Gavin, 416 Mich. at 429.
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the agreement. This is not an inconsistency and, regardless, the arbitrator found that from 2004
to 2011, MasTech and Michael O’Brien engaged in a pattern of “deception, dishonesty, half-
truths, covert activity, and less than full disclosure.” It found that MasTech breached its duties
of good faith and fair dealing by not disclosing O’Brien’s interests in the MasTech companies,
failing to present all required sales opportunities to Bleichert, and not trying to sell all Bleichert
products as required under the sales representative agreement. In so finding, the arbitrator set
forth the factual basis for his ruling, as required by the arbitration agreement.
MasTech also argues that that there is an inconsistency between the arbitrator’s finding
that MasTech’s first material breach also included a violation of its duties under certain
provisions of the sales representative agreement and its conclusion that there was no impropriety
with regard to the jobs listed in Exhibit 107B. These findings, however, are only inconsistent if
this Court considers the alleged admission of Bleichert’s counsel at the arbitration hearing that
Bleichert had no evidence of breaches of those provisions of the sales representative agreement,
other than the 107B projects. Thus, even if reviewable, any inconsistency is not apparent on the
face of the award.14
The next asserted inconsistency is the arbitrator’s failure to find that the services
performed by MasTech, for which the commissions in question were earned, were improperly
performed, while at the same time deciding to award such commissions to Bleichert. This
alleged factual inconsistency is closely related to MasTech’s assertion that the arbitrator
misinterpreted and misapplied the law, which is reviewable.15 MasTech argues that the arbitrator
misapplied the relevant law by concluding that MasTech was not entitled to any of the
commissions it had not been paid, even those for services properly performed. MasTech argues
that the arbitrator found no evidence of damages to Bleichert resulting from MasTech’s breach of
fiduciary duty, yet the arbitrator essentially awarded Bleichert $890,833.89—the amount of the
unpaid commissions—for this breach.
The faithless agent rule provides that an agent who engages in misconduct is not entitled
to the compensation related to the act that was performed improperly.16 However, “[i]t is the
generally accepted rule that an officer may forfeit all right to compensation because of fraud,
misconduct or gross neglect in the management of the corporation or in the performance of his
duties.”17
14
Id. at 428-429; Saveski, 261 Mich. App. at 555.
15
See Nordlund, 288 Mich. App. at 228.
16
See Harris v Specialties Distrib Co, 305 Mich. 373, 379; 9 NW2d 645 (1943) (noting that the
employee had no right to profit from improper sales and his claim should be reduced by the fees
of gratuities he received); Rippey v Wilson, 280 Mich. 233, 245; 273 N.W. 552 (1937) (noting that
an attorney may lose his right to fees if he engages in unprofessional conduct, but when services
are severable, misconduct in one phase does not result in forfeiture of fees in another phase).
17
Toy ex rel Ketcham v Lapeer Farmers Mut Fire Ins Ass’n, 297 Mich. 188, 192; 297 N.W. 230
(1941); see also Sweeney & Moore v Chapman, 295 Mich. 360, 363; 294 N.W. 711 (1940) (noting
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In his award, the arbitrator concluded that MasTech “engaged in serious misconduct,
breach of its duties of full disclosure and of good faith and fair dealing – all representing a
material breach of the 2007 Sale Representative Agreement.” The arbitrator found that from
2004 to 2011, “there was a clear and definite pattern by MasTech and Michael O’Brien of
deception, dishonesty, half-truths, covert activity, and less than full disclosure.” The arbitrator
concluded that “MasTech repeatedly breached its duty to fully, fairly, and honestly disclose
information about Michael O’Brien’s actual ownership interests” in the MasTech-related
companies. These conclusions indicate that the arbitrator found that MasTech engaged in willful
misconduct. Thus, the arbitrator could have required MasTech to forfeit its right to all
compensation under the sales representative agreement.18 Instead, the arbitrator decided that
MasTech should only forfeit those commissions that Bleichert had not yet paid, which was
actually a better result for MasTech. Regardless, any potential legal error is not subject to review
as it is not “evident without scrutiny of intermediate mental indicia.”19 Further, even if the
arbitrator’s award of damages was not supported by case law and could not be granted by a trial
court, “[t]he fact that the relief could not or would not be granted by a court of law or equity is
not ground for vacating or refusing to confirm the award.”20
Affirmed.
/s/ Michael J. Riordan
/s/ Henry William Saad
/s/ Michael J. Talbot
that, generally, a broker forfeits his right to compensation by “misconduct, breach of duty, or
wilful [sic] disregard”); 2 Restatement Agency, 2d, § 469, p 399 (“An agent is entitled to no
compensation for conduct which is disobedient or which is a breach of his duty of loyalty; if
such conduct constitutes a willful and deliberate breach of his contract of service, he is not
entitled to compensation even for properly performed services for which no compensation is
apportioned.”).
18
See Toy, 297 Mich. at 192; Sweeney, 295 Mich. at 363; 2 Restatement Agency, 2d, § 469, p
399.
19
Gavin, 416 Mich. at 429.
20
See MCR 3.602(J)(2).
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