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BlogsPublications | February 12, 2016
2 minute read

A party who agrees that an arbitration clause does not apply is bound by that stipulation, regardless of the harsh results, says COA

A party who expressly waives its right to arbitration forgoes the ability to later assert that right in litigating the remaining unsettled claims against an opponent; notwithstanding the harsh results to the waiving party, held the Michigan Court of Appeals in Nexteer Automotive Corporation v Mando America Corporation, No. 324463.  The other party is not required to show prejudice to enforce the waiver.   

In 2013, competitors, Nexteer Automotive Corporation (“Nexteer”) and Mando America Corporation (“Mando”), considered doing business together in selling steering products.  The parties each signed a nondisclosure agreement that contained an arbitration clause.  Once the discussions broke down and several high-level Nexteer employees left the company for Mando, Nexteer filed a complaint against Mando claiming that the employees acted in concert to divulge trade secrets to Mando.  In a case management order, the parties stipulated that “[a]n agreement to arbitrate this controversy . . . exists” but “is not applicable.”  The trial court granted summary disposition on some of Nexteer’s claims, but unsettled claims remained.  Mando filed a motion to compel arbitration and the trial court found that Nexteer’s claims were arbitral in spite of the waiver of arbitration by the parties; Nexteer appealed.

The Court of Appeals held that the trial court erred when it determined that Mando’s stipulation was not an express waiver because “the stipulation directly indicated an intent not to pursue arbitration.”  Mando argued that it did not know it had a right to arbitration in the remaining claims and holding the parties to an agreement so early in the proceedings would lead to harsh results; the Court was unpersuaded.  The Court concluded that parties have long been held to agreements they enter, regardless of the harsh results, and that Mando was aware of Nexteer’s allegations in its complaint.  Mando further argued that even if it waived its right to arbitrate, this waiver did not prejudice Nexteer.  However, the Court held that where there is an express waiver the party seeking to enforce it is not required to show prejudice.  The Court reversed the trial court’s holding and remanded the case for further proceedings.