Rooyakker & Sitz, PLLC v. Plante & Moran, PLLC
742 N.W.2d 409, 276 Mich. App. 146 (2007)
Rule of Law:
An arbitration agreement is considered an irrevocable statutory arbitration agreement under Michigan law if it is in writing and provides for a judgment of any court having jurisdiction to be rendered upon the arbitrator's award. Such an agreement renders disputes arising from the contract, including statutory enforceability challenges and related tort claims involving non-parties, subject to arbitration, unless explicitly exempted by statute.
Facts:
- Mathew D. Rooyakker, George M. Sitz, and Sandra K. Burns were employed by Plante & Moran, PLLC, an accounting and business consulting firm, at its Gaylord office.
- As a condition of their employment, Rooyakker, Sitz, and Burns each signed a "Practice Staff — Relationship Agreement" with Plante & Moran, which contained a client solicitation clause and an arbitration clause.
- The client solicitation clause prohibited former staff members from directly or indirectly providing professional services to any Plante & Moran client for two years after termination and stipulated a payment of damages for breach.
- The arbitration clause stated that "at the option of the Firm, any dispute or controversy arising out of or relating to this Agreement, may be settled by arbitration" and that "Judgment may be entered based on the arbitrator’s decision in any court having jurisdiction."
- On July 13, 2005, Plante & Moran informed Rooyakker, Sitz, and Burns that it was closing its Gaylord office.
- Rooyakker, Sitz, and Burns declined an offer to move to Plante & Moran’s Traverse City office, terminated their employment, and opened their own firm, Rooyakker and Sitz, PLLC, on December 2, 2005, in Gaylord.
- Several of Plante & Moran’s former Gaylord clients subsequently hired Rooyakker and Sitz, PLLC, to provide accounting and tax services.
- Plante & Moran initiated arbitration proceedings against Rooyakker, Sitz, and Burns in March 2006, claiming they violated the client solicitation clause.
Procedural Posture:
- Mathew D. Rooyakker, George M. Sitz, Sandra K. Burns, and Rooyakker and Sitz, PLLC (plaintiffs) filed a suit in circuit court on March 20, 2006, seeking a declaration that their employment agreement was unreasonable and unenforceable, and alleging tortious interference with business expectations/relationships and defamation against Plante & Moran, PLLC, Kevin Lang, and Michelle Carroll (defendants).
- On June 2, 2006, defendants moved for summary disposition, arguing that claims related to the agreement should be arbitrated and other claims lacked evidentiary support.
- On the same date, plaintiffs also moved for summary disposition, contending the agreement was unenforceable under the Michigan Antitrust Reform Act (MARA) and due to frustration of purpose.
- On September 8, 2006, the circuit court issued a written opinion and order granting summary disposition in favor of defendants, concluding the arbitration clause was valid and binding, dismissing plaintiffs' frustration of purpose and Sitz's fraud claims, and reserving the remaining issues (MARA violation, tortious interference of business, defamation, and excessive damages) for arbitration.
- Plaintiffs appealed this order as of right to the Michigan Court of Appeals.
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Issue:
Does an arbitration clause in an employment agreement that allows "judgment to be entered... in any court having jurisdiction" constitute a valid and irrevocable statutory arbitration agreement under Michigan law, thereby requiring arbitration of claims, including statutory enforceability challenges, tort claims related to the agreement, and claims involving non-parties whose involvement arises from the agreement?
Opinions:
Majority - Schuette, J.
Yes, an arbitration clause that allows judgment to be entered in "any court having jurisdiction" is a valid and irrevocable statutory arbitration agreement under Michigan law, requiring arbitration of claims related to the agreement, including statutory enforceability challenges, tort claims, and claims involving non-parties whose involvement arises from the agreement. The Court rejected plaintiffs' arguments on several points. First, the Court affirmed that the arbitration clause was a statutory arbitration agreement. While MCL 600.5001(2) refers to a "circuit court," the Court, citing Gordon Sel-Way, Inc v Spence Bros, Inc and Hetrick v David A Friedman, DPM, PC, found that the phrase "any court having jurisdiction" was sufficient to meet the statutory requirement for enforceability. This interpretation aligns with Michigan's strong public policy favoring arbitration. Second, the Court held that claims under the Michigan Antitrust Reform Act (MARA) were subject to arbitration. Citing Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, the Court reiterated that agreeing to arbitrate a statutory claim does not forgo substantive rights but merely shifts the forum. It reasoned that if the Legislature intended to exempt antitrust actions from arbitration, it would have done so explicitly. The Court also found that the client solicitation clause, even if considered a noncompetition clause, did not violate MARA because it was reasonable under MCL 445.774a(1) to protect Plante & Moran’s competitive business interests, given its reasonable duration (two years) and scope (preventing solicitation of former clients, not practicing accounting altogether). Third, the Court affirmed the dismissal of plaintiffs' frustration-of-purpose claim. It applied the doctrine's conditions, finding that the closure of the Gaylord office was a reasonably foreseeable event, and the risk was arguably assumed, as evidenced by discussions about the office's viability before the agreement was signed. Furthermore, the core purpose of the agreement—protecting client relationships—was not necessarily frustrated, as clients could still be served from other offices. Fourth, the Court affirmed the dismissal of George Sitz's fraud-in-the-inducement claim. The alleged misrepresentation, concerning the future economic viability of the Gaylord office, was not a basis for reasonable reliance. The Court stated that changes in markets and economic conditions are frequent, and one cannot reasonably rely on representations about an office remaining open if it becomes economically unviable. Finally, the Court found that claims involving non-parties (Rooyakker & Sitz, PLLC, Kevin Lang, and Michelle Carroll) were properly referred to arbitration. Despite the argument not being preserved on appeal, the Court concluded that the broad language of the arbitration clause ("any dispute or controversy arising out of or relating to" the agreement) covered the tortious interference and defamation claims, as they arose out of the individual plaintiffs’ past employment with Plante & Moran. This also served the public policy of avoiding bifurcation and resolving all related disputes in a single forum.
Analysis:
This case significantly strengthens Michigan's public policy favoring arbitration, providing a broad interpretation of what constitutes a statutory and irrevocable arbitration agreement. It clarifies that specific "circuit court" language is not essential if the clause broadly permits court enforcement of an award. The ruling also affirms that statutory claims, like those under MARA, are generally arbitrable unless explicitly excluded by the Legislature, and related tort claims involving non-parties can be swept into arbitration under a broad clause to prevent bifurcation of disputes. This decision sets a high bar for parties attempting to avoid arbitration based on frustration of purpose or fraud in the inducement, particularly when the underlying events or representations involve foreseeable economic realities.
