Bienenstock & Associates, Inc v. Lowry
314 Mich. App. 508
| Mich. Ct. App. | 2016Background
- Plaintiffs (LBA and principals) had independent contractor agreements (ICAs) with 22 former court reporters containing an AAA arbitration clause; several other reporters had no ICA.
- Defendants filed demands with the AAA seeking class arbitration (hundreds claimed) under the ICAs and AAA rules; plaintiffs sought a declaratory judgment in state court to bar class arbitration and consolidation.
- Plaintiffs moved for summary disposition asking the court to (1) decide whether class arbitration is permitted and (2) rule consolidation impermissible; defendants argued the arbitrator should decide because the contracts incorporated AAA rules.
- The trial court ruled that, under federal arbitration doctrine, whether class arbitration is permitted (a “gateway” issue) is for the court to decide, but whether multiple arbitrations may be consolidated is a subsidiary procedural question for the arbitrator.
- The Court of Appeals affirmed the denial of plaintiffs’ summary disposition on consolidation, holding that when a contract is silent on consolidation the arbitrator decides that procedural question under the FAA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who decides whether class arbitration may proceed when contract is silent? | Court should decide as a gateway arbitrability question. | Arbitrator should decide if contract refers to AAA rules permitting class procedures. | Court: gateway issue — court decides. |
| Who decides whether multiple arbitrations should be consolidated when contract is silent? | Court should decide consolidation and prohibit it. | Arbitrator should decide consolidation as a procedural matter under AAA rules. | Arbitrator decides consolidation (procedural/subsidiary issue). |
| Does Stolt‑Nielsen change who decides consolidation? | Stolt‑Nielsen and later cases require courts to decide class and related issues. | Stolt‑Nielsen addressed only whether class arbitration may be authorized, not who decides consolidation. | Stolt‑Nielsen does not change that consolidation is procedural and for arbitrators. |
| Do post‑Stolt decisions holding class arbitration a gateway issue require that consolidation also be a gateway issue? | Yes — plaintiffs urge analogizing class arbitrability rulings to consolidation. | No — class arbitration raises distinct, complex concerns unlike consolidation. | No — consolidation is materially different and remains for arbitrators absent contractual language. |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (arbitration is a matter of contract; courts decide arbitrability absent clear delegation)
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (distinguishes gateway arbitrability issues from procedural questions for arbitrators)
- Stolt‑Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (court addressed whether class arbitration can be imposed absent contractual basis)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (plurality opinion relevant to earlier circuit decisions on class arbitration)
- Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir.) (held class arbitration is a gateway issue for courts)
- Employers Ins. Co. of Wausau v. Century Indem. Co., 443 F.3d 573 (7th Cir.) (consolidation is a procedural matter for arbitrators)
- Certain Underwriters at Lloyd’s London v. Westchester Fire Ins. Co., 489 F.3d 580 (3d Cir.) (consolidation left to arbitrator when contract silent)