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A Better Partnership
May 25, 2015

COA reiterates the finality of arbitration awards

In Fette v Peters Construction Co., No. 320803, the Court of Appeals held that when there is no procedural error in an arbitration hearing, and the arbitrator did not exceed his or her powers, nor prejudice the rights of a party, the courts will not vacate an arbitration award. The Court also held that a subpoena can be quashed when the witness is asked to testify to information the requesting party already knows itself. The Court also addressed awarding attorney fees and costs at both the trial and appellate level:  An unsuccessful complaint to vacate an arbitration award can still be made in good faith, particularly when there inadequate case law on the matter; and appellate costs cannot be awarded under MCL 600.2591, which only applies to the trial level, but may be awarded under MCR 7.216(C) if properly requested on a separate motion.
 
Plaintiffs, Daniel Fette and Berrien County Board of Public Works, contracted with Defendant, Peters Construction Co., for a construction project. When a contract dispute arose, Defendant filed a claim for arbitration under the terms of the contract.  In the arbitration, both parties exchanged their witness lists and proposed exhibits, however at the hearing Defendant did not present its previously exchanged 19 exhibits, instead relying solely on the testimony of one witness. Plaintiffs presented witness testimony as well as their exhibits. The arbitrator found for Defendant, awarded $45,301.12, and made no findings of fact or conclusions of law.
 
Plaintiffs filed a complaint in circuit court to vacate the award, arguing that the arbitrator improperly considered Defendant’s exhibits that were exchanged prior to, but not admitted during, the hearing. The trial court affirmed the award, as evidence was presented at the hearing and a court cannot evaluate the merits of an arbitrator’s decision. Also, at trial, Defendant successfully quashed Plaintiffs’ subpoena for Defendant’s sole arbitration hearing witness.
 
The Court of Appeals affirmed the trial court’s ruling on both issues. The Court concluded that there was properly submitted evidence that the arbitrator could have considered in making its award in favor of Defendant.  The Court further noted that, even if the award was against the great weight of evidence, it would be precluded from vacating the award.  The Court of Appeals also held that even if the arbitrator did consider the exhibits submitted in advance but not presented at the hearing, this was not a violation of the contractually agreed upon arbitration rules.  In short, Plaintiffs failed to show any procedural error, or that the arbitrator exceeded his or her power or prejudiced Plaintiffs’ rights. The Court also found no error in the circuit court’s quashing of Plaintiffs’ subpoena, finding that the witness would only be able to testify as to information Plaintiffs also knew themselves.
           
The Court of Appeals also upheld the trial court’s denial of Defendant’s request for attorney fees. MCR 2.114 allows an award for fees when a plaintiff files a complaint to vacate an arbitration award without a reasonable basis in law or fact. Because there was a lack of clear and adequate case law on the matter, Plaintiffs’ complaint, although unsuccessful, was made in good faith.
 
Defendant requested appellate costs under MCL 600.2591, which the Court, consistent with precedent, found to apply only for trial level actions under the clear language of the statute. Alternatively, Defendant requested appellate costs under MCR 7.216(C), but requested the costs in its appellate brief, rather than a separate motion as required under the statute. The Court denied this request without prejudice, as Defendant would have 21 days from the date of the opinion under the statute to file a motion under MCR 7.216(C).

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