Universal Academy v. Berkshire Development Inc

STATE OF MICHIGAN
COURT OF APPEALS
UNIVERSAL ACADEMY, UNPUBLISHED
June 20, 2017
Plaintiff-Appellant,
v No. 330707
Wayne Circuit Court
BERKSHIRE DEVELOPMENT, INC., LC No. 15-009072-CZ
Defendant-Appellee.
Before: STEPHENS, P.J., and K. F. KELLY and MURRAY, JJ.
PER CURIAM.
In this action for declaratory judgment to enjoin arbitration, plaintiff, Universal Academy
(Universal), appeals as of right the trial court order denying its motion for entry of a default
judgment against defendant, Berkshire Development, Inc. (Berkshire), terminating a preliminary
injunction against arbitration, and closing the case. We affirm.
I. BACKGROUND
This case arose out of an agreement between Universal and Berkshire for Berkshire to
provide demolition services to Universal and Hamadeh Education Services, Inc. (HES). The
agreement contained the following arbitration provision:
In the event of a dispute between Contractor and the Owner that cannot be
resolved, the parties agree to binding arbitration with the American Arbitration
Association in accordance with the Construction Industry’s Rules of the American
Arbitration Association in effect as of the date of this Agreement. The decision of
the arbitrator shall be final and binding on the parties and judgment many [sic] be
entered upon it in accordance with the laws of the State of Michigan in any court
of competent jurisdiction.
Universal ultimately terminated the agreement, alleging material breaches by Berkshire.
Following termination of the agreement, a number of trucking companies that had
subcontracted with Berkshire to provide trucking services for the demolition project filed a
complaint against Berkshire, Universal, and HES requesting foreclosure of their construction
liens and payment for their services. In this underlying case, Berkshire filed a cross-complaint
against Universal and HES on January 2, 2015, requesting foreclosure of the lien it recorded
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pursuant to the Construction Lien Act, MCL 570.1118(2), and asserting claims of promissory
estoppel and fraudulent inducement. Five months after filing its cross-complaint, on May 1,
2015, Berkshire filed a motion to enforce the arbitration agreement between it and Universal.
The trial court ultimately granted summary disposition to Universal pursuant to MCR
2.116(C)(7), (8) and (10) dismissing all claims raised in Berkshire’s cross-complaint. It also
denied Berkshire’s motion to enforce the parties’ arbitration agreement, noting that Berkshire
had no claims left against Universal to arbitrate.
Following dismissal of its cross-complaint in the underlying case, Berkshire filed a
demand for arbitration with the American Arbitration Association (AAA) on June 12, 2015, to
arbitrate its breach of contract claim against Universal. In response, Universal filed a verified
complaint for declaratory relief and to permanently enjoin arbitration of any claims arising out of
the demolition project because Berkshire waived its right to arbitration, and res judicata and
compulsory joinder, MCR 2.203(A), barred such claims. When Berkshire failed to timely file its
answer to Universal’s complaint, the trial court entered a default, and later denied Berkshire’s
motion to set aside that default. However, the trial court ultimately refused to grant Universal’s
motion for entry of a default judgment against Berkshire for declaratory relief, and dismissed
Universal’s case, finding that Berkshire did not waive its right to arbitration, and that the
application of res judicata and compulsory joinder is for the arbitrator, not the trial court, to
decide.
II. MOTION FOR ENTRY OF DEFAULT JUDGMENT
Universal first argues on appeal that the trial court abused its discretion when it denied its
motion for entry of a default judgment.1 Specifically, Universal asserts that by denying its
motion for entry of a default judgment, the trial court effectively set aside the default without a
finding of good cause or meritorious defense pursuant to MCR 2.603(D). We disagree.
“We review for an abuse of discretion a trial court’s decision on a motion to set aside a
default and whether to grant a default judgment.” Huntington Nat’l Bank v Ristich, 292 Mich
App 376, 383; 808 NW2d 511 (2011), citing Saffian v Simmons, 477 Mich. 8, 12; 727 NW2d 132
(2007). “A trial court abuses its discretion when it reaches a decision that falls outside the range
of principled outcomes.” Huntington Nat’l Bank, 292 Mich. App. at 383, citing Corporan v
Henton, 282 Mich. App. 599, 605-606; 766 NW2d 903 (2009).
Universal argues that a trial court may only deny entry of a default judgment after it has
properly entered a default under limited circumstances, and that no such circumstances existed in
this case. Indeed, “the policy of this state is generally against setting aside defaults and default
judgments that have been properly entered.” Shawl v Spence Bros, Inc, 280 Mich. App. 213, 221;
760 NW2d 674 (2008), quoting Alken-Ziegler, Inc v Waterbury Headers Corp, 461 Mich. 219,
1
Berkshire also challenges the appellate jurisdiction of this Court in its brief on appeal.
However, this Court has jurisdiction over Universal’s appeal, because a declaratory judgment is
reviewable as a final judgment.
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229; 600 NW2d 638 (1999). Thus, according to Universal, by denying its motion for entry of a
default judgment, the trial court effectively set aside the default properly entered against
Berkshire without finding that Berkshire demonstrated good cause or a meritorious defense
pursuant to MCR 2.603(D)(1).
In response to Universal’s claim, Berkshire first argues that this Court should affirm the
trial court’s decision to deny Universal’s motion for entry of a default judgment because the trial
court erred when it initially denied Berkshire’s motion to set aside the default.2 “MCR
2.603(D)(1), which governs motions to set aside a default, provides: ‘A motion to set aside a
default or a default judgment, except when grounded on lack of jurisdiction over the defendant,
shall be granted only if good cause is shown and an affidavit of facts showing a meritorious
defense is filed.’ ” Shawl, 280 Mich. App. at 218. “ ‘Good cause’ can be shown by: (1) a
substantial defect or irregularity in the proceedings upon which the default was based, (2) a
reasonable excuse for failure to comply with the requirements which created the default, or (3)
some other reason showing that manifest injustice would result from permitting the default to
stand.” Id. at 221 (quotation marks and citations omitted). To determine whether a defendant
has demonstrated good cause, the trial court should consider:
(1) whether the party completely failed to respond or simply missed the deadline
to file; (2) if the party simply missed the deadline to file, how long after the
deadline the filing occurred; (3) the duration between entry of the default
judgment and the filing of the motion to set aside the judgment; (4) whether there
was defective process or notice; (5) the circumstances behind the failure to file or
file timely; (6) whether the failure was knowing or intentional; (7) the size of the
judgment and the amount of costs due under MCR 2.603(D)(4); (8) whether the
default judgment results in an ongoing liability (as with paternity or child
support); and (9) if an insurer is involved, whether internal policies of the
company were followed. [Id. at 238.]
To determine whether a defendant has demonstrated a meritorious defense, a trial court
“should consider whether the affidavit contains evidence that: (1) the plaintiff cannot prove or
2
We disagree with Universal’s argument that this Court should not treat Berkshire’s first
argument as an alternative ground for affirmance, and that Berkshire should have cross-appealed
the trial court’s order denying its motion to set aside the default. “[A]n appellee is not required
to file a cross-appeal to urge an alternative ground for affirming the trial court’s order.”
Vanslembrouck ex rel Vanslembrouck v Halperin, 277 Mich. App. 558, 565-566; 747 NW2d 311
(2008), citing Middlebrooks v Wayne Co, 446 Mich. 151, 166 n 41; 521 NW2d 774 (1994).
However, “an appellee may not obtain a decision more favorable than that rendered below
without filing a cross-appeal.” Barrow v Detroit Election Comm, 305 Mich. App. 649, 683; 854
NW2d 489 (2014), citing Turcheck v Amerifund Fin, Inc, 272 Mich. App. 341, 351; 725 NW2d
684 (2006). Here, the outcome of the case would have been the same had the trial court initially
set aside the default. It would have still denied Universal declaratory relief and a permanent
injunction.
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defendant can disprove an element of the claim or a statutory requirement; (2) a ground for
summary disposition exists under MCR 2.116(C)(2), (3), (5), (6), (7) or (8); or (3) the plaintiff’s
claim rests on evidence that is inadmissible.” Id. at 238. Although the good cause and
meritorious defense requirements are separate, “if a party states a meritorious defense that would
be absolute if proven, a lesser showing of ‘good cause’ will be required than if the defense were
weaker, in order to prevent a manifest injustice.” Alken-Ziegler, Inc, 461 Mich. at 230-231, 233-
234.
We conclude that the trial court did not abuse its discretion when it initially denied
Berkshire’s motion to set aside the default. We need not even consider whether Berkshire
demonstrated good cause because it is clear that the affidavit of Sam Saleh, president of
Berkshire, attached to Berkshire’s motion to set aside the default, contained no evidence
demonstrating a meritorious defense. Beyond attempting to explain why Berkshire failed to
timely answer Universal’s verified complaint, Saleh stated only that Universal never
compensated Berkshire for its demolition work, Berkshire never intended to waive its right to
arbitration, an arbitration rule states that no judicial proceeding relating to the subject matter of
arbitration shall be deemed a waiver of the right to arbitrate, and Berkshire relied on the
arbitration provision in the parties’ agreement to file its arbitration demand. The affidavit did not
address res judicata and compulsory joinder. Thus, the affidavit failed to contain evidence
demonstrating a meritorious defense. Even if, as Berkshire asserts, the trial court implicitly
found a meritorious defense when it refused to enter a default judgment and denied Universal
declaratory relief, Berkshire still failed to meet the standard set forth in MCR 2.603(D), to set
aside the default by stating facts demonstrating such a defense in its affidavit.
Alternatively, Berkshire argues that the trial court did not abuse its discretion because the
claims raised in Universal’s complaint did not support entry of a default judgment. Specifically,
Berkshire claims that, even if it failed to demonstrate good cause and a meritorious defense to set
aside the default, entry of a default judgment would have been improper because Universal’s
waiver, res judicata, and compulsory joinder arguments failed as a matter of law.
Again, “the policy of this state is generally against setting aside defaults and default
judgments that have been properly entered.” Shawl, 280 Mich. App. at 221. However, “[t]he
entry of a default does not operate as an admission that the complaint states a cause of action. If
the complaint fails to state a cause of action, it will not support a judgment.” State ex rel
Saginaw Prosecuting Attorney v Bobenal Investments, Inc, 111 Mich. App. 16, 22; 314 NW2d
512 (1981), citing Hofweber v Detroit Trust Co, 295 Mich. 96; 294 N.W. 108 (1940). “A plaintiff
must provide sufficient facts in his or her complaint to give the defendant notice of the claims
against which he or she must defend: the plaintiff must provide a ‘statement of facts, without
repetition, on which the pleader relies in stating the cause of action, with the specific allegations
necessary reasonably to inform the adverse party of the nature of the claims the adverse party is
called on to defend[.]’ ” Kincaid v Cardwell, 300 Mich. App. 513, 529; 834 NW2d 122 (2013),
quoting MCR 2.111(B)(1) (alteration in original).
In Wilson v King, 298 Mich. App. 378, 380-381; 827 NW2d 203 (2012), this Court treated
the trial court’s refusal to enter a default and dismissal of the plaintiff’s complaint “as a sua
sponte granting of summary disposition pursuant to MCR 2.116(I)(1) and MCR 2.116(C)(8).”
There, the plaintiff, as a next friend, filed a complaint for sibling visitation, and the trial court
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concluded that Michigan law does not provide a cause of action for sibling visitation. Wilson,
298 Mich. App. at 379-380.
Although the trial court never explicitly stated that it denied Universal’s motion for entry
of a default judgment because Universal’s verified complaint failed to state a cause of action to
support a judgment, it did dismiss the complaint after ruling that Berkshire did not waive its right
to arbitration, and that the arbitrator has the authority to consider whether res judicata and
compulsory joinder bar arbitration of Berkshire’s breach of contract claim. These were the two
arguments Universal used to support its request for a declaratory judgment and a permanent
injunction. Thus, the analysis this Court used to review the trial court’s decision in Wilson is
also appropriate here.
“A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint by the
pleadings alone.” Id. at 381, citing Maiden v Rozwood, 461 Mich. 109, 119; 597 NW2d 817
(1999). “All well-pleaded factual allegations are accepted as true and construed in a light most
favorable to the plaintiff,” and “[a] motion under MCR 2.116(C)(8) may be granted only where
the claims alleged are so clearly unenforceable as a matter of law that no factual development
could possibly justify recovery.” Wilson, 298 Mich. App. at 381, citing Maiden, 461 Mich. at 119
(quotation marks and citation omitted).
As will be discussed infra, the trial court did not abuse its discretion when it denied
Universal’s motion for entry of a default judgment because Universal’s verified complaint failed
to state a cause of action for declaratory relief or permanent injunction. Berkshire was entitled to
judgment as a matter of law with regard to Universal’s waiver, res judicata, and compulsory
joinder arguments.
III. WAIVER OF ARBITRATION
Below, and now on appeal, Universal asserts entitlement to a declaratory judgment and
permanent injunction barring arbitration of any claims arising out of the demolition project
because Berkshire waived its right to arbitration when it filed its cross-complaint in the
underlying case. We disagree.
“Whether one has waived his right to arbitration depends on the particular facts and
circumstances of each case.” Madison Dist Pub Sch v Myers, 247 Mich. App. 583, 588; 637
NW2d 526 (2001), citing Hendrickson v Moghissi, 158 Mich. App. 290, 299-300; 404 NW2d 728
(1987). This Court reviews de novo whether particular circumstances establish a waiver of the
right to arbitration. Madison Dist Pub Sch, 247 Mich. App. at 588, citing North West Mich
Constr, Inc v Stroud, 185 Mich. App. 649, 650-652; 462 NW2d 804 (1990). Further, this Court
reviews a trial court’s factual determinations regarding such circumstances for clear error.
Madison Dist Pub Sch, 247 Mich. App. at 588, citing MCR 2.613(C). “Clear error is found only
when on review of the entire record, the reviewing court is left with the definite and firm
conviction that a mistake has been made.” Peters v Gunnell, Inc, 253 Mich. App. 211, 221-222;
655 NW2d 582 (2002), citing Walters v Snyder, 239 Mich. App. 453, 456; 608 NW2d 97 (2000).
“Whether a dispute is arbitrable represents a question of law for the courts that we review de
novo.” Madison Dist Pub Sch, 247 Mich. App. at 594-595.
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While the trial court focused on somewhat irrelevant facts to determine that Berkshire did
not waive arbitration, its ultimate conclusion was correct. See Gleason v Mich Dep’t of Transp,
256 Mich. App. 1, 3; 662 NW2d 822 (2003) (“A trial court’s ruling may be upheld on appeal
where the right result issued, albeit for the wrong reason.”). Thus, Universal’s waiver argument
fails, as a matter of law.
The Uniform Arbitration Act (UAA), MCL 691.1681, et seq., governs arbitration
agreements. MCL 691.1683(1).3 MCL 691.1684(1) provides, “Except as otherwise provided in
subsections (2) and (3), a party to an agreement to arbitrate or to an arbitration proceeding may
waive or the parties may vary the effect of the requirements of this act to the extent permitted by
law.”
Where a contractual right to arbitrate exists, waiver is disfavored. Madison Dist Pub Sch,
247 Mich. App. at 588, citing Salesin v State Farm Fire & Casualty Co, 229 Mich. App. 346, 356;
581 NW2d 781 (1998). “The ‘party arguing there has been a waiver of this right bears a heavy
burden of proof’ and ‘must demonstrate knowledge of an existing right to compel arbitration,
acts inconsistent with the right to arbitrate, and prejudice resulting from the inconsistent acts.’ ”
Madison Dist Pub Sch, 247 Mich. App. at 588, quoting Salesin, 229 Mich. App. at 356 (citation
omitted).
There is no question that Berkshire had knowledge of its right to compel arbitration.
Berkshire moved to enforce the parties’ arbitration agreement five months after filing its cross-
complaint against Universal and HES in the underlying case.
Moving next to the second requirement, the following provides guidance regarding the
type of conduct considered inconsistent with a party’s right to arbitrate:
Various forms of participation by a [party] in an action have been considered by
the courts in determining whether there has been a waiver of the [party]’s right to
compel arbitration or to rely on arbitration as a defense to the action. It has been
generally held or recognized that by such conduct as defending the action or
proceeding with the trial, a [party] waives the right to arbitration of the dispute
involved. A waiver of the right to arbitration [sic] . . . has also been found from
particular acts of participation by a [party], each act being considered
independently as constituting a waiver. Thus, a [party] has been held to have
waived the right to arbitration of the dispute involved by filing an answer without
properly demanding or asserting the right to arbitration, by filing an answer
containing a counterclaim . . . without demanding arbitration or by filing a
counterclaim which was considered inconsistent with a previous demand for
arbitration, by filing a third-party complaint or cross-claim, or by taking various
other steps, including filing a notice of readiness for trial, filing a motion for
summary judgment, or utilizing judicial discovery procedures. [Madison Dist
3
MCL 691.1683(1) states, “On or after July 1, 2013, this act governs an agreement to arbitrate
whenever made.”
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Pub Sch v Myers, 247 Mich. App. at 589 (quotation marks and citations omitted;
alterations in original).]
“A waiver may be express or it may be implied when a party actively participates in a litigation
or acts in a manner inconsistent with its right to proceed to arbitration.” Capital Mtg Corp v
Coopers & Lybrand, 142 Mich. App. 531, 535; 369 NW2d 922 (1985). However, arbitration is
not waived by litigating an inarbitrable claim. Madison Dist Pub Sch, 247 Mich. App. at 589-590,
citing Auto Club Ins Ass’n v Lozanis, 215 Mich. App. 415, 421-422; 546 NW2d 648 (1996),
overruled in part on other grounds by Perry v Sied, 461 Mich. 680, 690 (2000).
According to the UAA, “whether an agreement to arbitrate exists or a controversy is
subject to an agreement to arbitrate” are questions for the trial court, while “[a]n arbitrator shall
decide whether a condition precedent to arbitrability has been fulfilled and whether a contract
containing a valid agreement to arbitrate is enforceable.” MCL 691.1686(2) and (3). “To
ascertain the arbitrability of an issue, the 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.” Huntington Woods v Ajax Paving Indus, Inc, 196 Mich. App. 71, 74-75; 492 NW2d
463 (1992), citing Fed Kemper Ins Co v American Bankers Ins Co, 137 Mich. App. 134, 139-140;
357 NW2d 834 (1984). “Any doubts about the arbitrability of an issue should be resolved in
favor of arbitration.” Huntington Woods, 196 Mich. App. at 75, citing Omega Constr Co, Inc v
Altman, 147 Mich. App. 649, 655; 382 NW2d 839 (1985).
Berkshire argues that none of the three claims raised in its cross-complaint – foreclosure
of construction liens, promissory estoppel, and fraudulent inducement – were arbitrable; thus, it
did not act inconsistently with its right to arbitrate by filing the cross-complaint against Universal
and HES. In response, Universal asserts that construction lien claims are arbitrable.
The parties’ arbitration agreement is very broad, encompassing any disputes that cannot
be resolved. MCL 570.1118(1) states, in pertinent part, “An action to enforce a construction lien
through foreclosure shall be brought in the circuit court for the county where the real property
described in the claim of lien is located.” However, caselaw indicates that an arbitrator may
properly rule on the validity of, and amount owed under, a construction lien. See Ronnisch
Constr Group, Inc v Lofts On The Nine, LLC, 306 Mich. App. 203, 214; 854 NW2d 744 (2014),
aff'd sub nom. Ronnisch Constr Group, Inc v Lofts on the Nine, LLC, 499 Mich. 544; 886 NW2d
113 (2016).4
4
Plaintiff asserts that our Supreme Court in Ronnisch, affirmed that the correct procedural
method for arbitrating a lien foreclosure claim was to arbitrate the underlying breach of contract
claim at the same time. We reject plaintiff’s interpretation. The issue in Ronnisch was “whether
plaintiff, Ronnisch Construction Group, Inc. (RCG), can seek attorney fees under § 118(2), MCL
570.1118(2), of the Construction Lien Act (CLA) from defendant Lofts on the Nine, LLC
(LOTN), given that plaintiff received a favorable arbitration award on its related breach of
contract claim but did not obtain a judgment on its construction lien claim.” 499 Mich. at 549.
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Regardless, we need not determine whether Berkshire acted inconsistent with its right to
arbitrate by filing its cross-complaint, or whether Berkshire’s construction lien, promissory
estoppel, and fraudulent inducement claims were arbitrable, because, as a matter of law,
Universal failed to allege facts in its complaint demonstrating that it suffered actual prejudice as
a result of any potential inconsistent acts. Universal’s verified complaint stated, “Defendant’s
filing of the Demand for Arbitration and its duplicative litigation of the prior claims has
extremely prejudiced [Universal] by (1) forcing it to litigate claims which have already been
litigated and dismissed by this Court; and by attempting to have it (2) re-litigate claims which
have already been litigated and dismissed by this Court; are not barred as a matter of law; and
which are no longer subject to arbitration.”
Despite Universal’s assertions to the contrary, Berkshire did not raise a breach of contract
claim in its cross-complaint.5 And as will be discussed infra, the arbitrator, rather than the trial
court, has the authority to determine whether res judicata and compulsory joinder bar Berkshire
from arbitrating claims arising out of the demolition project and the parties’ agreement.
Further, Universal suffered no real prejudice from having to initially defend against
Berkshire’s claims in the trial court. First, Berkshire filed its cross-complaint as part of the suit
initiated by the subcontractor trucking companies against Berkshire, Universal, and HES. Thus,
Universal was already defending itself against claims in the trial court. Second, although this
Court has found prejudice where one party was forced to defend itself in litigation for 1½ years
before the other party sought arbitration, Madison Dist Pub Sch, 147 Mich. App. at 599-600,
Berkshire filed its motion to compel arbitration in the underlying case just five months after
filing its cross-complaint, and demanded the arbitration at issue in this case just one month after
that.
IV. RES JUDICATA AND COMPULSORY JOINDER CLAIMS
Below and on appeal, Universal also asserts entitlement to a declaratory judgment and
permanent injunction barring arbitration of any claims arising out of the demolition project
because res judicata and compulsory joinder bar such claims. In its opinion denying Universal’s
motion for entry of a default judgment, the trial court concluded that the arbitrator, rather than
the court, has the authority to consider the applicability of res judicata and compulsory joinder.
We agree with the trial court.
Generally, “ ‘[f]or an issue to be preserved for appellate review, it must be raised,
addressed, and decided by the lower court.’ ” Mouzon v Achievable Visions, 308 Mich. App. 415,
419; 864 NW2d 606 (2014), quoting People v Metamora Water Serv, 276 Mich. App. 376, 382;
741 NW2d 61 (2007). In its verified complaint, at the hearing for Berkshire’s motion to set aside
the default, and at the hearing regarding Universal’s motion for entry of a default judgment,
Universal asserted entitlement to declaratory relief and a permanent injunction based on the
Whether Ronnisch was required to arbitrate the breach of contract claim with the lien foreclosure
claim was not an issue.
5
Berkshire’s cross-complaint raised three claims: Count I: Foreclosure of Lien; Count II:
Promissory Estoppel; and Count III: Fraudulent Inducement.
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argument that res judicata and compulsory joinder barred arbitration of Berkshire’s breach of
contract claim. In Berkshire’s brief in support of the motion to set aside the default, it argued
that the arbitrator, not the trial court, should address Universal’s res judicata claims. The parties
raise the same arguments on appeal.
Ultimately, the trial court denied Universal’s motion for entry of a default judgment and
dismissed the case, concluding that the arbitrator had the authority to consider the applicability
of res judicata and compulsory joinder to Berkshire’s breach of contract claim. Thus,
Universal’s argument that res judicata and compulsory joinder bar arbitration of claims arising
out of the demolition project is unpreserved, but the issue regarding whether a trial court or
arbitrator should determine the applicability of res judicata and compulsory joinder has been
preserved for appellate review.
This Court reviews the application of res judicata and compulsory joinder de novo. Estes
v Titus, 481 Mich. 573, 578-579; 751 NW2d 493 (2008). This Court also reviews de novo
whether a trial court or arbitrator has the authority to decide a particular issue. American
Federation of State v Hamtramck Housing Comm, 290 Mich. App. 672, 674; 804 NW2d 120
(2010). Finally, unpreserved issues are reviewed for plain error. Demski v Petlick, 309 Mich
App 404, 426-427; 873 NW2d 596 (2015). “To avoid forfeiture under the plain error rule, three
requirements must be met: 1) the error must have occurred, 2) the error was plain, i.e., clear or
obvious, 3) and the plain error affected substantial rights.” Id. at 427 (quotation marks and
citations omitted).
We need not consider whether res judicata or compulsory joinder bar arbitration of any
claims arising out of the demolition project because the trial court correctly concluded that the
arbitrator holds such authority. Again, “whether an agreement to arbitrate exists or a controversy
is subject to an agreement to arbitrate” are questions for the trial court, while “[a]n arbitrator
shall decide whether a condition precedent to arbitrability has been fulfilled and whether a
contract containing a valid agreement to arbitrate is enforceable.” MCL 691.1686(2) and (3).
After a trial court has determined that a particular claim is arbitrable, procedural questions must
generally be decided by the arbitrator. Bienenstock & Assoc, Inc v Lowry, 314 Mich. App. 508,
516; 887 NW2d 237 (2016). “In other words, ‘the parties intend arbitrators, not courts, to decide
disputes about the meaning and application of particular procedural preconditions for the use of
arbitration.’ ” Id. (citation omitted).
Neither party presented any published Michigan caselaw specifically holding that res
judicata and compulsory joinder are questions for an arbitrator, rather than a trial court.
However, we reason that res judicata and compulsory joinder should be considered procedural
preconditions to arbitration and are, thus, most appropriately considered by an arbitrator. As a
result, Universal’s complaint failed to state a cause of action for declaratory relief and a
permanent injunction, as a matter of law, and the trial court properly denied Universal’s motion
for entry of a default judgment.
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Affirmed.
/s/ Cynthia Diane Stephens
/s/ Kirsten Frank Kelly
/s/ Christopher M. Murray
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