Russell v. RAC Natl. Prod. Serv., L.L.C.

[Cite as Russell v. RAC Natl. Prod. Serv., L.L.C., 2014-Ohio-3392.]
IN THE COURT OF APPEALS OF OHIO
FOURTH APPELLATE DISTRICT
WASHINGTON COUNTY
Traci L. Russell, et. al., : Case No. 14CA17
Plaintiffs-Appellees, : DECISION AND
JUDGMENT ENTRY
v. :
RAC National Product Service, LLC, :
Defendant-Appellant. : RELEASED: 7/31/2014
______________________________________________________________________
APPEARANCES:
David W. Orlandini & Gary C. Safir, Davis & Young, Westerville, Ohio for Appellant.
James R. Leach, Parkersburg, West Virginia for Appellees.
_____________________________________________________________________________
HOOVER, A.J.,
{¶1} After reviewing the notice of appeal filed in this matter, we issued an order
directing Appellant RAC National Product Service to file a memorandum addressing
whether the entry appealed from is a final appealable order. RAC National filed a
memorandum arguing that the May 12, 2014 order appealed from denies its motion for a
stay pending arbitration pursuant to R.C. 2711.02 and therefore is appealable under R.C.
2711.02(C). Appellees argue that the May 12, 2014 order is a nullity because it is a denial
of RAC National’s motion to reconsider the trial court’s final appealable January 10, 2014
order denying RAC National’s motion to compel arbitration. After reviewing the
memoranda and the relevant law, we find that the order appealed from is not a final
appealable order and the appeal is hereby DISMISSED.
Washington App. No. 14CA17 2
I.
{¶2} In May, 2013, the Russells filed a complaint against RAC National. In
November, 2013, RAC National filed a motion to dismiss coupled with a motion to compel
arbitration. The portion of the motion seeking a dismissal of the complaint was based on
Civ.R. 12(B)(1) and (6). The portion of the motion seeking to compel arbitration was made
pursuant to the Federal Arbitration Act, 9 U.S.C. Section 4 and the Ohio Arbitration Act,
R.C. 2711.03. On January 10, 2014, the trial court issued a decision in which it found that
there was no valid arbitration agreement between the parties and, therefore, no basis to
dismiss the complaint under Civ.R. 12(B)(1) or (6). The order denied both motions. Russell
v. RAC National Product Service, LLC, Case No. 13TR164, Decision, (Jan. 10, 2014).
{¶3} RAC National did not appeal the January 10, 2014 order that found that no
valid arbitration agreement existed. Instead, in February, 2014, RAC National filed a
“Defendant’s Motion to Reconsider” in which it asked the trial court to “reconsider its ruling,
dismiss this matter and submit the matter to binding arbitration.” It also made an
alternative request to stay the proceedings, though it did not specifically reference R.C.
2711.02 in the motion. It stated, “In the alternative, Defendant requests that the
proceedings be stayed until the arbitration proceedings are complete.” On May 12, 2014,
the trial court issued an order denying RAC National’s motion to reconsider, and stated in
part:
Based upon the reasons specifically stated in this Court’s Decision
filed on January 10, 2014 denying Defendant’s Motion to Dismiss and
Compel Arbitration; Plaintiff’s written responses to both Defendant’s Motion
to Dismiss and Motion to Reconsider and the authority cited therein; the
arguments placed upon the record during the hearing, including but not
limited to the lack of evidence of mutual agreement to the terms of the
Lease-Purchase Agreement and Arbitration Agreement as reflected in the
lack of evidence that the Plaintiff Traci Russell read and understood the
terms of the Lease-Purchase Agreement and Arbitration Agreement, which
Washington App. No. 14CA17 3
is essential to the formation of any contract, the Court hereby ORDERS that
the Defendant’s Motion to Reconsider be DENIED.
The trial court also denied RAC National’s alternative request for a stay: “In addition, this
Court ORDERS that the Defendant’s request that this matter be stayed until the arbitration
proceedings are completed is also DENIED.” Russell v. RAC National Product Service,
LLC, Case No. 13-TR-164, Order Denying Defendant’s Motion to Reconsider (May 12,
2014).
{¶4} RAC National appeals the May 12, 2014 order denying the motion to
reconsider and denying the request to stay the proceedings.
II.
{¶5} Appellate courts in Ohio have jurisdiction to review the final orders or
judgments of inferior courts within their district. Section 3(B)(2), Article IV of the Ohio
Constitution; R.C. 2501.02. A final appealable order is defined in R.C. 2505.02 and the
relevant provisions for this case are:
(B) An order is a final order that may be reviewed, affirmed, modified,
or reversed, with or without retrial, when it is one of the following:
(2) An order that affects a substantial right made in a special
proceeding or upon a summary application in an action after judgment; . . . .
{¶6} If a judgment is not final and appealable, then an appellate court has no
jurisdiction to review the matter and must dismiss the appeal. Production Credit Assn. v.
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Hedges, 87 Ohio App.3d 207, 210 at fn. 2 (4 Dist. 1993); Kouns v. Pemberton, 84 Ohio
App. 3d 499, 501 (4th Dist. 1992). To determine whether the May 12, 2014 order is a final
appealable order, we must first determine whether the January 10, 2014 order is a final
appealable order.
{¶7} RAC National argues that the January 10, 2014 order that denied its motion
Washington App. No. 14CA17 4
to compel arbitration was not a final appealable order because it also contained an order
denying a motion to dismiss under Civ.R. 12(B)(1) and (6). RAC National argues that
because an order denying a motion to dismiss based upon an arbitration provision is not a
final appealable order, the January 10, 2014 order was not appealable.
{¶8} An order denying a motion to dismiss based upon an arbitration provision is
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not a final appealable order. John R. Davis Trust 8/12/05 v. Beggs, 10 Dist. Franklin App.
No. 08AP-432, 2008-Ohio-6311(order denying motion to dismiss based on arbitration
clauses in agreement was not a final appealable order); Taylor v. Norfolk Southern
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Railway Co., 8 Dist. Cuyahoga App. No. 85699, 2005-Ohio-4576. Dismissal is not an
option provided in R.C. 2711.01 et seq. However, the trial court’s order was not limited to
the motion motion to dismiss; it also addressed RAC National’s motion to compel
arbitration under R.C. 2711.03. The January 10, 2014 order determined that no valid
arbitration agreement existed between the parties and denied the motion to compel
arbitration under R.C. 2711.03.
{¶9} The Ohio Arbitration Act, R.C. Chapter 2711, provides different arbitration
enforcement mechanisms. A party may seek direct enforcement of such agreements
through an order to compel arbitration under R.C. 2711.03, or indirect enforcement
through an order staying proceedings under R.C. 2711.02. These are separate and
distinct procedures. Brumm v. McDonald & Co. Securities, Inc., 78 Ohio App.3d 96, 603
N.E.2d 1141 (4th Dist. 2002) citing 6 Ohio Jurisprudence 3d (1978) 40, Arbitration &
Award, Section 39; see also Maestle v. Best Buy Co., 100 Ohio St.3d 330, 2003-Ohio-
6465, 800 N.E.2d 7 (“A party seeking to enforce an arbitration provision may choose to
move for a stay under R.C. 2711.02, or to petition for an order for the parties to proceed to
arbitration under R.C. 2711.03, or to seek orders under both statutes.”).
Washington App. No. 14CA17 5
{¶10} Although proceedings under R.C. 2711.02 and R.C. 2711.03 are separate
and distinct, both require the court to determine whether the very existence of an
arbitration agreement is at issue. Under R.C. 2711.02, governing proceedings to stay, the
court must be “satisfied that the issue involved in the action is referable to arbitration
under an agreement in writing for arbitration . . . .” R.C. 2711.02(B). Under R.C. 2711.03,
governing proceedings to compel, if the court finds that there is an issue with the making
of the arbitration agreement, it proceeds summarily with a trial on the issue and either
party has the right to a jury trial. Richie’s Food Distributor, Inc. v. Refrigerated Construction
Services, 4th Dist. Pike App. No. 02CA683, 2002-Ohio-3763; Chrysler Fin. Servs. V.
Henderson, 4th Dist. Athens App. No. 11CA4, 2011-Ohio-6813 (trial court was not
required to hold an oral or evidentiary hearing regarding auto purchaser's motion to
compel arbitration, in action brought against them by financial services company alleging
breach of retail installment contract, absent a specific request for an oral hearing); Liese v.
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Kent State Univ., 11 Dist. Portage App. No. 2003-P-0033, 2004-Ohio-5322 (trial court
can make a determination concerning the applicability of an arbitration agreement through
summary judgment proceedings and a party may waive its rights to a hearing and trial
under R.C. 2711.03). Under both statutory provisions, the court must determine that a
valid enforceable arbitration agreement exists before determining the appropriate relief to
grant.
{¶11} By its terms, R.C. 2711.03 applies where there has been a petition for an
order to compel the parties to proceed to arbitration. RAC National’s motion to compel
arbitration was expressly made pursuant to R.C. 2711.03 and did not seek a stay of the
proceedings under R.C. 2711.02. The trial court’s January 10, 2014 order denying the
motion to compel arbitration expressly determined that there was no valid arbitration
Washington App. No. 14CA17 6
agreement between the parties. If the January 10, 2014 order is a final appealable order,
then the trial court could not entertain motions for reconsideration on the issue of whether
there was a valid arbitration agreement between the parties, because “[t]he Ohio Rules of
Civil Procedure do not prescribe motions for reconsideration after a final judgment in the
trial court.” Pitts v. Ohio Dept. of Transp., 67 Ohio St.2d 378, 21 O.O.3d 238, 423 N.E.2d
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1105 (1981); see also Tedeshi v.Atrium Ctrs., 8 Dist. Cuyahoga App. No. 97647 LLC,
2012-Ohio- 2929 (motion for a reconsideration of a stay granted pursuant to R.C. 2711.02
was a nullity).
{¶12} The Russells argue that the January 10, 2014 order is a final appealable
order under R.C. 2711.02(C). However, R.C. 2711.02(C) governs “an order under division
(B) of this section that grants or denies a stay of a trial of any action pending arbitration”
and refers back to section R.C. 2711.02(B) which governs applications for a stay. It does
not address orders arising out of proceedings set forth in R.C. 2711.03. We note that while
the federal statute, 9 U.S.C. Section 16(a)(1)(B), expressly states that an order denying a
petition to compel arbitration made under 9 U.S.C Section 4 is appealable, Ohio’s version
does not include a similar provision. See R.C. 2711.15 (“An appeal may be taken from an
order confirming, modifying, correcting, or vacating an award made in an arbitration
proceeding or from judgment entered upon an award”).
{¶13} Instead, the trial court’s January 10, 2014 order made pursuant to R.C.
2711.03 is a final appealable order under R.C. 2505.02(B)(2) as one that “affects a
substantial right made in a special proceeding.” R.C. 2505.02(A)(1) defines a substantial
right as “a right that the United States Constitution, the Ohio Constitution, a statute, the
common law, or a rule of procedure entitles a person to enforce or protect.” The Ohio
Arbitration Act gives persons the right to enforce arbitration agreements and provides a
Washington App. No. 14CA17 7
variety of proceedings in furtherance of this right. As for the right to compel arbitration,
R.C. 2711.03(B) goes so far as to provide a jury trial, if demanded, to determine the issue
when the making of an arbitration agreement is in issue. If the jury finds that no agreement
for arbitration was made, then the court dismisses the petition to compel arbitration. In this
case, the trial court, rather than a jury, made the determination that no valid arbitration
agreement exists between the parties. This decision affected a substantial right of RAC
National when it determined that it would not be entitled to arbitrate this dispute.
{¶14} We also find that the proceedings set forth in R.C. 2711.03 are special
proceedings under R.C. 2505.01(A)(2), which defines “special proceeding” as “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.” The proceedings set forth in R.C. 2711.03 are special
proceedings because they were created by the Ohio Arbitration Act, R.C. 2711.01 et seq.
in 1953. See generally, Worldwide Asset Purchasing, LLC v. Easterling, 186 Ohio App.3d
478, 2009-Ohio-6196, 928 N.E.2d 1148 (10th Dist.)(discussing the history of the Federal
Arbitration Act and the Ohio Arbitration Act); Geiger v. Morgan Stanley DW, Inc., 10th Dist.
Franklin App. No. 09AP-608, 2010-Ohio-2850 (“[a]rbitration actions qualify as special
proceedings because arbitration was not recognized at common law or equity, and was
legislatively provided for in R.C. Chapter 2711.”) quoting Kelm v. Kelm, 93 Ohio App.3d
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686, 691, 639 N.E.2d 842 (10 Dist. 1994), citing Stewart v. Midwestern Indemn. Co., 45
Ohio St.3d 124, 128, 543 N.E.2d 1200 (1989)(Douglas, J., dissenting); FIA Card Servs.,
N.A. v. Wood, 7th Dist. Jefferson App. No. 08-JE-13, 2009-Ohio-1513; Binn v. Sterling
Jewelers, Inc., 9th Dist. Summit App. No. 24522, 2009-Ohio-3359; Shopsmith
Woodworking Promotions, Inc. v. American Woodworking Academy, Inc., 2nd Dist.
Montgomery App. No. 15268, 1995 WL 614355 (Oct. 18, 1995).
Washington App. No. 14CA17 8
{¶15} Thus, we find that the January 10, 2014 order, which determined that there
was no valid arbitration agreement between the parties under R.C. 2711.03, is a final
appealable order under R.C.2505.02(B)(2) as one that affects a substantial right in a
special proceeding. Here, the trial court should have denied RAC National’s motion to
reconsider on the ground that the motion was a nullity. The trial court’s May 12, 2014
order purporting to reconsider the validity of the arbitration agreement was a nullity. “Once
an appealable or final judgment in a case has been journalized, it cannot be modified by
that court except as provided under Civ.R. 50(B) (motion notwithstanding the verdict),
Civ.R. 59 (motion for a new trial), or Civ.R. 60(B) (motion for relief from judgment).” Pitts v.
Ohio Dept. of Transp., 67 Ohio St.2d 378, 380, 423 N.E.2d 1105 (1981)(Any order
purporting to reconsider a final judgment absent one of the prescribed avenues is a
nullity); Green Tree Servicing, L.L.C. v. Kramer, 193 Ohio App.3d 140, 2011-Ohio-1408nd
(2 Dist.).
{¶16} We agree that an order denying a stay under R.C. 2711.02 is a final
appealable order, but here RAC National had already sought direct enforcement of the
arbitration agreement under R.C. 2711.03 and had received a final appealable order in
which the trial court determined that there was no valid enforceable arbitration agreement.
RAC National could not then ask the trial court to reconsider its determination of the issue
for the purposes of a second, indirect bite of the apple under R.C. 2711.02. Although
proceedings under R.C. 2711.02 and R.C. 2711.03 are separate and distinct, the
existence of a valid arbitration agreement is foundational to both. Richie’s Food
Distributor, Inc., supra; see also Church v. Fleishour Homes, Inc., 172 Ohio App.3d 205,
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2007-Ohio-1806, 874 N.E.2d 795 (5 Dist.).
{¶17} We find that once the trial court made a determination that there was no
Washington App. No. 14CA17 9
valid enforceable arbitration agreement under 2711.03, that determination was a final
appealable order. The May 12, 2014 order was a nullity.
III.
{¶18} We conclude that the May 12, 2014 order denying appellant’s motion to
reconsider its decision denying a motion to compel arbitration under R.C. 2711.03 that
included a denial of appellant’s motion to stay the proceedings under R.C. 2711.02, is a
nullity and is not a final appealable order. Therefore, we hereby DISMISS this appeal.
{¶19} The clerk shall serve a copy of this order on all counsel of record at their last
known addresses.
APPEAL DISMISSED. COSTS TO APPELLANT. IT IS SO ORDERED.
McFarland, J., concurs.
Harsha, J., dissenting:
{¶20} Because the statutes provide “separate and distinct” avenues, and the
parties can seek orders under both statutes, see Maestle, supra, I believe RAC can
appeal the May 12, 2014 order under R.C. 2711.02(C). But it cannot prevail because of
collateral estoppel arising from the trial court’s January 10, 2014 determination that no
valid arbitration agreement exists.
FOR THE COURT
________________________________
Marie Hoover
Administrative Judge