Kellogg v. Griffiths Health Care Group , 2011 Ohio 1733 ( 2011 )

[Cite as Kellogg v. Griffiths Health Care Group, 2011-Ohio-1733.]
IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
MARION COUNTY
LAURA J. KELLOGG,
PLAINTIFF-APPELLEE, CASE NO. 9-10-59
v.
GRIFFITHS HEALTH CARE GROUP, OPINION
DEFENDANT-APPELLANT.
Appeal from Marion County Common Pleas Court
Trial Court No. 2009 CV 0291
Judgment Affirmed
Date of Decision: April 11, 2011
APPEARANCES:
Geoffrey E. Webster for Appellant
Derek F. Bricker and William W. Patmon, III for Appellee
Case No. 9-10-59
WILLAMOWSKI, J.
{¶1} Defendant-Appellant, Griffiths Health Care Group (“GHCG”),
appeals the judgment of the Marion County Court of Common Pleas denying
GHCG’s motion for a stay of proceedings pending arbitration of the complaint of
Plaintiff-Appellee, Laura K. Kellogg (“Kellogg”) for wrongful termination. On
appeal, GHCG contends that the trial court erred in its finding that GHCG did not
have a valid arbitration agreement. For the reasons set forth below, the judgment
is affirmed.
{¶2} Kellogg worked as a business office manager at GHCG’s Harding
Pointe nursing home facility in Marion, Ohio, from approximately October 4,
2007 until she was terminated on October 17, 2008. Kellogg originally worked as
a “leased employee” through Diversified Employment Solutions, Inc. (“DES”),
but was later hired directly by GHCG after GHCG ended its contractual
relationship with DES. GHCG maintains that it hired Kellogg on October 16,
2007, although Kellogg insists that she was an employee of DES until sometime in
January 2008.
{¶3} On September 29 and October 10 of 2008, Kellogg was verbally and
physically assaulted by a resident at the facility and she claimed that she sustained
injuries requiring medical treatment. Kellogg filed a workers’ compensation claim
and also filed felonious assault and aggravated menacing charges against the
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patient. GHCG claimed Kellogg violated policies and terminated her on October
17, 2008. On April 3, 2009, Kellogg filed a complaint1 for wrongful termination.
{¶4} Motions, discovery practice, and status conferences proceeded in this
case for nearly one year. On March 15, 2010, GHCG filed a Motion for Stay of
Proceedings Pending Outcome of Arbitration (“Motion for Stay”). GHCG
claimed that Kellogg signed GHCG’s application for employment on October 16,
2007, which allegedly contained the following arbitration clause.
Agreement to Arbitrate Disputes. I agree that any dispute,
claim or controversy which may arise between me and the
Company with regard to this Application for Employment or
with regard to my employment by the Company if hired,
including any claim that I was note [sic] hired or that I was
disciplined or discharged as a result of my age, sex, color, race,
creed, national origin, religious persuasion, or disability or in
violation of Ohio law, shall be subject to and fully settled by
mandatory and binding arbitration ***.
Kellogg filed a response to the Motion for Stay; GHCG filed a reply; a
teleconference was held and Kellogg was granted permission to file a surreply due
to newly discovered evidence on the subject; and, GHCG filed a reply to
Kellogg’s surreply.
{¶5} In her motions arguing against the Motion for Stay, Kellogg made the
following arguments: she worked for DES, not GHCG, at the time the document
1
Kellogg later filed a motion for leave to file an amended complaint, which was not opposed. Kellogg’s
motion was granted and was deemed filed as of August 25, 2010. GHCG did not file an answer to the
amended complaint.
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was allegedly signed on October 16, 2007 (and she provided paystubs and a W-2
listing DES as her employer); “Company” is not defined in the alleged arbitration
agreement or documents, so there is no way to know the identity of that party; the
agreement is incomplete because GHCG only provided one page/section and not
the entire document; and, Kellogg submitted an affidavit disputing that it was her
signature, claiming that it was different from a signature on a similar document
she signed with DES on October 2, 2007. Furthermore, Kellogg argued that
GHCG waived the right to arbitrate because it failed to plead an arbitration clause
as an affirmative defense pursuant to Civ.R. 8(C) and because GHCG acquiesced
and actively participated in litigation for nearly a year before raising the matter.
{¶6} GHCG claimed that it did not know it possessed the document with
the arbitration agreement until discovering it just before filing the Motion to Stay;
that Kellogg was an employee of GHCG and DES was only handling its payroll;
that Kellogg was bound by the terms of the valid arbitration agreement; and, that it
did not waive its right to arbitrate based on the totality of the circumstances and
the fact that there was no prejudice.
{¶7} The trial court reviewed all of the materials submitted by the parties,
although it did not hold an evidentiary hearing. On September 8, 2010, the trial
court overruled GHCG’s Motion to Stay, finding that “this Court cannot say that it
is convinced that [GHCG] has demonstrated a valid arbitration agreement.” (Sept.
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8, 2010 J.E.) It is from this judgment that GHCG now appeals, raising the
following two assignments of error.
First Assignment of Error
The trial court erred in not applying the presumption of
arbitrability.
Second Assignment of Error
The trial court erred to the substantial prejudice of [GHCG] in
denying [GHCG]’s motion to stay the proceedings pending
outcome of the arbitration.
{¶8} As a preliminary matter, we note that an order which grants or denies
a stay of proceedings pending arbitration is a final appealable order. R.C.
2711.02(C). Ohio and federal courts recognize that there is a strong presumption
in favor of arbitration and they encourage arbitration to settle disputes. ABM
Farms, Inc. v. Woods, 81 Ohio St.3d 498, 500, 1998-Ohio-612, 692 N.E.2d 574.
The public policy in favor of arbitration is reflected in R.C. 2711.02(B):
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.
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{¶9} Typically, a decision to grant or deny a stay of proceedings pending
arbitration is reviewed under an abuse-of-discretion standard. Morris v. Morris,
189 Ohio App.3d 608, 2010-Ohio-4750, 939 N.E.2d 928, ¶15. However, a de
novo standard of review is appropriate when the appeal presents a question of law.
Id.; Barhorst, Inc. v. Hanson Pipe & Prods. Ohio, Inc., 169 Ohio App.3d 778,
2006-Ohio-6858, 865 N.E.2d 75, ¶10. Furthermore, when a trial court makes
factual findings, such as any findings regarding the circumstances surrounding the
making of the contract, those factual findings should be reviewed with great
deference. Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-
938, 884 N.E.2d 12, ¶38; Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73
Ohio St.3d 107, 108, 1995-Ohio-214, 652 N.E.2d 684 (contract interpretation, a
question of law, is reviewed de novo, “[u]nlike determinations of fact which are
given great deference”).
{¶10} In its two assignments of error, GHCG argues that the arbitrability of
a claim is a question of law which must be reviewed de novo and that any doubts
concerning the scope of an arbitration agreement should be resolved in favor of
arbitration. GHCG argues that there “is no dispute that [Kellogg] signed the
Arbitration Agreement, nor that the Arbitration Agreement applies to the dispute
and claims” in the case. (Appellant’s Br., p. 8.) Therefore, GHCG believes the
trial court should have ruled in favor of arbitration.
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{¶11} However, this is not a case where the trial court was simply asked to
examine or interpret the extent or applicability of an arbitration clause to a
particular matter. The first preliminary issue that needed to be resolved was
whether or not the contract was agreed to by the parties involved. In spite of
GHCG’s claims, there were serious questions of fact as to whether the document
in question was signed by Kellogg and whether GHCG was the employer or
“Company” referenced in the document.
{¶12} Prior to making any determination regarding the arbitrability of any
issue raised by the parties' claims, a court must first determine whether the written
arbitration agreement being invoked is in fact enforceable under basic contract
precepts. Benjamin v. Pipoly, 155 Ohio App.3d 171, 2003-Ohio-5666, 800 N.E.2d
50, ¶31. Arbitration is a matter of contract and a party cannot be required to
submit to arbitration any dispute which he has not agreed in writing to arbitrate.
Council of Smaller Enterprises v. Gates McDonald & Co. 80 Ohio St.3d 661, 665,
1998-Ohio-172, 687 N.E.2d 1352; I Sports v. IMG Worldwide, Inc., 157 Ohio
App.3d 593, 2004-Ohio-3113, 813 N.E.2d 4, ¶10. “To determine whether
arbitration is appropriate, we must first look to whether the parties agreed to
arbitrate an issue in dispute, not to a general policy goal in favor of arbitration.”
Klausing v. Chef Solutions, Inc., 3d Dist. No. 1-07-34, 2007-Ohio-6014, ¶9, citing
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E.E.O.C. v. Waffle House Inc. (2002), 534 U.S. 279, 122 S.Ct. 754, 151 L.Ed.2d
755.
{¶13} It is not for this Court to make findings of fact. We must give
deference to the trial court’s findings that GHCG did not satisfactorily
demonstrate the existence of a valid arbitration agreement. An appellate court is
to afford deference to a trial court's decision and “must not substitute its judgment
for that of the trial court where there exists some competent and credible evidence
supporting the findings of fact and conclusions of law rendered by the trial court.”
Myers v. Garson, 66 Ohio St.3d 610, 616, 1993-Ohio-9, 614 N.E.2d 742. The
record in this case contained Kellogg’s affidavit stating that the signature on the
arbitration agreement was not hers, along with other evidence calling into question
whether GHCG was her employer at that time and even whether it was the
“Company” referenced in the agreement. The record supports the trial court’s
finding that there was insufficient evidence of the existence of a valid agreement
which provided for arbitration.
{¶14} However, even if that were not the case, we also find that GHCG’s
failure to timely bring the matter to the attention of the trial court constitutes a
waiver. Like any other right that attaches under a contract, the right to arbitration
may be waived. Atkinson v. Dick Masheter Leasing II, Inc., 10th Dist. No. 01AP-
1016, 2002-Ohio-4299, ¶18, citing Griffith v. Linton (1998), 130 Ohio App.3d
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746, 751, 721 N.E.2d 146. Courts have found the right to proceed with arbitration
is adversely affected when a party has acted inconsistently with the right, such as
actively participating in litigation. Id. Waiver attaches where there is active
participation in a lawsuit, “evincing an acquiescence to proceeding in a judicial
rather than arbitration forum.” Griffith. at 752, 721 N.E.2d 146.
{¶15} The General Assembly, when enacting R.C. 2711.02, did not specify
at what point in the litigation process a party must file an application for stay to
preserve the right to arbitrate and various courts of appeals have sometimes
differed regarding the timeliness of a motion for stay of proceedings and referral
to arbitration. See Harsco Corp. v. Crane Carrier Co. (1997), 122 Ohio App.3d
406, 415, 701 N.E.2d 1040. In Harsco, this Court has stated that “[t]he better rule
of law appears to be that a motion for stay of proceedings pending arbitration and
a referral to arbitration may be filed after the defending party answers the
complaint if (1) the application of the arbitration clause is affirmatively pled in the
answer, and (2) the defending parties' conduct, based on the totality of the
circumstances under Phillips,2 does not demonstrate a waiver of the clause.”
Harsco at 415.
{¶16} In Harsco, we found that the defendant did not waive its right to
arbitrate even though it waited three months before filing for a motion to stay the
2
Phillips v. Lee Homes, Inc. (Feb. 17, 1994), Cuyahoga App. No. 64353, 1994 WL 50696.
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proceedings and requesting arbitration. Id. The defendant had raised the issue as
a defense in its answer; very little discovery had taken place; and the other party
was not prejudiced by the “brief delay” in requesting arbitration. Id. In the case
before us, however, GHCG failed to raise the existence of an arbitration clause
anywhere within its answer and it actively participated in the lawsuit for a year
before bringing the matter to the attention of the trial court for the first time.
{¶17} A party to a contract to arbitrate waives its right when it files a
lawsuit rather than requesting arbitration. Mills v. Jaguar-Cleveland Motors, Inc.
(1980), 69 Ohio App.2d 111, 113, 430 N.E.2d 965. When the other party, the
potential defendant, is confronted with a filed lawsuit, the right to arbitrate can be
saved by seeking enforcement of the arbitration clause. Id. This may be done
under R.C. 2711.02 by application to stay the legal proceedings pending the
arbitration. “Failure to move for a stay, coupled with responsive pleadings, will
constitute a defendant’s waiver.” Austin v. Squire (1997), 118 Ohio App.3d 35,
37, 691 N.E.2d 1085, quoting Mills. See, also, Jones v. Honchell (1984), 14 Ohio
App.3d 120, 122, 470 N.E.2d 219 (when a defendant fails to raise the arbitration
provision of the contract in an answer, he waives the right to submit the matter to
arbitration).
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{¶18} In this case, GHCG filed an answer on May 22, 2009. GHCG
neither moved for a stay pursuant to R.C. 2711.02 at that time, nor did it raise the
matter in its answer, even though it raised twenty-two other defenses.3
{¶19} Given Ohio's public policy favoring arbitration, the party asserting
that the right to arbitrate has been waived bears the burden of proving waiver.
Morris v. Morris, 2010-Ohio-4750, at ¶17. A party asserting waiver must prove
that the waiving party knew of the existing right to arbitrate and, based on the
totality of the circumstances, acted inconsistently with that known right. Id. at
¶18; Harsco at 414; Phillips v. Lee Homes, Inc., 8th Dist. No. 64353, 1994 WL
50696.
{¶20} “The question of waiver is usually a fact-driven issue and an
appellate court will not reverse the trial court's decision absent a showing of an
abuse of discretion.” Morris at ¶17 (internal quotations and citations omitted.) In
determining whether the totality of circumstances supports a finding of waiver, a
court may consider (1) whether the party seeking arbitration invoked the court's
3
Although GHCG titled its list of defenses as “Affirmative Defenses,” they went far beyond only
“affirmative defenses” as defined by Civ.R. 8(C). GHCG’s list constituted an entire range of defenses in
both fact and law and under various other Civil Rules and statutes. Although some courts have held that an
arbitration agreement should be pled as an affirmative defense under Civ.R. 8(C), which includes
“arbitration and award” in its non-exclusive list of affirmative defenses, the existence or assertion of the
right to arbitrate is different from “arbitration and award,” which implies that arbitration has already
occurred and an award has been determined. See Hudson v. Ernst & Young, L.L.P., 189 Ohio App.3d 60,
2010-Ohio-2731, 937 N.E.2d 585, ¶¶35-38. If arbitration has not yet occurred, it is simply a contractual
obligation and should be pled in the same manner as any other component of a contract or defense.
However, as discussed above, it should be included in the first responsive pleading, if it hasn’t already been
brought to the court’s attention pursuant to R.C. 2711.02.
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jurisdiction by filing a complaint or claim without first requesting a stay, (2) the
delay, if any, by the party seeking arbitration to request a stay, (3) the extent to
which the party seeking arbitration has participated in the litigation, and, (4)
whether prior inconsistent acts by the party seeking arbitration would prejudice the
nonmoving party. Id. at ¶18.
{¶21} In the case before us, we find that Kellogg established that (1)
GHCG knew of the existing right to arbitrate; and, (2) based on the totality of the
circumstances, GHCG acted inconsistently with that known right. Therefore, the
trial court did not err in denying GHCG’s motion for a stay.
{¶22} GHCG claims that it did not request a stay pending arbitration sooner
because “GHCG did not know until very recently it possessed [the document.]”
(GHCG’s Motion to Stay, p. 6.) However, the facts indicate that GHCG was, or
should have been, completely aware of the existence of the document containing
the purported arbitration agreement. First, GHCG’s attorney’s affidavit concedes
that the application with the arbitration clause was not found in some
inconspicuous location. Instead, it was discovered within GHCG’s own records
“maintained in connection with the administration and appeal of Plaintiff’s
workers compensation, work-sponsored, and unemployment benefits [claims
against it].” (Mar. 12, 2010 Affidavit of Eric B. Hersberger, attached to GHCG’s
Motion to Stay.) Furthermore, the President and CEO of GHCG, James Griffith,
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stated in his affidavit that all employees complete a standard GHCG “Application
for Employment” which contains the arbitration clause in question. GHCG cannot
maintain that it did not know of the existence of an arbitration agreement while at
the same time claiming that signing an application with an arbitration agreement
was a standard practice for every applicant.
{¶23} Also, the record contradicts GHCG’s assertion that litigation had not
proceeded very far and that Kellogg would not suffer prejudice. Litigation had
proceeded for nearly a year, during which time the parties both filed pleadings and
numerous other motions; served and responded to multiple sets of discovery
requests; participated in status conferences with the trial court; filed subpoenas to
compel production of documents; filed and withdrew various deposition notices;
and more. A prime objective of an agreement to arbitrate is to achieve
“streamlined proceedings and expeditious results.” Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc. (1985), 473 U.S. 614, 633, 105 S.Ct. 3346, 87
L.Ed.2d 444. The Ohio Supreme Court has stated that “arbitration is favored
because it provides the parties thereto with a relatively expeditious and
economical means of resolving a dispute.” Hayes v. Oakridge Home, 122 Ohio
St.3d 63, 2009-Ohio-54, 908 N.E.2d 408, quoting Mahoning Cty. Bd. of Mental
Retardation & Dev. Disabilities v. Mahoning Cty. TMR Edn. Ass’n. (1986), 22
Ohio St.3d 80, 83, 488 N.E.2d 872. Arbitration has the additional benefit of
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unburdening crowded court dockets. Id. However, those benefits are lost when
litigation proceeds for nearly a year, there are nearly fifty entries on the trial
court’s docket, and the parties participate in extensive discovery. Based on the
totality of the circumstances, GHCG’s actions constituted a waiver of the belatedly
asserted right to arbitrate. R.C. 2711.02(B) states that a court shall stay the action
in the trial court pending arbitration “provided the applicant for the stay is not in
default in proceeding with arbitration.” Id. (Emphasis added.) Under the facts
in this case, GHCG was in default and waived arbitration.
{¶24} There was considerable evidence in the record calling into question
the authenticity of Kellogg’s signature on the alleged arbitration agreement and
supporting the trial court’s finding that no valid arbitration agreement existed. In
addition, based upon the totality of the circumstances, even if there would have
been a valid arbitration agreement, GHCG’s lengthy delay in raising the matter
constituted a waiver. Based on all of the above, the trial court did not err in
denying GHCG’s request to stay the proceedings pending arbitration. GHCG’s
first and second assignments of error are overruled.
{¶25} Having found no error prejudicial to the Appellant herein in the
particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
ROGERS, P.J. and PRESTON, J., concur.
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