Internatl. Culture & Trade Complex, Inc. v. Drenik , 2014 Ohio 713 ( 2014 )

[Cite as Internatl. Culture & Trade Complex, Inc. v. Drenik, 2014-Ohio-713.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
International Culture & Trade :
Complex, Inc.,
:
Plaintiff-Appellee,
:
v. No. 13AP-596
: (C.P.C. No. 10CVH02-2918)
Gary Drenik et al.,
: (REGULAR CALENDAR)
Defendants-Appellants.
:
Prosper International, Ltd.,
:
Petitioner-Appellee,
:
v. No. 13AP-597
: (C.P.C. No. 10CVH09-13963)
International Culture & Trade
Complex, Inc., : (REGULAR CALENDAR)
Respondent-Appellee, :
(Prosper Business Development :
Corp. et al.,
:
Appellants).
:
D E C I S I O N
Rendered on February 27, 2014
James E. Arnold & Associates, LPA, James E. Arnold,
Gerhardt A. Gosnell, II and Damion M. Clifford, for
appellants.
Cooper & Elliott, LLC, Rex H. Elliott, Charles H. Cooper, Jr.,
Bradley A. Strickling and Barton R. Keyes, for appellees
International Culture & Trade Complex, Inc. and Dr. Joseph
Pilotta.
Nos. 13AP-596 and 13AP-597 2
APPEALS from the Franklin County Court of Common Pleas
TYACK, J.
{¶ 1} Appellants, Gary Drenik, Phil Rist, and Prosper International Ltd., appeal
the judgment of the Franklin County Court of Common Pleas which confirmed an award
issued in arbitration on December 17, 2012. For the following reasons, we affirm the
judgment of the trial court.
{¶ 2} Appellants bring two assignments of error for our consideration:
I. The Trial Court abused its discretion when it sua sponte
modified the Arbitration Award by entering Final Judgment
in favor of Dr. Joseph Pilotta and International Culture and
Trade Complex Inc.
II. The Trial Court abused its discretion in confirming the
Arbitration Award in favor of Dr. Pilotta on a claim that he
never submitted to the Arbitrator.
{¶ 3} This case involves three men and their various business entities that sought
to engage in international trade arrangements with businesses in China. A focus on the
relevant facts is necessary to understand the limited scope of this appeal, but we are in
agreement with the trial court that arbitrator Robert G. Stachler's explanation of events in
his 32-page decision is very thorough.
{¶ 4} Appellants, Gary Drenik and Phil Rist, each own one-half of Prosper
Business Development Corporation ("Prosper Business"). Appellee, Dr. Joseph Pilotta,
owns International Culture and Trade Complex Inc. ("ICTC"). Mr. Drenik, Mr. Rist and
Dr. Pilotta, through ICTC, formed Prosper International, Ltd. ("International") to broker
relationships between United States and international companies. Prosper Business
served as the management company of International. The dispute between the parties
revolves around Dr. Pilotta and ICTC leaving International and whether there was
misconduct, breach of fiduciary duties, or loss of business opportunities that resulted
from the falling out of these three men.
{¶ 5} The arbitrator ruled that ICTC breached its fiduciary duty and contract and
that Dr. Pilotta breached his fiduciary duty, fraudulently misrepresented and tortuously
Nos. 13AP-596 and 13AP-597 3
interfered with business relationships. The arbitrator awarded damages in the amount of
$810,000 to be paid by Dr. Pilotta and ICTC to International.
{¶ 6} The arbitrator also found that Prosper Business and its owners Mr. Drenik
and Mr. Rist caused damages to Dr. Pilotta in the amended amount of $1,087,385 by not
sharing the financial proceeds of the Marketstar settlement. The Marketstar settlement
was the result of a separate arbitration that awarded damages to International for actions
during a time when Dr. Pilotta was still a one-third member. The initial award of
$1,308,738.20 was quickly amended by the arbitrator due to a calculation error.
{¶ 7} Appellants argue that the trial court abused its discretion in confirming the
arbitration award. "The term 'abuse of discretion' connotes more than an error of law or
judgment; it implies that the court's attitude is unreasonable, arbitrary or
unconscionable." Blakemore v. Blakemore, 5 Ohio St.3d 217, 219 (1983). "Abuse of
discretion" implies a decision that is arbitrary or capricious, one that is without a
reasonable basis or clearly wrong. Pembaur v. Leis, 1 Ohio St.3d 89 (1982); In re Ghali,
83 Ohio App.3d 460 (10th Dist.1992). More recently, in a case involving many of the
same parties, we reiterated that an abuse of discretion standard is used to review a trial
court's confirmation of an arbitration award. BIGResearch, L.L.C. v. PENN, L.L.C., 10th
Dist. No. 11AP-855, 2012-Ohio-2992, ¶ 24.
{¶ 8} The arbitration system of dispute resolution can only be ensured through
judicial restraint and a reviewing court must give due respect to an arbitrator's award.
Hillsboro v. Fraternal Order of Police, Ohio Labor Council, Inc., 52 Ohio St.3d 174, 178
(1990). " 'It is the policy of the law to favor and encourage arbitration and every
reasonable intendment will be indulged to give effect to such proceedings and to favor the
regularity and integrity of the arbitrator's acts.' " Bd. of Edn. of the Findlay City School
Dist. v. Findlay Edn. Assn., 49 Ohio St.3d 129, 131 (1990), quoting Mahoning Cty. Bd. of
Mental Retardation v. Mahoning Cty. TMR Edn. Assn., 22 Ohio St.3d 80, 84 (1986).
{¶ 9} Appellant's first assignment of error argues that the trial court abused its
discretion when it sua sponte modified the arbitration award by entering the final
judgment for not just Dr. Pilotta but for ICTC as well. They argue appellees never filed a
motion to modify the award as required by R.C. 2711.11 and 2711.13. We do not find the
trial court abused its discretion as it was not modifying the award.
Nos. 13AP-596 and 13AP-597 4
{¶ 10} Appellant argues that Dr. Pilotta is the only person identified as the
recipient of the award for the Marketstar settlement. Paragraph 2 of the arbitrator's
Operative Provisions of the award states:
The claim of Respondents and Counter Claimants ICTC and
Dr. Joseph Pilotta for Gary Drenik, Phil Rist and Prosper
Business Development Corp. (PBDC) breach of fiduciary
duty in not sharing any portion of the ultimate settlement of
the Marketstar arbitration with Dr. Pilotta is granted and Dr.
Pilotta is awarded damages in the amount of [$1,087,385
(arbitrator's amended amount)] to be paid jointly and
severally by Drenik, Rist and PBDC.
(R. 88, Arbitrator's Final Award, at 30.) The trial court stated in its final judgment:
The Arbitrator found in favor of plaintiff International
Culture & Trade Complex, Inc. ("ICTC") and Joseph Pilotta
on their claims for breach of fiduciary duty against
defendants Gary Drenik, Phil Rist, and Prosper Business
Development Corporation ("PBDC"). The Arbitrator
awarded $1,087,385 on these claims jointly severally against
Drenik, Rist, and PBDC.
(R. 114 Court of Common Pleas Final Judgment, at 1-2.) Appellants argue that this
amounts to a modification of the arbitration award as the intent of the arbitrator could
only be in favor of Dr. Pilotta.
{¶ 11} The trial court did not modify the award. The trial court does not actually
state that the Marketstar settlement is due to ICTC. The court simply states that ICTC
and Dr. Pilotta prevailed in their claim of a breach of fiduciary duty against appellants and
that $1,087,385 is awarded jointly and severally against appellants Mr. Drenik, Mr. Rist,
and PBDC. Nothing in the trial court's final judgment of June 14, 2013 or its Journal
Entry and Decision of May 29, 2013 indicates that the arbitrator awarded any part of the
$1,087,385 to ICTC. The trial court did not sua sponte modify the arbitration award and
could not have abused its discretion for that reason.
{¶ 12} The first assignment of error is overruled.
{¶ 13} Appellant's second assignment of error argues that the trial court abused its
discretion in affirming an award in which the arbitrator exceeded his authority by
Nos. 13AP-596 and 13AP-597 5
awarding $1,087,385 to Dr. Pilotta on a claim of breach of fiduciary duty that was never
submitted to the arbitrator. We agree with the trial court that the arbitrator did not
exceed his authority.
{¶ 14} This issue was addressed by the trial court which found that the arbitrator
could issue awards in favor of Dr. Pilotta. "[T]he parties stipulated before Arbitrator
Stachler to have him hear and decide ALL issues even if they were on the margins of the
four-corners of the their basic arbitration agreement." (Emphasis sic.) (R. 107, Journal
Entry and Decision, at 5.)
{¶ 15} The trial court relied on several factors in this determination. First,
appellants conceded that "the parties agreed to arbitrate several claims asserted by Pilotta
as well as International 's claims against Pilotta." (R. 101, Memorandum filed April 19,
2013, at 3.) The trial court also stated that appellants conceded that appellees raised Dr.
Pilotta's claim before the arbitration hearing ended in a confidential proposed findings of
fact and conclusions of law. The trial court also noted that the arbitrator carefully
received explicit assurance that he could hear all issues regardless of how or when ICTC's
relationship with Dr. Pilotta terminated. The assurances that were received were as
follows:
[THE ARBITRATOR]: First of all, I'm going to ask you, so
there's no misunderstanding, that with respect to the
claimant, it includes Prosper International, Prosper
Business, BIGresearch, Gary Drenik, and Phil Rist. They
would be subject to the outcome of this arbitration. I don't
want somebody to say, well, they weren't part of the
arbitration agreement.
MR. PRICE: No. Nobody is claiming that, Your Honor.
THE ARBITRATOR: I just want to clarify that.
Now with, with respect to the respondents, Joe Pilotta,
International Trade & Culture Complex, Inc. are bound by
the outcome of this arbitration agreement. In other words,
you're not taking the position, well, they weren't parties to
the arbitration provision. None of that. I don't want to be
faced with that at the end of this case.
Nos. 13AP-596 and 13AP-597 6
MR. KEYES: That's correct, Mr. Stachler. We are not
suggesting that either Dr. Pilotta or ICTC are not subject to
the arbitration provision.
(R. 105 , Arbitration Proceedings, October 2, 2012, at 1241-42.)
{¶ 16} The trial court concluded that, by agreeing to put forth disputes not
necessarily covered by the arbitration agreement and conducting the arbitration in an
informal manner, it is disingenuous to claim the arbitrator decided too much:
By agreeing to arbitrate disputes that might not otherwise
have been covered, and then conducting the arbitration in an
informal manner in which each side's proposed findings and
conclusions were apparently not known to the other, the
parties put themselves in some jeopardy of the arbitrator
doing exactly what occurred here. No party can be heard to
complain – after learning the outcome of the arbitration –
that things proceeded too informally or that the Arbitrator
decided too much.
(R. 107, Journal Entry and Decision, at 5.)
{¶ 17} There is further evidence to support the trial court's conclusion. Both ICTC
and Dr. Pilotta are listed as claimants in their statement of claims and they list their
claims, including count one: breach of fiduciary duty against appellants as harming them.
(R. 104, ICTC and Dr. Pilotta's Statement of Claims, at 1, 10.) This can only indicate that
both Dr. Pilotta and ICTC are claiming they were harmed by appellants. Further,
appellants themselves moved to add Dr. Pilotta as a party to the arbitration after the
arbitrator amended the final award.
{¶ 18} Appellant points to a chart that was submitted to the arbitrator to illustrate
the parties' claims and counterclaims. (R. 102.) This chart only lists ICTC as the
counterclaimant (appellees were listed as counterclaimants in arbitration) to bring a
breach of fiduciary duty, but the chart does not indicate that it set the bounds of the
arbitrator's jurisdiction. The same chart is used again to highlight the elimination of
certain counterclaims of appellees by submitting the same chart as before with the
removed counterclaims crossed out. Those eliminated counterclaims of appellee were,
Nos. 13AP-596 and 13AP-597 7
however, specifically spelled out in the notice to the arbitrator, to which the chart was
attached as an example, and did not include a breach of fiduciary duty counterclaim
brought by Dr. Pilotta. (Appellant's Appendix, exhibit D.) This chart's various versions,
which appellants rely on heavily, can be easily interpreted as illuminating the various
claims and not as rigidly setting the boundaries of what claims are under the arbitrator's
jurisdiction. It is not an abuse of discretion to rely on the statement of claims, rather than
a chart used as an example to illuminate those claims. We find generally that the formal
statement of claims is controlling, not an exhibit generated to illustrate that document.
{¶ 19} Having reviewed the record, we find that the trial court did not abuse its
discretion in finding that the arbitrator did not exceed his authority in issuing an award to
Dr. Pilotta on a claim of breach of fiduciary duty brought by ICTC and Dr. Pilotta.
{¶ 20} The second assignment of error is overruled.
{¶ 21} Having overruled both assignments of error, the judgment of the Franklin
County Court of Common Pleas is affirmed.
Judgment affirmed.
SADLER, P.J., and CONNOR, J., concur.