Operating Agreement – Arbitration Clause

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WI Court of Appeals – District II

Case Name: Midwest Neurosciences Associates, LLC, et al. v. Great Lakes Neurosurgical Associates, LLC, et al.

Case No.: 2016AP601

Officials: Neubauer, C.J., Reilly, P.J., and Hagedorn, J.

Focus: Operating Agreement – Arbitration Clause

This is a case about who determines whether an arbitration provision applies. Should the question be submitted to arbitration, or should the court decide? The dispute in this litigation arises out of the operating agreement (Operating Agreement) of Midwest Neurosciences Associates, LLC (Midwest). The agreement established a partnership of medical practitioners. Among its terms was a noncompete provision and a clause requiring that any and all disputes be resolved through arbitration. Midwest brought suit against Great Lakes Neurosurgical Associates, LLC (Great Lakes)—one of its former members—and Great Lakes’ President Yashdip Pannu for alleged violations of the noncompete provision. Midwest sought to compel arbitration per the Operating Agreement. The circuit court, however, denied the request and granted Great Lakes’ motion for a declaratory judgment. Midwest appeals and argues that the circuit court should have granted its motion to compel arbitration.

The heart of this dispute is whether the arbitration clause in the Operating Agreement still applies. Great Lakes maintains that the clause was superseded by a subsequent agreement and is therefore inoperative, or alternatively, that this is a question for the court to decide as the circuit court did here. We hold that the question of whether the arbitration clause was superseded should have been submitted to arbitration, and we therefore reverse the circuit court’s order.

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.