DocketNumber: No. 1748.
Judges: Stephenson, Harsha, Abele
Filed Date: 1/28/1992
Status: Precedential
Modified Date: 10/19/2024
This is an appeal from a judgment entered by the Ross County Court of Common Pleas denying a motion to vacate an arbitration award granted to Pricie Brumm, plaintiff below and appellant herein, in her action against McDonald and Company Securities, Inc. ("McDonald"), defendant below and appellee herein. Appellant assigns the following errors for our review:
I. "The trial court erred in failing to have a trial and hearing on the issue of the arbitrability of the claims made by the plaintiff in her complaint pursuant to R.C.
II. "The trial court erred in finding the arbitration clause contained in the defendant's `Options Trading Agreement' applicable to the claims asserted in the plaintiff's complaint in that the operative facts giving rise to the plaintiff's complaint occurred prior to the formation of the contract containing the arbitration clause."
III. "The trial court erred in failing to vacate the arbitration award pursuant to R.C.
The record reveals the following facts pertinent to this appeal. On or about January 26, 1988, appellant placed an order with McDonald to purchase, on her behalf, five thousand call options for stock of Federated Department Stores.1 Later that day, McDonald gave telephone confirmation that the purchase had been consummated. On January 27, 1988, appellant received written confirmation of the purchase and, on the same day, entered into a certain "Options Trading Agreement" (the "option agreement") with McDonald.
On January 29, 1988, appellant remitted to McDonald the sum of $18,665 to cover the purchase of the call options.2 Later that same day, appellant received notice from McDonald that it had, of its own initiative, "cancelled" the transaction. Testimony presented by McDonald's representatives below reveals that when this transaction was reviewed for suitability by principals at *Page 99 McDonald, the investment was considered far too risky and aggressive for one in appellant's financial position.3
Accordingly, McDonald proceeded to "cancel" the transaction by effecting a buy out of appellant's position. McDonald then sold the call options for less than their purchase price and sustained a loss. On, or about, February 10, 1988, appellant received a check from McDonald reimbursing her for the entire amount which she had previously remitted for the purchase of the call options. Appellant never cashed that check and evidence presented below reveals that the options substantially appreciated in price following the cancellation by McDonald.4
Appellant commenced the action below on May 2, 1988, alleging that McDonald had breached a contractual relationship with her. Appellant demanded judgment, inter alia, for compensatory damages in the amount of $92,500. On May 20, 1988, McDonald filed a motion to dismiss, or stay, proceedings on the basis that the previously mentioned option agreement provided that any dispute arising between the parties should be arbitrated.
On July 6, 1988, the court below sustained McDonald's motion and ordered all proceedings before the court to be stayed pending arbitration of the dispute. Appellant appealed from that decision and in Brumm v. McDonald Co. Securities, Inc. (Aug. 1, 1989), Ross App. No. 1532, unreported, at 4, 1989 WL 86283, we dismissed said appeal for lack of a final appealable order pursuant to R.C.
The matter proceeded to arbitration on April 10, 1990. Subsequently, and without any explanation or reasoning, the arbitration panel awarded damages to appellant in the amount of $3,125. On July 17, 1990, appellant filed her motion and application to vacate the arbitration award, and McDonald filed its memorandum in opposition to such request. On November 21, 1990, the court below overruled appellant's motion to vacate and this appeal followed. *Page 100
Appellant's first assignment of error addressed the provisions of R.C.
"The party aggrieved by the alleged failure of another to perform under a written agreement for arbitration may petition any court of common pleas * * * for an order directing that such arbitration proceed in the manner provided for in such agreement. * * * The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the agreement. If the making ofthe arbitration agreement or the failure to perform it is inissue, the court shall proceed summarily to the trial thereof. * * *" (Emphasis added.)
In her memorandum contra to McDonald's motion to stay proceedings, appellant argued that there was no binding arbitration agreement in effect at the time of the events which gave rise to the dispute below. Thus, appellant concludes that the making of the arbitration agreement was brought into issue and the trial court was obligated to conduct a trial on that issue prior to ordering a stay of proceedings. We disagree.
Appellant's argument fails to distinguish between the different arbitration enforcement mechanisms provided for in R.C. Chapter 2711. The Ohio Arbitration Act allows for either direct enforcement of such agreements through an order to compel arbitration under R.C.
By its terms, R.C.
"If any suit or proceeding is brought upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceedings is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the agreement * * *."
There is no obligation under this statute to conduct a trial on the issue of the making of the arbitration agreement. Rather, the court need only be "satisfied" that the dispute is referable to arbitration under such agreement. *Page 101
Although appellant argues, in substance, that the court below erred in determining that the dispute below was so referable, we consider that argument in reviewing appellant's next assignment of error and therefore do not address it here. Suffice it to say, there is no requirement under R.C.
In her second assignment of error, appellant contends that the trial court erred in determining that her dispute with McDonald was referable to arbitration. The basis for this contention lies with the timing of the execution of the aforementioned option agreement. At the conclusion of that document, the following is shown:
"The undersigned has received, read and understands the most recent Options Clearing Corporation Prospectus and any supplement thereto and has also read and understands the foregoing agreement in its entirety.
"DATE Jan 27 1988 SIGN HERE s/ Pricie Brumm
"APPROVED s/ Debra D. Rufe
Appellant argues that a contract to arbitrate disputes between the parties did not arise until February 1, 1988, when an employee of McDonald "approved" the option agreement. Appellant continues that when McDonald bought out appellant's position with respect to the call options on January 29, 1988, there was, as yet, no binding arbitration agreement between them. Thus, appellant concludes, there could have been no agreement to submit this particular dispute to arbitration. We disagree.
Generally speaking, arbitration is a matter of contract law and, therefore, the relationship between the parties is controlled both by the arbitration agreement and by the law of contracts. See Teramar Corp. v. Rodier Corp. (1987),
Moreover, to the extent that an agreement had not already been reached between the parties, we note that the agreement primarily sets forth only covenants to be undertaken by appellant and that it appears to have been prepared by McDonald. Thus, appellant's signing of the agreement on January 27, 1988 would have been an acceptance of the terms offered therein by McDonald. In either event, the arbitration clause in the option agreement would have been enforceable by the time of those events which gave rise to the dispute below.
Notwithstanding our analysis of this issue, appellant has also failed to persuade us that the timing of the signatures on the option agreement is even relevant to enforcement of the arbitration clause. The provisions of both R.C.
However, there is nothing in those statutes which require signatures to be on those written agreements. In construing similar provisions under the Federal Arbitration Act, the federal courts have consistently held that, to enforce an arbitration clause, it is only necessary that the provision be in writing and it is not required that such writing be signed. See, e.g., Med. Dev. Corp. v. Indus. Molding Corp. (C.A.10, 1973),
"It does not follow, however, that under the [Arbitration] Act an obligation to arbitrate attaches only to one who has personally signed the written arbitration provision. For the Act contains no built-in Statute of Frauds provision but merely requires that the arbitration provision itself be in writing. Ordinary contract principles determine who is bound by such written provisions and of course parties can become contractually bound absent their signatures. It is not surprising then to find a long series of decisions which recognize that the variety of ways in which a party may become bound by a written arbitration provision is limited only by generally operative principles of contract law." (Footnote omitted.)
This reasoning is highly persuasive. The policy of the law in Ohio is to favor and encourage arbitration. Dayton ClassroomTeachers Assn. v. Dayton Bd. of Edn. (1975),
In her final assignment of error, appellant contends that the trial court erred in not vacating the arbitrator's award. We disagree. Generally, an arbitration award carries a presumption of validity. See Findlay City School Dist. Bd. of Edn. v.Findlay Edn. Assn. (1990),
"(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."
The appellate review of an arbitration award is limited to an evaluation of the confirmation order of the common pleas court and we cannot review the substantive merits of the award absent evidence of material mistakes or extensive impropriety. Oil,Chemical Atomic Workers Internatl. Union, AFL-CIO, Local 7-629v. RMI Co. (1987),
Appellant first draws our attention to the disparity between the award rendered by the arbitrators and the damages to which she would have been entitled under her claims against McDonald. Thus, appellant asserts, "there is no rational nexus between the issues supposedly submitted to the arbitration board and the monetary finding by them in the amount of $3,125.00 * * *." McDonald responds, however, by characterizing that award as only nominal damages. After a thorough review of the record, we are persuaded that sufficient evidence was adduced below to sustain that characterization.
Appellant contends that her claims against McDonald were in conversion and breach of contract. The measure of damages in a conversion action is the value of the converted property at thetime of the conversion. Erie RR. Co. v. Steinberg (1916),
There is also equally persuasive evidence that no compensatory damages would have been warranted under appellant's breach of contract claim.8 The relationship between a broker and a customer on whose behalf stock will be purchased is that of agent and principal. See Lamprecht v. State (1911),
"All option transactions executed on the Chicago Board of Options (CBOE), American Stock Exchange (AMEX) or any other option exchange, shall be subject to the rules, constitution, regulations, customs and practices of those Exchanges and to those of the Options Clearing Corporation and I agree to complywith all such rules as they may apply to my transactions." (Emphasis added.)
Additionally, we note a number of cases in which customers of stockbrokers are deemed to have contemplated and authorized a course of dealing in accordance with rules and customs of the stock exchanges. See, e.g., White v. Merrill Lynch, Pierce,Fenner Smith, Inc. (1966),
We do not attempt to speculate as to the reasoning behind the amount of the arbitration award. Undoubtedly, a more detailed opinion from the board of arbitrators would have been beneficial in understanding why the award was fixed at $3,125. However, in light of the foregoing analysis, we are not persuaded that the arbitration panel made a "material mistake" in reaching that result.
We are equally unpersuaded that the award evidences any "extensive impropriety." Appellant suggests the award should be vacated because it was "a simple majority award and not unanimous." This is meritless as Ohio law only requires that a majority of the arbitrators sign the award. See R.C.
Having considered all errors assigned and argued herein, and finding the same to be without merit, the judgment of the trial court is affirmed.
Judgment affirmed.
HARSHA and PETER B. ABELE, JJ., concur.
"Any controversy between you and the undersigned arising out of our [sic] relating to this contract or the breach thereof, shall be settled to the extent consistent with Federal and State Law by arbitration * * *. Any arbitration hereunder shall be before at least three arbitrators and the award of the arbitrators, or of a majority of them, shall be final and judgment upon the award rendered may be entered in any court, state or federal, having jurisdiction."
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