Where a plaintiff sought a declaratory judgment, arguing that, because he was not a party to the services agreement, defendant’s claims against him in his individual capacity were not subject to an arbitration provision in a services agreement between the defendant and a limited liability company, the denial of that request must be reversed because agency principles cannot be applied to compel plaintiff, a nonsignatory to the agreement, to arbitrate the claims the defendant has brought against him in his individual capacity.
“In this declaratory action, plaintiff appeals by right the circuit court’s order granting summary disposition to defendant under MCR 2.116(C)(8) (failure to state a claim on which relief can be granted) and requiring plaintiff to submit to arbitration of defendant’s claims against him. On appeal, plaintiff contends that the trial court erred in: (1) ignoring basic tenets of contract, corporate, and agency law; (2) failing to take note of significant factual differences between leading Michigan caselaw and the instant case; and (3) ignoring the distinction between binding a resisting signatory to an arbitration agreement and binding a resisting non-signatory. We reverse and remand. …
“At all relevant times, plaintiff was the sole member, owner, officer, director, and manager of Newton Hometown Pharmacy LLC (the Pharmacy), which operated a pharmacy in Newberry, Michigan. Defendant operates a hospital in Newberry. In 2015, defendant and the Pharmacy executed a services agreement (the Agreement), under which defendant engaged the Pharmacy for the procurement of drugs under a federal program known as the 340B Program, pursuant to 42 USC 256(b). Plaintiff signed on behalf of the Pharmacy in his capacity as its sole member. Plaintiff did not sign the agreement in his individual capacity. …
“We hold that, although plaintiff acted as the Pharmacy’s agent, agency principles cannot be applied to compel plaintiff, a nonsignatory to the Agreement, to arbitrate the claims defendant has brought against him in his individual capacity. Further, defendant has failed to come forward with the requisite admissible evidence in support of its alternative argument that it is entitled to summary disposition pursuant to MCR 2.116(C)(10) because plaintiff’s actions merit piercing the corporate veil. MCR 2.116(G)(3). …
“Given the lack of precedential caselaw addressing the present fact scenario, whether a resisting nonsignatory may be compelled to arbitrate, we review caselaw from other jurisdictions for persuasive guidance. …
“This federal caselaw allowing a nonsignatory agent to enforce an arbitration agreement against a signatory, while disallowing enforcement of an arbitration agreement against a resisting nonsignatory, underscores the contract principle that ‘a party cannot be required to arbitrate when it is not legally or factually a party to the agreement.’ … For these reasons, we hold that the trial court erred when it granted summary disposition to defendant on the ground that agency principles could properly be applied to compel nonsignatory plaintiff to arbitrate the claims defendant brought against him individually.
“However, a nonsignatory party can be found to be a party to an agreement in certain circumstances under the law. …
“In this case, defendant alleges that plaintiff committed fraud by not timely disclosing the sale of the Pharmacy’s assets and disbursing the proceeds of the sale. However, the only evidence that defendant has offered for this assertion is plaintiff’s deposition testimony indicating that he sold the business. That testimony did not establish that plaintiff in fact delayed disclosing the sale or disbursed any such proceeds, or indicate why any delay in disclosure, or disbursements, constituted fraudulent activity. Defendant therefore came far short of carrying its burden to demonstrate a lack of genuine issue of material fact concerning the requisites for piercing the corporate veil. MCR 2.116(G)(3); Cleveland, 350 Mich App at 331. Because defendant made only a cursory attempt at presenting its argument for veil-piercing, we cannot properly affirm on that alternative ground under MCR 2.116(C)(10). …
“Although plaintiff acted as the Pharmacy’s agent, agency principles cannot properly be applied to compel plaintiff, a resisting nonsignatory to the Agreement, to arbitrate the claims defendant has brought against him in his individual capacity. Further, because defendant has not demonstrated that it is entitled to summary disposition on the issue of piercing the corporate veil, that doctrine does not offer an alternative ground for affirming the result below. For these reasons, we reverse the trial court’s order granting summary disposition in defendant’s favor and remand this case to the trial court for further proceedings consistent with this opinion.”