More and more frequently, citizens who seek to enter a business relationship with a commercial entity such as a bank, credit card company, or even a real estate agent is expected, or indeed required, to accept an arbitration provision. Generally, an arbitration provision is a clause calling for the resolution of any dispute by arbitrator, and the result is binding, without any right of appeal for either errors of fact or law.

In a recent decision the US Supreme Court in Hall Street Associates LLC v Mattel Inc, decided March 25, 2008, concluded that when a party seeks to vacate an arbitration award by using the Federal Arbitration Act’s procedure for expedited judicial review, the Federal Arbitration Act’s grounds for vacating an award are exclusive, and federal courts cannot enforce a contractual expansion of those grounds. The Court ruled that a provision added to an Arbitration Clause that purported to expand the extent of judicial review beyond that specified in the Federal Arbitration Act, 9 U S C §§9-11 was invalid. On June 9, 2009, the Fifth Circuit Court of Appeals (with retired Associate Justice O’Connor sitting on the panel) ruled that Hall Street precluded any non-statutory basis for judicial reversal of an arbitration award. Saipem America v Wellington Underwriting Agencies, Case No. 08-20247.

Michigan’s Arbitration Act , MCL 600.5001, does not include the same degrees of specific limitation as are found in the FAA. Nonetheless, the validity of additional terms regarding judicial review beyond those in the statute does not appear to have been addressed by Michigan courts as it was in Hall.

Hence, in any case where an Arbitration Clause is insisted upon, the party who may be faced with such a clause may want to think twice about signing such an agreement, especially where it is suggested that it could be revised to expand the scope of judicial review. Such may prove to be ineffective. As a result, parties will be bound by the arbitrator’s decision, even if premised upon serious errors of fact, law or both that may be committed by the arbitrator.

Philip R. Rosi

You may get a knock on your door during dinner. Or receive a phone call or letter. It’s for you. Well, actually, it’s for your resources – your land, water, air, trees, oil or gas. With the ever-growing demand for natural resources, and the rising trends in both value and scarcity, the pressure placed on private landowners is increasing.

Oil, gas, and lumber companies have been active for generations. These days you might also be contacted by the cellular communications, hydropower, and wind power industries seeking to place towers, turbines, powerlines, pipelines, disposal wells, and other equipment on private land that has the physical attributes they seek.

Do your research. A decision made today may substantially impact your land and its resources for generations. As a landowner it is essential to know your rights and the characteristics, needs, and value of your resources. Only by being adequately informed can a landowner level the playing field and make meaningful decisions.

Let’s review some common misconceptions relating to the development of natural resources on private land.

1. You have little or no time to decide.

You may be told that if you do not sign within a very short time period, the offer will be withdrawn and you will forgo any benefits. There is usually no legitimate reason for such pressure. And do you really want to proceed without fully understanding the risks and benefits involved?

2. They don’t really know what’s there.

Developers speculate. Without actual site data, they may not know the precise extent and value of your resources. But it’s a good bet they know more than you do. Contract and lease offers are usually the result of significant research and planning. It is incumbent upon landowners to do their own homework before making any decisions.

3. It’s the”standard in the industry,” so you must accept it.

Every landowner should know that the so-called “industry standard” was developed by the industry itself – often decades ago – and may not reflect present realities. In most cases there is no limiting regulation, and the contract terms are subject to negotiation.

4. Everyone else has gotten the same deal.

While developers may prefer to compensate everyone the same, some resources are simply more desirable than others. Unfortunately, many landowners are unaware of the leverage they have and do not attempt to negotiate. The increasing prevalence of confidentiality clauses demonstrates that not everyone is getting the same deal.

5. It’s too late, the contract is already signed.

Even after a contract is signed, it is not too late to have it reviewed by a legal professional or expert in the field. Certain provisions may be unenforceable, or the assumptions and values may have changed. Modification or termination may be an option. Every landowner should at least understand their rights and obligations that will apply during the term.

{ 1 comment }