Whether to allow consolidation of arbitrations is not a question Michigan courts must decide, according to a recent opinion in Lauren Bienenstock & Assocs. v. Lowry, No. 323986. Unless the parties have agreed that a court will decide the issue, arbitrators have sole authority to decide whether to administratively consolidate multiple arbitrations. The same is not true for arbitration as a class. According to the Court of Appeals, whether to allow class arbitration is still considered a “gateway” issue to be decided by the courts.
The multiple defendants in this case were independent contractors for plaintiff Lauren Bienenstock & Associates, Inc. (LBA) who signed agreements containing a clause requiring the arbitration of disputes under that agreement pursuant to the rules and regulations of the American Arbitration Association (AAA). Initially, the defendants filed suit in Macomb circuit court seeking allegedly overdue compensation, but the court granted plaintiffs LBA, Lauren Bienenstock, and Samuel Bienenstock summary disposition under the clause above, because it precluded the lawsuit. The defendants then filed a demand for arbitration with the AAA and sought to arbitrate as a class. The plaintiffs filed this action in Oakland circuit court, seeking a declaration that class arbitration was not permitted and an injunction against class arbitration, arguing this was a “gateway” issue for the court to decide. Pointing to the AAA rules, which allow class arbitration, the defendants argued that class arbitration and consolidation were issues for the arbitrator to decide. Ruling from the bench, the trial court granted plaintiffs summary disposition on the class arbitration issue, but held that the arbitrators must decide whether consolidation is permitted. The plaintiffs appealed.
On review, the Court of Appeals affirmed the lower court’s decision under the Federal Arbitration Act (FAA) and federal law. The Court explained that United States Supreme Court decisions indicate there are two situations in which a court would be the arbiter of whether consolidation is permissible: (1) if the contract expressly says so; and (2) where it is a gateway issue involving whether a contract to arbitrate exists or whether a type of claim falls under the arbitration agreement. The court found that neither condition existed here. It also found near unanimity among federal courts that consolidation was a procedural or subsidiary issue for the arbitrator to decide.
