Marquez v. Koch ( 2012 )

[Cite as Marquez v. Koch, 2012-Ohio-5466.]
IN THE COURT OF APPEALS OF OHIO
FOURTH APPELLATE DISTRICT
ROSS COUNTY
Larry D. Marquez, :
: Case No. 11CA3283
Plaintiff-Appellee, :
: DECISION AND
v. : JUDGMENT ENTRY
:
William J. Koch, et al., :
:
Defendants-Appellants. : Filed: November 19, 2012
______________________________________________________________________
APPEARANCES:
Chad E. Burton, Tony M. Alexander, and Brandon Cogswell, Burton Law LLC,
Beavercreek, Ohio, for Appellants American Finco Financial Services, LLC, Peter
Kanatzar, and John Does, Representatives of American Finco Financial Services, LLC.
D. Dale Seif, Jr. and Jason Shugart, Seif & Shugart, LLC, Waverly, Ohio, for Appellee
Larry D. Marquez.
______________________________________________________________________
Kline, J.:
{¶1} American Finco Financial Services, LLC (hereinafter “American”), Peter
Kanatzar, and John Does, Representatives of American,1 appeal the judgment of the
Ross County Court of Common Pleas, which denied Appellants’ motion to stay the
proceedings. Appellants contend that the presence of arbitrable claims required the trial
court to grant the motion to stay. Because a stay was required under R.C. 2711.02(B),
we agree. Accordingly, we reverse the judgment of the trial court and remand this
cause to the trial court for further proceedings consistent with this opinion.
1
Hereinafter, we will refer to American, Kanatzar, and John Does collectively as
“Appellants.”
Ross App. No. 11CA3283 2
I.
{¶2} The dispute in this case generally revolves around the purchase of a
water-filtration system by Larry Marquez (hereinafter “Larry”) and Ann Marquez
(hereinafter “Ann”). (We will refer to Larry and Ann collectively as “Appellees.”)
{¶3} Appellees allege that they entered into an agreement with Wm. Koch and
Sons, Inc. (hereinafter “Koch”) for the purchase and installation of a water-filtration
system. In order to finance the transaction, Larry entered into a financing agreement
with American. The financing agreement contained an arbitration provision. Ann did
not sign the financing agreement.
{¶4} Appellees claim that Koch did not properly install the water-filtration
system. As a result, Appellees filed suit against various entities and individuals,
including Appellants. Appellees assert multiple claims for relief. For purposes of this
appeal, we note that Appellees allege that Appellants engaged in various unfair and
deceptive trade practices.
{¶5} On October 19, 2010, Appellants moved to compel arbitration and to stay
the proceedings pending the outcome of the arbitration. And on August 22, 2011, the
trial court found (1) that Larry entered into an arbitration agreement with American and
(2) that Larry’s “arbitrational agreement is enforceable only against [Appellants].”
August 22, 2011 Judgment Entry. The trial court also determined that Ann did not enter
into an arbitration agreement. Moreover, the trial court ruled that Ann’s claims and
Larry’s non-arbitrable claims were to “proceed through the normal course of scheduling
in [the trial] court.” Id. Thus, the trial court declined to stay the proceedings of the non-
arbitrable claims pending arbitration of Larry’s arbitrable claims.
Ross App. No. 11CA3283 3
{¶6} Appellants appeal and assert the following assignment of error: “THE
TRIAL COURT ERRED IN DENYING APPELLANTS’ MOTION TO STAY THE
PROCEEDINGS PENDING ARBITRATION.”
II.
{¶7} In their sole assignment of error, Appellants argue that the trial court erred
by failing to stay the proceedings pending arbitration of Larry’s arbitrable claims.
{¶8} “Generally, absent an abuse of discretion, a reviewing court should not
disturb a trial court’s decision regarding a motion to stay proceedings pending
arbitration.” K.M.P., Inc. v. Ohio Historical Soc., 4th Dist. No. 03CA2, 2003-Ohio-4443,
¶ 14. An abuse of discretion connotes more than a mere error of judgment; it implies
that the court’s attitude is unreasonable, arbitrary, or unconscionable. Blakemore v.
Blakemore, 5 Ohio St.3d 217, 219, 450 N.E.2d 1140 (1983).
{¶9} “It is well-established that Ohio and federal courts encourage arbitration to
settle disputes.” Cheney v. Sears, Roebuck and Co., 10th Dist. No. 04AP-1354, 2005-
Ohio-3283, ¶ 6. Additionally, “[t]his strong public policy position is further encouraged
by the Ohio legislature, as reflected by R.C. 2711.02, which provides that a court shall
stay trial proceedings to allow for arbitration when an action is brought upon any issue
referable to arbitration.” Id. Specifically, R.C. 2711.02(B) provides as follows:
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
Ross App. No. 11CA3283 4
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.
Thus, “[g]iven both the judicial and legislative predisposition to resolving disputes by
arbitration, a party opposing a motion to stay proceedings pending arbitration has a
heavy burden.” Cheney at ¶ 6.
{¶10} The plain language of R.C. 2711.02(B) demonstrates that a stay was
warranted pending arbitration of Larry’s arbitrable claims. As stated above, R.C.
2711.02(B) provides that the trial court, “upon being satisfied that the issue involved in
the action is referable to 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[.]” (Emphasis added.) And usually, we interpret a provision containing
the word “shall” as mandatory. See Florkey v. Malott, 4th Dist. No. 11CA9, 2011-Ohio-
5199, ¶ 20. Thus, because the trial court found that Larry’s claims against Appellants
were arbitrable, the court should have stayed the proceedings pending arbitration of
Larry’s arbitrable claims. See Krafcik v. USA Energy Consultants, Inc., 107 Ohio
App.3d 59, 64, 667 N.E.2d 1027 (8th Dist.1995) (“The language of [R.C. 2711.02] is
mandatory and it ‘shall’ be enforced. * * * As USA, the party applying for the stay, is not
in default in proceeding with arbitration, its motion for a stay must be granted under the
statute.”).
Ross App. No. 11CA3283 5
{¶11} Moreover, the presence of non-arbitrable claims and parties not subject to
an arbitration agreement does not justify the denial of Appellants’ motion to stay. See
Murray v. David Moore Builders, Inc., 177 Ohio App.3d 62, 2008-Ohio-2960, 893 N.E.2d
897, ¶ 11 (9th Dist.) (“To the extent that the Murrays’ claims against Moore are subject
to a valid arbitration provision, the trial court erred by denying the stay because of the
presence of nonarbitrable claims and parties who cannot be compelled to arbitrate.”);
Cheney at ¶ 12 (“Pursuant to R.C. 2711.02, when an action involves both arbitrable and
non-arbitrable claims, the entire proceeding must be stayed until the issues that are
subject to arbitration are resolved.”); see also Hussein v. Hafner & Shugarman Ents.,
Inc., 176 Ohio App.3d 127, 2008-Ohio-1791, 890 N.E.2d 356, ¶ 47 (6th Dist.); BSA
Invests., Inc. v. DePalma, 173 Ohio App.3d 504, 2007-Ohio-4059, 879 N.E.2d 222, ¶¶
8-9, 16-17, 21 (8th Dist.); Krafcik at 64; Glenmoore Builders, Inc. v. Kennedy, 11th Dist.
No. 2001-P-0007, 2001 WL 1561742, *5-6 (Dec. 7, 2001); DH-KL Corp. v. Stampp
Corbin Corp., 10th Dist. No. 97APE02-206, 1997 WL 467319, *3 (Aug. 12, 1997).
{¶12} We have recognized that a stay may not be appropriate when all the
arbitrable claims in a case are derivative of the non-arbitrable claims. See Slusher v.
Ohio Valley Propane Servs., 177 Ohio App.3d 852, 2008-Ohio-41, 896 N.E.2d 715, ¶ 26
(4th Dist.). This is so because, until the non-arbitrable claims are resolved, “there is
nothing to arbitrate.” Id. That is not the case here, however. Larry asserts direct claims
against Appellants based on Appellants’ allegedly unfair and deceptive trade practices.
We acknowledge that Larry also asserts derivative claims against Appellants.
Nevertheless, this is not a case where all of Larry’s arbitrable claims are derivative of
Ross App. No. 11CA3283 6
non-arbitrable claims. Thus, there is something to arbitrate, and Slusher does not
apply.
{¶13} Appellees argue that the trial court did not err because Ann did not agree
to arbitrate any claims against Appellants. Appellees’ argument, however, avoids the
issue before us. Appellants do not argue that the trial court should have compelled Ann
to arbitrate. Instead, Appellants argue that the trial court erred by not staying the
proceedings pending resolution of Larry’s arbitrable claims. The mere fact that Ann’s
claims against Appellants are not subject to arbitration does not justify the trial court’s
denial of Appellants’ motion to stay. See Murray at ¶ 11; see also DH-KL Corp. at *3
(“[T]he trial court did not order any of the remaining appellees (other than SCC) to
submit to arbitration. It simply stayed the proceedings, pending the arbitration process
that involved SCC and DH-KL.”) (Emphasis sic.).
{¶14} Appellees also argue that Larry was fraudulently induced into signing the
financing agreement. Appellees claim that Larry signed the financing agreement based
on misrepresentations regarding Koch’s authorized-dealer status, Koch’s competency to
perform the requested work, and Koch’s authorization to work in Ohio. “‘A claim that the
contract containing the arbitration clause was induced by fraud does not defeat a motion
to compel arbitration unless the claimant can demonstrate specifically that the
arbitration clause itself was fraudulently induced.’” Krafcik, 107 Ohio App.3d at 63, 667
N.E.2d 1027, quoting Matter of Mgt. Recruiters Internatl., Inc. and Nebel, 765 F.Supp.
419, 420 (N.D.Ohio 1991); see also ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498,
502, 692 N.E.2d 574 (1998). Here, there is no evidence that the arbitration clause itself
Ross App. No. 11CA3283 7
was fraudulently induced. Therefore, Appellees cannot show that the trial court erred by
referring Larry’s claims to arbitration in spite of the alleged misrepresentations.
{¶15} For the reasons stated above, we conclude that the trial court abused its
discretion when, after determining that some of Larry’s claims were arbitrable, the court
failed to grant Appellants’ motion to stay pending arbitration. Accordingly, we sustain
Appellants’ assignment of error, reverse the judgment of the trial court, and remand this
cause to the trial court for further proceedings consistent with this opinion.
JUDGMENT REVERSED
AND CAUSE REMANDED.
Ross App. No. 11CA3283 8
JUDGMENT ENTRY
It is ordered that the JUDGMENT BE REVERSED and that this CAUSE BE
REMANDED to the trial court for further proceedings consistent with this opinion.
Appellee shall pay the costs herein taxed.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the
Ross County Court of Common Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule
27 of the Rules of Appellate Procedure. Exceptions.
Abele, P.J. and McFarland, J.: Concur in Judgment & Opinion.
For the Court
BY:_____________________________
Roger L. Kline, Judge
NOTICE TO COUNSEL
Pursuant to Local Rule No. 14, this document constitutes a final judgment
entry and the time period for further appeal commences from the date of filing
with the clerk.