Signed for the Company, Sued as Yourself: When a Michigan LLC’s Arbitration Clause Binds the Owner

What happened in Demerse v. Helen Newberry Joy Hospital

David Demerse was the sole member, owner, and manager of Newton Hometown Pharmacy LLC. In 2015 the pharmacy and Helen Newberry Joy Hospital signed a services agreement for drug procurement under the federal 340B program (a federal drug-discount program). Demerse signed that agreement on behalf of the pharmacy, not in his individual capacity.

The agreement contained a broad arbitration clause. It covered claims “between Pharmacy and Hospital or either’s subsidiaries, parents, affiliates, officers, directors, and/or employees” that arose out of or related to the agreement, including tort and statutory claims.

The relationship later broke down. The hospital brought claims against Demerse personally, including tortious interference with the agreement, tortious interference with a business relationship or expectancy, and fraudulent conveyance under Michigan’s Uniform Voidable Transactions Act (MCL 566.31 et seq.). The hospital alleged that Demerse sold the pharmacy’s assets and made below-value disbursements that reduced what it could recover. Demerse filed a declaratory action asking a court to decide that he never personally agreed to arbitrate. The Luce Circuit Court disagreed and ordered him into arbitration.

What the Michigan Court of Appeals decided

On June 29, 2026, in a published, unanimous opinion, the Michigan Court of Appeals reversed and sent the case back to the trial court. The court held that agency principles could not be used to compel Demerse, a nonsignatory in his individual capacity, to arbitrate the claims the hospital brought against him personally.

The court’s reasoning rested on a basic rule of arbitration. Arbitration is a matter of contract, so “a party cannot be required to arbitrate when it is not legally or factually a party to the agreement.” And, the court stressed, “it matters whether the party resisting arbitration is a signatory or not” (quoting federal authority the panel found persuasive). Demerse had signed only for the pharmacy, which made him, in his individual capacity, a nonparty to the agreement.

Two settled principles reinforced that conclusion. Under the Michigan Limited Liability Company Act, a member or manager of an LLC “is not liable for the acts, debts, or obligations of the limited liability company” (MCL 450.4501(4)). And under ordinary agency law, an agent who contracts for a disclosed principal is generally not personally liable to the other side absent an express agreement to be. The broad language of the arbitration clause did not, by itself, make Demerse a party to the agreement.

The court also distinguished the cases the hospital relied on. Those decisions involved either parties who had all signed the contract or a nonsignatory agent seeking to enforce an arbitration clause. This case was the reverse: a signatory trying to force a nonsignatory to arbitrate. That difference mattered.

Why piercing the corporate veil did not save the claim

The hospital also argued that the court should look past the LLC and treat Demerse and the pharmacy as one. Michigan allows that only in limited circumstances. Under the test the court applied, the entity must be a mere instrumentality of the individual, it must have been used to commit a fraud or wrong, and the plaintiff must have suffered an unjust loss.

The hospital did not produce enough evidence to establish veil piercing as an alternative basis for summary disposition (Michigan’s term for summary judgment). Its evidence consisted principally of Demerse’s deposition testimony that he had sold the business. That testimony did not establish the alleged delay in disclosing the sale, improper disbursement of the proceeds, or why those acts amounted to fraudulent conduct. The court therefore declined to affirm the trial court on veil-piercing grounds.

What this means for your contracts

The practical lesson is about drafting and signing, not about avoiding arbitration in the abstract. Arbitration clauses are powerful precisely because they are contractual, and that same contractual nature limits how far they reach.

If your business wants an arbitration clause to bind an owner, officer, director, affiliate, or guarantor as an individual, the contract should say so clearly and that person should sign in a personal capacity, or sign a separate guaranty or acknowledgment. A general reference to a company’s “officers and employees” is not a substitute for the individual’s own signature. Existing contracts, especially with closely held companies and single-member LLCs, are worth reviewing with that gap in mind.

The decision also illustrates the broader importance of maintaining the legal distinction between an owner and the entity. Michigan’s LLC statute and ordinary agency principles generally respect that separation, although they do not insulate an owner from liability for the owner’s own conduct or from obligations the owner personally undertakes. That separation works best when the operating agreement, the signature blocks, and the company’s records all reflect it. And if a business does need to reach the individual behind the entity, veil piercing is a demanding standard that requires real evidence, not argument.

Frequently asked questions

Can I be forced to arbitrate just because I signed a contract for my company?

Generally no. If you signed only on behalf of your company and not in your individual capacity, you are usually not a party to the contract personally, so an arbitration clause in that contract does not bind you as an individual. That was the core of the Demerse decision.

Our arbitration clause lists the company’s “officers and employees.” Doesn’t that cover them personally?

Not by itself. In Demerse, that kind of broad language did not force an individual who never signed personally into arbitration. If you want to bind specific people as individuals, name them, say so clearly, and have them sign in a personal capacity or sign a separate guaranty.

Does signing a contract for my LLC make me personally liable under the contract?

Generally, not if the LLC is the disclosed contracting party and you sign solely in a representative capacity. Michigan law provides that a member or manager of an LLC is not personally liable for the company’s obligations, and an agent who contracts for a disclosed principal is generally not personally liable on the contract without an express agreement to be. That protection is about contract liability and depends on maintaining a real separation between you and the company; it does not shield you from liability for your own conduct.

Does this decision mean the hospital’s claims against Mr. Demerse were dismissed?

No. The court decided only that the individual claims could not be sent to arbitration. They return to the trial court, where they can still be litigated. Avoiding arbitration decided the forum, not the merits.

What does it take to disregard an LLC and treat the owner and company as one?

Piercing the corporate veil is one way a court can disregard the normal separation between an LLC and its owner. In Michigan, that generally requires showing that the entity was a mere instrumentality of the individual, that it was used to commit a fraud or wrong, and that the plaintiff suffered an unjust loss. In Demerse, the hospital did not produce enough evidence to establish those requirements at the summary-disposition stage. An owner can still face personal liability on other grounds, including the owner’s own conduct or obligations personally undertaken.