Hunter v. Rhino Shield ( 2015 )

[Cite as Hunter v. Rhino Shield, 2015-Ohio-4603.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Ruth A. Hunter et al., :
Plaintiffs-Appellees, :
v. :
No. 15AP-172
Rhino Shield et al., : (C.P.C. No. 14CV-1274)
Defendants-Appellees, : (REGULAR CALENDAR)
Tri-State Coating, Inc., :
Defendant-Appellant. :
D E C I S I O N
Rendered on November 5, 2015
Law Offices of James P. Connors, and James P. Connors, for
appellees Ruth A. and David G. Hunter.
Scherner & Sybert LLC, and Dave Lackey, for appellant.
APPEAL from the Franklin County Court of Common Pleas
SADLER, J.
{¶ 1} Defendant-appellant, Tri-State Coating, Inc., appeals a judgment of the
Franklin County Court of Common Pleas that denied appellant's motion to stay this
matter pending arbitration. For the following reasons, we affirm that judgment.
{¶ 2} On February 6, 2014, plaintiffs-appellees, Ruth A. and David G. Hunter,
filed suit against appellant and six other defendants.1 The complaint alleged that David G.
Hunter contracted with appellant to apply Rhino Shield, a ceramic wall covering, to the
1Appellees did not obtain service of the summons and complaint on the other six defendants, and they are
not part of this appeal.
No. 15AP-172 2
exterior of appellees' home. In appellees' opinion, appellant performed the work in a
shoddy and unworkmanlike manner, and it failed to repair the botched job as it promised
to do. Appellees asserted claims for breach of contract, negligent and/or intentional
misrepresentation, and violations of the Ohio Consumer Sales Practices Act, R.C. 1345.01
et seq., and the Ohio Home Solicitation Sales Act, R.C. 1345.21 et seq.
{¶ 3} Appellant answered appellees' complaint. Importantly, appellant admitted
in its answer that "venue [was] proper and that [the trial] [c]ourt ha[d] personal and
subject matter jurisdiction over it." (Mar. 11, 2014 Answer, ¶ 12.) The answer did not
mention arbitration.
{¶ 4} Appellees and appellant engaged in discovery. Appellant propounded
interrogatories, requests for the production of documents, and requests for admission
upon appellees. Appellant also responded to appellees' discovery requests. Later,
appellant filed a disclosure of witnesses that listed the lay and expert witnesses it expected
to call at trial.
{¶ 5} On May 20, 2014, appellant moved for a jury view of appellees' house. In
the motion, appellant stated that it intended the motion to serve as a formal notice to
appellees of their duty to preserve the evidence so a future jury could assess it.
{¶ 6} Two days after moving for a jury view, appellant filed a motion for partial
summary judgment. Pointing to an exculpatory clause in the contract between it and
appellees, appellant argued that appellees' damages were limited to $10,919—the amount
that appellees had paid appellant for the work on their home. Appellant requested that
the trial court enter judgment so restricting appellees' recovery.
{¶ 7} On May 29, 2014, appellees moved to compel discovery responses from
appellant. Appellant opposed the motion and requested that the trial court grant it a
protective order excusing it from responding to the discovery requests in dispute.
{¶ 8} On September 4, 2014, appellees moved for leave to amend their complaint
to add additional defendants, including the specific individuals who worked on their
home and the manufacturer of Rhino Shield. In addition to seeking leave, appellees
separately filed their amended complaint. Initially, appellant contested the motion for
leave and requested that the trial court strike the amended complaint. Appellant
subsequently filed an answer to the amended complaint on October 2, 2014. Soon
No. 15AP-172 3
thereafter, the trial court granted appellees leave to file the amended complaint, and it
accepted the already-filed amended complaint and answer as part of the record.
{¶ 9} On October 10, 2014, appellant provided further responses to appellees'
written discovery requests. Around that same time, appellant's attorney began
coordinating the scheduling of depositions with appellees' attorney. In an e-mail sent to
appellees' attorney the morning of October 13, 2014, appellant's attorney confirmed the
deposition of one witness for October 16 and indicated that he was checking the
availability of another witness for a deposition on October 21. Approximately five hours
later, appellant's attorney sent appellees' attorney an e-mail that cancelled all depositions.
Appellant's attorney explained that he and his client had decided to ask the court to
enforce the arbitration provision in the parties' contract.
{¶ 10} Consistent with its attorney's e-mail, on October 13, 2014, appellant moved
for an order either compelling arbitration pursuant to R.C. 2711.03 or, alternatively,
granting a stay pending arbitration pursuant to R.C. 2711.02. The motion relied on an
arbitration provision in the parties' contract, which states:
Any questions, disputes, controversies, or litigation arising
either directly or indirectly from this contract, including but
not limited to disputes concerning the validity, interpretation,
or effect of this contract, or interpretation and enforcement of
the rights and obligations of the parties hereunder, shall be
governed (whether in law or in equity) by the laws of the
breach thereof shall submit to a single arbitrator under the
applicable rules of the American Arbitration Association, and
any decision rendered there under shall conclusively bind the
parties.2
(Contract, 2.)
{¶ 11} One day after filing its motion, appellant submitted an amended answer to
the trial court. For the first time, appellant set forth a defense based on the arbitration
provision in a responsive pleading.3
2 Grammatically, this provision is nonsensical. Either it is missing words or it includes extraneous words.
Both parties, however, presume that this provision mandates arbitration of their dispute. Consequently, we
will presume the same.
3 Appellant did not need leave to amend its answer because it filed the amended answer within 28 days of
October 2, 2014—the date on which appellant served its answer to the amended complaint. See Civ.R. 15(A)
("A party may amend its pleading once as a matter of course within twenty-eight days after serving it.").
No. 15AP-172 4
{¶ 12} Appellant later withdrew the portion of its motion that requested the trial
court to compel arbitration. The only question before the trial court, therefore, was
whether to stay the case pending arbitration.
{¶ 13} Appellees opposed appellant's motion to stay on the ground that appellant
had waived the arbitration provision. Appellees pointed out that appellant had conceded
in its original answer that venue and jurisdiction were proper and that appellant had
actively participated in the litigation. Appellees argued that these acts were inconsistent
with the right to arbitrate and justified denial of appellant's motion.
{¶ 14} In a judgment dated March 5, 2015, the trial court denied appellant's
motion for a stay pending arbitration. Appellant now appeals the March 5, 2015
judgment, and it assigns the following error: "The trial court erred when it held that
[appellant] waived its right to arbitrate this dispute."
{¶ 15} Both the General Assembly and Ohio courts have expressed a strong public
policy favoring arbitration. Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-
2054, ¶ 15. Arbitration is favored because it provides parties with a relatively expeditious
and economical means of resolving a dispute and unburdens crowded court dockets. Id.
A party may obtain a stay of litigation in order to arbitrate pursuant to R.C. 2711.02(B),
which states:
If any action is brought upon any issue referable to arbitration
under an agreement in writing for arbitration, the court in
which the action is pending, upon being satisfied that the
issue involved in the action is referable to arbitration under an
agreement in writing for arbitration, shall on application of
one of the parties stay the trial of the action until the
arbitration of the issue has been had in accordance with the
agreement, provided the applicant for the stay is not in default
in proceeding with arbitration.
{¶ 16} The contractual right to arbitration, like any other contractual right, may be
waived. Pinnell v. Cugini & Cappoccia Builders, Inc., 10th Dist. No. 13AP-579, 2014-
Ohio-669, ¶ 17; Dispatch Printing Co. v. Recovery Ltd. Partnership, 10th Dist. No. 10AP-
353, 2011-Ohio-80, ¶ 19. However, a court will not lightly infer waiver of a right to
arbitrate. Morris v. Morris, 189 Ohio App. 3d 608, 2010-Ohio-4750, ¶ 18 (10th Dist.). To
establish such a waiver, the party asserting waiver must prove that the waiving party knew
No. 15AP-172 5
of the right to arbitrate and, based on the totality of the circumstances, acted
inconsistently with that right. Pinnell at ¶ 18; Blackburn v. Citifinancial, Inc., 10th Dist.
No. 05AP-733, 2007-Ohio-1463, ¶ 17. In determining whether the totality of the
circumstances includes actions inconsistent with the right to arbitrate, a court may
consider: (1) whether the party seeking arbitration invoked the court's jurisdiction by
filing a complaint or claim without first requesting a stay, (2) the length of the delay, if
any, in seeking arbitration, (3) the extent to which the party seeking arbitration has
participated in the litigation, and (4) whether the inconsistent acts of the party seeking
arbitration prejudiced the party asserting waiver. Pinnell at ¶ 18; Dispatch Printing Co. at
¶ 21. In short, waiver occurs when a party's active participation in a lawsuit evinces an
acquiescence to proceeding in a judicial forum. Pinnell at ¶ 18; Blackburn at ¶ 19.
{¶ 17} The standard under which an appellate court reviews an order granting or
denying a stay pending arbitration depends on the nature of the issues involved. Pinnell
at ¶ 17. When the issue is whether a party waived its right to arbitrate, appellate courts
review a trial court's judgment for an abuse of discretion. Id.; Morris at ¶ 17. Appellate
courts apply this standard because resolution of the waiver issue requires a fact-intensive
analysis. Pinnell at ¶ 17; Morris at ¶ 17.
{¶ 18} In the case at bar, the parties do not dispute that appellant knew of its right
to arbitrate. The trial court, therefore, focused its attention on whether appellant acted
inconsistently with its known right. The trial court answered that question affirmatively
because appellant: (1) filed an answer to the original complaint that did not reference
arbitration, (2) waited seven months before filing the motion to stay, (3) exchanged
discovery with appellees, (4) requested a jury view of appellees' home, (5) disclosed its
witness list, and (6) moved for partial summary judgment.
{¶ 19} On appeal, appellant largely concentrates on diminishing the importance of
its failure to reference arbitration in its original answer. Appellant points out that it
asserted its right to arbitrate in its amended answer. It argues that, because an amended
pleading supersedes an original pleading, its amended answer negated all the admissions
and omissions of its original answer. Appellant thus contends that the trial court erred in
considering, as part of the totality of the circumstances, the lack of an arbitration defense
in the original answer. According to appellant, the trial court should have instead
No. 15AP-172 6
conducted its analysis using the pretense that appellant had raised the arbitration defense
at the first opportunity. We disagree.
{¶ 20} Appellant is correct that an amended pleading supersedes the original
pleading. Morris at ¶ 32. That rule, however, does not mean that a trial court must
disregard the original answer when determining whether a defendant acted inconsistently
with the right to arbitrate. Whether a defendant has acted inconsistently is a factual
inquiry, and the original answer may provide clues for determining if a defendant
intended to pursue—or relinquish—the right to arbitrate. Here, the original answer holds
just such evidence. Not only did appellant fail to reference arbitration in its answer, it
also affirmatively admitted that both venue and jurisdiction rested with the trial court.
Moreover, appellant stayed silent regarding arbitration until filing its third answer, some
seven months after filing its original answer. We find no error in the trial court's
consideration of these facts as part of its review of the totality of the circumstances.
{¶ 21} Our conclusion in this matter is not inconsistent with Morris. There, our
analysis focused on a different waiver rule; namely, the rule that affirmative defenses are
waived if not raised in the initial pleading or an amended pleading. See Jim's Steak
House, Inc. v. Cleveland, 81 Ohio St. 3d 18, 20 (1998). One of the appellants in Morris
argued that the trial court erred in refusing to allow him to assert the new affirmative
defense of arbitration in response to the appellees' amended pleadings. Apparently, the
trial court had concluded that the appellant had waived the defense because he did not
raise it in his initial responsive pleading. We agreed with the appellant's argument for two
reasons. First, by filing amended pleadings, the appellees opened the door for the
appellant to raise new affirmative defenses in his responsive pleadings. Id. at ¶ 18.
Second, the right to arbitrate, as protected by R.C. 2711.02, is not a Civ.R. 8(C) affirmative
defense and, thus, the appellant's failure to include it in his initial responsive pleading did
not result in waiver. Id.
{¶ 22} Here, the question is not solely whether appellant waived the defense of the
right to arbitrate by not raising it in its original answer. For the two reasons set forth in
Morris, appellant could raise that defense in its amended answer to appellees' amended
complaint. The question here is whether, during the entire course of litigation, appellant
acted inconsistently with its right to arbitrate. While resolving that question includes
No. 15AP-172 7
consideration of whether appellant omitted the arbitration defense from its original
answer, the absence of the defense merely contributes to the overall analysis.
{¶ 23} The trial court cited multiple factors in concluding that appellant acted
inconsistently with its right to arbitrate. We add to those factors appellant's filing of
opposing memoranda to appellees' motions to compel and to amend their complaint,
appellant's request for a protective order, and appellant's participation in the scheduling
of depositions. Together, all these factors militate against a stay of the case pending
arbitration.
{¶ 24} The trial court ultimately found one factor decisive: the filing of the motion
for partial summary judgment. We concur with that finding. "Filing a motion for
summary judgment is inconsistent with the right to arbitrate because it places the dispute
squarely before the court for resolution on the merits and demonstrates an election to
proceed with litigation as opposed to arbitration." Griffith v. Linton, 130 Ohio App. 3d
746, 753 (10th Dist.1998). Generally, a party who moves for summary judgment "has
made a decision to take advantage of the judicial system and should not be able thereafter
to seek compelled arbitration." Khan v. Parsons Global Servs., 521 F.3d 421, 427
(D.C.Cir.2008).
{¶ 25} In its motion for partial summary judgment, appellant requested that the
trial court interpret and enforce the exclusionary provision in the parties' contract in its
favor and limit the amount of appellees' damages. The contract's arbitration provision
designates interpretation and enforcement of the contract as a matter for arbitration.
Appellant, therefore, submitted an arbitrable issue to the trial court for resolution on its
merits. This act was wholly inconsistent with arbitration. Consequently, when
considering appellant's bid for partial summary judgment in conjunction with its other
acts and omissions, we conclude that the trial court did not abuse its discretion in
determining that appellant acted inconsistently with its right to arbitrate. The trial court,
therefore, did not err in finding a waiver of arbitration had occurred or in denying the
motion for a stay pending arbitration.
No. 15AP-172 8
{¶ 26} For the foregoing reasons, we overrule appellant's sole assignment of error
and affirm the judgment of the Franklin County Court of Common Pleas.
Judgment affirmed.
DORRIAN and BRUNNER, JJ., concur.
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