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  • Writer's pictureRobert Lusk

Court of Appeals Decision Highlights the Enforceability of Arbitration Agreements in Michigan

The Court of Appeals recent decision in TBI Solutions, LLC, v Gall, Case No. 356747 (February 24, 2022) highlights the enforceability of arbitration agreements under Michigan’s Uniform Arbitration Act. TBI involved an arbitration agreement between an employer, a medical provider, and an employee, its former clinical director. The employer filed a demand for arbitration after the employee quit. The employee responded with a lawsuit, alleging the arbitration agreement was not enforceable because he never signed it. The court, in the employee’s lawsuit, held he was bound by the arbitration agreement even though he hadn’t signed it, because he effectively assented to its provisions by continuing his employment.

Before the arbitrator, the employee continued to argue that, even if he was required to arbitrate, he was not bound by the substantive provisions of the arbitration agreement because he hadn’t signed it. The arbitrator rejected this argument, relying on the trial court's decision under the doctrine of res judicata, and awarded the employer $11,000 in damages and $50,000 in attorney’s fees. The employee appealed the award of attorney fees.

The Court of Appeals noted the arbitrator had reached the correct conclusion for the wrong reason. The doctrine of collateral estoppel rather than res judicata, precluded the employee from re-litigating the trial court’s decision enforcing the arbitration agreement. The Court also rejected the employee’s attempt to create a nice distinction between the determination there was an enforceable arbitration agreement and the conclusion the entire arbitration agreement was enforceable. On the facts of this case, the Court concluded there was no distinction to make because, given the employee’s argument, he was not bound by the agreement to arbitrate unless he was also bound by the entire agreement to arbitrate.

Regardless of the parties’ other arguments, an interesting aspect of this case is the attorney's fees award. Typically, in civil litigation, each party bears its own attorney’s fees and costs. This can effectively preclude a party (plaintiff or defendant) from litigating the merits of a case when the prospective attorney’s fees and costs overwhelm the value of the entire case. This is not necessarily true in arbitration. In an arbitration agreement, as in any contract, the parties may agree the prevailing party will recover attorney’s fees and costs, as was apparently the case here.

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