Bright Future Partners, Inc. v. Proctor & Gamble Distrib., L.L.C. , 2017 Ohio 4145 ( 2017 )

[Cite as Bright Future Partners, Inc. v. Proctor & Gamble Distrib., L.L.C., 2017-Ohio-4145.]
IN THE COURT OF APPEALS
FIRST APPELLATE DISTRICT OF OHIO
HAMILTON COUNTY, OHIO
BRIGHT FUTURE PARTNERS, INC., : APPEAL NO. C-160589
TRIAL NO. A-1601857
and :
ANNE CHAMBERS, : O P I N I O N.
Plaintiffs-Appellees, :
vs. :
THE PROCTOR & GAMBLE :
DISTRIBUTING, LLC.,
Defendant-Appellant. :
Civil Appeal From: Hamilton County Court of Common Pleas
Judgment Appealed From Is: Appeal Dismissed in Part, Reversed in Part, and Cause
Remanded
Date of Judgment Entry on Appeal: June 7, 2017
Eberly, McMahon, Copetas, LLC, and David A. Eberly, for Plaintiffs-Appellees,
Faruki, Ireland, & Cox, PLL, and D. Jeffrey Ireland, for Defendant-Appellant.
OHIO FIRST DISTRICT COURT OF APPEALS
M ILLER , Judge.
{¶1} Bright Future Partners, Inc., (“Bright Future”) and Anne Chambers filed
a complaint for discovery against The Proctor & Gamble Distributing, LLC, (“P&G”),
citing R.C. 2317.48 and Civ.R. 34(D). The complaint included 15 requests for
production of documents from P&G, allegedly necessary because Bright Future and
Chambers had “causes of actions against P&G that include, but are not limited to,
breaches of contract * * * .” The contract at issue involved the sale of a product line
from P&G to Bright Future. Chambers had signed the contract as president of Bright
Future, but not in her individual capacity. Chambers nonetheless sued for discovery in
her individual capacity as a purported “third party beneficiary” of the contract.
{¶2} The contract included a dispute resolution clause. It required the parties
to first enter into good faith negotiations regarding any dispute arising out of the
contract, and, if negotiations failed, to proceed to arbitration. It also required the
parties to first negotiate and then arbitrate “any issue as to whether a claim is
arbitrable.” The dispute resolution provisions stated that the parties were not entitled
to any discovery during negotiations and that if the dispute proceeded to arbitration,
there would “be no discovery, except as the arbitrator will permit following a
determination by the arbitrator that the person seeking such discovery has a
substantial, demonstrable need.”
{¶3} P&G moved to dismiss the complaint under Civ.R. 12(B)(6) on the
ground that Bright Future and Chambers had failed to plead a claim under either R.C.
2317.48 or Civ.R. 34(D). In the alternative, P&G asked the court to stay the
proceedings pending arbitration. The trial court denied P&G’s motion, and later
issued an order entitled “entry regarding timing of responses to plaintiff’s [sic]
discovery requests.” The entry directed P&G to respond to Bright Future and
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OHIO FIRST DISTRICT COURT OF APPEALS
Chambers’s requests for production of documents by June 18, 2016. This appeal
followed.
No Final Order on Merits of the Discovery Action
{¶4} In its first and second assignments of error, P&G contends, respectively,
that the trial court erred when it denied its Civ.R. 12(B)(6) motion to dismiss and also
erred when it issued its “entry regarding timing of responses to plaintiff’s [sic]
discovery requests.” Because neither order is a final order, we are without jurisdiction
to review these arguments.
{¶5} This court has “such jurisdiction as may be provided by law to review
and affirm, modify, or reverse judgments or final orders of the courts of record inferior
to the court of appeals within the district * * * .” Article IV, Section 3(B)(2), Ohio
Constitution. A final order is one that meets the requirements of R.C. 2505.02, and, if
applicable, Civ.R. 54(B). Chef Italiano Corp. v. Kent State Univ., 44 Ohio St.3d 86,
541 N.E.2d 64 (1989), syllabus. If Bright Future and Chambers’s cause of action is a
“special proceeding,” then R.C. 2505.02(B)(2) applies. R.C. 2505.02(B)(1) applies if it
is not. A special proceeding is “an action or proceeding that is specially created by
statute and that prior to 1853 was not denoted as an action at law or a suit in equity.”
R.C. 2505.02(A)(2).
{¶6} To determine what division of R.C. 2505.02 to apply, we must examine
“the actual nature or subject matter” of Bright Future and Chambers’s complaint, and
not merely the form in which the action is pleaded. See Hambleton v. R.G. Barry
Corp., 12 Ohio St.3d 179, 183, 465 N.E.2d 1289 (1984). Bright Future and Chambers
cited R.C. 2317.48 and Civ.R. 34(D) in their complaint. Both allow for an action for
prelitigation discovery. However, it is well-settled that an action for discovery under
R.C. 2317.48 “is limited solely to interrogatories specifically concerning the facts
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OHIO FIRST DISTRICT COURT OF APPEALS
necessary to the complaint or answer and are to be submitted only to the potentially
adverse party to the contemplated lawsuit.” Poulos v. Parker Sweeper Co., 44 Ohio
St.3d 124, 541 N.E.2d 1031 (1989), syllabus.1 In contrast, Civ.R. 34(D) allows, among
other things, a party to request the production of documents.
{¶7} Here, Bright Future and Chambers sought only the production of
documents from P&G, which is permissible under Civ.R. 34(D) but not under R.C.
2317.48. We therefore find, without passing on the propriety of Bright Future and
Chambers’s requests under Civ.R. 34(D), that the complaint at issue is one seeking
discovery under Civ.R. 34(D) only.
{¶8} Having determined the actual nature and subject matter of Bright
Future and Chambers’s complaint, we turn to our R.C. 2505.02 analysis. Because
Civ.R. 34(D) is not a statute, this appeal is not taken from a “special proceeding.” See
R.C. 2505.02(A)(2). Thus, R.C. 2505.02(B)(1) applies in this case.
{¶9} R.C. 2505.02(B)(1) states that an order is a final order if it “affects a
substantial right in an action that in effect determines the action and prevents a
judgment.” P&G’s motion to dismiss tested the sufficiency of the complaint; it did not
determine the action and prevent a judgment in P&G’s favor. It was not a final order.
See Polikoff v. Adam, 67 Ohio St.3d 100, 103, 616 N.E.2d 213 (1993) (holding that the
denial of a motion to dismiss is generally not a final order). We therefore are without
jurisdiction to review the trial court’s judgment denying this motion under the first
assignment of error.
1 Bright Future and Chambers suggest that Poulos is not good law. In support, they cite Benner v.
Walker Ambulance Co., 118 Ohio App.3d 341, 692 N.E.2d 1053 (6th Dist.1997), a Sixth Appellate
District case holding that where Civ.R. 34(D) and R.C. 2317.48 conflict on procedural matters,
Civ.R. 34(D) prevails. Even if an appellate district court could overrule Ohio Supreme Court
precedent, Benner does not purport to do so.
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶10} Likewise, we are without jurisdiction to review the court’s “entry
regarding timing of responses to plaintiff’s [sic] discovery requests.” P&G
characterizes this entry as one compelling production of the requested documents.
Bright Future and Chambers persuasively argue that it did not. It simply set a deadline
for P&G to respond to Bright Future and Chambers’s requests for production of
documents. Discovery had yet to proceed as set forth in Civ.R. 34(D), which provides
that prelitigation discovery is subject to Civ.R. 26(B) and 45(F). These rules govern
the scope of discovery. Consequently, after the trial court issued its “entry regarding
timing of responses to plaintiff’s [sic] discovery requests,” P&G still had the
opportunity to object to the requests, which the trial court would be required to rule on
if Bright Future and Chambers were not satisfied with the objection. See Wheeler v.
Girvin, 1st Dist. Hamilton No. C-980302, 1999 WL 193431, *5 (Apr. 9, 1999) (holding
that once a trial court has granted a discovery-only action, “discovery should proceed
according to the civil rules, and the trial court enjoys broad discretion to decide if
matters are privileged or are otherwise proper subjects for discovery.”). Absent an
order compelling discovery, there is no final order.
{¶11} Because P&G was under no obligation to turn over any documents when
it appealed, the trial court’s entry, akin to a scheduling order, did not determine the
discovery action or prevent a judgment in P&G’s favor. It was therefore not a final
order, and we are without jurisdiction to review P&G’s second assignment of error.
Motion to Stay Pending Arbitration
{¶12} P&G’s third assignment of error contends that the trial court erred in
denying the motion to stay the proceedings pending arbitration. We note that the trial
court’s order in this respect is a final order. R.C. 2711.02(C) provides that “an order
under division (B) of this section that grants or denies a stay of a trial of any action
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OHIO FIRST DISTRICT COURT OF APPEALS
pending arbitration * * * is a final order and may be reviewed, affirmed, modified, or
reversed on appeal pursuant to the Rules of Appellate Procedure and, to the extent not
in conflict with those rules, Chapter 2505. of the Revised Code.”
{¶13} At issue here, R.C. 2711.02(B) states
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.
P&G contends that the issue of whether Bright Future and Chambers are entitled to
prelitigation discovery must be submitted to arbitration per the dispute resolution
clause in the parties’ contract. In response, Bright Future and Chambers argue that
discovery disputes, in general, fall outside the scope of arbitration.
{¶14} Whether a controversy is arbitrable under a contract requires the court
to invoke principles of contract interpretation, and presents a question of law that we
review de novo. Rippe & Kingston Co., PSC v. Kruse, 1st Dist. Hamilton No. C-130587,
2014-Ohio-2428, ¶ 20.
{¶15} Bright Future and Chambers argue that, as a general rule, discovery-only
claims fall outside the scope of arbitration. In support, they cite White v. Equity, Inc.,
178 Ohio App.3d 604, 2008-Ohio-5226, 899 N.E.2d 205 (10th Dist.), and Bartok v.
Merrill Lynch, 9th Dist. Summit No. 14500, 1990 WL 116974 (Aug. 8, 1990).
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OHIO FIRST DISTRICT COURT OF APPEALS
{¶16} In White, appellant had filed a complaint for prelitigation discovery and
the trial court had stayed the complaint pending arbitration. On appeal, appellant
argued that the stay should not have been granted. The arbitration agreement in White
required that the appellant and appellees arbitrate the merits of any claim arising from
the parties’ contract. White at ¶ 12. The court held that because a discovery-only action
was an auxiliary proceeding and not one concerning the merits of a claim arising out of
the parties’ contract, appellant’s “discovery-only” cause of action fell outside of the
scope of the arbitration agreement. Id. at ¶ 12, 15. It therefore held that the stay
should not have been granted. Id. at 17. The court acknowledged that, if the issue of
prelitigation discovery had been a matter referable to arbitration under the parties’
agreement, then the trial court’s judgment staying the proceedings would have been
correct. Id. at ¶ 9. The court did not rule, as argued by Bright Future and Chambers,
that all discovery-only actions fall outside the scope of arbitration.
{¶17} Bartok involved a discovery proceeding under R.C. 2317.48. The court
held that the appellee’s action could proceed despite the existence of an arbitration
clause in the parties’ underlying agreement. Bartok at *2. The court did not create a
blanket rule that discovery actions were not subject to arbitration. In its analysis, the
Bartok court cited no language from the parties’ arbitration agreement. Bartok’s
relevance to this case is therefore negligible because it is impossible to determine if
Bartok and this case involved similar arbitration provisions.
{¶18} In addition to the reasons stated, we further find Bartok to be
unpersuasive because of the public policy in Ohio that heavily favors the resolution of
disputes through arbitration. Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio
St.3d 276, 2007-Ohio-1947, 865 N.E.2d 18, ¶ 18.
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{¶19} Here, the contract at issue has a dispute resolution clause that requires
the parties to first enter into good faith negotiations regarding any dispute arising out
of the contract, and, if negotiations fail, to proceed to arbitration. It also requires that
the parties first negotiate and then arbitrate “any issue as to whether a claim is
arbitrable.” Finally, the dispute resolution provisions state that the parties are not
entitled to any discovery during negotiations and that if the dispute proceeded to
arbitration, there would “be no discovery, except as the arbitrator will permit following
a determination by the arbitrator that the person seeking such discovery has a
substantial, demonstrable need.”
{¶20} Bright Future and Chambers claim that P&G may have breached its
contract with Bright Future, and that discovery is necessary to determine if this is the
case. According to the plain language of the underlying contract, the discovery
complaint arises out of a potential breach of the contract, and the dispute resolution
clause in the contract is triggered. See Aultman Hosp. Assn. v. Community Mut. Ins.
Co., 46 Ohio St.3d 51, 544 N.E.2d 920 (1989), syllabus (courts will not give a contract a
construction other than that which the plain language of the contract provides). At a
minimum, because the parties must first negotiate and then arbitrate “any issue as to
whether a claim is arbitrable,” the parties were required to negotiate then arbitrate
whether the “discovery-only” claim is subject to arbitration. The dispute resolution
provisions also clearly require the parties to negotiate and then arbitrate the potential
breach-of-contract claim. During arbitration, any discovery disputes are to be resolved
by the arbitrator. Of particular significance is the fact that the dispute resolution clause
explicitly states that there will be no discovery allowed during the negotiation phase,
meaning pre-arbitration. The complaint for discovery is an attempt to circumvent what
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OHIO FIRST DISTRICT COURT OF APPEALS
the parties clearly bargained for, i.e., to have discovery in a potential breach-of-
contract claim conducted in arbitration.
{¶21} Given the plain language of the dispute resolution clause, we hold that
the trial court erred by denying P&G’s motion to stay the proceedings pending
arbitration.
{¶22} Bright Future and Chambers also claim that the trial court’s judgment
should be affirmed as to Chambers because she was not a party to the contract, and as
a third-party beneficiary only, she is not bound by the contract’s dispute resolution
provisions. Assuming arguendo that Chambers is not bound by the arbitration
provisions, “[o]nce a court determines an issue in the proceeding is covered by a
written arbitration agreement, even claims involving nonsignatories to the arbitration
agreement will be stayed under R.C. 2711.02(B).” Jarvis v. Lehr, 1st Dist. Hamilton
No. C-130832, 2014-Ohio-3567, ¶ 11. Further, allowing a plaintiff to avoid an
arbitration agreement by naming a signatory agent in her individual capacity would
severely undermine the policy in Ohio that heavily favors the resolution of disputes
through arbitration. Genaw v. Lieb, 2d Dist. Montgomery No. Civ.A. 20593, 2005-
Ohio-807, ¶ 24.
{¶23} We therefore sustain P&G’s third assignment of error.
Conclusion
{¶24} In sum, we are without jurisdiction to review P&G’s first or second
assignments of error because neither involves a final order. Therefore that portion of
P&G’s appeal taken from the trial court’s denial of its Civ.R. 12(B)(6) motion, and from
the court’s “entry regarding timing of plaintiff’s [sic] discovery requests” is hereby
dismissed. We reverse the trial court’s judgment denying P&G’s motion to stay the
proceedings pending arbitration.
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{¶25} This matter is remanded for the trial court to enter an order staying the
proceedings pursuant to R.C. 2711.02(B).
Appeal dismissed in part, judgment reversed in part, and cause remanded.
CUNNINGHAM, P.J., and DETERS J., concur.
Please note:
The court has recorded its own entry this date.
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