An arbitrator can hear testimony, take evidence, and ultimately issue an award in the absence of one of the parties if that party, although on notice concerning the proceedings, has defaulted or failed to appear.[1]
Nonetheless, an arbitration award must be supported by at minimum some evidence, and arbitrator must base his award on evidence in the record.[2] In other words, an arbiter may not issue an award solely on the basis of the default or absence of one of the parties, but must take sufficient evidence from the non-defaulting party to justify the award.[3]
In Daniel Bello Hernandez v. Gaucho, LLC, defendants offered plaintiff the position of executive chef in their Northville Restaurant and a future five-percent ownership interest in the company. Shortly after being hired, the plaintiff was terminated and in response alleged that as a five-percent owner of the restaurant, he had not received the profits to which he was entitled.
On May 24, 2011, the arbitrator awarded plaintiff $107,500 in damages, costs, and attorney fees. The award was based on the previous default of the defendants, who had failed to provide discovery during the pendency of the proceedings. The order was vacated by the circuit court upon motion after it was discovered that the arbiter never conducted an arbitration hearing, heard testimony, or took any other proofs.
The Plaintiff argues that the court should have confirmed the arbitration award because defendants defaulted during the November 2008 lawsuit. Defendants counter that the arbitrator was not entitled to issue an award without taking any proof and solely on the basis of their default. The Court of Appeals upheld the circuit’s court’s order to vacate the arbitration award, citing MCL 691.1695(3) – even when the arbitrator is entitled to proceed in the absence of a defaulting party, the arbitrator is still required to hear and decide the controversy on the evidence.
