Now Accepting New Clients!

BUSINESS LAW 3: Did arbitrator exceed his powers by making a material error of law?

October 2013, plaintiff filed this lawsuit seeking the assessment of damages against defendant, his brother, for allegedly trespassing on a self-service car wash located in Detroit that was owned by plaintiff, and for breach of contractual and fiduciary duties. Plaintiff alleged that in mid-2012, plaintiff established the LLC and subsequently purchased the self-service car wash for $110,000 doing business as the LLC. Plaintiff appointed defendant as his agent to run the car wash, and instructed defendant to pay himself a salary from funds generated by the LLC and tender any excess funds to plaintiff as profits. After defendant failed to tender any funds to plaintiff, and after defendant declined to cease operation of the car wash, plaintiff filed this case.

Defendant gave a different rendition of the facts. Defendant contended that he established the LLC in 2011, and that he purchased the car wash at that time for $140,000. Defendant then put $60,000 of work into the property. However, while defendant was out of the country in 2012, plaintiff deceptively created an LLC bearing the name and convinced an agent of defendant to transfer title of the car wash to plaintiff’s LLC. As part of his answer to plaintiff’s complaint, defendant counterclaimed to quiet title to the property.

July 2015, the trial court entered a stipulated order for binding arbitration containing the following provision: IT IS HEREBY ORDERED AND ADJUDGED that the parties will engage in binding arbitration, pursuant to MCR 3.602 and MCL 691.1681 et seq. The Plaintiff will select an arbitrator; the Defendant will select an arbitrator; and the two arbitrators will select the third arbitrator.

The arbitration panel majority found that defendant was the owner of the car wash, that the parties agreed about that fact, and that the only real controversy was whether plaintiff also had an ownership interest. As such, plaintiff bore the burden of proof to establish by a preponderance of the evidence that he supplied money to defendant to assist in purchasing the car wash. Noting that the evidence was near equipoise, because plaintiff bore the burden of proof, the majority found that there was no evidence that would support or sustain a finding that [plaintiff had] an interest in the car wash. Accordingly, defendant was awarded a judgment of “no cause of action.” The dissenting arbitrator agreed with the majority as to the applicable burden of proof, but contended that plaintiff established co-ownership of the car wash by a preponderance of the evidence.

Plaintiff focuses on MCL 691.1703(1)(d) and MCR 3.602(J)(2)(c), contending that the trial court was required to vacate the arbitration award after it was shown that the arbitrators exceeded their powers by making an error of law.

An arbitrator may exceed his or her powers by making a material error of law that substantially affects the outcome of the arbitration. In order for a court to vacate an arbitration award because of an error of law, the error must have been so substantial that, but for the error, the award would have been substantially different.

Plaintiff primarily contends that the arbitration panel’s majority incorrectly found that plaintiff bore the burden of proof.

The arbitrators made an explicit factual finding that defendant was the owner of the car wash, that the parties agreed to that fact. The arbitrators believed that the burden of proof to establish that plaintiff was a co-owner of the property belonged to him, and after having already found defendant to undoubtedly have been the owner of the property, the appeals court found no error apparent on the face of that decision.

If you are a business owner facing litigation, obtaining the right legal representation is essential.

At Aldrich Legal Services, you will work with an attorney who has the extensive litigation experience necessary to help you reach an effective resolution that protects your interests.

Contact Aldrich Legal Services

Basic responsibilities of an executor

Originally posted on 01/11/2017 The emotional toils of dealing with the death of a loved one can be considerably difficult. Nevertheless, perseverance is paramount; especially if you are appointed to be an executor to one’s...

What you need to compliment your will

Originally posted on 02/08/2017 Making end-of-life plans usually end with a will, but they shouldn't. Some believe that simply having a will is enough. However, this post will briefly explain how having other estate planning...

The benefits of home health care providers

Originally posted on 03/22/2017 As we get older or suffer an injury, we need a little extra help. Home health care providers or caregivers can provide the assistance needed to handle your or your loved one's health and safety...

What to know about bail conditions

Originally posted on 03/06/2017 If you have been arrested and are being held on the suspicion that you have committed a particular crime, chances are that the only thing you are thinking about is getting out of jail as soon as possible and...

College students and estate planning

Originally posted on 12/16/2016 With college semesters starting up in Michigan, it may not be so easy to get college students to think responsibly. This time can be especially tough with the need of moving back to school and getting...

Three reasons to put a power of attorney in place

Originally posted on 11/08/2016 While no one wants to think of the unfortunate possibility of being incapacitated or of a time when we can't handle our own affairs, this circumstance is a real possibility. If something happens and this...

How to approach parents about estate planning

Originally posted on 12/09/2016 Family forms a strong foundation for many people's first and most intimate community. It is important to strengthen these first relationships so even uncommon questions become natural. For those...

PROBATE 44: Petition for Mental Health Treatment

Michigan’s Mental Health Code governs the civil admission and discharge procedures for a person with a mental illness. Specifically, MCL 330.1434 sets forth the procedure and content requirements for a petition for mental health treatment.

Should you get your criminal record expunged?

Originally posted on 04/12/2017 If you have been convicted of a crime, have served your sentence, and have followed all court recommendations, you should be able to put your past behind you and move on with life. Moving forward is critical...

Choosing the right executor for an estate

Originally posted on 05/28/2017 When people are thinking about planning their estate, they often think about trying to minimize the estate tax, keeping their will updated, and keeping items out of probate court; however, there is another...

Understanding how the Miranda warning works

Originally posted on 11/25/2016 Michigan residents who have seen television police shows or movies involving law enforcement have no doubt watched many dramatic scenes with officers quoting something to the effect of, "You have the...

Don't let a bad decision, unfair contract, or a messy divorce get in the way of a promising future!
Contact the experienced team at Aldrich Legal Services today to schedule your free initial
and secure reliable and trustworthy representation today!
Get the Help You Need From a Team You Can Truly Count On: (734) 404-3000