Opinion
Docket No. 151687.
03-24-2016
BECK v. PARK WEST GALLERIES, INC.
Kaufman, Payton, & Chapa, PC (by Donald L. Payton, Farmington Hills and Brian A. Catrinar ), for Audrey Mahoney, David and Felice Oppenheim, and Patty Brown. Seyburn Kahn, PC (by Joel H. Serlin and Barry M. Rosenbaum, Southfield), for Park West Galleries, Inc., Albert Scaglione, Morris Shapiro, Albert Molina, and Plymouth Auctioneering Services, Ltd.
Kaufman, Payton, & Chapa, PC (by Donald L. Payton, Farmington Hills and Brian A. Catrinar ), for Audrey Mahoney, David and Felice Oppenheim, and Patty Brown.
Seyburn Kahn, PC (by Joel H. Serlin and Barry M. Rosenbaum, Southfield), for Park West Galleries, Inc., Albert Scaglione, Morris Shapiro, Albert Molina, and Plymouth Auctioneering Services, Ltd.
PER CURIAM.This case requires the Court to consider whether an arbitration clause included in invoices for plaintiffs' artwork purchases applies to disputes arising from plaintiffs' previous artwork purchases when the invoices for the previous purchases did not refer to arbitration. We agree with plaintiffs that the arbitration clause contained in the later invoices cannot be applied to disputes arising from prior sales with invoices that did not contain the clause. Each transaction involved a separate and distinct contract, and the facts do not reasonably support a conclusion that the parties intended for the arbitration clause to retroactively apply to the previous contracts.
Accordingly, we reverse that part of the Court of Appeals judgment that extends the arbitration clause to the parties' prior transactions that did not refer to arbitration. We remand this case to the Court of Appeals for consideration of the issues raised in plaintiffs' appeal that the Court did not address to the extent those issues relate to claims that are not subject to arbitration. In all other respects, leave to appeal is denied because we are not persuaded that the remaining question presented should be reviewed by this Court.
I. BASIC FACTS AND PROCEEDINGS
Defendant Park West Galleries, Inc. (Park West) sold art on various cruise ships traversing international waters. Plaintiffs purchased art from Park West on multiple occasions over the course of several years while on different cruise ships in different locations.
The action was originally filed by 12 plaintiffs, but most agreed to dismiss their claims, leaving only plaintiffs Audrey Mahoney, David Oppenheim, Felice Oppenheim, and Patty Brown.
With each sale, Park West provided plaintiffs with a certificate of authentication and a written appraisal, both of which were signed by agents of defendants. All the purchases made by plaintiffs were also accompanied by a signed invoice under which the parties agreed to the terms of the transaction. By 2007, the invoices that Park West provided with plaintiffs' purchases contained an agreement to arbitrate all claims concerning the transaction, which provided in pertinent part:
The owners of Park West, Albert Scaglione and Albert Molina; the gallery director, Morris Shapiro; and Plymouth Auctioneering Services, Ltd., are also defendants in this matter. All defendants are in the same position for purposes of this appeal.
ARBITRATION OF CLAIMS AND DISPUTES AND WAIVER OF JURY TRIAL. Any disputes or claims of any kind, including but not limited to the display, promotion, auction, purchase, sale or delivery of art, items, or appraisals shall be brought solely in non-binding arbitration and not in any court or to any jury.... All decisions respecting the arbitrability of any dispute shall be decided by the arbitrator(s).
However, prior invoices provided with plaintiffs' purchases contained no such clause.
All the invoices for the 2007 and 2008 purchases made by Mahoney and Brown contained the arbitration clause, but only some of the invoices for the Oppenheims' purchases did. The Oppenheims purchased four pieces of art from defendants: one in 2003, one in 2004, one in 2008, and one in 2009. The invoices for the Oppenheims' purchases in 2003 and 2004 did not contain the arbitration clause, but the invoices for purchases made in 2008 and 2009 did.
According to plaintiffs, years after they made their purchases, they discovered that the art purchased from Park West was not actually worth the represented value and that some of the art was forged. Plaintiffs filed the instant suit against defendants on September 28, 2011, asserting claims of breach of contract, breach of warranty of fitness, fraud, negligent misrepresentation, conspiracy, conversion, negligence, intentional infliction of emotional distress, violation of the sales of fine art act, violation of the Art Multiple Sales Act, and violation of the Michigan Consumer Protection Act.
MCL 442.321 et seq.
MCL 442.351 et seq.
MCL 445.901 et seq.
On June 1, 2012, the trial court granted defendants' first motion for summary disposition under MCR 2.116(C)(7) with respect to claims arising out of transactions with invoices that contained the arbitration clause. The trial court determined that the clause was enforceable and required arbitration of all disputes arising from the purchases described in those particular invoices. The trial court thus dismissed all claims brought by plaintiffs Audrey Mahoney and Patty Brown and some of the claims brought by plaintiffs David and Felice Oppenheim. The trial court declined to dismiss any of the claims brought by the Oppenheims that involved purchases in which the invoices did not contain an arbitration clause, concluding that the arbitration clause in the later invoices did not extend to transactions with invoices that did not contain the clause.
Defendants filed a second motion for summary disposition under MCR 2.116(C)(7), alleging that the rest of the Oppenheims' claims were barred by the statute of limitations. The trial court agreed in a September 6, 2013 order and opinion and dismissed the Oppenheims' remaining claims.
Mahoney, Brown, and the Oppenheims appealed in the Court of Appeals. Defendants cross-appealed, disputing the trial court's ruling that not all the Oppenheims' claims were subject to arbitration. The Court of Appeals reversed in part, holding that the arbitration clause in invoices for the later-executed transactions extended to prior transactions for which the invoices did not contain the clause. Consequently, all the Oppenheims' claims were deemed subject to arbitration and dismissed. Mahoney, Brown, and the Oppenheims then filed an application for leave to appeal in this Court, arguing in relevant part that the Court of Appeals erred by concluding that all their claims are subject to arbitration.
Beck v. Park West Galleries, Inc., unpublished opinion per curiam of the Court of Appeals, issued March 3, 2015 (Docket No. 319463), 2015 WL 928682. The Court of Appeals majority adopted the reasoning of the dissent in a prior, virtually identical case involving different plaintiffs. Id. at 4–7, citing Cohen v. Park West Galleries, Inc., unpublished opinion per curiam of the Court of Appeals, issued April 5, 2012 (Docket No. 302746), 2012 WL 1138728 ( Murray, J., dissenting in part).
While the Oppenheims, Mahoney, and Brown also argued in their application to appeal in this Court that the arbitration clauses themselves are invalid, we are not persuaded that this question should be reviewed by this Court. Consequently, for purposes of this opinion, hereafter the term "plaintiffs" will refer to the Oppenheims, because they are the only plaintiffs at issue in this appeal who purchased art covered by invoices that did not contain the arbitration clause.
II. STANDARD OF REVIEW
This Court reviews de novo a trial court's decision on a motion for summary disposition brought under MCR 2.116(C)(7). Under MCR 2.116(C)(7), summary disposition is appropriate if a claim is barred because of "an agreement to arbitrate...." Whether an issue is subject to arbitration is also reviewed de novo.
Fane v. Detroit Library Comm., 465 Mich. 68, 74, 631 N.W.2d 678 (2001).
In re Nestorovski Estate, 283 Mich.App. 177, 184, 769 N.W.2d 720 (2009).
III. ANALYSIS
"Arbitration is a matter of contract." Accordingly, we must apply the same legal principles that govern contract interpretation to the interpretation of an arbitration agreement. Our primary task in construing a contract is to give effect to the parties' intentions at the time they entered into the contract, which requires an examination of the language of the contract according to its plain and ordinary meaning. We must interpret and enforce clear and unambiguous language as it is written.
Kaleva–Norman–Dickson Sch. Dist. No. 6 v. Kaleva–Norman–Dickson Sch. Teachers' Ass'n, 393 Mich. 583, 587, 227 N.W.2d 500 (1975).
Miller–Davis Co. v. Ahrens Constr., Inc., 495 Mich. 161, 174, 848 N.W.2d 95 (2014).
Frankenmuth Mut. Ins. Co. v. Masters, 460 Mich. 105, 111, 595 N.W.2d 832 (1999).
With these principles in mind, the pertinent issue for our review is whether the Court of Appeals erred by concluding that the arbitration clause included in the parties' later invoices encompassed disputes arising from earlier transactions when the invoices for the earlier transactions did not contain the clause. We conclude that the Court of Appeals erred because "[a] party cannot be required to arbitrate an issue which he has not agreed to submit to arbitration," and there is no evidence from which this Court can conclude that the parties' intended to subject the earlier transactions to arbitration.
Kaleva, 393 Mich. at 587, 227 N.W.2d 500.
Michigan law requires that separate contracts be treated separately. Plaintiffs' purchases were of unique pieces of art purchased on different cruise ships in various international waters on different dates. Each unique transaction, accompanied by a separate invoice, constituted a separate and distinct contract, capable of independent enforcement. The invoices pertaining to plaintiffs' 2003 and 2004 purchases did not require any dispute arising from those purchases to be arbitrated; those invoices contained absolutely no reference to arbitration. There is, therefore, no basis on which to conclude that at the time of those purchases the parties intended to arbitrate any disputes that might arise.
See Mich. Nat'l Bank v. Martin, 19 Mich.App. 458, 462, 172 N.W.2d 920 (1969). The Restatement of Contracts supports the notion that separate contracts are to be treated separately. For example, comment d regarding Restatement Contracts, 2d, § 231, pp. 197–198, provides in relevant part:
The rules that protect parties whose performances are to be exchanged under an exchange of promises apply only when the promises are exchanged as part of a single contract.... [I]f one or more promises by each party are not part of the consideration for one or more promises by the other party, there are instead separate exchanges.... In deciding whether there is a single contract rather than separate contracts, the court must look to the actual bargain of the parties ... to decide whether each promise on one side was sought and given as at least part of the exchange for each promise on the other side.
Similarly, comment b regarding Restatement, § 240, p. 230, provides in relevant part:
If there are two separate contracts, one party's performance under the first and the other party's performance under the second are not to be exchanged under a single exchange of promises, and even a total failure of performance by one party as to the first has no necessary effect on the other party's duty to perform the second.
Accordingly, disputes arising from plaintiffs' 2003 and 2004 purchases are subject to arbitration only if the arbitration clause contained in the 2008 and 2009 invoices can be retroactively applied to the earlier transactions. Michigan law, however, has long recognized that contracts generally cannot be construed to operate retroactively, and there is no basis on which to find that the parties in the instant case intended for the later arbitration clauses to apply retroactively in contravention of this general principle. The Court of Appeals erroneously concluded that the phrase "[a]ny disputes or claims of any kind" contained in the arbitration clause was sufficiently broad to encompass disputes arising under prior contracts that did not contain the clause. However, it is significant that the plain language of the invoices that contained the arbitration clause does not refer to previous transactions between the parties let alone suggest that the clause was to apply to such transactions. Similarly, the 2003 and 2004 invoices do not indicate that the terms of a subsequent contract between the parties might apply to the 2003 and 2004 transactions. Having examined all the facts, we are unable to conclude that the parties intended the interpretation adopted by the Court of Appeals.
See Hyatt v. Grover & Baker Sewing–Machine Co., 41 Mich. 225, 227, 1 N.W. 1037 (1879) (holding that a surety contract would only apply prospectively given that the contract did not specify retroactive application); Brockway v. Petted, 79 Mich. 620, 626, 45 N.W. 61 (1890) (stating that a surety contract only applies to future events unless otherwise provided in the contract).
The Court of Appeals relied heavily on the proposition that Michigan courts " ‘resolve all conflicts in favor of arbitration,’ " and particularly on Kaleva–Norman–Dickson Sch. Dist. No. 6 v. Kaleva–Norman–Dickson Sch. Teachers' Ass'n, in which this Court stated:
Beck, unpub. op. at 7 (citation omitted).
Kaleva, 393 Mich. at 592, 227 N.W.2d 500, quoting United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582–583, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960) (alteration in original).
"An order to arbitrate the particular grievance should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute...." Absent an "express provision excluding [a] particular grievance from arbitration" or the "most forceful evidence of a purpose to exclude the claim", ... the matter should go to arbitration[.]
A majority of the Court of Appeals panel determined that this language was controlling and resolved the issue in favor of defendants. While this language recognized "[t]he policy favoring arbitration of disputes arising under collective bargaining agreements," it does not remotely suggest that an arbitration agreement between parties outside the collective-bargaining context applies to any dispute arising out of any aspect of their relationship. That is, a general policy favoring arbitration cannot trump the actual intent and agreement of the parties. This is not to say that an arbitration clause in a later contract can never be applied to a previous contract, but the facts of this case do not provide for such retroactive application. Consequently, there is no basis on which to conclude that disputes arising from plaintiffs' 2003 and 2004 purchases are subject to arbitration.
Judge Hoekstra disagreed with the majority's conclusion that the arbitration clause included in later invoices applied to disputes over the earlier transactions for which the invoices did not contain the arbitration clause.
Kaleva, 393 Mich. at 591, 227 N.W.2d 500.
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Moreover, the analysis in Kaleva is inapplicable to the factual circumstances of the instant case. In Kaleva, the relevant arbitration provision was contained in a collective-bargaining agreement, the terms of which governed the plaintiff's employment with the defendant. There was no dispute that the collective-bargaining agreement containing the clause was applicable to the parties' employment relationship, and the relevant issue was simply whether the plaintiff's particular grievance fell within the terms of the arbitration clause. In contrast, the arbitration clause in the instant case was extended from distinct contracts concerning separate transactions to disputes over earlier transactions with their own distinct contracts. Therefore, the facts and issues presented in Kaleva were very different from those presented here. Consequently, the analysis in Kaleva is not helpful in resolving the instant matter and does not compel the result reached by the Court of Appeals.We are also not persuaded by the federal authority cited by the Court of Appeals. In those cases, the federal courts held that the terms of later-executed contracts applied to previous dealings between the same parties. See Levin v. Alms & Assoc., Inc., 634 F.3d 260 (C.A.4, 2011), and Watson Wyatt & Co. v. SBC Holdings, Inc., 513 F.3d 646 (C.A.6, 2008). Those cases are distinguishable from the present case because the litigants' transactions in the federal cases were ongoing and regular, evincing a steady and continuous business relationship. In the instant case, the parties' transactions were sporadic and irregular, evincing nothing more than the execution of separate and distinct transactions that were distant in time. The inclusion of the arbitration clause in the later contracts at issue here did not put plaintiffs on notice that it was to apply to all previous contracts between the parties.
In sum, the undisputed facts do not reasonably support the conclusion that the parties intended for the arbitration clause contained in the invoices for some transactions to apply to separate and distinct prior transactions. There simply is no legal basis on which to retroactively insert an arbitration clause into the parties' 2003 and 2004 contracts. Consequently, only plaintiffs' claims arising from purchases for which the invoices included the arbitration clause are subject to arbitration.
IV. CONCLUSION
We disagree with the Court of Appeals' conclusion that, by signing an invoice containing an arbitration clause, plaintiffs agreed to arbitrate not only disputes regarding transactions described in that invoice, but also disputes regarding past transactions, regardless of whether the invoices associated with the past transactions included an arbitration clause. The plain language of plaintiffs' 2003 and 2004 invoices makes no mention of arbitration, and there is no basis on which to conclude that the parties intended for the arbitration clause contained in their 2008 and 2009 invoices to retroactively apply to the earlier transactions.
Because we conclude that the only claims subject to arbitration are those arising from invoice agreements containing an arbitration clause, we reverse that part of the Court of Appeals judgment that applied the arbitration clause to the parties' prior transactions completed without reference to arbitration. We remand this case to the Court of Appeals for consideration of the issues raised in plaintiffs' appeal that the Court did not address to the extent those issues relate to claims that are not subject to arbitration. In all other respects, leave to appeal is denied, because we are not persuaded that the remaining question presented should be reviewed by this Court.
YOUNG, C.J., and MARKMAN, ZAHRA, McCORMACK, VIVIANO, BERNSTEIN, and LARSEN, JJ., concurred.