Hughes v. Hughes , 2020 Ohio 4653 ( 2020 )

[Cite as Hughes v. Hughes, 2020-Ohio-4653.]
IN THE COURT OF APPEALS OF OHIO
TENTH APPELLATE DISTRICT
Carl F. Hughes, :
Plaintiff-Appellant, :
No. 19AP-329
v. : (C.P.C. No. 18CV-10344)
Martin J. Hughes, III et al., : (REGULAR CALENDAR)
Defendants-Appellees. :
D E C I S I O N
Rendered on September 29, 2020
On brief: Zeiger, Tigges & Little LLP, Marion H. Little, Jr.,
and Christopher J. Hogan, for appellant. Argued:
Christopher J. Hogan.
On brief: Taft Stettinius & Hollister, LLP, Julia B. Meister,
Russell S. Sayre, and Philip D. Williamson, for appellee
Martin J. Hughes, III. Argued: Julia B. Meister.
On brief: James E. Arnold & Associates, LPA, James E.
Arnold, and Gerhardt A. Gosnell, for appellee Robin Hughes.
APPEAL from the Franklin County Court of Common Pleas
DORRIAN, J.
{¶ 1} Plaintiff-appellant, Carl F. Hughes, appeals the judgment of the Franklin
County Court of Common Pleas denying appellant's motion to vacate an arbitrator's
decision and award finding appellant committed a breach of trust. For the following
reasons, we affirm the trial court judgment.
I. Facts and Procedural History
{¶ 2} Appellant and defendant-appellee, Martin J. Hughes, III ("Martin"), are co-
trustees of their late mother's trust, entitled the Natalie A. Hughes 2005 Trust, Amended
No. 19AP-329 2
and Restated on July 8, 2017 (the "trust"). Appellee Robin Hughes ("Robin"), wife of
Natalie's deceased son, Paul, serves in a fiduciary capacity for her two children who are
named trust beneficiaries.
{¶ 3} Disputes concerning the administration of the trust led both appellant and
appellees to submit certain issues to arbitration in accordance with the mandatory
arbitration provision of the trust. Specific to this appeal, appellees claimed appellant
committed a material breach of trust. The matter proceeded to an arbitration hearing
conducted on October 10 and 11, 2018.
{¶ 4} The arbitrator, in a decision dated October 25, 2018, found appellant
committed a material breach of trust by putting his own interests ahead of the other
beneficiaries of the trust and hindering and delaying the inheritance of the other
beneficiaries. In particular, the arbitrator took issue with appellant failing to provide for the
payment of the estate taxes or otherwise plan for the payment of taxes and his failure to
promptly distribute their mother's interest in Fahey Bank to the other beneficiaries.
Specifically, the arbitrator stated:
[The attorney for the trust] testified that the settlor's overriding
intent in her final estate plan was to be "fair" to her
beneficiaries. It is clear that Natalie intended for her Fahey
Bank shares to be promptly distributed to her beneficiaries as
a pre-residuary specific bequest. Carl has refused to carry out
this intent.
[The attorney for the trust] testified that, while Natalie was on
her deathbed, she made her sons, Martin and Carl promise that
they would get along. It is the Arbitrator's opinion that both
Martin and Carl—if they ever intended to keep that promise—
have long since broken it. But Carl's conduct has been
intolerable. His actions, and more appropriately his inactions,
to delay the administration of the Trust have been intentional
and generally without justification. Carl's own statements and
testimony are that he rejects out of hand any proposal by
Martin to advance the administration of the Trust, to distribute
the Fahey Bank shares, to allow his Co-Trustee to vote the
Fahey Bank shares, or to provide any provision for the payment
of estate taxes. Further, Carl has pointed to concerns about a
lack of liquidity to pay estate taxes, but has expressly refused to
contribute any funds from his "own pocket" toward the
payment of any estate taxes that may be owed. Nor has Carl
proposed any plan or provision for the payment of the estate
No. 19AP-329 3
taxes. Carl's repeated delays, denials and refusals rise to the
level of a breach of trust. This is especially true when combined
with his refusal to provide any counter proposal for the
payment of estate taxes other than to wait for a final
determination from the IRS, which may be as long as five years.
Martin's conduct has been hasty and aggressive, and it is
understandable why Carl might be cynical toward Martin.
Nevertheless, Martin's conduct has sought to advance the
administration of the Trust for the beneficiaries. Carl's has not.
Carl's conduct has been questionable dating back to April 2017
when he obtained an advance of his Fahey inheritance via a
dubious "agreement" with his mother. Carl may very well
believe that this action and his subsequent actions protect
Fahey Bank. But he has fiduciary duty under the Trust to the
beneficiaries. That supersedes his duties to the bank. While
Carl has enjoyed the privileges and benefits of his inheritance,
he has shown no intent to distribute the Fahey Bank shares to
the other beneficiaries as the Trust requires, and thus has
deprived them of their rights under the Trust. This continued
refusal -- even after the proposed plan for liquidity by Martin -
- is not for any legitimate Trust purpose but rather to protect
his own interest in Fahey Bank. Carl has put his own interests
ahead of the other beneficiaries of the Trust and hindered and
delayed their inheritance as Natalie intended. This is a material
breach of his fiduciary duty.
(Footnotes omitted.) (Arbitrator's Decision at 11-13.) As a result, the arbitrator ordered
appellant be suspended as trustee pursuant to R.C. 5810.01(B)(6) effective November 1,
2018 for 90 days, during which time Martin would execute a liquidity plan and distributions
in accordance with the trust.1
{¶ 5} On December 12, 2018, appellant filed a motion pursuant to R.C. 2711.10 and
2711.13 asking the common pleas court to vacate the arbitrator's award to the extent it found
appellant committed a breach of trust and suspended him as co-trustee. In the motion,
appellant argued that relief is warranted because the challenged portions of the arbitrator's
award are inconsistent with the express language of the trust and the arbitrator ignored
1 The arbitrator noted that, pursuant to an initial stipulation, the parties agreed "any award under this
Arbitration shall not abridge any [p]arty's rights under R.C. 2711" notwithstanding Section 13.8 of the trust,
which includes a statement that the arbitrator's decision is final and not appealable to any court. (Arbitrator's
Decision at 2.)
No. 19AP-329 4
clearly defined law that requires plain and unambiguous terms of an instrument to be
enforced as written without resort to extrinsic evidence. As a result, appellant contended it
is necessary to vacate the award to correct a manifest disregard of clearly applicable law.
Appellant argued the manifest disregard of the law standard applied since it is recognized
under federal law, specifically Dawahare v. Spencer, 210 F.3d 666, 669 (6th Cir.2000),
and the Tenth District Court of Appeals generally looks to federal case law in applying and
construing the Ohio Arbitration Act. Appellant additionally cited two Ninth District Court
of Appeals cases that followed federal case law in recognizing the manifest disregard of the
law standard.
{¶ 6} On April 26, 2019, the trial court issued a decision and entry denying
appellant's motion. The trial court first determined the matter was not moot despite the
90-day suspension having ended because the arbitrator's determination that appellant
committed a breach of trust remained in effect. Regarding appellant's arguments on
vacating the arbitrator's award, the trial court maintained that R.C. 2711.10 limits judicial
review of arbitrations to claims of fraud, corruption, misconduct, an imperfect award or the
arbitrator exceeded his authority, and a trial court is precluded from examining the merits
of the issues arbitrated. The trial court cited case law emphasizing that no arbitration would
be binding if parties could challenge an arbitration decision on the ground that the
arbitrator erroneously decided the legal or factual issues. Considering the contentions in
appellant's motion, the trial court found appellant essentially disagreed with the
arbitrator's interpretation of the trust, which is not a sufficient ground to vacate, modify, or
correct an award. Therefore, because appellant failed to allege any ground to vacate the
arbitrator's award relating to his breach of trust and suspension, the trial court denied
appellant's motion.
{¶ 7} Appellant filed a timely appeal.
II. Assignment of Error
{¶ 8} Appellant assigns the following sole assignment of error for our review:
The Trial Court abused its discretion in denying Plaintiff-
Appellant Carl F. Hughes' Motion to Vacate Arbitrator's
Award Finding That He Committed a Breach of Trust.
No. 19AP-329 5
III. Analysis
{¶ 9} In his assignment of error, appellant contends the trial court abused its
discretion in denying his motion to vacate the arbitrator's award finding he committed a
breach of trust. For the following reasons, we disagree.
{¶ 10} "Public policy in Ohio favors the resolution of labor disputes through
arbitration." Columbus v. Internatl. Assn. of Firefighters, Local 67, 10th Dist. No. 18AP-
486, 2020-Ohio-356, ¶ 12, quoting Franklin Cty. Sheriff v. Teamsters Local No. 413, 10th
Dist. No. 17AP-717, 2018-Ohio-3684, ¶ 17. In line with this policy, "[j]udicial review of
arbitration awards is limited in order to encourage the resolution of disputes in arbitration."
Id., citing Wright State Univ. v. Fraternal Order of Police, 2d Dist. No. 2016-CA-35, 2017-
Ohio-854, ¶ 12.
{¶ 11} R.C. 2711.13 permits parties to an arbitration to file a motion in the court of
common pleas for an order vacating an award in an arbitration proceeding "as prescribed
in [R.C.] 2711.10." R.C. 2711.13. Pursuant to R.C. 2711.10:
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.
{¶ 12} "When reviewing a decision of a common pleas court confirming, modifying,
vacating, or correcting an arbitration award, an appellate court should accept findings of
fact that are not clearly erroneous but decide questions of law de novo." Internatl. Assn. of
Firefighters, Local 67 at ¶ 14, citing Portage Cty. Bd. of Dev. Disabilities v. Portage Cty.
No. 19AP-329 6
Educators' Assn. for Dev. Disabilities, 153 Ohio St.3d 219, 2018-Ohio-1590, syllabus. See
also E.W. v. T.W., 10th Dist. No. 16AP-88, 2017-Ohio-8504, ¶ 13, quoting Martin v. Mahr
Machine Rebuilding, Inc., 11th Dist. No. 2015-L-101, 2017-Ohio-1101, ¶ 4 (" 'Whether
the trial court applied the correct legal standard is a legal issue that we review de novo.' ").
{¶ 13} In support of his assignment of error, appellant first contends the trial court
failed to apply the correct legal standard in evaluating the motion to vacate. Specifically,
appellant maintains the trial court erred in failing to recognize and apply the "manifest
disregard of the law" standard as stated by the Sixth Circuit in Dawahare, a federal case
from 2000 that found the vacation of an arbitration award is required where "the relevant
law [is] clearly defined and the arbitrator * * * ha[s] consciously chosen not to apply it." Id.
at 669. Appellant states that this court in Dh-Kl Corp. v. Corbin, 10th Dist. No. 97APE02-
206 (Aug. 12, 1997), and more recently the Supreme Court of Ohio in Portage Cty., at ¶ 20,
generally recognize that the Ohio Arbitration Act should be construed and applied in a
manner consistent with its substantially similar federal counterpart. Appellant further
argues this court "substantively considered" such an argument in Close v. Motorists Mut.
Ins. Co., 21 Ohio App.3d 228, 231 (10th Dist.1985), and cites to two cases from the Ninth
District that recognized the manifest disregard of the law standard. (Appellant's Brief at 15.)
Moreover, appellant believes the trial court incorrectly characterized appellant's arguments
as a "non-actionable" disagreement with the arbitrator's interpretation of the trust.
(Appellant's Brief at 5.)
{¶ 14} Appellees counter that the manifest disregard of the law standard is a
judicially created standard under federal case law and not a ground for vacating an
arbitration award under R.C. 2711.10 in Ohio. Appellees note federal court decisions
construing the Federal Arbitration Act are not binding on this court and, regardless,
emphasize that the Supreme Court has determined the grounds listed in R.C. 2711.10 are
exhaustive. Appellees argue that this court in Total Pharm., Inc. v. Oak Hills Manor, LLC,
10th Dist. No. 10AP-1035, 2011-Ohio-2548, ¶ 1-5, already declined to add a manifest
disregard of the law standard to R.C. 2711.10 and additionally cite to Eighth District Court
of Appeals decisions that, consistent with the Supreme Court's position, refuse to recognize
manifest disregard of the law as a ground to vacate an arbitration award. Appellees note
that appellant did not move to vacate the arbitration award for any of the grounds listed in
No. 19AP-329 7
R.C. 2711.10, and in his briefs appellant did not ask the court to construe R.C. 2711.10 but,
instead, asks this court to add a ground to the statute in line with federal case law. Finally,
appellees contend that, even if a manifest disregard of the law standard applies, the
arbitrator did not manifestly disregard Ohio law in issuing his award, and appellant merely
disagrees with the arbitrator's conclusions and desires this court to substitute our judgment
for that of the arbitrator.
{¶ 15} For the following reasons, we agree with appellees that reversal is not
warranted in this case. First, contrary to appellant's position, federal case law calls the
applicability of the manifest disregard of the law standard into doubt. Appellant cites to
Dawahare, a Sixth Circuit decision issued in 2000, for the proposition that federal courts
apply the manifest disregard of the law standard "in addition" to a substantially similar
federal statute. Id. at 669. However, the Supreme Court of the United States in Hall St.
Assocs., LLC v. Mattel, Inc., 552 U.S. 576 (2007), later found that the federal statutes to
vacate or modify an arbitration award "compel[] a reading of the [statutory] categories as
exclusive" rather than expandable. Id. at 586. In doing so, the United States Supreme Court
called into doubt the circuit court's reliance on Wilko v. Swan, 346 U.S. 427 (1953), as the
basis for the manifest disregard of the law doctrine. Last year, the Sixth Circuit Court of
Appeals cited Hall Street in explaining "the only grounds for vacating, modifying, or
correcting an arbitration award under the FAA are those that the FAA expressly lists. * * *
And that list is narrow." (Emphasis sic.) PolyOne Corp. v. Westlake Vinyls, Inc., 937 F.3d
692, 696 (6th Cir.2019). PolyOne Corp. further remarked that the "FAA does not provide
for judicial review of an arbitrator's legal conclusion." Id. at 697. Therefore, even if
appellant is correct in arguing we should look to federal law in determining his present
motion to vacate the arbitrator's award, appellant is undermined by more recent federal
case law.
{¶ 16} Furthermore, as opposed to the federal cases cited by appellant, Ohio law
confines review of a motion to vacate an arbitration award to the grounds listed in R.C.
2711.10. Pursuant to R.C. 2711.13, parties to an arbitration may move to vacate an
arbitrator's award but only "as prescribed in [R.C.] 2711.10." (Emphasis added.) Consistent
with R.C. 2711.13, the Supreme Court of Ohio has held that "[a]n arbitration award may be
challenged only through the procedure set forth in R.C. 2711.13 and on the grounds
No. 19AP-329 8
enumerated 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.' " Miller v.
Gunckle, 96 Ohio St.3d 359, 2002-Ohio-4932, ¶ 10, quoting Warren Edn. Assn. v. Warren
City Bd. of Edn., 18 Ohio St.3d 170, 173 (1985). See also Cedar Fair, L.P. v. Falfas, 140
Ohio St.3d 447, 2014-Ohio-3943, ¶ 5-6.
{¶ 17} In line with Supreme Court of Ohio precedent, this court has recognized that
" '[a] trial court may not evaluate the actual merits of an award and must limit its review to
determining whether the appealing party has established that the award is defective within
the confines of R.C. Chapter 2711.' " Champion Chrysler v. Dimension Serv. Corp., 10th
Dist. No. 17AP-860, 2018-Ohio-5248, ¶ 10, quoting Telle v. Estate of William Soroka, 10th
Dist. No. 08AP-272, 2008-Ohio-4902, ¶ 9. See, e.g., Total Pharm., Inc. at ¶ 4 (finding an
assignment of error asserting an arbitration award should be vacated due to the manifest
disregard of the law "d[id] not allege that the arbitration or arbitrator violated any of the
conditions required for vacating an award from a binding arbitration," and that trial court
did not err in following R.C. 2711.10).
{¶ 18} We disagree with appellant that this court's earlier decision in Close may have
established a different approach from Champion Chrysler, Telle, or Total Pharm., Inc. The
relevant text of Close reads, in its entirety:
[Cross-Assignment of Error 2] The trial court erred in failing to
find that the two arbitrators were guilty of misbehavior or
exceeded their powers, thus prejudicing the rights of appellee
by their "manifest disregard" of applicable law.
[3] The trial court erred in failing to find that the award was
grossly incorrect and unfair.
In these cross-assignments of error, Close argues that the
arbitrators disregarded his argument that Mrs. [C]lose
responded to a "sudden emergency" and is, thus, innocent of
any comparative negligence. The record, however, does not
contain any evidence of the deliberations of the arbitrators, and
we cannot impute to them any misbehavior or improper
execution of their powers. The general policy in Ohio is to
encourage arbitration, and "every reasonable intendment will
be indulged." Campbell v.. Automatic Die & Products Co.
(1954), 162 Ohio St. 321, at 329 [55 O.O. 195].
No. 19AP-329 9
Thus, Close's second and third cross-assignments of error are
overruled.
Id. at 231. Close did not expressly adopt a manifest disregard of the law standard.
Furthermore, in overruling the assignment of error, Close focused on the lack of evidence
supporting misbehavior or improper execution of the arbitrators powers—two of the
statutory grounds listed in R.C. 2711.10. Therefore, we find Close to be consistent with the
approach of this court and the Supreme Court of Ohio in confining judicial review of an
arbitration award to the grounds listed in R.C. 2711.10.
{¶ 19} In this case, appellant did not argue either to the trial court or on appeal that
any of the statutory grounds listed in R.C. 2711.10 support vacating the arbitrator's award.
We note that at oral argument appellant raised, for the first time, the argument that the
manifest disregard of the law standard is applicable as an aspect of R.C. 2711.10(D), and
that the Supreme Court of Ohio in Goodyear Tire & Rubber Co. v. Local Union No. 220,
United Rubber Cork, Linoleum & Plastic Workers of Am., 42 Ohio St.2d 516 (1975), could
have but did not foreclose the manifest disregard standard applying under R.C. 2711.10(D).
However, both to the trial court and on appeal, appellant argued the manifest disregard of
the law standard is applicable as stated under federal law that found the standard to be a
valid alternative to the grounds listed in the statute (as opposed to a part of R.C.
2711.10(D)). Appellant likewise did not cite to Goodyear in his principal appellate brief,
and, in his reply brief appellant considered Goodyear to be "inapposite." (Appellant's Reply
Brief at 6, fn. 2.) "An appellant cannot change the theory of his case and present new
arguments for the first time on appeal." Quaye v. N. Mkt. Dev. Auth., 10th Dist. No. 15AP-
1102, 2017-Ohio-7412, ¶ 28-29. Neither may a party raise an argument for the first time at
oral argument, particularly when the party had ample opportunity to explore such issues in
its brief. Mun. Tax Invest. LLC v. Northup Reinhardt Corp., 10th Dist. No. 19AP-26, 2019-
Ohio-4867, ¶ 32. As a result, we decline to address appellant's alternative argument
presented for the first time on appeal at oral argument.
{¶ 20} Finally, we do not find appellant's citations to the Ninth District cases,
Automated Tracking Sys. v. Great Am. Ins. Co., 130 Ohio App.3d 238 (9th Dist.1998), and
Bennett v. Sunnywood Land Dev., Inc., 9th Dist. No. 06CA0089-M, 2007-Ohio-2154,
persuasive. Both cases were based on the federal case Merrill Lynch, Pierce, Fenner &
No. 19AP-329 10
Smith, Inc. v. Jaros, 70 F.3d 418, 421 (1995), which regarded the manifest disregard of the
law standard as a separate ground from the statutory categories. Furthermore, both cases
were issued prior to Hall Street and new Sixth Circuit cases that undermine the continued
viability of the manifest disregard standard under federal law. We therefore do not find
Automated Tracking Sys. or Bennett to be determinative in this case.
{¶ 21} Considering all the above, we find appellant has not demonstrated the trial
court failed to apply the correct legal standard in reaching its decision to uphold the
arbitrator's decision and award. As such, appellant has not met his burden to affirmatively
demonstrate the trial court erred in denying appellant's motion to vacate the arbitrator's
award finding he committed a breach of trust. Miller v. Johnson & Angelo, 10th Dist. No.
01AP-1210, 2002-Ohio-3681, ¶ 2 ("The burden of affirmatively demonstrating error on
appeal rests with the [appellant]."); see also App.R. 16(A). Because we find appellant failed
to show the trial court applied the incorrect legal standard, his derivative argument
premised on the proper application of the manifest disregard of the law standard is moot.
Rithy Properties, Inc. v. Cheeseman, 10th Dist. No. 15AP-641, 2016-Ohio-1602, ¶ 14.
{¶ 22} Accordingly, we overrule appellant's assignment of error.
IV. Conclusion
{¶ 23} Having overruled appellant's sole assignment of error, we affirm the
judgment of the Franklin County Court of Common Pleas.
Judgment affirmed.
BRUNNER and NELSON, JJ., concur.