GB AZ 1, L.L.C. v. Arizona Motors, L.L.C.

[Cite as GB AZ 1, L.L.C. v. Arizona Motors, L.L.C., 2011-Ohio-1808.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 95502
GB AZ 1, LLC
PLAINTIFF-APPELLEE
vs.
ARIZONA MOTORS, LLC, ET AL.
DEFENDANTS-APPELLANTS
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-719497
BEFORE: Keough, J., Boyle, P.J., and Sweeney, J.
RELEASED AND JOURNALIZED: April 14, 2011
ATTORNEYS FOR APPELLANTS
Stephen B. Doucette
Mark R. Koberna
Rick D. Sonkin
Sonkin & Koberna, Co., LPA
3401 Enterprise Parkway
Suite 400
Cleveland, OH 44122
ATTORNEYS FOR APPELLEE
For GB AZ 1, LLC
J. Kurt Denkewalter
J. Kurt Denkewalter, LLC
110 South Huntington Street
Medina, OH 44256
Also listed:
For Volkswagen of America, Inc.
David A. Schaefer
McCarthy, Lebit, Crystal & Liffman Co.
1800 Midland Building
101 Prospect Avenue
Cleveland, OH 44115
KATHLEEN ANN KEOUGH, J.:
{¶ 1} Defendants-appellants, Arizona Motors, LLC, Joseph Huang,
Kevin Whalen, and Seth Severin (collectively “appellants”), appeal from the
trial court’s decision denying their motion to compel arbitration and stay all
proceedings pending arbitration. Finding no merit to the appeal, we affirm.
{¶ 2} In May 2010, plaintiff-appellee, GB AZ 1, LLC (“appellee”), filed
an amended complaint against Volkswagen of America, Inc., Joseph Abbass,
and appellants alleging breach of contract, promissory estoppel, fraud, unjust
enrichment/quantum meruit, fraudulent inducement, civil conspiracy, and
negligent misrepresentation. These causes of action arose out of a business
deal whereby appellee and appellants agreed to purchase and develop
property in Peoria, Arizona for the purposes of establishing a Volkswagen car
dealership. The terms and conditions of the agreement were set forth in a
Joint Venture Agreement that all parties executed in 2007. Appellee
terminated the business relationship and filed its amended complaint
alleging damages.
{¶ 3} In response, appellants filed their answer and a motion to compel
arbitration and stay proceedings pending arbitration. Appellants demanded
that the matter be submitted to arbitration pursuant to an arbitration
provision contained in a Lease Agreement executed only by appellee and
appellant Arizona Motors.
{¶ 4} Appellee maintained, however, that the Lease Agreement was not
at issue and did not control this matter. Instead, appellee argued that the
Joint Venture Agreement executed by all parties was the contract in dispute
and upon which the amended complaint was based. Because the Joint
Venture Agreement did not contain an arbitration provision, appellee
requested that the court deny the motion to compel. The trial court agreed
with appellee and denied appellants’ motion to compel arbitration and stay
proceedings pending arbitration.
{¶ 5} Appellants appeal, raising as their sole assignment of error that
the trial court erred in denying their motion to compel arbitration and stay all
proceedings pending arbitration.
{¶ 6} This court has previously been split as to the standard of review
for the granting or denial of a motion to compel arbitration and to stay
proceedings pending arbitration. See Shumaker v. Saks Inc., 163 Ohio
App.3d 173, 2005-Ohio-4391, 837 N.E.2d 393, citing Vanyo v. Clear Channel
Worldwide, 156 Ohio App. 3d 706, 2004-Ohio-1793, 808 N.E.2d 482 (holding
that the question of whether a party has agreed to submit an issue to
arbitration is a question of law requiring de novo review). Cf. Bevan v.
Owens-Illinois, Inc., Cuyahoga App. No. 84776, 2005-Ohio-2323; Sikes v.
Ganley Pontiac Honda (Sept. 13, 2001), Cuyahoga App. No. 79015 (holding
that the appropriate standard of review is abuse of discretion).
{¶ 7} In Taylor v. Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352,
2008-Ohio-938, 884 N.E.2d 12,, the Ohio Supreme Court clarified this issue
and held that when determining the alleged unconscionability of an
arbitration clause, the reviewing court must conduct a de novo review.
{¶ 8} However, the issue before this court does not involve an
allegation of unconscionability or enforceability of an arbitration clause.
Rather, the issue is whether the allegations in the amended complaint
pertain to the Lease Agreement, thereby invoking the arbitration provision
contained therein, or whether the allegations arise from the Joint Venture
Agreement, which does not contain an arbitration provision. Resolving this
issue requires us to simply review the factual allegations contained in the
amended complaint and determine what document gives rise to the
controversy between the parties.
{¶ 9} Regardless of which standard of appellate review this court
applies, abuse of discretion or de novo, we find that the trial court did not err
in denying appellants’ motion to compel arbitration and stay proceedings
pending arbitration.
{¶ 10} Appellants contend that the claims and facts alleged in the
amended complaint “fall squarely within the language of the arbitration
provision, which covers ‘any dispute, controversy or claim arising out of or
relating to’ the Lease.” Reviewing the amended complaint, we disagree and
find that no dispute, controversy or claim alleged in the amended complaint
arises out of the Lease Agreement.
{¶ 11} The allegations contained in the amended complaint pertain
solely to the Joint Venture Agreement, wherein the parties agreed to
purchase and develop property in Peoria, Arizona for the purposes of
establishing a Volkswagen car dealership. Paragraph 37 of the amended
complaint alleges that appellee terminated the Joint Venture Agreement in
January 2008 and demanded reimbursement for monies expended in
connection with purchasing the Peoria site. This termination was prior to
the execution of the Lease Agreement.
{¶ 12} Additionally, paragraph 49 of the amended complaint alleges that
the Lease Agreement was executed in July 2008, but that it never “(1)
commenced, (2) became effective or (3) became an enforceable contract for
many reasons including, without limitation, the Defendants [sic] inability to
provide the tri-party agreement with Defendant Volkswagen.” Although the
Lease Agreement was executed between appellee and appellant Arizona
Motors, the amended complaint contains no allegation that damages resulted
from nonperformance under the Lease Agreement. In fact, appellants
maintain in their appellate brief that “[i]t is undisputed that Arizona Motors
was not awarded the Volkswagen franchise that would have made the
dealership successful and the Lease marketable.” After reviewing the terms
of the Lease Agreement, it is questionable whether the Lease Agreement
commenced or became effective for the appellee to even assert a claim against
it.
{¶ 13} Therefore, we find that the allegations and causes of action giving
rise to the amended complaint pertain to the Joint Venture Agreement, which
does not contain an arbitration provision. “[A]rbitration is a matter of
contract and, in spite of the strong policy in its favor, a party cannot be
compelled to arbitrate any dispute which he has not agreed to submit.”
Stillings v. Franklin Twp. Bd. of Trustees (1994), 97 Ohio App. 3d 504, 508,
646 N.E.2d 1184. Accordingly, the trial court did not err in denying
appellants’ motion to compel arbitration and stay proceedings. The
assignment of error is overruled.
Judgment affirmed.
It is ordered that appellee recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court 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.
KATHLEEN ANN KEOUGH, JUDGE
MARY J. BOYLE, P.J., and
JAMES J. SWEENEY, J., CONCUR