JUST WHAT IS A “REASONED AWARD” IN THE CONTEXT OF AN ARBITRATION AGREEMENT, AND WHAT HAPPENS IF THE ARBITRATOR DOES NOT GIVE A REASONED AWARD?

Often times in private arbitration agreements — especially those reached after a conflict has arisen between the parties — the parties will agree that any decision by an arbitrator must include a “reasoned award.” But just what constitutes a reasoned award, and what happens when an arbitrator does not provide a reasoned award?  Neither the Michigan Supreme Court nor the Michigan Court of Appeals has issued any published decisions addressing what constitutes a “reasoned award,” but several unpublished opinions from the Michigan Court of Appeals have provided guideposts defining: (1) what should be contained in a reasoned award; (2) what will not suffice as a reasoned award; and (3) what happens when an arbitrator does not issue a reasoned award.

First, as to the issue of what constitutes a reasoned award, the Michigan Court of Appeals “indicated that it is an award that on its face ‘sufficiently explains the basis for the arbitrator’s decision and reasoning,’ but ‘formal findings of fact and conclusions of law [are] not required.’” Ciotti v Harris, unpublished opinion per curiam of the Court of Appeals, issued December 12, 2017 (Docket No 332972) (quoting Mehl v Fifth Third Bank, unpublished opinion per curiam of the Court of Appeals, issued December 11, 2008 (Docket No. 278977).

Two Court of Appeals cases set up bookends for what will be considered a reasoned opinion, and what fails to meet the standard of a reasoned opinion. In Karmanos v Compuware Corp., unpublished opinion per curiam of the Court of Appeals, issued October 20, 2016 (Docket Nos. 327476, 327712), the Court Of Appeals referred to an award stating the claimant was entitled to $16,500,000 against the respondent as “an unreasoned award.” Likewise, in Ciotti, the Court of Appeals held that an initial award that “provided nothing more than the dollar amount of the award the arbitrators deemed appropriate [and that] lacked even a line or two of unexplained conclusions . . . violated the arbitration agreement’s mandate that the arbitrators produce a ‘reasoned’ award.”

On the other end of the spectrum, the Court of Appeals has held that where an “arbitration award states that the panel deliberated on the matter for over two days, taking into account ‘the extensive briefs, evidence and testimony presented’ at the hearing [and] then presents a detailed discussion of” the panel’s findings on the issues of negligence and comparative negligence, then “[t]he arbitrators’ amended award offers more than a simple result announcing an award in plaintiff’s favor.”  Ciotti, supra.  The Court of Appeals held this was a reasoned award , even though “it [did] not discuss all of the evidence presented at the hearing, the parties’ arguments, or the law applicable to the issues presented, such detailed analysis is beyond that required for a reasoned award.” Id.  Similarly, in Mehl, the Court of Appeals stated that the arbitrator did give a “reasoned award” when the arbitrator’s award “explained that the case came down to credibility and that plaintiffs’ evidence was insufficient to meet the agreed on clear and convincing standard of proof.”

Second, in the event that an arbitrator does not give a “reasoned award” the Court of Appeals has consistently held that the remedy for the aggrieved party is to file a motion to vacate the award. Ciotti, supra.  The reasoning behind the motion to vacate the award is that if the arbitration agreement requires the arbitrator to make a reasoned award, and the arbitrator fails to do so, then the arbitrator exceeded his or her powers because the arbitrator “act[ed] beyond the material terms of the contract from which they primarily draw their authority[.]”

Finally, this “reasoned award” analysis only applies when the arbitration agreement between the parties specifically calls for a reasoned award. In the absence of such language, “an arbitrator need not provide a record of findings and supporting law to issue a valid, enforceable award,” although he may issue a written explanation for an award if he deems it appropriate to do so. Saveski v Tiseo Architects, Inc, 261 Mich App 553, 556-557; 682 NW2d 542 (2004).