COMPANY 1 filed a complaint against Company 2 and Company 3, alleging that it provided goods and services to Company 3 under a contract and that Company 3 failed to pay the contract price of $6,825.00. COMPANY 1 sought recovery of this amount for breach of contract and also sought $10,000 for costs, interest, statutory sanctions, and attorney fees.
Company 3 and Company 2 filed a combined counter-complaint and third-party complaint, stating, in pertinent part, that Company 2 had been assigned various accounts but that COMPANY 1, as well as the third-party defendants, wrongly received the monies for these accounts. Company 3 and Company 2 alleged embezzlement, requesting damages of $25,000, and conversion, requesting treble damages.
The case proceeded to case evaluation. The evaluation resulted in recommended awards of (1) $6,000 to COMPANY 1 and against Company 3 and Company 2 and (2) $36,000 to Company 3 and Company 2 and against COMPANY 1 and two of the third-party defendants. Company 3 and Company 2 accepted the awards but COMPANY 1 rejected them.
Subsequently, all parties stipulated to submit the case to binding arbitration.
The arbitrator awarded $7,815.00 to COMPANY 1 and against Company 3 and Company 2. The arbitrator also awarded Company 3 and Company 2 $36,015.73 against COMPANY 1 and the three third-party defendants. The arbitrator noted, in paragraph 3 of the award document, that its awards were inclusive of all costs, interest and attorney fees.
Company 3 and Company 2 filed a motion to modify or correct the arbitration awards, stating that the arbitration proceedings did not encompass case-evaluation sanctions under MCR 2.403 and that the arbitration agreement specifically reserved the issue of attorney fees for the trial court. Accordingly, Company 3 and Company 2 requested that the court strike paragraph 3 of the award document.
The court ordered that paragraph 3 of the award document be stricken to the extent it might apply to case-evaluation sanctions, because the Arbitration Agreement to arbitrate provided that the issue was not to be submitted to arbitration.
The arbitrator stated that the award document had not included any amount for case-evaluation sanctions and that, in fact, he had not even known the results of the case evaluation until after issuance of the awards.
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