Bienenstock & Associates, Inc v. Lowry

STATE OF MICHIGAN
COURT OF APPEALS
LAUREN BIENENSTOCK & ASSOCIATES, FOR PUBLICATION
INC, LAUREN BIENENSTOCK, and SAMUEL March 3, 2016
BIENENSTOCK, 9:00 a.m.
Plaintiffs-Appellants,
v No. 323986
Oakland Circuit Court
SUSAN LOWRY, CAROLYN GRITTINI, LC No. 2013-137660-CZ
JACQUELYN FLECK, BARBARA ESSIAN,
PAULA RASKIN, ROBERT GRITTINI, MARY
JO POWER, PAMELA GOLETZ, a/k/a PAMELA
LANEY, TAMMY NANNINI, CHRISTINE
GONZALEZ, a/k/a CHRISTINE
DIFRANCESCO, MAUREEN COLLIER, SARA
MANN, SHERRIE MANIER, DEBORAH
CULVER, MELISSA RIELI, VINCENT
QUAGLIA, MARLANA WILLICK, KATHLEEN
REISING, DIANNE SARKISIAN, AMY LENGA,
MEIGHAN LINEBARUGH, BONNIE MURPHY,
MARIE PUCHEL, PAMELA SMITH, LORETTA
STUMP, LISA LAMPRIDES, a/k/a LISA
GRAMBO, JOANNE KIPPERT, a/k/a JOANNE
BUGG, APRIL KURTZ, LAURA KERR, CINDY
BATTISTON, PATTI PILARSKI, MARY REED,
MONICA STORM, and PAMELA
WORTHINGTON, a/k/a PAMELA JACKSON,
Defendants-Appellees.
Before: STEPHENS, P.J., and CAVANAGH and MURRAY, JJ.
MURRAY, J.
In this action for declaratory and injunctive relief, plaintiffs Lauren Bienenstock &
Associates, Inc. (LBA), Lauren Bienenstock, and Samuel Bienenstock appeal as of right the
order of the Oakland Circuit Court granting in part and denying in part their motion for summary
disposition. The question presented is whether a trial court or arbitrator has the authority under
the Federal Arbitration Act (FAA), 9 USC § 1 et seq., to determine whether multiple arbitration
cases should be consolidated when the arbitration agreement is silent on that issue. We hold that
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the arbitrator is the one to decide that issue, and so we affirm the trial court’s order denying
plaintiffs’ motion for summary disposition on that issue.
I. FACTS AND PROCEDURAL HISTORY
The factual backdrop to this proceeding arose from a dispute about compensation. All of
the defendants worked as independent contractors for LBA at some point in the past. All but two
of the defendants, Monica Storm and Pamela Worthington a/k/a Pamela Jackson (“Jackson”),
signed independent contractor agreements (ICA) with LBA for performing their work as licensed
court reporters. Each of the ICAs signed by the 22 defendants contained the following clause:
Any dispute relating to this Agreement, or breach thereof, shall be settled
pursuant to the rules and regulations of the American Arbitration Association
(“AAA”). Either Party requesting arbitration under this Agreement shall make a
demand on the other party by registered or certified mail, with a copy to the
AAA’s Southfield, Michigan office, which shall be the location of any arbitration
hearing. The arbitration shall then take place as noticed by the AAA, and the
outcome thereof shall be binding regardless of whether one of the parties fails or
refuses to participate.
Initially defendants filed a lawsuit in Macomb circuit court against plaintiffs seeking
what they believed was overdue compensation. However, as a result of the arbitration clause
quoted above, plaintiffs moved for—and were granted—summary disposition with regard to the
22 defendants in this case—all of whom had signed an ICA with an arbitration agreement—and
were denied summary disposition with regard to the four other court reporters for whom no ICA
could be found.1 These 22 defendants appealed that decision to this Court, arguing that because
the ICAs were not valid or enforceable, they were not required to resolve their disputes in
arbitration. We concluded otherwise. Lowry v Lauren Bienenstock & Assoc, Inc, unpublished
opinion per curiam of the Court of Appeals, issued December 23, 2014 (Docket No. 317516).
In any event, while those two cases were pending, defendants (including the 22 with a
pending appeal) filed a demand for arbitration against plaintiffs with the American Arbitration
Association (AAA). Because their ICAs provided that arbitration would be handled pursuant to
AAA rules and regulations, and AAA rules permitted class arbitration under certain
circumstances, defendants filed their arbitration as a class arbitration, defining the class as “[a]ll
court reporters who currently provide, or formerly provided, court reporting services as
independent contractors for [LBA] pursuant to a written [ICA] that included an arbitration
provision.” Defendants asserted that the class numbered in the hundreds, they all shared a
common transaction arising out of the same facts and applicable law, joinder of all the claimants
would be impracticable, and class arbitration was the most convenient and cost-effective way of
disposing of the dispute.
1
The four remaining court reporters, however, voluntarily dismissed their claims without
prejudice because they did not live or do business in Macomb County. They then refiled in
Oakland Circuit Court, with one additional court reporter, reasserting the same allegations.
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Plaintiffs responded by filing the instant suit in Oakland circuit court, requesting
declaratory and injunctive relief regarding defendants’ arbitration before the AAA. Specifically,
plaintiffs requested that the trial court declare that defendants were not permitted to bring a class
arbitration and that it enjoin their current class arbitration from going forward. Plaintiffs asserted
that federal case law under the FAA held that it was a court’s duty to decide the “gateway issue”
of whether class arbitration is permitted. That question was not, as asserted by defendants, for
the arbitrator to decide. Relatedly, plaintiffs also asked for a declaration that defendants were
only permitted to proceed with individual arbitration regarding their own individual claims, and
that there should not be any consolidation. Soon after filing suit, plaintiffs moved for summary
disposition of all their claims pursuant to MCR 2.116(C)(6) and (C)(10), asking the trial court to
(1) find that it had the authority to determine whether class arbitration or consolidation were
permitted and (2) decide those issues in plaintiffs’ favor.
Defendants, of course, disagreed with plaintiffs’ arguments. Instead, defendants
countered, the arbitrator should determine whether class arbitration (and consolidation) is
permitted, principally because the arbitration agreement specifically stated that it would be
handled under AAA rules and regulations, and those rules permit class arbitration in certain
circumstances, and gives the arbitrator the authority to decide consolidation issues. Noting that
the cases relied upon by plaintiffs hold only that a trial court should decide whether class
arbitration is permitted when the contract does not require otherwise, defendants pointed to the
contract’s specific reference to AAA rules, which state that the arbitrator is to make the decision,
and argued that provision required the trial court to defer to the arbitrator.
At the motion hearing, the trial court ruled from the bench. First, the trial court held that,
pursuant to persuasive case law, in the face of contractual silence whether class arbitration is
permitted is a gateway issue for the trial court to decide. The trial court also held that whether
consolidation was permitted was a subsidiary question for the arbitrator to decide and denied
plaintiffs’ motion for summary disposition on that question.
The trial court subsequently denied plaintiffs’ motion for reconsideration. In doing so,
the trial court ruled that because the question of consolidation of claims that are undoubtedly
arbitrable falls into the subsidiary question category, without specific instruction from the
contract, it is an issue for the arbitrator to decide. Although the trial court noted the potential for
disparate treatment between class arbitration and consolidation decisions and who can decide
them, the court reasoned that a decision from the United States Court of Appeals for the Sixth
Circuit, Reed Elsevier, Inc v Crockett, 734 F3d 594, 597 (CA 6, 2013), supported the principle
that courts should decide the gateway issue of class arbitration, but that no decision supported the
theory that consolidation was also a gateway issue, and so it concluded that it was a subsidiary
issue.
This appeal followed.
II. ANALYSIS
“This Court reviews decisions on motions for summary disposition de novo to determine
if the moving party was entitled to judgment as a matter of law.” Alcona Co v Wolverine
Environmental Prod, Inc, 233 Mich. App. 238, 245; 590 NW2d 586 (1998). A motion for
summary disposition pursuant to MCR 2.116(C)(10) “tests the factual sufficiency of the
complaint.” Joseph v Auto Club Ins Ass’n, 491 Mich. 200, 206; 815 NW2d 412 (2012). “In
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evaluating a motion for summary disposition brought under this subsection, a trial court
considers affidavits, pleadings, depositions, admissions, and other evidence submitted by the
parties, MCR 2.116(G)(5), in the light most favorable to the party opposing the motion.”
Maiden v Rozwood, 461 Mich. 109, 120; 597 NW2d 817 (1999). Summary disposition is proper
where there is no “genuine issue regarding any material fact.” Id.
A. GENERAL PRINCIPLES
As noted at the outset of this opinion, the only issue to be decided is who—a trial court
judge or an arbitrator—is the appropriate one to decide whether multiple arbitrations should be
consolidated when the contract does not speak to the issue. The issue is governed by federal law,
as there is no dispute that the FAA applies to these contracts. See Amtower v William C Roney &
Co (On Remand), 232 Mich. App. 226, 232; 590 NW2d 580 (1998) (this Court must apply the
FAA because “[s]tate courts are bound, under the Supremacy Clause, US Const, art VI, cl 2, to
enforce the FAA’s substantive provisions” for contracts arising out of interstate commerce).
With regard to issues involving federal law, this Court is bound by decisions of the United States
Supreme Court, Abela v General Motors Corp, 469 Mich. 603, 606; 677 NW2d 325 (2004), but
is not bound by decisions from any lower federal courts, because “[a]lthough lower federal court
decisions may be persuasive, they are not binding on state courts.” Id. at 606-607.
“[A]rbitration is simply a matter of contract between the parties; it is a way to resolve
those disputes—but only those disputes—that the parties have agreed to submit to arbitration.”
First Options of Chicago, Inc v Kaplan, 514 U.S. 938, 943; 115 S. Ct. 1920; 131 L. Ed. 2d 985
(1995). In other words, “arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed so to submit.” Howsam v Dean Witter
Reynolds, Inc, 537 U.S. 79, 83; 123 S. Ct. 588; 154 L. Ed. 2d 491 (2002), quoting United
Steelworkers of America v Warrior & Gulf Navigation Co, 363 U.S. 574, 582; 80 S. Ct. 1347; 4 L
Ed 2d 1409 (1960). “In this endeavor, as with any other contract, the parties’ intentions control.”
Stolt-Nielsen SA v AnimalFeeds Int’l Corp, 559 U.S. 662, 682; 130 S. Ct. 1758; 176 L. Ed. 2d 605
(2010) (internal citations and quotations omitted).
“Where ordinary contracts are at issue, it is up to the parties to determine whether a
particular matter is primarily for arbitrators or for courts to decide.” BG Group PLC v Republic
of Argentina, 572 US ___, ___; 134 S. Ct. 1198, 1206; 188 L. Ed. 2d 220 (2014). However, “[i]f
the contract is silent on the matter of who primarily is to decide ‘threshold’ questions about
arbitration, courts determine the parties’ intent with the help of presumptions.” Id. at __; 134 S
Ct at 1206. One such presumption is that “[u]nless the parties clearly and unmistakably provide
otherwise, the question of whether the parties agreed to arbitrate is to be decided by the court,
not the arbitrator.” AT&T Technologies, Inc v Communication Workers of America, 475 U.S. 643,
649; 106 S. Ct. 1415; 89 L. Ed. 2d 648 (1986). In Howsam, 537 U.S. at 83, the Supreme Court
referred to the above exception as a “gateway question,” or a “question of arbitrability” and held
that it had a limited scope. Examples of gateway or arbitrability issues “include questions such
as ‘whether the parties are bound by a given arbitration clause,’ or ‘whether an arbitration clause
in a concededly binding contract applies to a particular type of controversy.’ ” BG Group, 572
US __; 134 S. Ct. at 1206, quoting Howsam, 537 U.S. at 84.
On the other hand, there are “procedural questions which grow out of the dispute and
bear on its final disposition.” Howsam, 537 U.S. at 84, quoting John Wiley & Sons, Inc v
Livingston, 376 U.S. 543, 557; 84 S. Ct. 909; 11 L. Ed. 2d 898 (1964). We presume (again, absent
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any relevant contract language) that procedural questions, sometimes referred to as subsidiary
questions, are to be decided by the arbitrator, not the courts. Howsam, 537 U.S. at 84. 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.” BG Group, 572 US
__; 134 S. Ct. at 1207. Examples of procedural questions for the arbitrator to decide include
“whether the first two steps of a grievance procedure were completed, where these steps are
prerequisites to arbitration,” and “allegations of waiver, delay, or a like defense to arbitrability.”
Howsam, 537 U.S. at 84 (internal citations and quotations omitted.). When the issue presented is
close and “there is doubt” about whether an issue is a gateway question for the courts or a
procedural one for arbitration, “we should resolve that doubt in favor of arbitration.” Green Tree
Financial Corp v Bazzle, 539 U.S. 444, 452; 123 S. Ct. 2402; 156 L. Ed. 2d 414 (2003) (plurality
opinion), citing Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, 473 U.S. 614, 626; 105 S
Ct 3346; 87 L. Ed. 2d 444 (1985).
From these doctrinal definitions there are typically two situations where a court would be
empowered to decide whether consolidation is permissible. First, if the contract between the
parties explicitly states that a court should decide the issue, then the parties’ intent would be
plain, and a court would be required to follow that intention. See Stolt-Nielsen SA, 559 U.S. at
682 (“In this endeavor, as with any other contract, the parties’ intentions control.”) and BG
Group, 572 US __; 134 S. Ct. at 1207 (“it is up to the parties to determine whether a particular
matter is for arbitrators or for courts to decide.”). Second, if the parties’ intent is not discernable
from the face of the contract, then a court must engage in presumptions regarding the parties’
intent, id., and should only decide an issue if it is a gateway issue involving whether a contract to
arbitrate exists or whether a particular type of claim falls under the arbitration agreement.
Howsam, 537 U.S. at 84.
B. APPLICATION OF GENERAL PRINCIPLES
Turning to the facts before us, the contract does not reveal an intent regarding
consolidation, as the text of the arbitration clause makes no mention of consolidation or the
potential combination of various parties. Rather, the contract merely grants broad power to the
arbitrator to determine all disputes arising between the parties. With no mention of consolidation
in the text of the contract, we must turn to the presumptions. BG Group, 572 US __; 134 S. Ct. at
1206. In doing so it is clear that the parties are subject to an arbitration agreement, and there is
no suggestion that the underlying claim for overdue compensation falls outside the terms of the
agreement. Consequently, the issue of who decides whether to consolidate arbitration claims
does not fall within the general purview of a gateway issue, see id., and Stolt-Nielsen SA, 559 U.S.
at 682, and is instead a procedural or subsidiary issue for the arbitrator to decide.
The United States Court of Appeals for the Seventh Circuit came to this same straight
forward conclusion in Employers Ins Co of Wausau v Century Indemnity Co, 443 F3d 573, 577
(CA 7, 2006), where the court cogently explained:
We find based on Howsam that the question of whether an arbitration agreement
forbids consolidated arbitration is a procedural one, which the arbitrator should
resolve. It does not involve whether Wausau and Century are bound by an
arbitration clause or whether the arbitration clause covers the Aqua-Chem
policies. Instead, the consolidation question concerns grievance procedures—i.e.,
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whether Century can be required to participate in one arbitration covering both the
Agreements, or in an arbitration with other reinsurers.
Accord, Harry Baker Smith Architects II PLLC v Sea Breeze I LLC, 83 So 3d 395, 399 (Miss
App, 2011) (Because the parties agreed to arbitrate, and both placed the issue before the
arbitrator, the issue of consolidation was for the arbitrator); Certain Underwriters at Lloyd’s
London v Westchester Fire Ins Co, 489 F3d 580, 587-588 (CA 3, 2007) (Because the parties
agreed to arbitrate the particular issue, any doubt who should decide the consolidation issue was
resolved in favor of the arbitrator); Shaw’s Supermarkets, Inc v United Food and Commercial
Workers Union, Local 791, 321 F3d 251, 254 (CA 1, 2003) (Concluding that because each of the
grievances were arbitrable, consolidation was an issue for the arbitrator).
In addition, allowing an arbitrator to decide consolidation issues in light of a silent
contract would in no way create a “risk of forcing parties to arbitrate a matter that they may well
not have agreed to arbitrate,” Howsam, 537 U.S. at 83-84 (emphasis added), because the
underlying claims indisputably fall under the agreed upon arbitration clause. And, in no way
will the answer on consolidation “determine whether the underlying controversy will proceed to
arbitration on the merits.” Id. at 83. Regardless of the outcome of this decision, each of the
grievances will proceed to arbitration, with the answer on consolidation only determining what
form that arbitration will take. Under the facts presented, the issue of consolidation is a
procedural one.
As we noted, our conclusion is consistent with a significant number of federal decisions,
each of which have held that whether to consolidate is for the arbitrator to decide when the
contract is silent on the issue. Indeed, the decisions are almost uniform in this conclusion. See,
e.g., Certain Underwriters at Lloyd’s London, 489 F3d at 587-588; Employers Ins Co of
Wausau, 443 F3d at 577; Shaw’s Supermarkets, Inc, 321 F3d at 254; and Blimpie International,
Inc v Blimpie of the Keys, 371 F Supp 2d 469, 473 (SDNY, 2005). We therefore hold that, in the
face of contractual silence on the issue, whether multiple arbitrations should be consolidated is a
question for the arbitrator.
To their credit, plaintiffs do not seek to hide from this line of cases. Instead, they argue
these cases were collectively based on an incorrect understanding of the precedential effect of
Bazzle,2 or that the passage of time, i.e., since Stolt-Nielson was released, has caused the plurality
opinion’s conclusion in Bazzle to be no longer persuasive. Proof of this, they argue, is that
several federal courts of appeal have recently held that whether class arbitration can proceed is a
gateway issue, which of course is contrary to the plurality decision in Bazzle. Plaintiffs are
correct that Bazzle provided a foundation for many of these cases, but of equal import to these
decisions—if not more important—was the majority opinion in Howsam. And, Stolt-Nielson did
2
Bazzle was a plurality decision, and although plurality opinions generally have no precedential
effect, there was a split amongst the circuits as to whether Bazzle contained a discernable holding
amongst the different opinions. See Employers Ins Co of Wausau, 443 F3d at 580 (concluding
that there was not one) with Pedcor Management Co, Inc v Nations Personnel of Texas, Inc, 343
F3d 355, 359 (CA 5, 2003) (finding that there was).
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not alter how we look at this precise issue, at least not in the way plaintiffs suggest. We explain
our conclusions below.
C. STOLT-NIELSON DOES NOT ADDRESS THIS ISSUE
First, Stolt-Nielson. Determining the import of Stolt-Nielson requires knowing its context
in relation to Bazzle. In Bazzle a plurality of the Court concluded that the issue whether a
contract allowed for class arbitration was not a gateway issue, and thus it was for the arbitrator,
rather than the court, to decide. See Bazzle, 539 U.S. at 452. After Bazzle was issued in 2003,
many federal courts relied in part on Bazzle to hold that arbitrators were to decide the procedural
question whether an arbitration agreement allowed for class arbitration, see Pedcor Management
Co, Inc v Nations Personnel of Texas, Inc, 343 F3d 355, 359-360 (CA 5, 2003) and Johnson v
Long John Silver’s Restaurants, Inc, 320 F Supp 2d 656 (MD Tenn, 2004), aff’d 414 F3d 583
(CA 6, 2005).3
But then came Stolt-Nielsen, in which a majority of justices made clear that Bazzle was
only a plurality decision, and thus did not contain a holding from that Court regarding anything,
let alone that deciding whether class wide arbitration was a gateway issue was for the court to
decide. Stolt-Nielson SA, 559 U.S. at 680. The Court made this point again in Oxford Health
Plans LLC v Sutter, __ US __, __; 133 S. Ct. 2064, 2068 n 2; 186 L. Ed. 2d 113 (2013), where a
majority said that the Court “has not yet decided whether the availability of class arbitration” is a
decision relegated to the court (thus a gateway issue) or the arbitrator (and thus a procedural, or
subsidiary, issue).4 See also Reed Elsevier, Inc, 734 F3d at 597-598 (recognizing that Bazzle
contained no precedential rulings, and holding that based on Stolt-Nielson, class arbitration was a
gateway issue for the court).
Plaintiffs argue that these two recent Supreme Court decisions have diminished the
importance of the Bazzle plurality’s opinion, and so in turn the cases decided before Stolt-
Nielson that addressed consolidation as a gateway issue with Bazzle as their foundation are
suspect, and should not be considered persuasive precedent. Stolt-Nielson does not, however,
affect this issue in the way plaintiffs perceive. As explained below, if anything Stolt-Nielson
implicitly disenfranchised courts from analogizing class arbitration issues to these involving
consolidation.
The issue presented in Stolt-Nielson, a post-arbitration case, was whether “imposing class
arbitration on parties whose arbitration clauses are ‘silent’ on that issue is consistent with the”
FAA. Stolt Nielson SA, 559 U.S. at 666. Accordingly, as some courts have noted, “Stolt-Nielson
3
As we noted earlier, during this same post-Bazzle, pre-Stolt-Nielson time period, courts were
likewise concluding that consolidation was also for the arbitrator to decide. See Certain
Underwriters at Lloyd’s London, 489 F3d at 587-588; Employers Ins Co of Wausau, 443 F3d at
577; Shaw’s Supermarkets, Inc, 321 F3d at 254; Blimpie International, Inc, 371 F Supp 2d at
473.
4
As a result, who decides whether an agreement authorizes class arbitration “remains open at the
Supreme Court level.” Price v NCR Corp, 908 F Supp 2d 935, 941 (ND Ill, 2012).
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concerns only how to decide whether an arbitration agreement authorizes class arbitration, not
who decides.” Lee v JP Morgan Chase & Co, 982 F Supp 2d 1109, 1113 (CD Calif, 2013). See
also Blue Cross Blue Shield of Massachusetts v BCS Ins Co, 671 F3d 635, 638-639 (CA 7, 2011)
(The only issue decided in Stolt-Nielson was whether the arbitrators exceeded their authority in
conducting a class arbitration, not who decides that issue in the first instance). That the Stolt-
Nielson Court did not address what entity—court or arbitrator—should decide whether an
arbitration agreement permitted class arbitration, was more recently made clear in Oxford Health
Systems, __ US at __; 133 S. Ct. at 2068 n 2. The question we are faced with today has therefore
not been decided by the United States Supreme Court, and thus Stolt-Nielson does not require
rejection of those decisions rendered after Bazzle which held that, absent contact language
addressing the issue, consolidation was for the arbitrator to decide. See Lee, 982 F Supp 2d at
1113 (rejecting the argument that Stolt-Nielson changed the legal landscape on gateway issues,
since it did not involve one) and Blue Cross Blue Shield of Massachusetts, 671 F3d at 640 (court
held that Stolt-Nielson did not require it to modify its prior holding in Employers Ins Co of
Wausau, 443 F3d at 577, that whether to consolidate arbitration cases was not a gateway issue).
D. CLASS ARBITRATION DECISIONS
Having rejected plaintiffs’ theory of the impact of Stolt-Nielson, we now turn to whether
the more recent class arbitration gateway decisions impact the consolidation issue. Although
there can be no doubt that the “confusion of whether class arbitration is a gateway or subsidiary
issue began with [these] two United States Supreme Court decisions,” Shakoor v VXI Global
Solutions, 2015 Ohio 2587; 35 NE3d 539, 545 (Ohio App, 2015), no real confusion exists but
that under these circumstances consolidation is a subsidiary issue. This holds true because,
despite this lack of clarity at the Supreme Court level, the simple fact is that most (if not all)
federal courts have held—pre and post-Stolt-Nielson—that consolidation is a procedural issue
properly left to the arbitrator. And this is not just a numbers game, where we look to where a
majority of the decisions have come down on an issue, and simply follow them. Instead, in
addition to recognizing (as we already have) the limited holding of Stolt-Nielson, these courts
also recognize (1) the significantly different and more complex considerations involved in
determining whether class arbitration should proceed compared to what is considered in
consolidation issues, and (2) the procedural nature of consolidation issues.
Decisions like Reed Elsevier, which have concluded contrary to Bazzle that class
arbitration is a gateway issue, do not support the argument that consolidation issues are as well.
Indeed, much of what is contained in Stolt-Nielson provides support for the conclusion that class
arbitration issues involve unique and particularly complex matters and are placed in a completely
different category than those involving consolidation. For example, the Court repeatedly
emphasized the significant differences between a bilateral arbitration (one claimant under one
contract) and class wide arbitration, classifying the differences as “fundamental.” Stolt-Nielson
SA, 559 U.S. at 686. The California Court of Appeals, citing to Stolt-Nielson, explained some of
these critical differences:
For example, arbitration's putative benefits—i.e., “lower costs, greater efficiency
and speed”—“are much less assured” in classwide arbitration, which, according to
the court, “giv[es] reason to doubt the parties’ mutual consent” to a classwide
arbitration procedure. (Stolt–Nielsen, supra, at p 685, 130 S. Ct. 1758; [AT & T
Mobility LLC v] Concepcion, [__US __; 131 S. Ct. 1740, 1750; 179 L. Ed. 2d 742
(2011)] [“the switch from bilateral to class arbitration sacrifices the principal
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advantage of arbitration—its informality—and makes the process slower, more
costly, and more likely to generate procedural morass than final judgment”].)
Further, “[c]onfidentiality becomes more difficult” in classwide arbitrations
(Concepcion, supra, at p 1750), a complication that “potentially frustrate[s] the
parties’ assumptions when they agreed to arbitrate.” (Stolt–Nielsen, supra, at p
686, 130 S. Ct. 1758.)[Garden Fresh Restaurant Corp v Superior Court, 231 Cal
App 4th 678, 686; 180 Cal Rptr 3d 89 (2014).]
An equal if not greater concern has been the impact class arbitration can have on third parties, for
a class arbitration award “no longer purports to bind just the parties to a single arbitration
agreement, but adjudicates the rights of absent parties as well.” Stolt-Nielson SA, 559 U.S. at 686.
No less significant are the notice and opt out requirements and a quagmire of other complex
issues that must be addressed in a class proceeding. See Opalinski v Robert Half Int’l Inc, 761
F3d 326, 332-335 (CA 3, 2014) and Reed Elsevier Inc, 734 F3d at 598, both discussing how
fundamental the differences are between class arbitration and bilateral arbitration. And because
of the significant issues and differences involved in class arbitration versus bilateral arbitration,
the Stolt-Nielson Court held that an arbitrator exceeded his authority by forcing parties to
proceed with class arbitration when no contractual language supported that type of proceeding.
Stolt-Nielson, 559 U.S. at 687.
The concerns that surface with class arbitrations do not, for the most part, exist with
consolidation. For one, consolidating arbitrations does not result in an arbitrator deciding the
rights of absent third parties. Instead, cases that are already subject to arbitration are merely
consolidated before the same arbitrator, who can then presumably create greater efficiencies
when it comes to discovery or other pre-arbitration matters. The rules typically considered in
deciding whether a class action should proceed-and what must be done if it does proceed-are
much more complex, time-consuming and expensive than what is typically required in deciding
whether to consolidate. Compare MCR 2.505(A) with MCR 3.501. In other words, the
significant concerns and issues raised by a request for class arbitration do not arise when
individual cases are consolidated. This point was articulated quite well by the United States
Court of Appeals for the Seventh Circuit, where Chief Judge Easterbrook wrote for the court in
Blue Cross Blue Shield of Massachusetts, 671 F3d at 640:
Class actions always have been treated as special. One self-selected plaintiff
represents others, who are entitled to protection from the representative’s
misconduct or incompetence. Often this requires individual notice to class
members, a procedure that may be more complex and costly than the adjudication
itself. See Eisen v Carlisle & Jacquelin, 417 U.S. 156; 94 S. Ct. 2140; 40 L. Ed. 2d
732 (1974). As a practical matter the representative’s small stake means that
lawyers are in charge, which creates a further need for the adjudicator to protect
the class. Finally, class actions can turn a small claim into a whopping one.
Unsurprisingly, Fed.R.Civ.P. 23 imposes stringent requirements on class
certification. Consolidation of suits that are going to proceed anyway poses none
of these potential problems. That’s why Fed.R.Civ.P. 42(a) leaves to a district
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judge’s discretion—and without any of Rule 23’s procedures and safeguards—the
decision whether to consolidate multiple suits. Just as consolidation under Rule
42(a) does not change the fundamental nature of litigation, so consolidation of the
plans’ claims would not change the fundamental nature of arbitration.5
Hence, decisions like Reed Elsevier Inc, i.e., post-Stolt-Nielson decisions holding that class
arbitration is a gateway issue, address a different animal than we do when addressing a
consolidation issue. And for that reason they provide no assistance to plaintiffs’ position.
E. CONCLUSION
Finally, critical to our decision is remembering that gateway issues involve “questions
such as ‘whether the parties are bound by a given arbitration clause,’ or ‘whether an arbitration
clause in a concededly binding contract applies to a particular controversy.’” BG Group, 572 US
__; 134 S. Ct. at 1206, quoting Howsam, 537 U.S. at 84. As we emphasized earlier, gateway
arbitrability questions fall into a very narrow range of issues, focusing on whether the parties
agreed to arbitrate at all, or agreed to arbitrate a particular type of claim. Garden Fresh
Restaurant Corp, 231 Cal App 4th at 684, citing in part Howsam, 537 U.S. at 83-84. Though
these may not be the only circumstances in which gateway issues may be found—as reflected by
those cases concluding that a decision on class arbitration is a gateway issue—this fundamental
underpinning to gateway issues makes it clear that the fact intensive decision of consolidation is
procedural.
For all these reasons, we conclude that the virtual unanimity amongst the federal courts
prior to (and after) Stolt-Nielson, holding that consolidation decisions are subsidiary ones left to
the arbitrator to decide under the contract (when the contract does not provide for a different
venue or otherwise address consolidation), remain persuasive authority, and nothing in the case
law since then requires a different conclusion.6 We therefore agree with and follow the rationale
of those cases and hold that, absent any contractual language addressing the issue, whether
multiple arbitrations should be consolidated is a procedural or subsidiary issue for the arbitrator
to decide.
5
MCR 2.505(A) contains the same criteria for consolidation of circuit court actions that are
contained in FRCP 42.
6
We point out that in Bay Co Bldg Auth v Spence Bros, 140 Mich. App. 182, 188; 362 NW2d 739
(1984), we held that in the absence of contractual language addressing consolidation, it was for
the arbitrator to decide the issue because it was a procedural, rather than a gateway, issue. But
we do not rely on that case, nor do we need to address Michigan’s newly enacted Uniform
Arbitration Act, MCL 691.1681 et seq, because this issue is controlled by federal law. In re
Salomon Inc Shareholders’ Derivative Litigation, 68 F3d 554, 559 (CA 2, 1995).
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Affirmed. Defendants may tax costs, having prevailed in full. MCR 7.219(A).
/s/ Christopher M. Murray
/s/ Cynthia Diane Stephens
/s/ Mark J. Cavanagh
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