Little Aquanauts, L.L.C. v. Makovich & Pusti Architects, Inc.

[Cite as Little Aquanauts, L.L.C. v. Makovich & Pusti Architects, Inc., 2021-Ohio-942.]
COURT OF APPEALS OF OHIO
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
LITTLE AQUANAUTS, L.L.C., :
Plaintiff-Appellee, :
No. 109594
v. :
MAKOVICH & PUSTI ARCHITECTS,
INC., ET AL., :
Defendants-Appellants. :
JOURNAL ENTRY AND OPINION
JUDGMENT: AFFIRMED
RELEASED AND JOURNALIZED: March 25, 2021
Civil Appeal from the Cuyahoga County Court of Common Pleas
Case No. CV-19-926299
Appearances:
Harvey + Abens, Co., L.P.A., David L. Harvey III, and
Matthew B. Abens, for appellee.
Shumaker, Loop & Kendrick, L.L.P., Nicholas T. Stack,
and Nicholas A. Huckaby, for appellant.
FRANK D. CELEBREZZE, JR., J.:
Appellant Endless Pools, Inc. (“Endless Pools”) challenges the trial
court’s judgment entry denying its motion to compel arbitration or, alternatively,
motion to dismiss with memorandum in support. After a thorough review of the law
and facts, we affirm the judgment of the trial court.
I. Factual and Procedural History
Appellee Little Aquanauts, L.L.C. (“Aquanauts”) is in the business of
teaching water self-rescue training to children. Aquanauts leased space for its
business, but the premises did not have a pool, so Aquanauts looked into installing
an endless pool. In fall 2016, Aquanauts initiated conversations with Endless Pools
regarding purchasing and installing one of their pools. Aquanauts alleged that it
relied on representations made by Endless Pools in selecting a pool design that
would be appropriate for and work in Aquanauts’ premises.
Aquanauts ultimately purchased the pool on Endless Pools’ website. As
part of the finalization process, Aquanauts was given an opportunity to view the
Terms and Conditions of Sale (“Terms and Conditions”) that would apply to the
purchase. The pertinent sections of the Terms and Conditions state as follows:
1. Terms and Conditions:
Any terms and conditions are limited to those contained in these Terms
and Conditions of Sale. By finalizing your order and choosing the I
Accept option, you are agreeing to the terms contained herein. * * *
These Terms and Conditions of Sale constitute the full and entire
agreement between the customer and Endless Pools pertaining to this
sale.
2. Governing Law:
The Laws of the Commonwealth of Pennsylvania will govern this sale
and these Terms and Conditions of Sale between Endless Pools and the
customer without regard to conflicts of laws or rules. Any arbitration or
litigation will be conducted in Delaware County, Pennsylvania. The
customer consents to the jurisdiction of the Federal and State courts
located in Pennsylvania, and submits to the jurisdiction thereof and
dismisses the right to change venue. The customer also consents to the
application of personal jurisdiction by any such court with respect to
such proceeding.
3. Limitation of Liability:
* * * Endless Pools shall not be responsible for any permits, fees,
licenses, and authorizations necessary to comply with local or state
codes or requirements. Endless Pools takes no responsibility for any
site preparation, including, but not limited to, preparing any slab or
foundation. Any Endless Pools product installed above grade must be
placed on a properly engineered structure.
***
6. Disputes:
Any disputes arising under these Terms and Conditions of Sale must be
submitted to binding arbitration before a JAMS arbitrator in
Philadelphia, Pennsylvania. The party in whose favor a judgment is
rendered in arbitration shall be reimbursed for its legal fees and costs
by the other party, in addition to any other damages awarded by the
arbitrator.
Construction and installation of the pool commenced, and, as it was
nearing completion, Aquanauts learned that the Cuyahoga County Board of Health
was required to inspect the pool and corresponding systems. Upon contacting the
Board of Health, Aquanauts was informed that it should have sought the approval
of the Board of Health prior to the pool’s construction and installation. Aquanauts
attempted to submit the paperwork belatedly, but it was rejected. Aquanauts was
informed that its pool was not compliant with the state of Ohio’s regulations.
Aquanauts was never able to use the pool and therefore was never able
to open for business; Aquanauts was forced to vacate its leased space.
Aquanauts filed suit against Endless Pools, along with the architect of
the project and the contractor who installed the endless pool. Pertinent to this
appeal, Aquanauts alleged claims against Endless Pools for negligent
misrepresentation and violation of Ohio’s Deceptive Trade Practices Act.
Endless Pools moved to compel arbitration or, in the alternative, to
dismiss the case, arguing that Aquanauts had agreed to arbitrate any claims.
Aquanauts opposed the motion, asserting that its claims fell outside of the scope of
the arbitration provision in the Terms and Conditions. The trial court denied
Endless Pools’ motion without analysis. Endless Pools then filed the instant appeal,
raising one assignment of error for our review:
The trial court erred in denying Endless Pools’ motion to dismiss
[Aquanauts’] claims against Endless Pools or, alternatively, to stay the
action and compel [Aquanauts] to re-assert its claims in arbitration.
II. Law and Discussion
This court applies a de novo standard of review when evaluating the
scope of an arbitration agreement, that is, whether a party has agreed to submit a
certain issue to arbitration. Seyfried v. O’Brien, 2017-Ohio-286, 81 N.E.3d 961, ¶ 18
(8th Dist.), citing McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No.
97261, 2012-Ohio-1543, ¶ 7. Any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration. Moses H. Cone Mem. Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 24-25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
Aquanauts does not dispute that it agreed to the Terms and Conditions,
which contained the arbitration provision. Endless Pools argues that the arbitration
provision is broad and covers any dispute “arising from” the Terms and Conditions.
Further, Endless Pools asserts that, even if the arbitration provision were not so all-
encompassing, Aquanauts’ claims would still be covered because Endless Pools
argues that Aquanauts’ claims are for breach of contract, but are creatively pled as
negligent misrepresentation and violation of Ohio’s Deceptive Trade Practices Act.
In addition, Endless Pools contends that Aquanauts’ claims directly
involve a provision from the Terms and Conditions, to wit: “Endless Pools shall not
be responsible for any permits, fees, licenses, and authorizations necessary to
comply with local or state codes or requirements.” Consequently, Endless Pools
maintains that arbitration of Aquanauts’ claims is mandatory.
In opposition, Aquanauts argues that its claims are not subject to the
arbitration provision because, by the very language of the Terms and Conditions, the
arbitration clause is quite narrow. Aquanauts maintains that its claims do not arise
from the Terms and Conditions, but instead are premised upon representations by
Endless Pools that occurred prior to entering the purchase. Aquanauts is not
alleging any issues with the subjects included in the Terms and Conditions. Rather,
its allegations stem from the duty of Endless Pools to communicate, prior to the sale,
correct and relevant information to guide or assist Aquanauts in its business
decision. Aquanauts asserts that Endless Pools’ duty to convey accurate information
about its pools existed independently of the Terms and Conditions.
Ohio recognizes a “strong public policy” in favor of arbitration and the
enforcement of arbitration provisions. Hayes v. Oakridge Home, 122 Ohio St.3d
63, 2009-Ohio-2054, 908 N.E.2d 408, ¶ 15; Taylor Bldg. Corp. of Am. v. Benfield,
117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 24; R.C. 2711.01(A). When
ruling on a motion to compel arbitration, however, the “proper focus” is on whether
the parties actually agreed to arbitrate the matter at issue, i.e., the language and
scope of the arbitration provision, not the general policies of the arbitration statutes.
Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d
1203, ¶ 20.
A “presumption favoring arbitration” arises when a claim in dispute
“falls within the scope of the arbitration provision.” Williams v. Aetna Fin. Co., 83
Ohio St.3d 464, 471, 700 N.E.2d 859 (1998); Taylor Bldg. at ¶ 27; Natale v. Frantz
Ward, L.L.P., 2018-Ohio-1412, 110 N.E.3d 829, ¶ 9 (8th Dist.). Although a party
cannot be compelled to arbitrate a dispute the party has not agreed to submit to
arbitration, Council of Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661,
665, 687 N.E.2d 1352 (1998), “[a]ny doubts regarding arbitrability should be
resolved in favor of arbitration,” Natale at ¶ 9, citing Academy of Medicine of
Cincinnati v. Aetna Health, Inc., 108 Ohio St.3d 185, 2006-Ohio-657, 842 N.E.2d
488, ¶ 14.
The threshold question is whether the parties agreed to arbitrate the
issues. In Aetna Health, Inc., the Supreme Court of Ohio reiterated that the test for
determining the arbitrability of a given dispute involves four rules:
(1) that “‘arbitration is a matter of contract and a party cannot be
required to so submit to arbitration any dispute which he has not
agreed to so submit’”; (2) that the question whether a particular claim
is arbitrable is one of law for the court to decide; (3) that when deciding
whether the parties have agreed to submit a particular claim to
arbitration, a court may not rule on the potential merits of the
underlying claim; and (4) that when a “‘contract contains an arbitration
provision, there is a presumption of arbitrability in the sense that “[a]n
order to arbitrate the particular grievance should not be denied unless
it may be said with positive assurance that the arbitration clause is not
susceptible of an interpretation that covers the asserted dispute.”’”
Id. at ¶ 5, quoting Cohen v. PaineWebber, Inc., 1st Dist. Hamilton No. C-010312,
2002-Ohio-196, ¶ 9, quoting Council of Smaller Ents. at 665-666, citing AT&T
Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643, 650, 106 S.Ct.
1415, 89 L.Ed.2d 648 (1986). ‘“[A] proper method of analysis * * * is to ask if an
action could be maintained without reference to the contract or relationship at issue.
If it could, it is likely outside the scope of the arbitration agreement.”’ Aetna Health,
Inc. at ¶ 6, quoting Fazio v. Lehman Bros., Inc., 340 F.3d 386, 395 (6th Cir.2003).
“[W]hile torts may sometimes be covered by arbitration clauses where
the allegations underlying the claims touch matters covered by the arbitration
agreement, tort claims that may be asserted independently, without reference to the
contract, fall outside of the scope of an arbitration provision.” Arnold v. Burger
King, 2015-Ohio-4485, 48 N.E.3d 69, ¶ 32 (8th Dist.), citing Fazio at ¶ 6; see also
Complete Personnel Logistics, Inc. v. Patton, 8th Dist. Cuyahoga No. 86857, 2006-
Ohio-3356, ¶ 15 (“[T]ort claims that may be asserted independently, without
reference to the contract, fall outside the scope of the arbitration provision.”).
We agree with Aquanauts that the arbitration provision in this matter
is narrow in scope and covers solely disputes “arising under these Terms and
Conditions of Sale.” The document containing the Terms and Conditions is brief
and only addresses the following areas: Aquanauts’ acceptance and the extent of the
terms and conditions contained therein, the governing law, limitation of liability,
payments, international shipments, and disputes.
Aquanauts’ claims allege that Endless Pools represented that the
selected pool would comply with all applicable codes and laws, that Endless Pools
supplied false information regarding the suitability and appropriateness of its
product for Aquanauts’ space, and that the pool was of a particular standard and
quality necessary for approval which it, in fact, was not. The Terms and Conditions
do not contain any information relating to the sale or specifics regarding the pool,
and as such, do not pertain to the claims alleged by Aquanauts. Accordingly,
Aquanauts’ claims can be asserted without any reference to the Terms and
Conditions.
Endless Pools argues that Aquanauts’ claim that Endless Pools
represented that the pool would be installed according to all applicable codes and
laws directly implicates Section 3 of the Terms and Conditions, “Limitation of
Liability” (“Endless Pools shall not be responsible for any permits, fees, licenses, and
authorizations necessary to comply with local or state codes or requirements.”).
However, Endless Pools’ argument is misplaced. Aquanauts’ claims are not alleging
that Endless Pools failed to obtain a permit, fee, license, or authorization, and thus
do not fall under the asserted provision.
Finally, Endless Pools’ argument that the parties agreed to submit any
issue of arbitrability to the arbitrator is without merit. “‘Unless the parties clearly
and unmistakably provide otherwise, the question of whether the parties agreed to
arbitrate is to be decided by the court, not the arbitrator.’” Pappas v. Richmond
Towers L.L.C., 8th Dist. Cuyahoga No. 94558, 2011-Ohio-5249, ¶ 14, quoting
Belmont County Sheriff v. FOP, Ohio Labor Council, Inc., 104 Ohio St.3d 568,
2004-Ohio-7106, 820 N.E.2d 918, ¶ 13, citing Council of Smaller Ents., 80 Ohio
St.3d at 666, 687 N.E.2d 1352.
Endless Pools argues that Aquanauts agreed to have the arbitrator
determine the issue of arbitrability because the arbitration clause provides that
dispute will be submitted to a JAMS arbitrator, and JAMS’ rules state that such
questions shall be determined by the arbitrator, but this is insufficient. Any
agreement for arbitrability to be decided by the arbitrator rather than the court must
be spelled out in the arbitration clause itself. See Pappas at ¶ 16. The arbitration
clause in the Terms and Conditions is silent as to jurisdiction; accordingly, the
parties did not unmistakably provide that the issue of arbitrability was to be
determined by the arbitrator. The issue was therefore properly determined by the
court.
The trial court properly denied the motion to compel arbitration, and
Endless Pools’ assignment of error is overruled.
III. Conclusion
Aquanauts’ claims do not fall within the scope of the arbitration
clause. Thus, the trial court did not err in denying Endless Pools’ motion to compel
arbitration or, alternatively, motion to dismiss. Endless Pools’ sole assignment of
error is overruled, and the judgment of the trial court is affirmed.
Judgment affirmed.
It is ordered that appellee recover from appellant 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.
FRANK D. CELEBREZZE, JR., JUDGE
ANITA LASTER MAYS, P.J., and
KATHLEEN ANN KEOUGH, J., CONCUR