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Michigan Overhauls Arbitration Rules

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David M. Lick
Foster Swift Construction Law News
March 27, 2013

Michigan has joined the growing number of states that have enacted the Revised Uniform Arbitration Act (the "RUAA"), which significantly overhauls the state's arbitration rules. The new law takes effect on July 1, 2013.

The prior law, the Michigan Arbitration Act (the “MAA”), was adopted in 1961 and was not updated for over 50 years. The MAA was very brief, provided few guidelines on the arbitration process, and the many gaps in the law were filled in by case law. This led to uncertainty and inconsistency in the arbitration process. Given the growth of arbitration as a preferred method of dispute resolution, the RUAA includes many important provisions that are intended to improve the efficiencies, and lower the costs, of arbitration.

Key Provisions

The Michigan RUAA is extensive and comprehensive (especially as compared to the MAA). A few of the key provisions include:

Electronic Records

While the MAA was adopted at a time when all records were in paper form, the RUAA provides for the use of electronic records, contracts and signatures.

Arbitration Initiation

The RUAA includes notice requirements to initiate arbitration. The MAA lacked any direction on how to start an arbitration proceeding.

Clarification on Issues of Arbitrability

The RUAA provides that courts are empowered to determine whether an agreement to arbitrate exists, but arbitrators are to determine procedural issues such as whether conditions precedent to arbitrability have been fulfilled. The MAA contained no guidance on these issues.

Disclosure

Arbitrators are required to disclose known financial interests or personal relationships that could affect their impartiality.

Immunity

Arbitrators, like judges, are entitled to immunity from civil liability.

Discovery

Arbitrators are authorized to limit or permit discovery and issue subpoenas.

How Might This Affect Me?

The RUAA does not mandate arbitration, but rather provides guidance on how an arbitration is to be conducted when agreed upon by the parties. Agreement to arbitrate clauses are commonly found in commercial contracts, as are provisions concerning what law will apply to the arbitration.

Parties to a contract are free to elect what rules will govern their arbitration. Therefore, the procedural rules of the Federal Arbitration Act (the “FAA”), state law (such as Michigan’s RUAA), or other rules – such as those of the American Arbitration Association – may govern an arbitration proceeding. Leaving open the issue of which rules apply may lead to unintended consequences.

It has been said that arbitration is a process with too few lawyers in the beginning and too many in the end. While arbitration clauses in contracts are often overlooked as boilerplate, they should be given careful consideration as the issue of what rules will apply to an arbitration can have serious consequences on the outcome of the arbitration should a dispute arise. Please give us a call if you’d like to review your contracts and analyze your options.