Toledo Clinic, Inc. v. Martinez , 2019 Ohio 431 ( 2019 )

[Cite as Toledo Clinic, Inc. v. Martinez, 2019-Ohio-431.]
IN THE COURT OF APPEALS OF OHIO
SIXTH APPELLATE DISTRICT
LUCAS COUNTY
Toledo Clinic, Inc. Court of Appeals No. L-17-1293
Appellee Trial Court No. CI0201703142
v.
Bernardo Martinez, M.D. DECISION AND JUDGMENT
Appellant Decided: February 8, 2019
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Jared J. Lefevre and Adam S. Nightingale, for appellee.
John J. McHugh, III, for appellant.
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PIETRYKOWSKI, J.
{¶ 1} Defendant-appellant, Bernardo Martinez, M.D., has appealed the November
1, 2017 judgment of the Lucas County Court of Common Pleas which confirmed the
arbitration award in favor of plaintiff-appellee, Toledo Clinic, Inc. (“TCI”). Because we
find that the trial court did not err, we affirm.
{¶ 2} The relevant facts of this case are not in dispute and are as follows. On
March 21, 2011, appellant, a board-certified vascular surgeon, and TCI entered into a
Shareholder Employment Agreement (“SEA”) which set forth the duties and
responsibilities of the parties including compensation, billing policies, termination, and
dispute resolution. The agreement required that appellant “purchase for cash (8) shares
of common stock of the Toledo Clinic for $250 per share within sixty (60) days after the
Effective Date.” The SEA stated that the agreement would “terminate immediately for
cause” if, inter alia, the stock shares were not purchased. During the term of his
employment with TCI, appellant failed to make the stock purchase. The SEA also gave
TCI the authority to adjust appellant’s salary upward or downward based upon any
surplus or deficits in appellant’s financial status which reflected the income and expenses
associated with his medical practice. From June 2011, through April 2013, appellant was
compensated his full base salary of $10,000 per month. Beginning in May 2013, TCI
began deducting amounts from appellant’s monthly compensation due to a perceived
deficit in appellant’s account. Appellant’s employment was terminated on March 31,
2015. Thereafter, TCI sent appellant a letter notifying him that he had a deficit income
account of $245,920.73, and demanding payment.
{¶ 3} On October 26, 2015, after the parties were unable to resolve their dispute
and pursuant to the SEA, TCI filed its demand for arbitration with the American
Arbitration Association (“AAA”) to recover the alleged deficit. Appellant filed a
counterclaim requesting that he be reimbursed for the amounts deducted from his
monthly base salary totaling $103,000, plus interest, and attorney fees and costs.
2.
{¶ 4} According to appellant, his counsel raised the issue of the jurisdiction of the
arbitrator as early as March 22, 2016. The arbitrator indicated that the issue had not been
raised until March 20, 2017, a few weeks before the April 6, 2017 arbitration hearing. At
that time, the arbitrator stated that she would decide her own jurisdiction prior to
addressing the merits of the parties’ claims. In response, appellant commenced an action
in the Lucas County Court of Common Pleas, case No. CI0201702152, requesting
“temporary, preliminary, and permanent injunctive relief prohibiting the arbitration.”
Appellant also raised various claims including breach of contract, unjust enrichment, and
racketeering.
{¶ 5} On March 29, 2017, TCI filed a motion to dismiss the complaint arguing that
because the arbitration had been pending for nearly two years and appellant had
submitted to the arbitrator’s authority, the trial court did not have jurisdiction to issue an
injunction and proceed on appellant’s claims. The trial court agreed and dismissed the
action on April 5, 2017, noting that the parties could challenge the arbitrator’s
jurisdiction at any point during those proceedings. Appellant did not appeal.
{¶ 6} The arbitration hearing was held on April 6, 2017; on May 30, 2017, an
interim award in TCI’s favor was issued in the amount of $240,651.38. On June 23,
2017, TCI was awarded an additional sun of $20,869.35, for attorney fees and expenses.
{¶ 7} TCI commenced the instant action on June 26, 2017, requesting that the
court confirm the arbitration award pursuant to R.C. 2711.09. On July 7, appellant filed a
motion to vacate the arbitration award on the grounds that the arbitrator exceeded her
authority in proceeding in the matter when the SEA containing the arbitration clause was
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not in effect at the time the dispute arose. Appellant specifically argued that because he
failed to purchase the shares of TCI stock as mandated by the SEA, it terminated 60 days
after the effective date as mandated by the language of the agreement.
{¶ 8} On November 1, 2017 the trial court granted TCI’s complaint and
application to confirm the arbitration award. The court confirmed the award finding that
appellant failed to demonstrate that the arbitrator lacked jurisdiction or authority under
R.C. 2711.10(D). This appeal followed.
{¶ 9} The following assignment of error is before the court:
Assignment of Error: The trial court erred substantially and
prejudicially to Bernardo Martinez, M.D., in declining to make the statutory
inquiry and findings mandated by Rev. Code Section 2711.02(B) before
permitting arbitration to proceed, and in subsequently confirming the award
entered upon such blemished jurisdiction.
{¶ 10} R.C. 2711.09 permits any party to an arbitration to apply to the court of
common pleas to confirm the award. R.C. 2711.10(D) further provides that upon
application, a court of common pleas shall make an order vacating an arbitration award if
“[t]he arbitrators exceeded their powers, or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter submitted was not made.”
{¶ 11} In determining whether an arbitrator exceed his or her powers, the trial
court may not reach the merits of the award, it may only set aside the award pursuant to
the factors under R.C. 2711.10. Ohio courts have consistently held that an arbitrator’s
award which draws its essence from the agreement of the parties, must be upheld unless it
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is unlawful, arbitrary or capricious. (Citations omitted.) Cleveland Bd. of Edn. v. Intl.
Bhd. of Firemen & Oilers Local 701, 120 Ohio App.3d 63, 68, 696 N.E.2d 658 (8th
Dist.1997). “When reviewing a decision of a common pleas court confirming,
modifying, vacating, or correcting an arbitration award, an appellate court should accept
findings of fact that are not clearly erroneous but decide questions of law de novo.”
Portage Cty. Bd. of Dev. Disabilities v. Portage Cty. Educators’ Assn. for Dev.
Disabilities, 153 Ohio St.3d 219, 2018-Ohio-1590, 103 N.E.3d 804, syllabus.
{¶ 12} Appellant contends that the trial court erred in determining that the
arbitrator had the jurisdictional authority to proceed. Appellant’s initial argument
challenges the April 5, 2017 decision of the Lucas County Court of Common Pleas, in
case No. CI-201702152, dismissing the action and, thus, denying his complaint for
injunctive relief. Appellant argues that pursuant to R.C. 2711.02(B), the trial court was
required to determine whether the matter was referable to arbitration; that the issue was
not properly dismissed and left for the arbitrator to decide. When challenged with the
argument that appellant failed to appeal that decision, appellant contends that the order on
its face was not final and appealable. TCI further argues that R.C. 2711.02(B) implicates
only those cases pending in a trial court that are proper subjects for arbitration.
{¶ 13} Reviewing the parties’ arguments, we agree that R.C. 2711.02(B) is
inapplicable to the present case. The section provides:
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
5.
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.
{¶ 14} This section clearly provides that the court in which an action is pending
can stay the action upon application of one of the parties pending arbitration in
accordance with the agreement. It does not provide that a party can actively participate in
arbitration and then “if the arbitration is still pending * * * change their legal remedy
midstream.” Cercone v. Merrill Lynch, Pierce, Fenner & Smith, 8th Dist. Cuyahoga No.
89561, 2008-Ohio-4229, ¶ 26. Thus, the only issue before this court is whether the trial
court erroneously confirmed the arbitration award.
{¶ 15} The arbitration clause at issue provides that “[i]f a claim or controversy
arises out of the interpretation or enforcement of the terms of this Agreement the parties
hereto agree to have the matter arbitrated in Lucas County, Ohio, according to the rules
of the American Arbitration Association.” (Emphasis added.) The AAA employment
arbitration rules specifically grant the arbitrator the authority to determine his or her own
jurisdiction providing:
6. JURISDICTION
a. The arbitrator shall have the power to rule on his or her own
jurisdiction, including any objections with respect to the existence, scope or
validity of the arbitration agreement.
6.
b. The arbitrator shall have the power to determine the existence or
validity of a contract of which an arbitration clause forms a part. Such
arbitration clause shall be treated as an agreement independent of the other
terms of the contract. A decision by the arbitrator that the contract is null
and void shall not for that reason alone render invalid the arbitration clause.
c. A party must object to the jurisdiction of the arbitrator or to the
arbitrability of a claim or counterclaim no later than the filing of the
answering statement to the claim or counterclaim that gives rise to the
objection. The arbitrator may rule on such objections as a preliminary
matter or as part of the final award.
{¶ 16} Similarly, Ohio courts have held that “‘[b]ecause the arbitration clause is a
separate entity, it only follows that an alleged failure of the contract in which it is
contained does not affect the provision itself.’” Norman v. Schumacher Homes of
Circleville, Inc., 2013-Ohio-2687, 994 N.E.2d 865, ¶ 34 (4th Dist.), quoting ABM Farms
v. Woods, 81 Ohio St.3d 498, 502, 692 N.E.2d 574 (1998).
{¶ 17} In the proceedings below, the court concluded that the arbitrator’s
determination that the parties agreed to arbitrate pursuant to the SEA was not erroneous.
This is so despite appellant’s failure to purchase the required stock shares which the
arbitrator concluded made the contract voidable, rather than void. Importantly, it is
undisputed that appellant actively participated in the arbitration for nearly two years, filed
an arbitration answering statement which asserted a counterclaim for unpaid salary, and
further failed to file an objection to the proceedings under the AAA rules quoted above.
7.
Certainly, had appellant believed the SEA to have been void, including the arbitration
provision, he could have contested it at inception of the arbitration proceedings.
Appellant’s assignment of error is not well-taken.
{¶ 18} On consideration whereof, we find that substantial justice was done the
party complaining and the judgment of the Lucas County Court of Common Pleas is
affirmed. Pursuant to App.R. 24, appellant is ordered to pay the costs of this appeal.
Judgment affirmed.
A certified copy of this entry shall constitute the mandate pursuant to App.R. 27.
See also 6th Dist.Loc.App.R. 4.
Mark L. Pietrykowski, J. _______________________________
JUDGE
Arlene Singer, J.
_______________________________
Christine E. Mayle, P.J. JUDGE
CONCUR.
_______________________________
JUDGE
This decision is subject to further editing by the Supreme Court of
Ohio’s Reporter of Decisions. Parties interested in viewing the final reported
version are advised to visit the Ohio Supreme Court’s web site at:
http://www.supremecourt.ohio.gov/ROD/docs/.
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