McCulloch v. Janney Montgomery Scott L.L.C. , 2014 Ohio 4002 ( 2014 )

[Cite as McCulloch v. Janney Montgomery Scott L.L.C., 2014-Ohio-4002.]
STATE OF OHIO, COLUMBIANA COUNTY
IN THE COURT OF APPEALS
SEVENTH DISTRICT
ROBERT McCULLOCH, III, et al.,
)
) CASE NO. 13 CO 40
PLAINTIFFS-APPELLANTS, )
)
VS. ) OPINION
)
JANNEY MONTGOMERY SCOTT LLC, )
)
DEFENDANT-APPELLEE. )
CHARACTER OF PROCEEDINGS: Civil Appeal from Common Pleas Court,
Case No. 12CV778.
JUDGMENT: Affirmed.
JUDGES:
Hon. Joseph J. Vukovich
Hon. Gene Donofrio
Hon. Mary DeGenaro
Dated: September 8, 2014
[Cite as McCulloch v. Janney Montgomery Scott L.L.C., 2014-Ohio-4002.]
APPEARANCES:
For Plaintiffs-Appellants: Attorney Michael McGee
107 Main Avenue, Suite 500
Warren, Ohio 44481
Attorney Anthony Paduano, Pro Hac Vice
1251 Avenue of the Americas, Ninth Floor
New York, New York 10025
For Defendant-Appellee: Attorney Jerry Santangelo, Pro Hac Vice
Attorney Brody Weichbrodt, Pro Hac Vice
Two North LaSalle Street, Suite 1700
Chicago, Illinois 60602
Attorney Joseph Simms
1660 West 2nd Street, Suite 1100
Cleveland, Ohio 44113-1448
[Cite as McCulloch v. Janney Montgomery Scott L.L.C., 2014-Ohio-4002.]
VUKOVICH, J.
{¶1} Plaintiffs-appellants Robert McCulloch, III and Hunter Associates Inc.,
appeal the decision of the Columbiana County Common Pleas Court denying its
motion to vacate the arbitration award and confirming the arbitration award in
defendant-appellee Janney Montgomery Scott LLC’s favor. Three issues are raised
in this appeal. The first is whether the cause is moot. The second is whether, in
addition to the standard of review espoused in R.C. 2711.10 to use in determining
whether an arbitration award is required to be vacated, does Ohio also recognize the
“manifest disregard of the law” standard? The third issue is, applying the correct
standard of review, did the panel of arbitrators overstep their authority by issuing an
award for Montgomery Scott?
{¶2} For the reasons expressed below, the judgment of the trial court to
deny the motion to vacate the arbitration award is hereby affirmed. We hold that the
cause is not moot, and that regardless of what standard is employed, the arbitrators
did not exceed their authority in issuing the award.
Statement of Facts and Case
{¶3} In the early 1980s McCulloch opened a financial broker/advisor firm in
Salem, Columbiana County, Ohio, that was affiliated with Parker/Hunter Inc. In 2005,
that firm branch was purchased by Montgomery Scott for $5 million. McCulloch and
his team continued to work for Montgomery Scott; McCulloch was Montgomery
Scott’s most senior corporate officer at the Salem branch. The record does indicate
that McCulloch did not like some of Montgomery Scott’s policies and believed that
those negatively affected the service he could provide for his clients. The record also
indicated that McCulloch did voice these concerns to Montgomery Scott’s corporate
office.
{¶4} On April 8, 2011, McCulloch and most of his management team at
Montgomery Scott resigned, walked down the street and began working for Hunter
Associates, taking with them a lot of McCulloch’s clients. Allegedly, this group
departure eventually caused Montgomery Scott to close its office in Salem.
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{¶5} In May 2011, Montgomery Scott initiated arbitration through FINRA
(Financial Industry Regulatory Authority). Montgomery Scott alleged raiding/unfair
competition against Hunter Associates; breach of fiduciary duty against McCulloch;
tortious inducement of breaches of fiduciary duty against Hunter Associates; civil
conspiracy against both McCulloch and Hunter Associates; and tortious interference
with actual and prospective business relationship against Hunter Associates.
McCulloch and Hunter Associates answered and filed a counterclaim.
{¶6} The arbitration hearing lasted 13 days over a span of five months. On
November 8, 2012, the arbitrators issued their decision finding McCulloch and Hunter
Associates jointly and severally liable for compensatory damages in the amount of
$2.4 million plus post-judgment interest. The award does not set forth reasoning.
McCulloch and Hunter Associates’ counterclaim was denied and dismissed.
{¶7} On December 9, 2012, Hunter Associates paid the $2.4 million
judgment. However, they failed to pay the interest, which was $12,000.
{¶8} On December 10, 2012, McCulloch and Hunter Associates filed a
complaint in the Columbiana County Common Pleas Court seeking to have the
arbitration award vacated under R.C. 2711.10(D). Montgomery Scott filed an answer
and cross motion for confirmation of the award.
{¶9} The trial court denied the motion to vacate the arbitration award and
confirmed the award. It entered judgment in Montgomery Scott’s favor and ordered
Hunter Associates and/or McCulloch to pay the remaining $12,000 of the judgment
plus interest at a rate of 6% from November 9, 2012 until the $12,000 is paid in full.
{¶10} This timely appeal follows, in which McCulloch and Hunter Associates
assert three assignments of error. However, prior to addressing the merits of
McCulloch and Hunter Associates’ appellate brief, we must first address Montgomery
Scott’s assertion that the case is moot because McCulloch and Hunter Associates
paid the principal amount of the award.
Moot
{¶11} Montgomery Scott argues that the case is moot because prior to filing
the motion to vacate the award in the Columbiana County Common Pleas Court,
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Hunter Associates paid the $2.4 million award. Hunter Associates, however, did not
pay the $12,000 interest award.
{¶12} There is case law that the satisfaction of a judgment renders an appeal
from a judgment moot. Blodgett v. Blodgett, 49 Ohio St. 3d 243, 245, 551 N.E.2d
1249 (1990); see also Wiest v. Wiegele, 170 Ohio App. 3d 700, 2006–Ohio–5348,
868 N.E.2d 1040, ¶ 12 (1st Dist.); Art's Rental Equip., Inc. v. Bear Creek Constr.,
LLC, 1st Dist. Nos. C–110544, C–110555, C–110558, C–110559, C–110564, C–
110785, C–110792, C–110797, C–110798, C–110799, C–110800, C–110801, C–
110808, and C–120309, 2012–Ohio–5371, ¶ 7. Absent a fraud upon the court,
where a judgment has been voluntarily paid and satisfied, that payment puts an end
to the controversy. It takes away “the right to appeal or prosecute error or even to
move for vacation of judgment.” Blodgett at 245, quoting Rauch v. Noble, 169 Ohio
St. 314, 316, 159 N.E.2d 451 (1959).
{¶13} Hunter Associates and McCulloch claim that the matter is not moot. It
contends that the arbitration award is not a judgment; the award does not reach the
status of a judgment until the award is confirmed by a common pleas court. It also
argues that the award has not been fully satisfied and that they were required by
FINRA rules to pay the matter within 30 days of the award or face sanctions.
{¶14} We do not need to render a holding on whether there is a distinction
between an arbitration award and a judgment. At this point in the proceedings, the
award has been confirmed and clearly is a judgment. Thus, the argument that an
arbitration award is not a judgment provides no basis for this court to find that the
cause is not moot.
{¶15} That said, the judgment to this point has only been partially paid; the
interest is still due. McCulloch and Hunter Associates claimed that they were
required to pay the award or they would face sanctions. FINRA Rule 13904 requires
awards to be paid within 30 days “unless a motion to vacate has been filed with a
court of competent jurisdiction.” At oral argument, McCulloch and Hunter Associates
explained that there are financial requirements by FINRA for operation and given the
size of the award, the only way they could keeping operating the business was to pay
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the principal amount of the award. Considering the reason why the principal amount
of the judgment was paid and the fact that the judgment has not been fully satisfied,
we hold that the matter is not moot.
Third Assignment of Error
{¶16} “The trial court erred by failing to apply the appropriate standard of
review.”
{¶17} The grounds for vacatur, as argued to the common pleas court, were
that the arbitrators exceeded their authority, and that they manifestly disregarded the
law. The trial court held that the arbitrators did not exceed their authority; the court
did not apply the manifest disregard of the law standard. Appellants argue that the
trial court erred when it did not apply the manifest disregard of the law standard.
{¶18} The grounds for vacation of an arbitration award are set forth in R.C.
2711.10, which provides:
In any of the following cases, the court of common pleas shall
make an order vacating the award upon the application of any party to
the arbitration if:
(A) The award was procured by corruption, fraud, or undue
means.
(B) There was evident partiality or corruption on the part of the
arbitrators, or any of them.
(C) The arbitrators were guilty of misconduct in refusing to
postpone the hearing, upon sufficient cause shown, or in refusing to
hear evidence pertinent and material to the controversy; or of any other
misbehavior by which the rights of any party have been prejudiced.
(D) The arbitrators exceeded their powers, or so imperfectly
executed them that a mutual, final, and definite award upon the subject
matter submitted was not made.
If an award is vacated and the time within which the agreement
required the award to be made has not expired, the court may direct a
rehearing by the arbitrators.
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R.C. 2711.10.
{¶19} These standards, however, are not the only ones used by courts in
determining whether to vacate or confirm an arbitration award. The Federal Sixth
Circuit Court of Appeals has recognized the manifest disregard of law standard.
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir.1995).
That court explained that the manifest disregard of the law standard is an alternative
to the statutory grounds and is a judicially created basis for vacation. Id. It then went
on to explain that this judicially created standard of review is very narrow. Id. “A
mere error in interpretation or application of the law is insufficient. [Anaconda Co. v.
District Lodge No. 27, 693 F.2d 35 (6th Cir.1982). Anaconda [Co. v. District Lodge
No. 27], 693 F.2d [350, 37-38 [(6th Cir.1982)]. Rather, the decision must fly in the
face of clearly established legal precedent. When faced with questions of law, an
arbitration panel does not act in manifest disregard of the law unless (1) the
applicable legal principle is clearly defined and not subject to reasonable debate; and
(2) the arbitrators refused to heed that legal principle.” Id.
{¶20} Jaros cited the United States Supreme Court decision in Wilko v. Swan,
346 U.S. 427, 74 S. Ct. 182 (1953), for the creation of the manifest disregard of law
standard. In Wilko, the Court makes a statement that, “the interpretations of the law
by the arbitrators in contrast to manifest disregard are not subject, in the federal
courts, to judicial review for error in interpretation.” Id. at 436-437.
{¶21} That said, Wilko is a 1953 decision and has been overruled by the
United States Supreme Court in Rodriguez de Quijas v. Shearson/Am. Exp., Inc., 490
U.S. 477 (1989). Rodriguez does not discuss the manifest disregard of the law
standard, but it does discuss at length the Wilko decision. The Court explains that
Wilko was decided incorrectly and in an era of “judicial hostility to arbitration.” Id. at
480-481. “To the extent that Wilko rested on suspicion of arbitration as a method of
weakening the protections afforded in the substantive law to would-be complainants,
it has fallen far out of step with our current strong endorsement of the federal statutes
favoring this method of resolving disputes.” Id.
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{¶22} Furthermore, to the extent that the Wilko decision discusses the
manifest disregard standard, it does so in the context of federal courts and the
federal arbitration act. While the federal courts may have expanded the review of
arbitration awards through case law, it is not clear that the Ohio Supreme Court has
done so.
{¶23} The Eighth Appellate District has reviewed the manifest disregard of the
law standard and has taken the position that the Ohio Supreme Court has not
expanded the review of arbitration awards. Accordingly, our sister district has
outrightly rejected the manifest disregard of the law standard. Assn. of Cleveland
Fire Fighters, Local 93 of Internatl. Assn. of Fire Fighters v. Cleveland, 8th Dist. No.
94361, 2010-Ohio-5597, ¶ 11; Cleveland v. Internatl. Bhd. of Elec. Workers Local 38,
8th Dist. No. 92982, 2009–Ohio–6223, at ¶ 18–23. In doing so, it has explained that
the manifest disregard of the law standard was judicially introduced in the Wilko
decision and that the Sixth Circuit Court of Appeals has interpreted what that
standard is and how it is applied. Internatl. Bhd. of Elec. Workers Local 38, ¶ 17-18.
The Eighth Appellate District acknowledged that some federal courts have expanded
the scope of review for arbitration awards to include a public policy exception, but it
rejected the application of that exception to Ohio law because “the Ohio State
Supreme Court has refused to expand state court review beyond the clear terms of
R.C. 2711.10.” Id. at ¶ 21. The basis for the rejection was the Ohio Supreme Court’s
decision in Warren Edn. Assn. v. Warren City Bd. of Edn., 18 Ohio St. 3d 170, 480
N.E.2d 456 (1985). Id. at ¶ 20, 22-23. In that case, the Court stated, “[T]he vacation,
modification or correction of an award may only be made on the grounds listed in
R.C. 2711.10 and 2711.11 * * *. The jurisdiction of the courts to review arbitration
awards is thus statutorily restricted; it is narrow and it is limited.” Id. at 173.
(Emphasis Added).
{¶24} That said, it is acknowledged that the Ninth Appellate District has used
the manifest disregard of the law standard. Automated Tracking Sys., Inc. v. Great
Am. Ins. Co., 130 Ohio App. 3d 238, 246, 719 N.E.2d 1036 (9th Dist.1998) (assuming
arguendo analysis); Bennett v. Sunnywood Land Dev., Inc., Ohio 9th Dist. No.
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06CA0089-M, 2007-Ohio-2154, ¶ 42 (appellant failed to demonstrate how the
evidence that was omitted would establish manifest disregard of the law).
{¶25} Considering the above, there is support for the position that the
manifest disregard of law standard is applicable in Ohio. There is also support for the
position that the only means to vacate an award are set forth in R.C. 2711.10 and
that the manifest disregard of the law is not applicable. This case, however, does not
present us with a situation where we must decide if the manifest disregard of the law
standard is the applicable standard for vacatur in Ohio. As is explained below, under
either standard the result is the same, the arbitrators’ act did not commit error.
First Assignment of Error
{¶26} “The trial court erred in affirming the award notwithstanding that there is
no cause of action for ‘raiding’ under Ohio law.”
{¶27} Appellate review of an arbitration award is confined to an evaluation of
the judicial order confirming, modifying, or vacating the award; the substantive merits
of the award are not reviewable. Handel's Ent., Inc. v. Wood, 7th Dist. No. 04MA238,
2005-Ohio-6922, ¶ 17. Thus, judicial review of an arbitration award is very narrow.
Id. at ¶ 18.
{¶28} This assignment of error discusses the four claims asserted against
McCulloch and Hunter Associates and argues why the arbitrators allegedly could not
have found in Montgomery Scott’s favor. Those four claims are raiding/unfair
competition against Hunter Associates; breach of fiduciary duty against McCulloch;
tortious inducement of breaches of fiduciary duty against Hunter Associates; and civil
conspiracy against both McCulloch and Hunter Associates. Appellants assert that
neither a raiding or tortious inducement of breach of fiduciary in the employer-
employee context are cognizable causes of action in Ohio. As to the breach of
fiduciary duty claim, appellants assert that Montgomery Scott did not prove this cause
of action, and even if it did, the arbitrators could not hold Hunter Associates jointly
and severally liable because the claim was only asserted against McCulloch. As to
the civil conspiracy claim, appellants assert that the claim failed as a matter of law
because it requires an unlawful act independent from the actual conspiracy.
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According to Hunter Associates and McCulloch, raiding and/or tortious inducement of
breach of fiduciary duty in the employment context could not be the independent
act(s), because those causes of action do not exist under Ohio law.
{¶29} Ohio courts have continually recognized that Ohio has a strong public
policy that favors arbitration of disputes. Hogan v. Hogan, 12th Dist. No. CA2007-12-
137, 2008-Ohio-6571, ¶ 14. Once a matter is arbitrated, “the only way to give effect
to the purposes of the arbitration system of conflict resolution is to give lasting effect
to the decisions rendered by an arbitrator whenever that is possible.” City of
Hillsboro v. Fraternal Order of Police, Ohio Labor Council, Inc. (1990), 52 Ohio St. 3d
174, 176, 556 N.E.2d 1186. The purpose of this lasting effect is to honor the parties'
decision to circumvent the traditional court-based litigation process. Hogan at ¶ 15.
“If parties cannot rely on the arbitrator's decision (if a court may overrule that decision
because it perceives factual or legal error in the decision), the parties have lost the
benefit of their bargain. Arbitration, which is intended to avoid litigation, would
instead become merely a system of ‘junior varsity trial courts' offering the losing party
de novo review.” Midwest Curtainwalls, Inc. v. Pinnacle 701, LLC, 8th Dist. No.
90591, 2008-Ohio-5134 ¶ 7.
{¶30} The arbitrators’ authority is derived from the parties’ agreement to
arbitrate the dispute and is defined and rooted in the arbitration agreement. Piqua v.
Fraternal Order of Police, 185 Ohio App. 3d 496 (2nd Dist.2009), ¶ 21. In collective
bargaining agreement cases, it is the collective bargaining agreement that governs.
Here, it is membership to FINRA and FINRA’s rules that dictates.
{¶31} FINRA’s Code of Arbitration Procedure for Industry Disputes Rule
13200 states, “Except as otherwise provided in the Code, a dispute must be
arbitrated under the Code if the dispute arises out of the business activities of a
member [a broker or dealer admitted to FINRA] or an associated person is between
or among: Members, Member and Associated Persons; or Associated persons.”
Two exceptions to mandatory arbitration claims are listed in the code: statutory
employment discrimination claims, and dispute arising under a whistleblower statute
that prohibits the use of pre-dispute arbitration agreements. FINRA Rule 13201.
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{¶32} The parties agree that Montgomery Scott and Hunter Associates are
both FINRA member firms and McCulloch is an associated person of FINRA.
Furthermore, the parties agree that the claims are properly before FINRA and that
they do not fall within the exceptions to arbitration.
{¶33} Since the parties agree the issues and facts raised were ones that were
required to be brought before the FINRA arbitrators, the question we must answer is,
if the arbitrators made errors of fact or law, does this mean the arbitrators exceeded
their authority or manifestly disregarded the law?
{¶34} The Second Appellate District has concluded that errors of fact or law
do not provide a basis for vacating the award:
It is because arbitration is a creature of private contract that
courts must ignore errors of fact or law. See Dayton, 2007-Ohio-1337,
2007 WL 866999, at ¶ 13, quoting Motor Wheel Corp., 98 Ohio App. 3d
at 52, 647 N.E.2d 844 (“‘The limited scope of judicial review of
arbitration decisions comes from the fact that arbitration is a creature of
contract’”). Parties, by agreeing to allow an arbitrator to resolve their
disputes, also implicitly agree to be bound by the mistakes the arbitrator
makes while carrying out his charge. See Dayton v. Fraternal Order of
Police (June 2, 2000), Montgomery App. No. 18158, 2000 WL 706829,
*3, citing Goodyear, 42 Ohio St. 2d at 522, 71 O.O.2d 509, 330 N.E.2d
703 (“When parties agree to submit their disputes to binding arbitration,
they agree to accept the result, regardless of its legal or factual
accuracy”). The comments to R.C. 2711.10, the statute governing
judicial vacation, explain, “The arbitrators are the sole judges of the law
and of the evidence and no vacation of an award will be had because of
their misconstruction of the facts or of the law.” See also Duckett
(quoting the same) and Dayton, 2007-Ohio-1337, 2007 WL 866999, at
¶ 13, quoting Motor Wheel Corp., 98 Ohio App. 3d at 52, 647 N.E.2d
844 (“If parties cannot rely on the arbitrator's decision (if a court may
overrule that decision because it perceives factual or legal error in the
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decision), the parties have lost the benefit of their bargain”). Therefore,
an error of fact or law alone is not a reason to vacate an award. Huber
Hts. (“[A]n error of law or fact, * * * [is] insufficient reason[ ] to vacate
the award”). For example, in Duckett, we reversed a vacation order
grounded on the trial court's disagreement with the arbitrator's
understanding of Ohio tort law. Each party had argued in favor of an
outcome that it believed the law required. “Although these arguments
present interesting questions of law and fact,” we said, “this Court may
not reach the merits of this case.” Duckett, 1984 WL 3838, *1. We said
that the Ohio Supreme Court's conclusion in Goodyear was dispositive
of the issue: “‘How this or another court might have decided the issue
presented to the arbitrator is irrelevant; that decision, by voluntary
contract, was left to arbitration.’” Duckett, 1984 WL 3838, *2, quoting
Goodyear, 42 Ohio St. 2d at 523, 71 O.O.2d 509, 330 N.E.2d 703; see
also Rathweg Ins. Assoc., Inc. v. First Ins. Agency Corp. (Aug. 18,
1992), Montgomery App. No. 13184, 1992 WL 206764, *4 (“A court
cannot go behind the face of an arbitration award to search for an error
of law or fact”). From Goodyear, we may derive the fundamental
principle upon which arbitral review restrictions rest: a trial court may
not substitute its judgment—its view of the facts or law—for that of the
arbitrator. See Rathweg at *3 (“An award is not reviewable by the
courts simply because the arbitrators decided the facts incorrectly,
made an error in judgment, or misapplied the law”). Critically then, in
reviewing an arbitrator's award, the court must distinguish between an
arbitrator's act in excess of his powers and an error merely in the way
the arbitrator executed his powers. The former is grounds to vacate;
the latter is not.
Piqua, 185 Ohio App. 3d 496 at ¶ 81.
{¶35} We agree with the above analysis. “Parties who agree to resolve their
disputes via binding arbitration agree to accept the result, even if the arbitrator's
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decision is based on factual inaccuracies or the arbitrator's incorrect legal analysis.”
Hogan, 2008-Ohio-6571 at ¶ 15.
{¶36} Furthermore, we do not agree with McCulloch and Hunter Associates’
assertion that this case presents this court with a situation where more than a
misapplication of law occurred. Their assertion is based on the claim that raiding and
tortious inducement of breach of a fiduciary duty in the employer-employee context
are not cognizable causes of action under Ohio law. In making this argument
appellants presume that Montgomery Scott is confined to the labels of its claims and
that Ohio law applies.
{¶37} Under Ohio procedural law, and more importantly the FINRA rules, only
notice pleading is required. Civ.R. 8(A); FINRA Rule 13302; Mounts v. Ravotti, 7th
Dist. No. 07MA182, 2008–Ohio–5045, ¶ 25–26 (the labels used in a particular cause
of action do not control the nature of that action); Dottore v. Vorys, Sater, Seymour &
Pease, L.L.P., 8th Dist. No. 98861, 2014-Ohio-25, ¶ 35 (cause of action is
determined from the “gist of the complaint,” not the label assigned to it by a party).
The language of the FINRA rule states that the claimant must file with the Director of
FINRA Dispute Resolution “a statement of claim specifying the relevant facts and
remedies requested.” FINRA Rule 13302. Consequently, the focus is on what facts
are pled, not the labels.
{¶38} This position is best explained by the corporate raiding claim. In the
statement of claim filed with FINRA under the label raiding, Montgomery Scott
describes the situation where McCulloch and Hunter Associates allegedly worked
together to have a large portion of Montgomery Scott’s work force in the Salem office
quit and go and work for Hunter Associates. This effectively “gutted” the Salem
office. This theory could be called corporate raiding, employee raiding or employee
pirating. Ohio case law does not state this theory is or is not a cause of action.
Regardless of its label, the actions as they are described might fall under Ohio
causes of action of unfair competition or tortious interference with a business
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relationship1, to name a few. However, even if they do not qualify as causes of
action under Ohio law, that does not mean that the arbitrators exceeded their
authority or manifestly disregarded the law.
{¶39} The arbitration agreement does not contain a choice of law clause.
Likewise, we cannot find anything in the FINRA rules that dictate the choice of law.
Moreover, there is no separate agreement in the record before us that indicates that
the parties agreed that Ohio would be the choice of law. Admittedly, the parties do
cite to Ohio law, however, in the limited record before us of the arbitration
proceedings, we note that there are citations to case law from, among others, the
federal courts, California, Ohio, Illinois and Pennsylvania.
{¶40} Our sister district has explained that an arbitration panel is not bound to
apply the law of any jurisdiction. Banks v. Jennings, 184 Ohio App. 3d 269, 2009-
Ohio-5035, ¶ 16. “Being extra-judicial, an arbitrator is generally free to resolve a
dispute in a way and for reasons that she alone believes are just, subject only to very
limited court review.” Id.
{¶41} Without a choice of law clause, we agree with that statement. That
reasoning is persuasive, especially when considering, that this is industry arbitration.
Thus, the panel’s award should be afforded deference because of the specialized
knowledge that the arbitrators have regarding the industry. It could be equated to an
administrative agency’s determination. In those cases, we consistently acknowledge
1
In Ohio, the tort of interference with business relationships occurs when an individual, without
privilege to do so, “induces or otherwise purposely causes a third person not to enter into or continue a
business relation with another.” Reali, Giampetro & Scott v. Soc. Natl. Bank, 133 Ohio App. 3d 844,
852 (7th Dist.1999), quoting A & B–Abell Elevator Co. v. Columbus/Cent. Ohio Bldg. & Constr. Trades
Council, 73 Ohio St. 3d 1, 14, 651 N.E.2d 1283 (1995). The elements of that cause of action are: “(1) a
business relationship or contract; (2) the wrongdoer's knowledge of the relationship or contract; (3) the
wrongdoer's intentional and improper action taken to prevent a contract formation, procure a
contractual breach, or terminate a business relationship; (4) a lack of privilege; and (5) resulting
damages.” Elite Designer Homes, Inc. v. Landmark Partners, 9th Dist. No. 22975, 2006–Ohio–4079,
¶ 31. See also Huffman v. Groff, 4th Dist. No. 10CA54, 2013-Ohio-222, ¶ 41 (“[t]he elements of
tortious interference with a business relationship are: (1) the existence of a prospective business
relationship; (2) the wrongdoer's knowledge thereof; (3) an intentional interference causing a breach or
termination of the relationship; and (4) damages resulting therefrom.” Morrison v. Renner, 5th Dist.
CT2011–0010, 2011–Ohio–6780, ¶ 21.); Licul v. Swagelok Co., 8th Dist. No. 86322, 2006-Ohio-711, ¶
28 (A claim of tortious interference with business relationships requires proof of the following
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that the agency has expertise in the area, and thus, we afford great deference to the
agency’s decision. Zidian v. Dept. of Commerce, 7th Dist. No. 11MA39, 2012-Ohio-
1499, ¶ 48; Turner v. Goldberg, 7th Dist. No. 96CA252, 1999 WL 61050 (Feb. 3,
1999). The same reasoning can apply here when dealing with security industry
issues.2
{¶42} Consequently, considering the above and our limited standard of
review, the common pleas court correctly confirmed the panel’s award and denied
the motion for vacatur; and we have no basis to conclude that the arbitrators
exceeded their authority or manifestly disregarded the law. This assignment of error
lacks merit.
Second Assignment of Error
{¶43} “The trial court erred in affirming the award holding Plaintiffs-appellant
jointly and severally liable for the entire award.”
{¶44} McCulloch and Hunter Associates claim that they cannot be held jointly
and severally liable because the only claim that was pled jointly and severally was
the civil conspiracy claim. They assert that since an underlying wrongful act was not
proven, there was no basis to find them jointly and severally liable. This assertion is
based, in part, on the claim that raiding and tortious inducement of breach of fiduciary
duty in the employer-employee context is not cognizable in Ohio. It was also based
on the fact that the civil conspiracy claim was the only claim asserted against both
McCulloch and Hunter Associates.
{¶45} For the reasons discussed above, this argument fails; the arbitration
panel was not bound to apply Ohio law and was free to resolve a dispute in a way
and for reasons that it believed were just.
{¶46} Furthermore, the entire case was predicated on concerted activity that
allegedly caused damage to Montgomery Scott. The remedy section of the
elements: “(1) a business relationship, (2) known to the tortfeasor, and (3) an act by the tortfeasor that
adversely interferes with that relationship, (4) done without privilege and (5) resulting in harm.”).
2
There are two types of arbitrators that FINRA employs – public and non-public arbitrators.
http://www.finra.org. Public arbitrators are not required to have knowledge of the securities industry,
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statement of the claim asks for any relief that the arbitrators deem just and seeks
damages from both McCulloch and Hunter Associates. Thus, there was a basis to
order joint and several liability. Therefore, for those reasons, this assignment of error
lacks merit.
Conclusion
{¶47} In conclusion, the judgment of the common pleas court to confirm the
arbitration panel’s award and deny McCulloch and Hunter Associates’ motion to
vacate is hereby affirmed. The cause is not moot and the arbitrators neither
exceeded their authority nor manifestly disregarded the law.
Donofrio, J., concurs.
DeGenaro, P.J., concurs.
while non-public arbitrators have a more extensive security industry background. Id. One of the
arbitrators in this panel is a non-public arbitrator having a security industry background.