Lesley G McCarthy v. Eugene Pallisco
327647
| Mich. Ct. App. | Oct 6, 2016Background
- Plaintiff and defendant entered a 2010 Confidential Settlement Agreement with an arbitration clause and fee-shifting to the prevailing party; Joel Serlin was named arbitrator with a procedure for appointing a successor.
- Both parties filed arbitration claims; Serlin presided over protracted, contentious proceedings and issued an award finding defendant materially breached the settlement by harassing plaintiff and naming plaintiff the prevailing party, reserving determination of costs/fees.
- Defendant objected, moved to disqualify Serlin twice alleging undisclosed conflicts and bias; Serlin denied the second motion but recused to avoid the appearance of partiality.
- Successor arbitrator Thomas Cranmer held an evidentiary hearing limited to fees/costs, denied defendant’s continuance and some discovery, and awarded plaintiff $229,956.90 in fees and costs.
- The trial court confirmed both Serlin’s and Cranmer’s awards and entered them as judgments; defendant appealed the denial of motions to vacate both awards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Serlin’s alleged undisclosed relationships required vacatur for evident partiality or misconduct | Serlin’s associations did not create an appearance of bias and did not require disclosure under the governing MAA | Serlin’s firm hired an attorney connected to plaintiff’s counsel and Serlin had past representation by a partner of plaintiff’s counsel, which should have been disclosed and vacated award | No vacatur: objective standard not met; relationships were remote and would not reasonably suggest bias |
| Whether Serlin exhibited evident bias in case management and rulings | Plaintiff: Serlin acted within authority, decisions explained, not motivated by bias | Defendant: Serlin’s procedural rulings, sanctions, escrow retention, and statements show bias | No vacatur: allegations speculative, not certain/direct, and insufficient under MCR 3.602(J)(2)(b) |
| Whether Serlin exceeded his authority by ignoring Agreement notice/cure provisions or misapplying prevailing-party clause | Plaintiff: Serlin had authority to interpret contract and determine prevailing party; award draws its essence from contract | Defendant: Serlin disregarded procedural/limitations rules and wrongly designated plaintiff prevailing, so exceeded powers | No vacatur: no error evident on face of award; arbitrator was authorized to decide prevailing party and interpret contract |
| Whether successor arbitrator Cranmer exceeded authority, denied required discovery or abused discretion in denying continuance | Plaintiff: Cranmer acted within court’s guidance and arbitrator authority to resolve fees; denial of continuance/discovery was permissible | Defendant: Cranmer lacked power beyond fee issue, refused ordered discovery, and wrongly denied continuance | No vacatur: Cranmer acted within authority; denial of continuance/discovery not shown to prejudice or be outside arbitrator’s discretion |
Key Cases Cited
- Nordlund & Assoc, Inc v Village of Hesperia, 288 Mich. App. 222 (arbitral award review is de novo but limited)
- Fette v Peters Constr Co, 310 Mich. App. 535 (judicial review limited to whether award draws essence from arbitration agreement)
- Gordon Sel‑Way, Inc v Spence Bros, Inc, 438 Mich. 488 (vacatur requires error evident on the face of the award and material to the result)
- DAIIE v Gavin, 416 Mich. 407 (standards for vacating arbitration awards)
- Police Officers Ass’n of Mich v Manistee Co, 250 Mich. App. 339 (arbitrator’s authority defined by contract; limits on review)
- Albion Pub Sch v Albion Ed Ass’n/MEA/NEA, 130 Mich. App. 698 (failure to disclose facts that reasonably suggest bias can warrant vacatur)
- Cipriano v Cipriano, 289 Mich. App. 361 (ex parte contacts and disclosure obligations in arbitration context)
- Saveski v Tiseo Architects, Inc, 261 Mich. App. 553 (arbitrator exceeds powers when acting beyond contract or controlling law)
- City of Ann Arbor v AFSCME Local 369, 284 Mich. App. 126 (courts cannot overturn arbitrator’s decision if arbitrator was arguably construing the contract)
- Belen v Allstate Ins Co, 173 Mich. App. 641 (partiality must be certain and direct, not remote or speculative)