Altobelli v. Hartmann

Michigan Supreme Court

Lansing, Michigan

Chief Justice: Justices:

Syllabus Robert P. Young, Jr. Stephen J. Markman

Brian K. Zahra

Bridget M. McCormack

David F. Viviano

Richard H. Bernstein

Joan L. Larsen

This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:

prepared by the Reporter of Decisions for the convenience of the reader. Corbin R. Davis

ALTOBELLI v HARTMANN

Docket No. 150656. Argued on application for leave to appeal March 9, 2016. Decided

June 13, 2016.

Dean Altobelli filed a complaint in the Ingham Circuit Court against seven individual

principals of the law firm of Miller, Canfield, Paddock and Stone, P.L.C. (the Firm)—five

managing directors, the Firm’s CEO, and the head of the Firm’s litigation group. Altobelli did

not name the Firm as a defendant. Altobelli himself was a senior principal of the Firm at the

time the events from which this lawsuit arose took place. All principals of the Firm were

required to sign an Operating Agreement that contained information concerning principals’

rights and obligations and the administration of the Firm’s business. The Operating Agreement

also contained an arbitration clause that mandated arbitration of “any dispute . . . between the

Firm . . . and any current or former Principal[.]” In 2010, Altobelli informed two of the

defendants—the Firm’s CEO, and the head of the Firm’s litigation group—that he wished to take

a leave of absence from the Firm so that he could pursue an opportunity to join the coaching staff

of the University of Alabama football team. Altobelli suggested that the Firm allow him to

maintain his ownership interest in the Firm and to return to the Firm as a senior principal any

time before June 1, 2011. Although Altobelli claimed he was initially promised he could take

the job in Alabama and still receive certain allocated funds from his clients, defendants claimed

that Altobelli knew that the individual making that alleged promise had no authority to make a

formal commitment to Altobelli. Believing that Altobelli had accepted the position at the

University of Alabama, the CEO and the managing directors concluded that Altobelli had

voluntarily withdrawn from the Firm. Altobelli argued that he did not voluntarily withdraw, but

that he was improperly terminated. Altobelli’s attempt to resolve the matter through the direct

settlement and mediation process, as outlined in the arbitration clause of the Operating

Agreement, was unsuccessful. In November 2011, Altobelli filed a demand for arbitration as

provided for in the arbitration clause. Despite having made the demand for arbitration, Altobelli

filed the instant lawsuit alleging that the seven individuals named as defendants were responsible

for engaging in tortious conduct with regard to Altobelli’s request for a leave of absence and

retention of his equity ownership in the Firm. Defendants filed a motion for summary

disposition and a motion to compel arbitration as required by the arbitration clause. Altobelli

filed a motion for partial summary disposition. The circuit court, Paula J. Manderfield, J., denied

defendants’ motions and granted Altobelli’s motion for partial summary disposition, finding as a

matter of law that Altobelli did not voluntarily withdraw from the Firm. Rather, the circuit court

concluded that defendants had improperly terminated Altobelli’s ownership interest without

authority. Defendants appealed in the Court of Appeals. The Court of Appeals, BORELLO, P.J.,

and SERVITTO and BECKERING, JJ., affirmed the circuit court’s denial of defendants’ motion to

compel arbitration and reversed the circuit court’s order granting partial summary disposition to

Altobelli. 307 Mich App 612 (2014). The Court of Appeals determined that the central question

was whether Altobelli could sue the Firm’s managing directors, CEO, and head of the litigation

group in their individual capacities or whether the arbitration clause required arbitration of the

dispute. The Court of Appeals decided that the arbitration clause only required the arbitration of

disputes between the Firm and a current or former principal, not disputes between a former

principal and individually named defendants. The Court of Appeals concluded that there existed

a question of fact about whether Altobelli voluntarily withdrew from the Firm. Defendants

appealed, and the Supreme Court ordered and heard oral argument on whether to grant the

application or take other action. 498 Mich 912 (2015).

In a unanimous opinion by Justice BERNSTEIN, the Supreme Court held:

The Operating Agreement’s mandatory arbitration clause is not limited to disputes

between the Firm and current or former principals of the Firm. The clause also applies to a

dispute between a former principal and individually named principals of the Firm acting as

agents of the Firm. Because the Operating Agreement’s arbitration clause applies to this case,

the lower courts erred by reaching the substantive content of Altobelli’s motion for partial

summary disposition. The arbitrators chosen according to the procedure outlined in the

arbitration clause are responsible for resolving the issues raised in Altobelli’s motion.

1. A court reviewing the disposition of a party’s motion to compel arbitration must avoid

analyzing the substantive merits of the dispute; if the dispute is arbitrable, the merits are to be

analyzed by the arbitrator(s). In this case, the lower courts should not have reached the issues

raised in Altobelli’s motion for partial summary disposition because the arbitration clause

mandated binding arbitration for disputes arising between a current or former principal of the

Firm and the Firm, which includes individual principals of the Firm acting as agents of the Firm.

2. In interpreting an arbitration clause, the agency principles that apply to corporations

also apply to professional limited liability companies. The operation of a professional limited

liability company depends on the actions of its employees who have been given the authority to

act as the company’s agents. The actions of these employees, when the employees are operating

on behalf of the company, are the acts of the company. Because a company cannot act on its

own, an arbitration clause that includes a company as a party to arbitration must also include

those employees that act as agents of the company.

3. An arbitration clause intended to cover any dispute between a current or former

principal and a company is broad in scope but applies only when the subject matter of the dispute

involves actions taken by a principal acting on behalf of the company. In this case, Altobelli

alleges numerous occasions on which one or more of the defendants deprived Altobelli of his

rights under the Operating Agreement. All of Altobelli’s allegations reflect decisions made by

defendants in their capacities as the Firm’s agents, as authorized by the Operating Agreement

and agency principles.

Reversed in part and vacated in part; application for leave to appeal as cross-appellant

denied as moot.

©2016 State of Michigan

Michigan Supreme Court

Lansing, Michigan

Chief Justice: Justices:

OPINION Robert P. Young, Jr. Stephen J. Markman

Brian K. Zahra

Bridget M. McCormack

David F. Viviano

Richard H. Bernstein

Joan L. Larsen

FILED June 13, 2016

STATE OF MICHIGAN

SUPREME COURT

DEAN ALTOBELLI,

Plaintiff-Appellee/

Cross-Appellant,

v No. 150656

MICHAEL W. HARTMANN, MICHAEL

A. COAKLEY, M. ANNA MAIURI,

JOSEPH M. FAZIO, DOUGLAS M.

KILBOURNE, JOHN D. LESLIE and

JEROME R. WATSON,

Defendants-Appellants/

Cross-Appellees.

BEFORE THE ENTIRE BENCH

BERNSTEIN, J.

This case requires the Court to address whether plaintiff’s tort claims against

individual principals of a law firm fall within the scope of an arbitration clause that

mandates arbitration for any dispute between the firm and a former principal. Generally

speaking, a company may only act through its agents. In this case, plaintiff, a former

principal, challenges actions the individual defendants performed in their capacities as

agents carrying out the business of the firm. Therefore, this is a dispute between the firm

and a former principal that falls within the scope of the arbitration clause and is subject to

binding arbitration.

Accordingly, we reverse that part of the Court of Appeals’ opinion holding that

this matter was not subject to arbitration. We vacate the remaining portion of the Court

of Appeals’ opinion, which relates to plaintiff’s motion for partial summary disposition,

and we remand this case to the trial court for further proceedings consistent with this

opinion.

I. FACTS AND PROCEDURAL HISTORY

In 1993, plaintiff Dean Altobelli began working as an attorney for Miller,

Canfield, Paddock and Stone, P.L.C. (“the Firm”), a professional limited liability

company formed under the Michigan Limited Liability Company Act (MLLCA),

MCL 450.4101 et seq. Upon joining the Firm, plaintiff signed the “Miller Canfield

Operating Agreement” (“Operating Agreement”), a document governing the Firm’s

internal affairs. The Operating Agreement provides that members of the Firm are

referred to as “principals.” All principals sign the Operating Agreement. The

introductory section of the Operating Agreement states that the document “by and

between the [Principals] . . . evidences the following agreement between them[.]” In a

subsequent section, the principals further acknowledge that the “covenants and

agreements herein contained shall inure to the benefit of and be binding upon the parties

hereto[.]”

2

The Operating Agreement delegates particular responsibilities and powers to

certain individuals within the Firm. A principal must devote “his or her full time and best

efforts to the success of the Firm except as otherwise approved in writing by the CEO

with the approval of the Managing Directors.” Principals may “voluntarily withdraw

from the Firm at any time” and shall involuntarily withdraw in the event of a two-thirds

vote of the senior principals. Senior principals are principals who have been granted

equity ownership in the Firm. Five senior principals, called the “managing directors,” are

invested with “[s]ole, full and complete power and authority to manage . . . the

Firm . . . .” Managing directors have the authority to designate a Chief Executive Officer

(“CEO”), who has, “with binding effect on the Managing Directors, the power and

authority of the Managing Directors with respect to the day-to-day administration of the

business and affairs of the Firm.”

The Operating Agreement also contains a mandatory arbitration agreement:

3.6 Alternative Dispute Resolution: Mandatory Arbitration. Any

dispute, controversy or claim (hereinafter “Dispute”) between the Firm or

the Partnership and any current or former Principal or Principals of the

Firm or current or former partner or partners of the Partnership (collectively

referred to as the “Parties”) of any kind or nature whatsoever (including,

without limitation, any dispute[,] controversy or claim regarding step

placement, or compensation, or the payment or non-payment of any bonus,

the amount or change in amount of any bonus) shall be solely and

conclusively resolved according to the following procedure:

(a) In the event of a Dispute, the Parties agree to first try in good

faith to settle the dispute directly. If the parties are unable to resolve the

dispute, they shall submit the dispute to third party neutral facilitation in

accordance with the mediation rules of the American Arbitration

Association (“Mediation”). If the Dispute is not resolved by a signed

Settlement Agreement within ninety (90) days of a written request for

Mediation given to one Party by the other and identifying the Dispute, the

Dispute shall be settled by binding arbitration (“Arbitration”) in accordance

3

with the internal laws of the State of Michigan. The Arbitration shall be

conducted in accordance with the Commercial Arbitration Rules of the

American Arbitration Association except as specifically provided herein.

Judgment upon the award rendered by the arbitrators may be entered in any

court having jurisdiction thereof. There shall be three (3) arbitrators; one of

whom shall be appointed by the Firm, one by the Principal(s) and/or

partner(s) (as applicable) and the third of whom shall be appointed by the

first two arbitrators. The hearing shall be held in the Detroit metropolitan

area. [Emphasis added.]

By January 2006, plaintiff had become a senior principal at the Firm. 1 However,

in late May or early June 2010, plaintiff decided he wanted to pursue a new opportunity

as an assistant coach for the University of Alabama football team. Plaintiff proposed a 7-

to 12-month leave of absence from the Firm to defendant Michael Hartmann, the Firm’s

CEO, and defendant Michael Coakley, who was the head of the Firm’s litigation group

but was not a managing director. Plaintiff suggested that the Firm permit him to maintain

his ownership interest and return to the Firm as a senior principal any time before June 1,

2011.

Plaintiff avers that Hartmann initially promised plaintiff that he could spend as

much time at the University of Alabama as he wanted and still receive certain allocated

income from his clients. Hartmann disputes this, claiming that although he told plaintiff

that he could “probably” return to the Firm, plaintiff knew Hartmann had no authority to

make a formal commitment. Plaintiff contends that, in reliance on Hartmann’s assurance,

he moved to finalize his agreement with the University of Alabama in June 2010.

Plaintiff claims he also spent many hours preserving his clients and business for the Firm.

1

Although plaintiff was a senior principal, he was not a managing director, and plaintiff

does not allege that he had any further authority in the Firm.

4

Plaintiff alleges that Hartmann then withdrew his support, suddenly rejecting the

proposed leave of absence and instead suggesting that plaintiff voluntarily withdraw from

the Firm without any assurance that he would be reinstated. In response, on July 10,

2010, plaintiff sent an e-mail to the managing directors seeking approval of the job

opportunity with the University of Alabama, and an exception to the section of the

Operating Agreement obligating a principal to devote his or her full time to the Firm.

Plaintiff claims he informed the managing directors that he had no plans to relinquish his

principal status or compensation. On July 20, 2010, plaintiff submitted a statement to

defendant Coakley detailing his past and projected contributions to the Firm. Plaintiff

asserts that Hartmann informed plaintiff the next day that the managing directors had

decided to terminate his equity ownership, effective July 31, 2010. In an e-mail response,

plaintiff demanded a vote of the principals, asserting that the managing directors lacked

the authority to terminate him under the Operating Agreement. On July 22, Hartmann

replied: “I did not say the Firm had terminated your position. I told you that since you

had voluntarily accepted a full time position at Alabama and had already started there, the

Firm will consider you to have withdrawn from the partnership as of July 31, 2010.”

Plaintiff disputes this, contending that he did not voluntarily withdraw from the Firm, that

he was improperly terminated, and that the Firm shorted plaintiff’s 2010 income as a

result. 2

2

While the parties dispute whether plaintiff voluntarily withdrew from the Firm in July

2010, it is undisputed that plaintiff eventually left the Firm, accepted a position at the

University of Alabama, and is no longer a principal of the Firm.

5

Plaintiff initially sought resolution through the direct settlement and mediation

process provided for in the Operating Agreement. In November 2011, when these efforts

failed, plaintiff filed a demand for arbitration with the American Arbitration Association,

as outlined in the Operating Agreement. Plaintiff’s arbitration demand contested his last

five years of compensation and the managing directors’ decision to treat his departure as

a relinquishment of his equity ownership status. Plaintiff alleged bad-faith discrimination

in the allocation of income, bad-faith violations of the Operating Agreement, bad-faith

misrepresentation, bad-faith conspiracy to improperly exclude him from the Firm, and

shareholder oppression in violation of MCL 450.4515.

Despite having set the arbitration proceeding in motion, and while the parties were

in the process of selecting arbitrators, plaintiff turned the tide by filing the instant case in

the Ingham Circuit Court. Plaintiff did not name the Firm itself as a defendant in the suit.

Instead, plaintiff named seven individual principals of the Firm: Hartmann, Coakley, and

the five managing directors (collectively, “defendants”). 3 In his circuit court complaint,

plaintiff presented claims substantially similar to those he had alleged in arbitration,

essentially repackaging them as tortious conduct: breach of fiduciary duty, illegal

shareholder oppression contrary to MCL 450.4515, conversion, bad-faith

misrepresentation, tortious interference with a business relationship or expectancy, and

civil conspiracy.

In the circuit court, defendants filed a motion for summary disposition under

MCR 2.116(C)(10), and a motion to compel arbitration under MCR 2.116(C)(7). In the

3

As principals, each of these defendants had signed the Operating Agreement.

6

motion to compel arbitration, defendants argued that plaintiff’s claims fell within the

scope of the Operating Agreement’s mandatory arbitration clause, and that the circuit

court was therefore compelled to dismiss the complaint. Plaintiff countered with a

motion for partial summary disposition with respect to his claims of shareholder

oppression, conversion, and tortious interference with a business relationship or

expectancy. The circuit court denied defendants’ motions, concluding that the dispute

did not fall within the ambit of the arbitration clause. The circuit court granted plaintiff’s

motion for partial summary disposition, finding as a matter of law that plaintiff did not

voluntarily withdraw from the Firm under MCL 450.4509(1) 4 or the Operating

Agreement, and that defendants had improperly terminated plaintiff’s ownership interest

without authority.

On appeal, the Court of Appeals affirmed the circuit court’s denial of defendants’

motion to compel arbitration, but reversed the circuit court’s order granting plaintiff’s

motion for partial summary disposition. Altobelli v Hartmann, 307 Mich App 612, 640;

861 NW2d 913 (2014). With respect to the motion to compel arbitration, the Court of

Appeals determined that the central question was whether plaintiff could sue the Firm’s

managers in their individual capacities or whether plaintiff was instead required to

arbitrate his claims against them. Id. at 626. After examining the plain language of the

arbitration clause, the Court of Appeals concluded that the provision only mandates

arbitration of disputes between “the Firm” and “a Principal.” Id. at 628. The Court of

4

MCL 450.4509(1) provides in pertinent part: “A member may withdraw from a limited

liability company only as provided in an operating agreement.”

7

Appeals rejected defendants’ argument that this was in essence a dispute between

plaintiff and the Firm, noting that plaintiff’s claims were asserted against defendants in

their individual capacities and sought to hold them personally liable for their actions. Id.

at 630-631. With respect to plaintiff’s motion, the Court of Appeals found that

MCL 450.4509(1) permits voluntary withdrawal if a firm’s operating agreement allows

for such withdrawal, even without specifying a particular method. Id. at 631-636. The

Court of Appeals then found that a genuine issue of fact existed as to whether plaintiff

voluntarily withdrew from the Firm, thus concluding that summary disposition was

unwarranted. Id. at 636-640.

In this Court, defendants challenged the Court of Appeals’ ruling on the motion to

compel arbitration. Plaintiff filed a cross-appeal, challenging the Court of Appeals’

findings on plaintiff’s motion for partial summary disposition. For the reasons stated

below, we reverse the Court of Appeals’ judgment with respect to the motion to compel

arbitration and vacate the remaining portions of the Court of Appeals’ decision relating to

plaintiff’s motion for partial summary disposition. 5

5

In light of our resolution of defendant’s application for leave to appeal, plaintiff’s

application for leave to appeal as cross-appellant is denied as moot.

Additionally, after oral argument in this Court, plaintiff filed a “Motion to Correct the

Record and to Impose Sanctions for Misconduct at Mini Oral Argument.” Plaintiff

alleged that, on the record during oral argument, defendants misrepresented the Firm’s

indemnification obligations and also violated court procedures by allowing a supposedly

unauthorized person to sit at defense counsel’s table. Defendants responded in

opposition. Plaintiff’s motion is denied for lack of any legal or factual basis to support its

claims.

8

II. STANDARD OF REVIEW

This Court reviews de novo a circuit court’s decision on a motion for summary

disposition brought under MCR 2.116(C)(7). Fane v Detroit Library Comm, 465 Mich

68, 74; 631 NW2d 678 (2001). Under MCR 2.116(C)(7), summary disposition is

appropriate if a claim is barred because of “an agreement to arbitrate[.]” Whether a

particular issue is subject to arbitration is also reviewed de novo, In re Nestorovski

Estate, 283 Mich App 177, 184; 769 NW2d 720 (2009), as is the interpretation of

contractual language, Morley v Auto Club of Mich, 458 Mich 459, 465; 581 NW2d 237

(1998).

III. ANALYSIS

“Arbitration is a matter of contract.” Kaleva-Norman-Dickson Sch Dist No 6 v

Kaleva-Norman-Dickson Sch Teachers’ Ass’n, 393 Mich 583, 587; 227 NW2d 500

(1975). Accordingly, when interpreting an arbitration agreement, we apply the same

legal principles that govern contract interpretation. See F J Siller & Co v City of Hart,

400 Mich 578, 581; 255 NW2d 347 (1977). Our primary task is to ascertain the intent of

the parties at the time they entered into the agreement, which we determine by examining

the language of the agreement according to its plain and ordinary meaning. See Miller-

Davis Co v Ahrens Constr, Inc, 495 Mich 161, 174; 848 NW2d 95 (2014). In considering

the scope of an arbitration agreement, we note that “[a] party cannot be required to

arbitrate an issue which [it] has not agreed to submit to arbitration.” Kaleva, 393 Mich at

587. “The general policy of this State is favorable to arbitration.” Detroit v A W

Kutsche, 309 Mich 700, 703; 16 NW2d 128 (1944). The burden is on the party seeking

to avoid the agreement, not the party seeking to enforce the agreement. McKinstry v

9

Valley Obstetrics-Gynecology Clinic, PC, 428 Mich 167, 184; 405 NW2d 88 (1987). In

deciding the threshold question of whether a dispute is arbitrable, a reviewing court must

avoid analyzing the substantive merits of the dispute. Kaleva, 393 Mich at 594-595. If

the dispute is arbitrable, “the merits of the dispute are for the arbitrator.” Id. at 595.

Applying these principles, we must consider whether the language of the

arbitration clause in the Operating Agreement is intended to cover the instant dispute

between plaintiff and the individually named defendants. The critical portion of the

agreement reads:

Any dispute, controversy or claim . . . between the Firm . . . and any

current or former Principal . . . of any kind or nature whatsoever

(including . . . compensation, or the payment or non-payment of any

bonus . . .) shall be solely and conclusively resolved according to the

following procedure [arbitration].

To resolve this issue, we must analyze two aspects of this provision. First, we must

determine who the parties intended to include in the phrase, “between the Firm . . .

and . . . [a] former Principal.” Second, we must determine whether the subject matter of

the instant dispute is covered by the arbitration clause.

With respect to who is included, it is undisputed that plaintiff is a former principal.

Therefore, this question turns on whether “the Firm” was meant to include the

individually named defendants. Here, we must consider the concept of agency.

Although no Michigan court has explicitly applied agency principles when interpreting

an arbitration clause, it is well established that “corporations can only act through officers

and agents.” Attorney General v Nat’l Cash Register Co, 182 Mich 99, 111; 148 NW

420 (1914). See Junius Ten Eyck v Pontiac, Oxford & Port Austin Railroad Co, 74 Mich

10

226, 232; 41 NW 905 (1889) (“The directors of a corporation are its agents.”); Mossman

v Millenbach Motor Sales, 284 Mich 562, 569; 280 NW 50 (1938) (“Where a corporation

has intrusted a manager with the general supervision of a particular branch of its

business, it invests him with the power of a general agent . . . .”). 6 This reflects the fact

that a company is not a physical being capable of taking its own actions or making its

own decisions. Indeed, a firm cannot act on its own behalf. Fraser Trebilcock Davis &

Dunlap PC v Boyce Trust 2350, 497 Mich 265, 275; 870 NW2d 494 (2015). Therefore,

“the acts of officers and agents of a corporation, within the scope of their employment,

are the acts of the corporation[.]” Nat’l Cash Register, 182 Mich at 111. 7

6

We recognize that some cited caselaw addresses situations where agents acted on behalf

of “a corporation,” whereas, in the instant case, the Firm is a professional limited liability

company. However, in applying agency principles to interpret the instant arbitration

clause, we see no reason to distinguish between a corporation and another type of

company, and therefore extend these established principles to the instant matter.

7

In its opinion in the instant case, the Court of Appeals extensively reviewed two

previous Michigan cases and ultimately found them inapplicable: Hall v Stark Reagan,

PC, 294 Mich App 88; 818 NW2d 367 (2011), rev’d in part 493 Mich 903 (2012), and

Rooyakker & Sitz v Plante & Moran, PLLC, 276 Mich App 146; 742 NW2d 409 (2007).

Altobelli, 307 Mich App at 625-631. In Hall, this Court considered an arbitration clause

that covered “ ‘a dispute regarding interpretation or enforcement of . . . the parties’ rights

or obligations’ ” under a shareholders’ agreement. Hall, 493 Mich at 903. This Court

held that a dispute involving the motives of the defendants for invoking the separation

provisions of the shareholders’ agreement fell within the scope of that particular

arbitration clause. Id. In Rooyakker, the Court of Appeals concluded that two tort claims

against nonparties to an arbitration agreement fell within the scope of an arbitration

clause that included “any dispute or controversy arising out of or relating to” the

agreement. Rooyakker, 276 Mich App at 163. Not only was the language of the

arbitration clauses in those cases substantially different from the arbitration clause in the

instant case, neither case considered whether claims against particular individuals, acting

as agents, fell within the scope of an arbitration clause, which is at issue in the instant

case. We thus agree with the Court of Appeals that neither case is instructive in the

instant matter.

11

Not only is this particular concept of agency ingrained in our caselaw, the

statutory scheme governing the Operating Agreement also incorporates this principle.

Under the Operating Agreement, the Firm is a limited liability company formed under the

MLLCA. MCL 450.4401(a) states that if the management of a limited liability company

is delegated to its members, “[t]he members are considered managers for purposes of

applying this act, including section 406 regarding the agency authority of managers . . . .”

(Emphasis added.) MCL 450.4406, in turn, states: “A manager is an agent of the limited

liability company for the purpose of its business . . . .” (Emphasis added.)

MCL 450.4402(4) adds: “If the articles of organization delegate management of a limited

liability company to managers, the articles of organization constitute notice to third

parties that managers, not members, have the agency authority described in section 406.”

(Emphasis added.) The MLLCA explicitly refers to agency authority and the ability of

individuals to act as agents for limited liability companies, which further supports the

application of agency principles to interpret the instant arbitration clause.

When interpreting an arbitration clause, other jurisdictions have similarly applied

agency principles. In Pritzker v Merrill Lynch, Pierce, Fenner & Smith, Inc, 7 F3d 1110,

1122 (CA 3, 1993) (citation omitted; alteration in original), the United States Court of

Appeals for the Third Circuit noted that a corporation “ ‘can only act through its

employees, and an arbitration agreement would be of little value if it did not extend to

[them].’ ” In Arnold v Arnold Corp-Printed Communications for Business, 920 F2d

1269, 1281 (CA 6, 1990), the Sixth Circuit Court of Appeals reasoned that if a plaintiff

could “ ‘avoid the practical consequences of an agreement to arbitrate by naming . . .

12

signatory parties in their individual capacities only, the effect of the rule requiring

arbitration would, in effect, be nullified.’ ” (Citation omitted.) The First Circuit agreed:

Such a rule is necessary, our sister circuits have reasoned, because a

corporate entity or other business can only operate through its employees

and an arbitration agreement would be a meaningless arrangement if its

terms did not extend to them. . . . Any other rule, in the view of these

courts, would permit the party bringing the complaint to avoid the practical

consequences of having signed an agreement to arbitrate; naming the other

party’s officers, directors or employees as defendants along with the

corporation would absolve the party of all obligations to arbitrate. [Grand

Wireless, Inc v Verizon Wireless, Inc, 748 F3d 1, 11 (CA 1, 2014), citing

Arnold, 920 F2d at 1281.]

For the above reasons, we hold that agency principles apply in determining who is

included within the scope of the arbitration clause.

Next, we must consider whether the arbitration clause encompasses the subject

matter of the dispute at issue in this case. Generally speaking, to ascertain whether the

subject matter of a dispute is of the type that parties intended to submit to arbitration, we

again begin with the plain language of the arbitration clause. See Miller-Davis, 495 Mich

at 174. We then consider whether a plaintiff’s particular action falls within that scope.

We note that the gravamen of an action is determined by considering the entire claim.

See Maiden v Rozwood, 461 Mich 109, 135; 597 NW2d 817 (1999). We look beyond the

mere procedural labels to determine the exact nature of the claim. Adams v Adams (On

Reconsideration), 276 Mich App 704, 711; 742 NW2d 399 (2007). This is to avoid

“artful pleading.” Maiden, 461 Mich at 135.

IV. APPLICATION

Turning to the instant case, we first consider who is included within the scope of

the arbitration clause in the Operating Agreement, and we next consider whether the

13

subject matter of the instant dispute is covered by the clause. With respect to who is

included, we begin with the plain language of the clause, asking whether the parties to the

Operating Agreement intended to include these particular defendants within the meaning

of “the Firm.” See Miller-Davis, 495 Mich at 174. Here, we note that the Operating

Agreement clearly recognizes the agency principles previously discussed. The Operating

Agreement, signed “by and between” plaintiff and defendants as an “agreement between

them,” delegates authority to certain individuals to carry out the Firm’s business and

manage its internal affairs. Managing directors are invested with the “[s]ole, full and

complete power and authority to manage . . . the Firm . . . .” The CEO has, “with binding

effect on the Managing Directors, the power and authority of the Managing Directors

with respect to the day-to-day administration of the business and affairs of the Firm.”

Thus, the language of the Operating Agreement evidences the parties’ understanding that

a company cannot act on its own, but instead depends on the actions of agents to carry

out its business. See Nat’l Cash Register, 182 Mich at 111. 8 By signing the Operating

8

We also note that the arbitration clause does not limit its scope to a dispute “naming the

Firm” and a former principal, but rather “between the Firm” and a former principal. Had

the parties intended that those named in the caption of a lawsuit dictate the scope of the

agreement, they could have chosen particular language to indicate as much. The fact that

they did not do so adds additional support to the conclusion that the plain language of the

agreement evinces the intent to more broadly include agents within the meaning of “the

Firm.” Plaintiff cannot now avoid the practical consequences of the arbitration clause

simply by naming defendants in their individual capacities only. See Arnold, 920 F2d at

1281; Grand Wireless, 748 F3d at 11.

14

Agreement and accepting the arbitration clause, plaintiff was aware that certain

individuals would be operating on the Firm’s behalf. 9

Under the facts of this case, defendants are those individuals operating on the

Firm’s behalf. Defendants are the five managing directors, the CEO, and the head of the

Firm’s litigation group. The Operating Agreement explicitly endows them with complete

power and responsibility for managing the affairs of the Firm. 10 As officers, managers,

and directors entrusted with carrying out the Firm’s business, defendants are agents of the

9

The Court of Appeals generally noted the following principle: “ ‘It is well established

that corporate employees and officials are personally liable for all tortious and criminal

acts in which they participate, regardless of whether they are acting on their own behalf

or on behalf of a corporation.’ ” Altobelli, 307 Mich App at 630-631, quoting Joy Mgt Co

v Detroit, 183 Mich App 334, 340; 455 NW2d 55 (1990). But resolution of the issues

presented in this appeal does not require the invocation of this principle. In this appeal,

we must decide in what venue plaintiff must bring his dispute, not whether the individual

defendants may be held personally liable for the tortious actions alleged within that

dispute. We conclude that, because plaintiff’s claims challenge defendants’ actions taken

in their capacity as agents of the Firm, plaintiff’s dispute falls within the scope of this

particular arbitration clause and must therefore be resolved in arbitration. Since this

dispute must be resolved in arbitration, whether these defendants can be held personally

liable for the challenged actions is a substantive matter reserved for the arbitrator. See

Kaleva, 393 Mich at 595.

10

We acknowledge that defendant Coakley is not a managing director or CEO, but rather

is a principal who is the head of the Firm’s litigation group. However, plaintiff does not

argue that Coakley’s unique status disqualifies him from being considered an agent.

Regardless, this argument would be meritless, because principals too can be agents of a

company. See Mossman, 284 Mich at 568; MCL 450.4401; MCL 450.4404(2)(a) (“In

discharging the manager’s duties, a manager may rely on information, opinions, reports,

or statements . . . if prepared or presented by [a manager or principal] whom the manager

reasonably believes to be reliable and competent in the matter presented.”). The

Operating Agreement itself states that “[t]he Principals do hereby agree to . . . engage in

the practice of law under the name ‘Miller, Canfield, Paddock and Stone, P.L.C.,’ ” and

“[e]ach Principal shall devote his or her full time and best efforts to the success of the

Firm . . . .”

15

Firm. Junius Ten Eyck, 74 Mich at 232; Mossman, 284 Mich at 569; MCL 450.4406.

Their acts are acts of the company. Nat’l Cash Register, 182 Mich at 111. Because it is

axiomatic that the Firm cannot act on its own, Fraser Trebilcock, 497 Mich at 275, and

because these particular defendants are clearly endowed with agency authority to

administer the Firm’s affairs, the individually named defendants must be included within

the meaning of “the Firm” in the arbitration clause. 11

Next, we turn to whether the arbitration clause covers the subject matter of the

dispute at issue in this case. The arbitration clause covers “[a]ny dispute, controversy or

11

The Court of Appeals noted that the arbitrator selection process in the arbitration clause

requires the selection of three arbitrators, “one of whom shall be appointed by the Firm,

one by the Principal(s) . . . and the third of whom shall be appointed by the first two

arbitrators.” Altobelli, 307 Mich App at 628 (quotation marks omitted). The Court of

Appeals reasoned that, in a dispute between principals, the Firm would not be a party, yet

the selection process would nonetheless require the Firm to select an arbitrator. Id. The

Court of Appeals concluded that this evinced the parties’ intent to distinguish between

the Firm and its principals as well as an intent to exclude disputes between principals

from the scope of the arbitration clause. Id.

Certainly, this language distinguishes between the Firm and an adversarial principal in

the arbitration proceeding, giving each the power to select an arbitrator. This provision

does not, however, demonstrate any intent to exclude individual principals from the

meaning of “the Firm.” The selection procedure still functions even if the proceeding

involves individually named defendants and a plaintiff; the defendants could collectively

choose one arbitrator and the plaintiff could choose another. In fact, were we to agree

with the Court of Appeals that individuals could not be included within the meaning of

“the Firm,” this selection process would not work. The Firm, a company, cannot actually

appoint its own arbitrators. The Firm itself cannot take any action at all. Instead, the act

of appointing an arbitrator must be done by the Firm’s representatives in the arbitration

proceeding. In ascertaining the intent of the parties at the time they entered the contract,

See Miller-Davis Co, 495 Mich at 174, we must conclude that this undeniable reality was

understood by the parties. This further demonstrates the intent to include individual

principals within the meaning of “the Firm,” without explicitly stating as much in the

arbitration clause.

16

claim . . . between the Firm . . . and [a] former Principal . . . of any kind or nature

whatsoever (including . . . compensation, or the payment or non-payment of any

bonus . . .).” (Emphasis added.) At the outset, we emphasize the extremely broad and

inclusive language of this provision. The plain language of the arbitration clause

indicates that “any dispute” must be between the Firm and a former principal. Therefore,

we consider more specifically whether the subject matter of the dispute reflects actions

taken by the individual defendants as agents of the Firm.

In considering the gravamen of plaintiff’s complaint, we examine the entire claim,

looking beyond procedural labels to determine the exact nature of the claim. Maiden,

461 Mich at 135; Adams, 276 Mich App at 710-711. The result of this inquiry indicates

that the instant dispute falls within the wide expanse of “any dispute” between the Firm

and a current or former principal. To begin, in the factual recitation section of his

complaint, plaintiff states that he initially approached defendants Hartmann and Coakley

to propose a leave of absence that might have put him at odds with the section of the

Operating Agreement obligating a principal to devote his or her full time to the Firm. In

doing so, plaintiff acknowledged that his request was subject to the rules established in

the Operating Agreement, and also that he believed Hartmann and Coakley had the

authority to sanction his proposal. Similarly, when Hartmann appeared unreceptive,

plaintiff informed the managing directors that he did not intend to relinquish his equity

status or compensation, again informing the Firm’s decision-makers that he sought

protection under the Operating Agreement. Plaintiff subsequently demanded the

requisite two-thirds vote of the principals before his membership could be terminated, as

outlined in the Operating Agreement. Believing that the managers ultimately terminated

17

his ownership without this necessary vote, plaintiff now requests economic damages,

particularly the “fair allocation of income (salary and bonuses).” Thus, the essence of

plaintiff’s allegations is that defendants’ actions deprived plaintiff of the compensation

and bonuses to which he was entitled. The arbitration clause explicitly encompasses a

dispute involving “compensation, or the payment or non-payment of any bonus[.]”

(Emphasis added.) This alone places plaintiff’s dispute squarely under the mantle of the

arbitration clause.

Examining plaintiff’s individual claims further entrenches this dispute within the

scope of the arbitration clause. Plaintiff first alleges breach of fiduciary duty. Plaintiff

substantiates this claim with numerous factual allegations which inextricably tie

defendants’ actions as agents of the Firm to the deprivation of plaintiff’s rights under the

Operating Agreement. “Bad-faith” allegations against defendants include “refusing to

disclose information relevant to the affairs of the Firm,” “excluding [plaintiff] from

involvement in significant Firm committees,” “isolating [plaintiff] from discussions about

a client,” and “terminat[ing plaintiff’s] ownership position without a vote of the Firm’s

owners.” All of these alleged actions reflect decisions made by defendants in their

capacities as the Firm’s agents, employing powers provided to them under the Operating

Agreement and agency principles. See Mossman, 284 Mich at 569 (“Where a

corporation has intrusted a manager with the general supervision of a particular branch of

its business, it invests him with the power of a general agent . . . .”) (quotation marks and

citation omitted); see also MCL 450.4401; MCL 450.4402(4). Therefore, this particular

claim involves a dispute between the Firm and plaintiff, and is thus covered by the

arbitration clause.

18

Likewise, to substantiate his claims of illegal shareholder oppression under

MCL 450.4515, tortious interference with a business relationship or expectancy, and civil

conspiracy, plaintiff asserts that defendants improperly terminated plaintiff’s ownership

in contravention of procedures established by the Operating Agreement. Plaintiff’s

conversion claim maintains that defendants “deprived [plaintiff] of his property without

due process required by law—the process required by the Operating Agreement.”

Plaintiff’s claim alleging bad-faith misrepresentation avers that defendants intentionally

duped plaintiff in order to secure the Firm’s business for themselves and other principals.

Thus, in each individual claim, plaintiff takes issue with defendants’ actions as agents

making decisions for the Firm, which plaintiff believes interfered with his financial

entitlements under the Operating Agreement.

In sum, plaintiff’s dispute falls within the scope of the mandatory arbitration

clause in the Operating Agreement. A company can only act through its agents, the

individual defendants are agents of the Firm, and plaintiff’s claims inextricably tie

defendants’ actions as agents to the alleged deprivation of plaintiff’s rights under the

Operating Agreement. Plaintiff’s dispute is subject to binding arbitration.

V. CONCLUSION

We reverse the part of the Court of Appeals’ opinion regarding the motion to

compel arbitration and instead hold that this case is subject to binding arbitration under

the arbitration clause of the Operating Agreement. Accordingly, the lower courts should

not have reached the merits of plaintiff’s motion for partial summary disposition, as the

motion addresses substantive contractual matters that must be resolved by the arbitrator.

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Therefore, we vacate the portion of the Court of Appeals’ opinion related to plaintiff’s

motion for partial summary disposition and remand this case to the trial court for further

proceedings consistent with this opinion.

Richard H. Bernstein

Robert P. Young, Jr.

Stephen J. Markman

Brian K. Zahra

Bridget M. McCormack

David F. Viviano

Joan L. Larsen

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