Nexteer Automotive Corporation v. Mando America Corporation

STATE OF MICHIGAN
COURT OF APPEALS
NEXTEER AUTOMOTIVE CORPORATION, FOR PUBLICATION
February 11, 2016
Plaintiff/Counter-Plaintiff/Third- 9:05 a.m.
Party Defendant-Appellant,
v No. 324463
Saginaw Circuit Court
MANDO AMERICA CORPORATION, TONY LC No. 13-021401-CK
DODAK, THEODORE G. SEEGER, TOMY
SEBASTIAN, CHRISTIAN ROSS, KEVIN
ROSS, ABRAHAM GEBREGERIS,
RAMAKRISHNAN RAJA
VENKITASUBRAMONY, TROY STRIETER,
JEREMY J. WARMBIER, and SCOTT
WENDLING,
Defendants-Appellees.
Before: O’CONNELL, P.J., and OWENS and BECKERING, JJ.
O’CONNELL, P.J.
Plaintiff, Nexteer Automotive Corporation, appeals by leave granted the trial court’s
order dismissing the case for arbitration after it concluded that Nexteer was not prejudiced by the
request of defendant, Mando American Corporation, to arbitrate after the parties had stipulated
that an arbitration provision was “not applicable.” We reverse and remand.
I. FACTUAL BACKGROUND
Nexteer and Mando are both steering system manufacturers. Nexteer and Mando are
competitors, but between April 2013 and August 2013, the parties considered operating jointly to
sell steering products. The parties each signed a nondisclosure agreement that provided that, in
the event of conflict, they would arbitrate in Switzerland. In August 2013, the parties stopped
pursuing the joint operation agreement.
In September 2013, a series of Nexteer’s high-level employees resigned and began
working for Mando. Nexteer contended that the employees had acted in concert to divulge trade
secrets to Mando. Each of the individual employees had previously signed employment
agreements with Nexteer. The agreements provided that the employees would not disclose any
trade secrets and, for 12 months after ending their employment, would not induce any other
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employees to leave Nexteer for another business venture. The employment agreements did not
contain arbitration provisions.
Nexteer filed its complaint on November 5, 2013. On November 25, 2013, the parties
stipulated to a case management order. In pertinent part, the parties stipulated that “[a]n
agreement to arbitrate this controversy . . . exists” but “is not applicable.”
In December 2013, Mando moved for summary disposition on a variety of grounds. The
trial court granted summary disposition on many of Nexteer’s claims, but several claims
remained. In May 2014, Mando filed a motion to compel arbitration on Nexteer’s remaining
claims.
Nexteer opposed Mando’s demand to arbitrate, contending that Mando had waived its
right to arbitration when it stipulated to the case management order. At a hearing on the motion,
the trial court summarized the conflict as follows:
. . . in this case we acknowledge there’s an arbitration agreement, but it doesn’t
apply. Boxes checked. And they ratify it through the lack of objection that that’s
not a waiver. Now, the question may be, Can they go back and unwaive it
somehow? I don’t know that. Can you—can you reassert a waived arbitration
provision months into a litigation?
Mando contended that even if it waived arbitration, Nexteer was not prejudiced by the request to
arbitrate. Nexteer responded that it was prejudiced by the waste of time, money, and discovery.
Stating that it was concerned about the effect of “affirmative acknowledgment that the arbitration
clause does not apply” and the potential prejudice, the trial court requested supplemental
briefing.
Following supplemental briefing, the trial court concluded that Nexteer’s claims were
arbitral. It determined that, while the parties had collectively and consciously agreed that the
arbitration provision did not apply, Mando had not waived arbitration because the specific
language of the order was that arbitration was “not applicable.” It also concluded that Nexteer
was not sufficiently prejudiced by Mando’s late request for arbitration to overcome the
presumption in favor of arbitration.
II. STANDARDS OF REVIEW
This Court reviews de novo questions of law, including the existence and enforceability
of an arbitration agreement. Michelson v Voison, 254 Mich. App. 691, 693-694; 658 NW2d 188
(2003). We also review de novo “whether the relevant circumstances establish a waiver of the
right to arbitration.” Madison Dist Pub Sch v Myers, 247 Mich. App. 583, 588; 637 NW2d 526
(2001). We review “for clear error the trial court’s factual determinations regarding the
applicable circumstances.” Id. A finding is clearly erroneous if, after reviewing the entire
record, we are definitely and firmly convinced that the trial court made a mistake. Peters v
Gunnell, Inc, 253 Mich. App. 211, 221; 655 NW2d 582 (2002).
III. ANALYSIS
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Nexteer contends that the trial court erred because Mando’s stipulation that the arbitration
provision “was not applicable” was an express waiver that prevented Mando from later
requesting to arbitrate Nexteer’s claims, not an implied waiver that required a showing of
prejudice. We agree.
Generally, courts disfavor the waiver of a contractual right to arbitration. Madison Dist
Pub Sch, 247 Mich. App. at 588. However, a party may waive any contractual rights, including
the right to arbitration. Joba Constr Co v Monroe Co Drain Comm’r, 150 Mich. App. 173, 178;
388 NW2d 251 (1986). A waiver of the right to arbitration may be express or implied. Id.;
Bielski v Wolverine Ins Co, 379 Mich. 280, 286; 150 NW2d 788 (1967).
A waiver is an intentional relinquishment of abandonment of a known right. Quality
Prods & Concepts Co v Nagel Precision, Inc, 469 Mich. 362, 374; 666 NW2d 251 (2003). An
affirmative expression of assent constitutes a waiver. Id. at 378. In contrast, a failure to timely
assert a right constitutes a forfeiture. Id. at 379.
“A stipulation is an agreement, admission or concession made by the parties in a legal
action with regard to a matter related to the case.” People v Metamora Water Serv, Inc, 276
Mich. App. 376, 385; 741 NW2d 61 (2007). To waive a right, the language of a stipulation must
show an intent to plainly relinquish that right. Whitley v Chrysler Corp, 373 Mich. 469, 474; 130
NW2d 26 (1964). However, the use of specific key words is not required to waive a right. See
Amalgamated Transit Union v Southeastern Mich Traps Auth, 437 Mich. 441, 463 n 16; 473
NW2d 249 (1991) (holding that the word “waiver” is not required to waive a right, even when a
statute requires “clear and unmistakable” evidence of waiver).
In this case, in November 2013, Mando stipulated that the arbitration provision in the
nondisclosure agreement between Nexteer and Mando did not apply to the parties’ controversy.
The language of the stipulation showed knowledge of an arbitration provision and a clear
expression of intent not to pursue arbitration. We conclude that the trial court erred when it
determined that Mando’s statement was not an express waiver because the stipulation directly
indicated an intent not to pursue arbitration, which was the same right that Mando sought to
assert six months later.
Mando contends that in this case it did not know that it had a right to arbitration, so it
could not have knowingly relinquished that right. It also contends that holding the parties to case
management orders that the parties agree to early in the proceedings leads to harsh results.
These arguments are not persuasive.
Courts have long held parties to agreements they make, regardless of the harshness of the
results. See, e.g., Balogh v Supreme Forest Woodmen Circle, 284 Mich. 700, 707; 280 N.W. 83
(1938) (“The insured was an able lawyer, and had a large experience in insurance matters and
must have understood and appreciated the legal consequences of his acts. If he did not, although
the result is harsh, we cannot rewrite his contract so as to create a liability where none existed.”).
In this case, Mando was aware of the arbitration clause in the nondisclosure agreement, and it
was aware of Nexteer’s general allegations in its complaint. It had the ability to apply the
language of the arbitration clause to the complaint in order to decide whether it should pursue
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arbitration. After stipulating that the arbitration provision did not apply, Mando may not now
argue that the arbitration provision does in fact apply.
As an alternative ground for affirmance, Mando contends that even if it waived its right
to arbitration, the trial court properly ordered arbitration because its demand to arbitrate did not
prejudice Nexteer. We disagree. A party attempting to enforce an implied waiver must show
prejudice:
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. [Maidson Dist Pub Sch, 247 Mich. App. at 588 (quotation marks
and citations omitted).]
However, where there is an express waiver, the party seeking to enforce the waiver need not
show prejudice. See Quality Prods, 469 Mich. at 378-379 (stating that discussion of implied
waivers is unnecessary if an express waiver exists). An implied waiver requires a failure to
timely assert a right to arbitrate, coupled with an inconsistent course of conduct. That is not
what happened in this case. Here, Mando expressed an explicit intent not to pursue arbitration.
Because we conclude that Mando expressly waived its right to arbitration when it stipulated that
the arbitration provision did not apply, we do not reach issues of implied waiver and prejudice.
We reverse and remand. As the prevailing party, Nexteer may tax costs. MCR 7.219(A).
We do not retain jurisdiction.
/s/ Peter D. O’Connell
/s/ Donald S. Owens
/s/ Jane M. Beckering
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