This case involves claims arising out of infelicitous securities investments in which defendant advised plaintiffs to participate. As a part of these investment transactions, plaintiffs executed customer agreements providing that any claims against defendant arising from the investments must be submitted to binding arbitration within one year of the accrual of the cause of action.
Plaintiffs sued and defendant moved to dismiss plaintiffs’ claims on the basis that plaintiffs had agreed to arbitrate any such disputes and that, under the arbitration provisions, plaintiffs’ claims were barred by the contractual limitation period. The trial court concluded that plaintiffs’ claims were barred by the contractual limitation period and dismissed plain
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tiffs’ action. The plaintiffs appealed. Relying on Michigan precedent,
Bennett v Shearson Lehman-American Express, Inc,
This case has now returned to us
1
on remand from the Supreme Court for the limited purpose of considering “whether the Federal Arbitration Act [FAA], 9 USC 1
et seq.,
requires that a court instead of arbitrators decide the issue of the timeliness of plaintiffs’ claims.”
I. UNDERLYING FACTS AND PROCEDURAL HISTORY
For completeness, we repeat the facts of this case as set forth in our prior unpublished opinion:
Following the advice of defendant, an investment adviser, plaintiffs invested in a limited partnership known as the Certified Historic Income Properties VH Limited Partnership (chips vii). Twelve of the plaintiffs, Franklin Amtower, Richard Bumb, Richard Cummings, Thomas DeAgostino, *230 David Farber, Jeffrey Farber, Carl Freeman, Patricia Hutchinson, Gary Lambert, Paul Tatseos, Barry Miller and John Christ, executed customer agreements with defendant. These agreements provided that any claims against defendant arising out of the chips vn transaction would be submitted to binding arbitration within one year of the accrual of the cause of action.
Plaintiffs brought this action pursuant to the Michigan Consumer Protection Act, MCL 445.901 et seq.-, MSA 19.418(1) et seq. Plaintiffs alleged that defendant misrepresented pertinent facts regarding the integrity of the CHIPS VII investment.[ 2 J Defendant moved for summary disposition against Amtower, Bumb, Cummings, DeAgostino, David and Jeffrey Farber, Freeman, Hutchinson, Lambert, Tatseos, Miller and Christ, arguing for outright dismissal or, alternatively, for an order to compel arbitration. Defendant argued that the arbitration agreement precluded these plaintiffs from obtaining relief from the courts. Defendant also argued that the action had been brought more than one year from the time the cause of action accrued. Defendant argued that the cause of action accrued in October, 1990, when plaintiffs were notified that the chips vn investments were failing. Plaintiffs argued in response that the arbitration agreement was invalid because they had not made a knowledgeable waiver of rights. Plaintiffs also argued that the cause of action did not accrue until May 8, 1991, when they learned that the chips vii general partner had misappropriated funds.
The trial court concluded that the arbitration agreement was valid and that the cause of action accrued in October, 1990. The trial court granted defendant’s summary disposition motion. The trial court later denied plaintiffis’] motion for relief from order and for reconsideration pursuant to MCR 2.612.
*231 On appeal, plaintiffs abandoned any claim that the arbitration agreements were invalid and argued only that the trial court erred in determining that their cause of action accrued in October 1990. Defendant argued that the court correctly made this determination. Although not an issue raised by the parties, we held in our prior opinion that the arbitrator, not the trial court, should decide whether plaintiffs’ claims were barred by the contractual one-year limitation period:
Although the existence of a contract to arbitrate and its enforceability is a judicial question that cannot be decided by an arbitrator, City of Huntington Woods v Ajax Paving [Industries, Inc (After Remand)],196 Mich App 71 , 74;492 NW2d 463 (1992), procedural matters arising out of an arbitrable dispute are for the arbitrator, and not the court, to determine. Bennett v Shearson Lehman-American Express, Inc,168 Mich App 80 , 83;423 NW2d 911 (1987). As such, the timeliness of bringing of an arbitration proceeding is a procedural issue to be determined by the arbitrator rather than the courts. Id.; see also Nielsen v Barnett,440 Mich 1 , 10;485 NW2d 666 (1992). Therefore, the trial court erred in making a determination regarding when plaintiffs’ cause of action accrued.
On the basis of defendant’s argument in seeking leave to appeal to the Supreme Court, that the FAA preempted state law and that federal law required the court rather than an arbitrator to determine the question of timeliness, the Supreme Court, in lieu of granting leave to appeal, remanded the matter for further consideration. 3
*232 H. ANALYSIS
Now that it has made its legal position more clear, we agree with defendant that the faa applies to this dispute, which dispute unquestionably arises out of contracts involving interstate commerce.
Allied-Bruce Terminix Cos, Inc v Dobson,
A GENERAL FEDERAL RULE — 'TIMELINESS ISSUES AS QUESTIONS OF “PROCEDURAL ARBITRABILITY’
In
John Wiley & Sons, Inc v Livingston,
B. PARTIES’ INTENT TO RESERVE TIMELINESS ISSUES FOR THE
COURT
Notwithstanding the general federal rule, it is equally clear that the parties to an arbitration agreement can provide that certain issues be determined
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by the court if they so specify in their contract. “ ‘[Arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he had not agreed so to submit.’ ”
AT & T Technologies, Inc v Communications Workers of America,
Consequently, the determination whether the issue of timeliness must be decided by the arbitrator or a court inexorably becomes a question of contract interpretation. When deciding whether the parties agreed to arbitrate a certain matter, courts should ordinarily apply basic state-law principles that govern the formation of contracts.
Id.
at 944. “ ‘The cardinal rule in the interpretation of contracts is
to ascertain the intention of the parties’ ” Goodwin, Inc v Orson E Coe Pontiac, Inc,
However, consistent with the strong federal policy promoting arbitration, any ambiguity concerning whether a specific issue falls within the scope of arbitration, such as whether a claim is timely, must be resolved in favor of submitting the question to the
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arbitrator for resolution. See
AT & T Technologies, supra
at 650. In other words, there is a presumption of arbitrability “ ‘unless it may be said with positive assurance that the arbitration clause is not susceptible of an inteipretation that covers the asserted dispute. Doubts should be resolved in favor of coverage.”’
Id.,
quoting
United Steelworkers of America v Warrior & Gulf Navigation Co,
With these principles in mind, we turn to the arbitration provisions at issue in this case. Most of the customer agreements contain the following language related to arbitration:
Any and all controversies which may arise between us . . . concerning, arising out of, or relating to, your business, my accounts), transactions with you for me, any other transactions, this agreement or the construction, performance or breach of this or any other agreement between us . . . shall be submitted to, and settled and determined by, binding arbitration.... Arbitration must be commenced within one year after the cause of such action accrued by service upon the other of a written demand for arbitration *236 or a written notice of intention to arbitrate, naming therein the arbitration tribunal.
Some of the agreements used slightly different language, but with the same import:
It is agreed that any controversy between us arising out of. . . this agreement shall be submitted to arbitration .... Arbitration must be commenced within one year after the cause of action accrued by service upon the other of a written demand for arbitration or a written notice of intention to arbitrate, naming therein the arbitration tribunal.
Particularly when considered in light of the federal presumption in favor of arbitrability, we believe that these broadly worded arbitration clauses, covering as they do any controversy arising between the parties, indicate that the arbitrator must decide the timeliness issue. This conclusion makes sense when one considers that the timeliness issue itself requires a determination of often-disputed, as here, fact questions regarding when “the cause of action accrued.” Federal precedent makes it clear that, ordinarily, this is a question that the arbitrator is in a better position to decide. In John Wiley & Sons, supra at 556-557, the Court explained: *237 We also believe, as a general rule, that submitting procedural matters, such as timeliness, to the arbitrator is consistent with the United States Supreme Court’s admonition that in deciding whether the parties have agreed to submit a particular grievance to arbitration, “a court is not to rule on the potential merits of the underlying claims.” AT &T Technologies, supra at 649.
*236 Questions concerning the procedural prerequisites to arbitration do not arise in a vacuum; they develop in the context of an actual dispute about the rights of the parties to the contract or those covered by it. . . .
Doubt whether grievance procedures or some part of them apply to a particular dispute, whether such procedures have been followed or excused, or whether the unexcused failure to follow them avoids the duty to arbitrate cannot ordinarily be answered without consideration of the merits of the dispute which is presented for arbitration.
*237 C. EXCEPTIONS TO THE GENERAL RULE — RONEY & CO v KASSAB AND SMITH BARNEY, INC v SARVER
In opposition to the general federal rule favoring the determination of timeliness issues by an arbitrator, defendant cites two recent decisions from the Sixth Circuit Court of Appeals,
Roney & Co v Kassab,
981 F2d 894 (CA 6, 1992), and
Smith Barney, Inc v Sarver,
In light of this “eligible for submission” language, it has been recognized that Rule 603 and §15 are unlike ordinary procedural limitation periods because they
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indicate “that the parties intended to bar from arbitration disputes raised more than six years after the events giving rise to them.”
PaineWebber Inc v Hartmann,
921 F2d 507, 513 (CA 3, 1990); see also
Cogswell v Merrill Lynch, Pierce, Fenner & Smith Inc,
We conclude that the analysis contained in Roney & Co and Smith Barney is limited to the unique language of Rule 603 and § 15 and represents a specific exception to the general federal rule that timeliness issues must be submitted to an arbitrator. 8 Conse *239 quently, the decisions in Roney & Co and Smith Barney provide no guidance in our determination how the arbitration agreements in this case should be construed. We further conclude that the contractual language at issue in this case does not unmistakably remove the issue of the timeliness of a claim from the purview of the arbitrator and is thus not equivalent to the language that the Sixth Circuit Court of Appeals found in Roney & Co and Smith Barney to preclude submission of the issue to an arbitrator.
m. CONCLUSION
Because the parties have included a broadly worded arbitration provision encompassing the core claim, we conclude that the timeliness of plaintiffs’ claims is for the arbitrator to decide as a procedural matter. Accordingly, we reverse and remand this matter to the trial court with instructions to grant defendant’s alternative motion to compel arbitration. We do not retain jurisdiction.
Reversed and remanded.
Notes
Upon remand, Judge Holbrook, Jr., was substituted for (now) Justice Clifford W. Taylor.
Plaintiffs also alleged claims of breach of fiduciary duty, breach of contract, and negligence.
Although defendant mentioned the faa and cited various federal cases in arguing before this Court that the trial court properly calculated the accrual date of plaintiffs’ claims, defendant did not, until it filed briefs in *232 the Supreme Court, assert that the matter was actually governed by the faa. We therefore addressed the arbitration question relying on Michigan precedent. See Bennett, supra at 83.
In any event, we note that
Bennett,
although a Michigan case, is entirely founded on federal law.
Bennett
can be traced directly back to our Supreme Court’s decision in
Brown v Holton Public Schools,
See, e.g.,
Glass v Kidder Peabody & Co, Inc,
See
Detroit v AW Kutsche & Co,
Although the general principles to be applied in construing arbitration agreements originated in the labor context, we note that the United States Supreme Court has since applied them in a commercial arbitration case. See
First Options, supra;
see also
PaineWebber Inc v Elahi,
By way of illustration, the Third, Sixth, Seventh, Tenth, and Eleventh Circuit Courts of Appeal have held that the application of the § 15 time-bar provision is for the court to decide. See, e.g.,
Smith Barney, supra; Cogswell, supra
at 478-481;
Merrill Lynch, Pierce, Fenner & Smith, Inc v Cohen,
This exception to the general rule is nevertheless consistent with the basic presumption of arbitrability, AT & T Technologies, supra at 650, and the principle that a court must enforce only the contractual arbitration agreement the parties have struck. First Options, supra at 947. As recognized in General Drivers, Warehousemen & Helpers, Local Union 89 v Moog Louisville Warehouse, 852 F2d 871 (CA 6, 1988), procedural matters (such as the timeliness of a claim) are presumptively resolved by an *239 arbitrator unless the parties have specified otherwise in the arbitration agreement. See id. at 875.
In General Drivers, the parties’ arbitration agreement provided that untimely grievances “ ‘shall not thereafter be arbitrable.’ ” Id. at 873. The Sixth Circuit Court of Appeals found that this language constituted “positive assurance” that the parties intended that the timeliness issue was for the court to decide as a condition precedent to arbitration. Id. at 874. As stated in the text, the language of the parties’ arbitration agreements in this case contains no similar language of “positive assurance” that they intended to remove the question of timeliness of a claim from the arbitrator’s consideration.