Steven D. Mann | Saura J. Sahu | Miller, Canfield, Paddock and Stone, PLC | 150 West Jefferson Suite 2500 | Detroit, Michigan 48226

State Bar of Michigan Public Corporation Law Section (PCLS)

The City of Holland had an arbitration agreement in its contract with Ms. French, the former City Clerk. French improperly stated on her voter registration and property tax filings that she was a resident of Holland, and was fired as a result. Counsel argues that the Arbitrator did not follow controlling law, or the terms of the arbitration agreement, when he avoided the question of whether French’s actions could have tarnished the City’s reputation and focused on intentional fraud instead. Although judicial review of arbitration is narrow, the Michigan Court Rules allow courts to “vacate an arbitration award [if t]he arbitrator exceeded his or her powers,” which is done if he or she [act[s] beyond the material terms of the contract . . . or in contravention of controlling principles of law.” The Arbitrator erroneously interpreted the meaning of “just cause,” thus disregarding controlling legal principles. The broad definition of “just cause” comprises of actions that could tarnish the employer’s reputation, including off-the-job actions, while taking into consideration the higher standard for leading officials. Also, the Arbitrator did not treat the Michigan Tax Tribunal’s relevant factual finding that French was not a Holland resident as binding, therefore contravening yet another controlling legal principle. The Supreme Court should reverse this decision because not doing so would lead municipalities to abandon arbitration and burden the courts, or continue to employ poor public officials.

The Michigan Supreme Court upheld a lower court ruling ordering the city reinstate French to her job with full back pay and benefits.

Jenifer French served for six years as the city clerk for the city of Holland. The city decided that she had falsely claimed residence in Holland and terminated her employment. French had filed a principal residence tax exemption (PRE) affidavit identifying Holland as her principal residence. City officials believed that French actually resided in Douglas. After French was fired, the Michigan Tax Tribunal (MTT) found that French failed to establish that the Holland home qualified as her “true, fixed, and permanent abode” and denied her a PRE. French challenged the city’s termination decision. In accordance with the city’s employee handbook, the parties arbitrated whether the city had just cause to fire her. An arbitrator found in French’s favor, concluding that because she had not dishonestly identified Holland as her principal residence, the city lacked just cause to discharge her. The circuit court
vacated the arbitration award, ruling that it conflicted with the MTT’s opinion and that the arbitrator failed to address every reason advanced by the city in support of French’s termination.
A subsequent arbitration resulted in an award in the city’s favor.