Arbitration agreement; Whether a nonsignatory could be compelled to arbitrate; American Fed’n of State, Cnty & Mun Employees Council 25 v Wayne Cnty; Agency principles; Distinguishing Altobelli v Hartmann & Steward v Flint Sch Dist; DK Joint Venture 1 v Weyand (5th Cir); Bel-Ray Co, Inc v Chemrite (Pty) Ltd (3d Cir); Claims brought against a party in their individual capacity; Piercing the corporate veil

Addressing for the first time in a published decision whether a resisting nonsignatory may be compelled to arbitrate, the court held that agency principles could not be applied to compel plaintiff, a resisting nonsignatory, to arbitrate the claims defendant “brought against him in his individual capacity.” It also concluded that defendant failed to show it was entitled to summary disposition based on piercing the corporate veil. Thus, the court reversed summary disposition for defendant and remanded. Plaintiff was the sole member, owner, officer, director, and manager of a pharmacy that signed a services agreement with defendant. Plaintiff signed the agreement “on behalf of the Pharmacy in his capacity as its sole member.” He did not sign it in his individual capacity. The agreement contained the arbitration provision. Plaintiff later filed this declaratory judgment action, “arguing that, because he was not a party to the Agreement, defendant’s claims against him in his individual capacity were not subject to its arbitration provision.” Based on agency principles, the trial court ruled in defendant’s favor. On plaintiff’s appeal, defendant asserted that Altobelli and Steward governed “when agency principles bind a nonsignatory to an arbitration agreement.” But the court found that the fact this case addressed “a signatory attempting to enforce arbitration against a nonsignatory . . . materially, factually distinguishes the present case from Altobelli, and likewise Steward.” Further, the parties did not “cite any published Michigan caselaw holding that the principle that ‘nonsignatories of arbitration agreements can . . . be bound by an agreement pursuant to . . . agency,’ includes a situation in which the party resisting the arbitration is a nonsignatory.” Thus, the court reviewed case law from other jurisdiction, including two federal decisions cited by plaintiff, DK Joint Venture 1 and Bel-Ray. It concluded that this case law underscored “the contract principle that ‘a party cannot be required to arbitrate when it is not legally or factually a party to the agreement.’” As a result, it held that the trial court erred in granting defendant summary disposition on the basis of agency principles. As to defendant’s alternative basis, it “came far short of carrying its burden to” show there was no genuine issue of material fact as to “the requisites for piercing the corporate veil.”