Preview:

STATE OF MICHIGAN
COURT OF APPEALS


REAL ESTATE ONE, INC., a Michigan Corporation, REAL ESTATE ONE, INC., d/b/a RALPH MANUEL ASSOCIATES, and KATHLEEN DALTON, Plaintiffs-Appellants, v AMERICAN ARBITRATION ASSOCIATION, INC., a New York Non-Profit Corporation, NICOLA GILSON, MATTHEW GILSON, CRANBROOK REALTORS, INC., a Michigan Corporation, DONNA STONE, DR. WENDY GRIFFITH, NICHOLAS DeSELLIER, JANET MITCHELL, OLENA SAMOYLENKO, ALEX SPIEGEL, JANET ROBERTSON, SANDY ROBERTSON, BETH ROSE, ROSE PREMIERE AUCTION GROUP, LLC, an Ohio Limited Liability Company, SAMUEL HANLON, SHIYAN LI, LANSHUN XI, CENTURY 21 HARTFORD SOUTH, INC., a Michigan Corporation, Defendants-Appellees.

UNPUBLISHED February 1, 2005

No. 249970 Oakland Circuit Court LC No. 02-045113-CZ

REAL ESTATE ONE, INC., a Michigan Corporation REAL ESTATE ONE, INC., d/b/a RALPH MANUEL ASSOCIATES, and KATHLEEN DALTON, Plaintiffs-Appellees, v AMERICAN ARBITRATION ASSOCIATION, INC., a New York Non-Profit Corporation, NICOLA GILSON, MATTHEW GILSON, CRANBROOK REALTORS, INC., a Michigan No. 250050 Oakland Circuit Court LC No. 02-045113-CZ

-1-


Corporation, DONNA STONE, DR. WENDY GRIFFITH, NICHOLAS DeSELLIER, JANET MITCHELL, OLENA SAMOYLENKO, ALEX SPIEGEL, JANET ROBERTSON, SANDY ROBERTSON, BETH ROSE, ROSE PREMIERE AUCTION GROUP, LLC, an Ohio Limited Liability Company, SAMUEL HANLON, SHIYAN LI, LANSHUN XI, CENTURY 21 HARTFORD SOUTH, INC., a Michigan Corporation, Defendants-Appellants.

Before: Meter, P.J., and Wilder and Schuette, JJ. PER CURIAM. Plaintiffs appeal as of right from an order granting a motion to dismiss filed by defendant American Arbitration Association, Inc. (AAA). Plaintiffs had asked the trial court, in pertinent part, to order AAA to refrain from processing, scheduling, and arbitrating disputes between plaintiff Real Estate One (REO) and third parties if the demand for arbitration is based on the standard arbitration clause, or a variant of it, that is used by REO in its purchase agreements. The trial court declined to grant this relief. The trial court did award REO $7,500 in sanctions against AAA for AAA's failure to comply with multiple orders to appear at show cause hearings. In a cross-appeal, AAA challenges the award of sanctions. We affirm both in the main appeal and in the cross-appeal. Docket No. 249970 On November 4, 2002, plaintiffs filed a "verified complaint for declaratory relief, temporary restraining order, permanent injunction and stay of arbitration." In the complaint, plaintiffs stated, in part: 11. This Complaint for Declaratory Relief seeks to permanently enjoin AAA from scheduling arbitration, and/or attempting to arbitrate, any dispute, involving the Plaintiffs, when the Plaintiffs have not specifically agreed to arbitrate. *** 13. The Plaintiffs seek injunctive relief[] in the context of the Gilson Arbitration[1] because it is the latest in a series of disputes filed with AAA's Home

Defendants Nicola and Matthew Gilson, disgruntled home buyers, had filed a demand for arbitration against REO and other parties on September 20, 2002.

1

-2-


Buyer/Home Seller arbitration program, wherein AAA has, without any apparent thought or cognitive process, automatically scheduled arbitrations purporting to bind REO, and/or its related entities. Plaintiffs noted that a "Home Buyer/Home Seller arbitration program" had been created by the Michigan Association of Realtors (MAR) "to be a quick and efficient means to resolve disputes between Buyers and Sellers of real estate." Plaintiffs further noted that REO drafted its standard-form purchase agreements to incorporate the arbitration program created by the MAR. They stated that the current clause used by REO in its purchase agreements is as follows: DISPUTE RESOLUTION. Seller and Purchaser agree that any controversy or claim relating to this Agreement, disposition of the Deposit, or the physical condition of the Property and any claim of fraud, misrepresentation or negligence shall be settled by arbitration in accordance with the Home Buyer/Home Seller Arbitration rules of the American Arbitration Association, and judgment on the award rendered by the Arbitrator may be entered in any court having jurisdiction. Plaintiffs indicated that REO also uses the following disclaimer in its purchase agreements: Purchaser and Seller acknowledge that Listing and Selling Brokers and their salespeople are not parties to this Agreement. Listing and Selling Brokers and their salespeople specifically disclaim any responsibility for the condition of the Property or for the performance of the Agreement by the Parties. Plaintiffs represented that the arbitration and disclaimer clauses in the Gilson matter were materially identical to the clauses in REO's standard-form purchase agreements but that AAA "is in the process of scheduling an arbitration hearing [purporting to bind REO and its related entities] based upon the Gilson Arbitration Clause and has repeatedly automatically scheduled arbitration hearings in the past, based upon the substantially similar REO Arbitration Clause." Plaintiffs alleged that the REO purchase agreements, including the arbitration and disclaimer clauses, are used by approximately 30,000 REO clients and customers each year and that "AAA automatically schedules an arbitration purporting to bind REO each time it receives a demand for arbitration based upon the REO Arbitration Clause." Plaintiffs stated: 29. This automatic scheduling of arbitrations, without any contractual, reasonable or permissible basis, leaves REO with two equally damaging options: 1) seek a stay of arbitration each time from this court before the scheduled arbitration or 2) seek this court's determination that the arbiter exceeded his/her authority after the arbitration has occurred. 30. Either option will result in needlessly repetitive litigation which will waste this court's scarce judicial resources. -3-


31. Moreover, either option will result in the necessary and undue expenditure of REO's resources. 32. This process will be repeated, perpetually, unless stopped by this court through the remedies sought herein. As relief, plaintiffs sought, among other things, a declaration that "merely by its promulgation of the REO Arbitration Clause, contained within REO Purchase Agreements, REO does not consent to arbitration." It further sought a "permanent injunction preventing AAA from processing, scheduling and arbitrating disputes between REO and third parties in which the claimant's demand for arbitration is based on the REO Arbitration Clause contained within its REO Purchase Agreements." Plaintiffs also sought specifically targeted relief in the context of the Gilson matter. In an opinion and order dated December 26, 2002, the court ruled, in part: . . . neither the Michigan nor the federal courts have resolved the question of whether arbitral immunity applies to a request for injunctive relief against a sponsoring organization such as Defendant AAA. However, this court does not believe that it must reach the doctrine of arbitral immunity to resolve the question of whether AAA is a proper party to this lawsuit. The court would note that the Demand for Arbitration in the Gilson case refers to a written contract providing for arbitration and names the sellers as well as the realtors. It also describes the nature of the dispute as to each of those parties. Once AAA received the Demand, they scheduled a hearing according to their Rules. Thus, the court finds that it was the naming of Plaintiff in the demand by the Gilsons that caused them to be parties to the Arbitration and not the ministerial action of AAA, which merely performed an administrative task. The appropriate remedy for Plaintiff was to seek injunctive relief against the Gilsons, who initiated the arbitration, which they did [sic] and not against AAA. The court is thus satisfied that AAA is not a proper party to this action. As to Plaintiff's request for injunctive relief in other pending arbitrations in which they are named as parties, the court finds that they must seek injunctive relief against the parties naming them in the Demand for Arbitration in the appropriate court, and not against AAA. [Emphasis added.] On February 11, 2003, plaintiffs filed an amended complaint in which they added facts and arguments relating to several other home buyers, in addition to the Gilsons. Plaintiffs asked the trial court to declare that "demands for arbitration based upon language identical to or substantially the same as the [language in the various buyers' arbitration clauses] are not arbitrable against Plaintiffs." Defendant filed a motion to dismiss, and on March 26, 2003, a successor judge ruled, in part, as follows:

-4-


I have reviewed Judge Mester's opinion and order of December 26th, 2002 in which he ruled that AAA has arbitral immunity[2]and that AAA is not a proper party to this case. I've looked at all the authorities that have been submitted and it appears to the Court that the American Arbitration Association is not a proper party to this type of action. It appears that there is a question as to what the obligation of the American Arbitration Association may be in accepting demands for arbitration insofar as whether they should make some effort to determine whether the matter that's being submitted is one that is properly submissible under their rules and regulations, however I am satisfied from reviewing the authorities that there is a form of quasi-immunity that's granted to the American Arbitration Association which prevents a party from challenging the method by which the American Arbitration Association proceeds in these arbitration matters. For that reason, I'm granting the American Arbitration Association's motion to be dismissed from this case. I do find that

Download REAL ESTATE ONE V AMERICAN ARBITRATION ASSN.pdf

Michigan Law