GLEICHER, J.
The individual parties to this appeal are present and former shareholders in a law firm, defendant Stark Reagan, P.C. Plaintiffs Patrick C. Hall and Ava Ortner filed a complaint against Stark Reagan and the individual defendants, asserting that age discrimination motivated defendants' decision to terminate Hall's and Ortner's shareholder status. The circuit court granted defendants summary disposition pursuant to MCR 2.116(C)(7) and ordered the case to proceed to arbitration. We reverse and remand for further proceedings.
In 2003, Stark Reagan hired Hall and Ortner as associate attorneys. On January 1, 2004, they became shareholders in the firm, joining seven of the eight attorneys named as individual defendants in this case.
At a January 8, 2009 shareholders' meeting, defendant R. Keith Stark proposed the termination of Hall's and Ortner's interests in Stark Reagan. According to affidavits submitted by Hall and Ortner, Stark explained that their terminations were needed "to change the `demographics' of the firm." The affidavits attested that defendant Joseph Ahern expressed that "the demographics of the firm was [sic] a problem because older attorneys lose their client bases," and that two younger attorneys "`had more potential' and their practices would be going up while ours would be going down." At the request of Hall and Ortner, the meeting adjourned until the next week. During the continued meeting on January 12, 2009, Ortner and Hall announced that the termination of their employment "constituted illegal age discrimination," and advised the other shareholders that they had retained legal counsel. On February 13, 2009, defendants Ahern and Jeffrey Fleury resigned as shareholders of Stark Reagan, effective immediately. The remaining shareholders voted to redeem the stock held by Hall and Ortner, terminating their employment effective March 1, 2009.
In April 2009, Hall and Ortner filed a three-count complaint in the Oakland Circuit Court alleging that defendants violated the Civil Rights Act (CRA), MCL 37.2101 et seq., by discriminating against them on the basis of their ages, unlawfully retaliating against them when they retained counsel, and conspiring to violate the CRA. Defendants filed a motion for summary disposition under MCR 2.116(C)(7), contending that a binding arbitration agreement barred the lawsuit. Defendants also moved for summary disposition under MCR 2.116(C)(5), challenging the capacity of Hall and Ortner to sue under the CRA. The circuit court entered an opinion and order granting defendants' subrule (C)(7) motion, reasoning as follows:
Hall and Ortner maintain that the arbitration clause in the shareholder agreement does not apply to this dispute arising under the CRA. We review de novo a circuit court's determination that an issue is subject to arbitration. In re Nestorovski Estate, 283 Mich.App. 177, 184, 769 N.W.2d 720 (2009).
"Arbitration is a matter of contract...." City of Ferndale v. Florence Cement Co., 269 Mich.App. 452, 460, 712 N.W.2d 522 (2006). Under the federal arbitration act (FAA), 9 USC 1 et seq., courts considering whether the parties agreed to arbitrate a certain matter "should apply ordinary state-law principles that govern the formation of contracts." First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
We first consider whether the arbitration clause language of the shareholders' agreement governs this action brought under the CRA. Article 14 of the shareholders' agreement, entitled "Miscellaneous Provisions," sets forth, in relevant part, the following with respect to arbitration:
The arbitration clause clearly and unambiguously declares that it applies to "[a]ny dispute regarding interpretation or enforcement of any of the parties' rights or obligations hereunder...." By these terms, the arbitration clause limits its scope to disputes relating to the "interpretation or enforcement" of the "rights or obligations" described within the shareholders' agreement.
The shareholders' agreement embodies the parties' intentions concerning the transfer, purchase, and sale of Stark Reagan stock. The 14 articles contained in the shareholders' agreement address: (1) general restrictions on the disposition of stock, (2) the manner in which shareholders may gain admission to the corporation through a vote of other shareholders, (3) the necessary conditions precedent to the sale, transfer, or other disposition of stock, (4) the purchase and sale of stock in the event of a shareholder's inability to practice law because of a disability, (5) the purchase of stock in the event of the death of a shareholder, (6) the redemption of stock in the event of a shareholder's retirement or "Of Counsel" status, (7) involuntary transfers of stock, including but not limited to "transfers pursuant to operation of law, a divorce proceeding, to judicial process and to proceedings in bankruptcy or receivership," (8) the sale of stock on termination of employment, (9) additional events triggering a stock redemption or purchase, (10) the procedural requirements applicable to the purchase of the stock of a selling shareholder, (11) stock prices and other terms, including the repayment of loans and capital contributions, (12) stock redemption or purchase payment terms, and (13) shareholder guaranties. Article 14 consists of the arbitration terms and other general, standard contractual clauses.
The shareholders' agreement makes no mention of any relationships between the
Our review of Hall's and Ortner's complaint reveals no allegation that defendants violated a term of the shareholders' agreement or disregarded the procedures for stock redemptions. Hall and Ortner have set forth no assertions touching on the price of their stock, payment terms, the manner of stock disposition, or any other right or obligation described in the shareholders' agreement. Simply put, Hall and Ortner have not advanced any claim or argument germane to the subject matter of the shareholders' agreement, or having its genesis in that agreement. To include an age-discrimination action within the scope of an arbitration provision expressly limited to the "interpretation or enforcement" of "rights or obligations" concerning corporate stock would expand the clause's reach beyond that intended by the parties. Consequently, Hall's and Ortner's age-discrimination claims fall outside the ambit of the arbitration provision.
Defendants insist that the following "Introductory Statements" of the shareholders' agreement compel arbitration of Hall's and Ortner's CRA claims:
Despite the references to "the continuous, harmonious and effective management of the affairs, policies, and operations of the Corporation" and "the orderly management and operation of the Corporation," we find nothing in the contract that addresses corporate management or operations beyond the realm of stock-related issues. Moreover, the subsequent arbitration clause specifically confines its reach to the resolution of disputes "regarding interpretation or enforcement of any of the parties' rights or obligations hereunder...." The "rights or obligations" delineated in the contract bear no relationship to Hall's and Ortner's age-discrimination claims.
The Florida Supreme Court observed that although some courts have characterized arbitration clauses referring to disputes arising "out of" or "under" the contract as restrictive, the phrase "arising out of or relating to" the contract is often construed as broadening the scope of an arbitration clause. Id. at 637. Nevertheless, the court explained that "even in contracts containing broad arbitration provisions, the determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause." Id. at 638. Citing American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93-94 (C.A.4, 1996), the court in Seifert announced that "the test for determining arbitrability of a particular claim under a broad arbitration provision is whether a `significant relationship' exists between the claim and the agreement containing the arbitration clause, regardless of the legal label attached to the dispute (i.e., tort or breach of contract)." Id. at 637-638. In Seifert, the court found that the facts and allegations pleaded in the complaint asserted negligence in the home's construction, rather than the violation of any duty set
If Seifert's "significant relationship" test represents an approach less deferential to a presumption of arbitrability, the standard adopted in Fazio v. Lehman Bros., Inc., 340 F.3d 386 (C.A.6, 2003), exemplifies the other end of the spectrum. In Fazio, the plaintiffs' broker misappropriated millions of dollars from his clients, Id. at 391. The plaintiffs sued the brokerage firms that had employed the broker, and the defendants moved to compel arbitration on the basis of a contract term calling for arbitration of "`[a]ny controversy arising out of or relating to any of my accounts, to transactions with you for me, or to this or any other agreement or the construction, performance or breach thereof...."' Id. at 391-392. The United States Court of Appeals for the Sixth Circuit held that the plaintiffs' fraud claims fell within the scope of the arbitration agreement because "[t]he lawsuit by necessity must describe why [the broker] was in control of the plaintiffs' money.... The plaintiffs therefore cannot maintain their action without reference to the account agreements, and accordingly, this action is covered by the arbitration clauses." Id. at 395. In a subsequent case, the Sixth Circuit described the Fazio standard as "whether an action could be maintained without reference to the contract or relationship at issue. If it could, it is likely outside the scope of the arbitration agreement." NCR Corp. v. Korala Assoc., Ltd., 512 F.3d 807, 813 (C.A.6, 2008) (internal quotation marks and citation omitted).
Other federal circuit courts of appeal have more directly addressed the language employed in the instant parties' shareholders' agreement. For example, in Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (C.A.9, 1983), the United States Court of Appeals for the Ninth Circuit distinguished the phrase "arising hereunder" from contractual provisions calling for the arbitration of disputes "arising out of and relating to" the contract. "We have no difficulty finding that `arising hereunder' is intended to cover a much narrower scope of disputes, i.e., only those relating to the interpretation and performance of the contract itself." Id. Professor Martin Domke adopted the Ninth Circuit's reasoning in his treatise on Commercial Arbitration, noting that "a clause providing for the arbitration of `any dispute arising hereunder' means arising under the contract itself and does not cover matters or claims independent of the contract or collateral to it." 1 Domke, Commercial Arbitration (3d ed.), § 8:14.
Irrespective which interpretive approach we apply to the shareholders' agreement's clause mandating the arbitration of "[a]ny dispute regarding interpretation or enforcement of any of the parties' rights or obligations hereunder," we cannot "arguably" construe this language to cover a dispute regarding workplace discrimination. In re Nestorovski, 283 Mich.App. at 202, 769 N.W.2d 720. The shareholders' agreement neither bears a significant relationship to Hall's and Ortner's CRA assertions, nor refers to any issue even tangentially
Pursuant to similar logic, we reject the circuit court's finding that Stark Reagan's Law Office Staff Manual "bec[a]me part of the Shareholder Agreement for those who executed that Agreement." The staff manual commences with the following relevant "INTRODUCTION":
The staff manual describes in several paragraphs the "ORGANIZATION AND MANAGEMENT OF THE FIRM," and explains the functions of the executive, personnel, and technology committees. Most of the staff manual content sets forth garden-variety terms and conditions of employment, including "GENERAL OFFICE POLICIES" concerning attendance, outside employment, computers and e-mail, and a host of other similar topics. The staff manual details Stark Reagan's compensation and benefit plans, and contains admonitions against sexual harassment and other "unwelcome conduct" "based upon a person's legally protected status, such as color, race, ancestry, religion, national origin, age, weight, physical handicap, medical condition, disability, marital status, veteran status, or other protected group status in addition to sex." The staff manual does not contain an arbitration clause.
The shareholders' agreement makes no mention of the staff manual. Rather, it includes the following clause under the heading "Entire Agreement":
Given that the parties contemplated that the shareholders' agreement would serve as "the entire agreement between the parties," no record evidence supports the circuit court's finding that the shareholders' agreement implicitly incorporated within its terms the law office staff manual.
Nor do we accept, as did the circuit court, that the Sixth Circuit's decision in Panepucci, 281 Fed.Appx. at 488, compels us to view the shareholders' agreement "as an umbrella or master agreement in relation to, and thus covering, the Staff Manual."
In this case, the shareholders' agreement supplies no evidence pertinent to Hall's and Ortner's age-discrimination claims.
Finally, we find entirely unpersuasive defendants' argument that Panepucci supports the circuit court's conclusion that the Stark Reagan staff manual should be considered part of the shareholders' agreement. In Panepucci, the Sixth Circuit determined that even if the defendants' attorney manual "were a contract, it would still be governed by the arbitration clause." Id. at 488. The Sixth Circuit premised this conclusion on language found in Nestle Waters North America, Inc. v. Bollman, 505 F.3d 498 (C.A.6, 2007). In Nestle Waters, the parties "entered into multiple contracts as part of one overall transaction or ongoing relationship." Id. at 503. The first contract in the series incorporated an arbitration clause stating that "`any controversy or claim ... arising out of this Agreement
The instant arbitration clause appears in a later agreement that both lacks a merger clause and expressly prohibited the incorporation of any "other agreements" within its subject matter. Given the substantial factual differences between this case and Nestle Waters, we derive no guidance from the latter. Furthermore, defendants have brought forth no evidence that the Stark Reagan shareholders intended that the contents of the staff manual would be integrated into the shareholders' agreement. In summary, we detect in defendants' cited federal authority no reason to alter our conclusion that the parties' arbitration agreement does not cover Hall's and Ortner's age-discrimination claims.
Lastly, defendants contend that we should affirm summary disposition on an alternate ground, that Hall and Ortner lack standing to sue under the CRA. According to defendants, only "employees" may sue under the CRA, and as shareholders of the firm, Hall and Ortner instead qualify as employers. In considering whether the statutory language of the CRA reflects a legislative intent that partners or shareholders in a law firm are entitled to the protections of the CRA, we bear in mind "[w]ell-established principles [that] guide this Court's statutory construction efforts. We begin our analysis by consulting the specific statutory language at issue." Bloomfield Charter Twp. v. Oakland Co. Clerk, 253 Mich.App. 1, 10, 654 N.W.2d 610 (2002).
The CRA defines an "employer" as "a person who has 1 or more employees, and includes an agent of that person." MCL 37.2201(a). A "person" includes "an individual, agent, association, corporation, ... partnership, ... or any other legal or commercial entity." MCL 37.2103(g).
Indisputably, defendants fall within the CRA's definition of "employer." Stark Reagan, a corporation and a "person" for purposes of the CRA, has more than one employee. MCL 37.2201(a); MCL 37.2103(g). As Stark Reagan's agents, the individual defendants are also "persons" who employ others. MCL 37.2201(a); MCL 37.2103(g). As employers, defendants face liability under the CRA if they "discriminate against an individual with respect to employment, compensation, or a term, condition, or privilege of employment, because of ... age...." MCL 37.2202(1)(a). Although the CRA does not define the term "individual," "unless a contract or statute provides a different definition, this Court has recognized that the term `an individual' designates a natural person or a single human being." People v. Haynes, 281 Mich.App. 27, 31, 760 N.W.2d 283 (2008).
When we apply the plain meaning of the word "individual" to the relevant portion of MCL 37.2202(1)(a), we conclude that the statute prohibits employers from discriminating against persons on the basis of age, with respect to "a term, condition, or privilege of employment...." Defendants have not challenged that Hall's and Ortner's age-discrimination claims assert an adverse employment action. Alternatively phrased, defendants have not denied that the February 13, 2009 vote of the shareholders concerned "a term, condition, or privilege of" Hall's and Ortner's employment. And even assuming that Hall and Ortner cannot be characterized as Stark Reagan "employees," we nevertheless find that their pleadings state a claim under the CRA.
In McClements v. Ford Motor Co., 473 Mich. 373, 376, 702 N.W.2d 166 (2005), amended 474 Mich. 1201, 704 N.W.2d 68 (2005), our Supreme Court considered whether a cashier working for AVI Food Systems, which operated three cafeterias at a Ford assembly plant, could maintain a sexual-harassment action against a Ford Motor Company employee. The Supreme Court held that "a worker is entitled to bring an action against a nonemployer defendant if the worker can establish that the defendant affected or controlled a term, condition, or privilege of the worker's employment." Id. at 389, 702 N.W.2d 166. Notably, the Supreme Court recognized that "MCL 37.2202 does not state that an employer is only forbidden from engaging in [prohibited] acts against its own employees.... [T]o limit the availability of relief under the CRA to those suits brought by an employee against his or her employer is not consistent with the statute." Id. at 386, 702 N.W.2d 166. Instead, to merit protection under the CRA, a plaintiff must show "some form of nexus or connection between the employer and the status of the nonemployee." Id. The Supreme Court continued:
Therefore, even were we to conclude that Hall and Ortner were not employees of Stark Reagan, we interpret the CRA as permitting their age-discrimination claim against defendants in light of the record evidence that defendants' actions "affected or controlled a term, condition, or privilege" of Hall's and Ortner's employment.
Reversed and remanded for further proceedings consistent with this opinion. We do not retain jurisdiction.
STEPHENS, J., concurred with GLEICHER, J.
KIRSTEN FRANK KELLY, P.J., (dissenting).
I respectfully dissent. The circuit court properly granted defendants summary disposition pursuant to MCR 2.116(C)(7) and properly ordered the case to proceed to arbitration. I would affirm.
As noted by the majority, the individual parties to this appeal are present and former shareholders in the law firm of defendant Stark Reagan, P.C. (the firm). Plaintiffs Patrick C. Hall and Ava Ortner first became "of counsel" to the firm in 2003 for a one year trial period to determine if they would become full partners
Plaintiffs became full partners of the firm in 2004, each paying $10,000 in a capital contribution to the firm and signing the 1991 Shareholders' Agreement. In 2005, a new Shareholders' Agreement was executed. A particular purpose of the agreement was to ensure effective management of the firm:
Stock ownership of the firm was divided equally among the partners. All shares were common shares and retained the same voting rights. Each partner served as an officer of the firm; during their five-year tenure with the firm, plaintiffs both held the position of vice president. The managing partner of the firm was elected
In addition to providing for management of the firm by its shareholders, the agreement specified the procedures and requirements for the involuntary termination of a partner's interest in the firm as well as the process by which the shares could be redeemed. And any dispute was to be submitted to arbitration:
In 2008, allegedly because of declining business and revenues, the partners began discussing restructuring of the firm, although they were unable to reach an agreement on how to accomplish the restructuring. On January 8, 2009, the Managing Partner, Keith Stark, proposed downsizing the firm by three attorneys, including partners. As noted by the majority:
Plaintiffs commenced the instant action alleging violations of the Civil Rights Act (CRA), MCL 37.2101 et seq. Defendants moved for summary disposition under MCR 2.116(C)(7), contending that the arbitration provision of the Shareholders' Agreement barred the lawsuit. Defendants also argued that plaintiffs, as shareholders, could not proceed on a claim under the CRA. The circuit court agreed with defendants that summary disposition was required under MCR 2.116(C)(7) and ordered the case to arbitration.
The existence and enforceability of an arbitration agreement are questions of law that we review de novo. Michelson v. Voison, 254 Mich.App. 691, 693-694, 658 N.W.2d 188 (2003). "[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he had not agreed to so submit.'" Amtower v. William C. Roney & Co. (On Remand), 232 Mich.App. 226, 234, 590 N.W.2d 580 (1998), quoting AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (quotation marks omitted) (alteration in original). When the language of an arbitration clause is clear and unambiguous, the intent of the parties will be determined according to the plain meaning of the language. However, any ambiguity in the language of an arbitration clause is to be resolved in favor of arbitration:
In order to determine whether a contested issue is subject to arbitration, we apply a three-part test: "1) is there an arbitration agreement in a contract between the parties; 2) is the disputed issue on its face or arguably within the contract's arbitration clause; and 3) is the dispute expressly exempted from arbitration by the terms of the contract." Detroit Auto. Inter-Ins. Exch. v. Reck, 90 Mich.App. 286, 290, 282 N.W.2d 292 (1979). "Any doubts about the arbitrability of an issue should be resolved in favor of arbitration." Huntington Woods v. Ajax Paving Indus., Inc. (After Remand), 196 Mich.App. 71, 75, 492 N.W.2d 463 (1992). And finally, "Segregating disputed issues `into categories of "arbitrable sheep and judicially-triable goats"'" is generally disapproved. In re Nestorovski Estate, 283 Mich.App. 177, 202-203, 769 N.W.2d 720 (2009), quoting Detroit Auto., 90 Mich.App. at 289, 282 N.W.2d 292.
Plaintiffs maintain that the arbitration clause in the Shareholders' Agreement does not apply to their complaint arising under the CRA. I disagree. Pursuant to the three-part test previously set forth, the first and third elements are met: the agreement clearly has an arbitration clause and plaintiffs' claims are not expressly exempted by the terms of the agreement. The relevant question is whether plaintiffs' CRA claims are on their face or arguably within the Agreement's
The arbitration clause clearly and unambiguously declares that it applies to "[a]ny dispute regarding interpretation or enforcement of any of the parties' rights or obligations hereunder...." (Emphasis added.) The word "any" is defined as "`every; all.'" Dep't of Agriculture v. Appletree Mktg., LLC, 485 Mich. 1, 8, 779 N.W.2d 237 (2010), quoting Random House Webster's College Dictionary (1997). By its very terms, the agreement is also "subject to" and "governed by" Michigan laws.
Another issue addressed by the parties in the circuit court and on appeal is the status of the respective parties within the firm. Plaintiffs allege that they were employees and that defendants — the firm as well as its individual shareholders — were their employers. Without addressing the merits of plaintiffs' claims, it is clear that this argument will necessitate an examination of the agreement and operation of the firm in order to ascertain the status and rights of the individual shareholders. Plaintiffs' complaint is replete with references to "non-controlling" and "controlling" shareholders. Plaintiffs allege that the individual defendants had the "decisionmaking power" over "non-controlling shareholders" like plaintiffs. Plaintiffs effectively allege that there were "super partners" who made decisions that were "rubber stamped," while plaintiffs and others were relegated to an inferior position within the firm. These facts cannot be determined without reference to how the firm operated and the partners' relationships. The proceedings will necessarily include an examination of plaintiffs' status as shareholders and will, therefore, require a reading and application of the Shareholders' Agreement. The claim that plaintiffs were marginalized as shareholders directly affects their rights and responsibilities under the agreement. The agreement is critically important to the case — not just tangential to it; it is directly intertwined with plaintiffs' claims that they held a lesser interest in the corporation.
Plaintiffs take the position that, because they were fully indemnified of their capital contribution under the agreement and do not raise any claim regarding the mechanics of the stock divestiture, the agreement does not apply to what they believe is their separate and distinct claim of age discrimination. I disagree. Though the mechanics of divestiture may have been proper, plaintiffs are challenging the very process and motive that led to the determination to buy out their shares and divest them of their interest in the corporation. The majority opinion concedes as much by stating that plaintiffs have "filed a complaint against Stark Reagan and the individual defendants, asserting that age discrimination motivated defendants' decision to terminate [their] shareholder status." Ante at 370 (emphasis added).
There are two divesture provisions in the agreement applicable to this case.
And the second, § 9.1, concerns shareholders who are forced out:
The agreement then sets out the procedural requirements for exercising a buyout, including price and terms. It is, as the majority notes, procedural in nature; however, that does not mean that it is inapplicable to plaintiffs' allegation of age discrimination. If found to be valid, their claim will undoubtedly include relief in the form of lost profits and stock ownership. Ultimately, plaintiffs are disputing whether defendants had the right to re-claim the shares.
Finally, because the arbitration clause was included in the agreement, the parties obviously gave some thought to the scope of any arbitration. It must be noted that the parties are not unsophisticated lay people; they are highly talented attorneys well versed in employment and contract law. As such, they were fully cognizant of all legal ramifications of the arbitration clause. The arbitration clause specifically refers to "any" dispute and does not exempt actions under the CRA as it does "civil action[s] of a summary nature where the relief sought is predicated on there being no dispute with respect to any fact." The law "insist[s] upon clarity before concluding that the parties did not want to arbitrate a related matter" and applying the presumption of arbitrability, it cannot be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers plaintiffs' complaint. Amtower, 232 Mich.App. at 235, 590 N.W.2d 580 (quotation marks and citation omitted) (alteration in original).
I do not take issue with the law cited by the majority; instead, I merely dispute the majority's application of these particular facts to the relevant law. Distilled to its essence, plaintiffs are contesting the involuntary redemption of shares, which was allegedly the result of unlawful discrimination. The Shareholders' Agreement is inextricably linked to plaintiffs' claims, which cannot be maintained without reference to the agreement. Plaintiffs' claims are, therefore, subject to arbitration. I would affirm the circuit court's order.