Hughes v. Hughes

2020 Ohio 4882, 160 N.E.3d 424

Opinion

[Cite as Hughes v. Hughes, 2020-Ohio-4882.]

IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT MARION COUNTY

MARTIN J. HUGHES, III,

PLAINTIFF-APPELLANT, CASE NO. 9-19-88

v.

CARL F. HUGHES, OPINION DEFENDANT-APPELLEE.

Appeal from Marion County Common Pleas Court Trial Court No. 19CV0605

Judgment Affirmed

Date of Decision: October 13, 2020

APPEARANCES:

Julia B. Meister for Appellant

Christopher J. Hogan for Appellee Case No. 9-19-88

PRESTON, J.

{¶1} Plaintiff-appellant, Martin J. Hughes, III (“Martin”), appeals the

December 10, 2019 decision of the Marion County Court of Common Pleas

dismissing his motion to vacate an arbitrator’s award. For the reasons that follow,

we affirm.

{¶2} This case arises from a dispute concerning the right to vote certain

shares in the Fahey Banking Company (“Fahey”). Martin and defendant-appellee,

Carl F. Hughes (“Carl”), are the surviving sons of Natalie Hughes (“Natalie”). At

one time, Natalie held a majority of the shares of Fahey common stock. In January

2004, Natalie was the record holder of 10,669 shares of Fahey common stock, which

represented approximately 54.72 percent of the outstanding shares of Fahey

common stock as of November 25, 2003. (Doc. No. 1, Ex. B). Natalie also

possessed a beneficial interest in additional shares of Fahey common stock as well

as potential voting rights arising from a number of proxy agreements. (Id.).

{¶3} On January 15, 2004, Martin, Carl, and Natalie entered into a Revised

and Restated Irrevocable Stockholder’s Agreement and Proxy (“RISAP”). (Id.).

Under the terms of the RISAP, Martin and Carl were irrevocably appointed to serve

as Natalie’s proxies, and each was given the right to vote one-half of the “Subject

Shares,” which were defined as “all shares of Fahey common stock that [Natalie]

beneficially own[ed] or otherwise [had] voting control over as of [January 15,

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2004],” “any shares or voting rights of Fahey common stock that [Natalie] [held]

after [January 15, 2004],” “any other shares of voting securities or voting rights over

such shares of voting securities that [Natalie] [acquired] after [January 15, 2004],”

and “any shares of voting stock or voting rights over such shares that result from the

exchange or conversion of Fahey voting securities beneficially owned by [Natalie]

or for which [Natalie] [held] voting rights after [January 15, 2004].” (Id.). In the

event that the Subject Shares were uneven in number, Carl was appointed Natalie’s

proxy “to vote a number of Subject Shares that is one greater than the number of

Subject Shares as to which [Martin] holds a proxy * * *.” (Id.). Furthermore, if

either Martin or Carl became unable to vote their Subject Shares “due to death or

incapacity,” the other was appointed Natalie’s proxy to vote all of the Subject

Shares. (Id.).

{¶4} In addition, the RISAP contained provisions governing the transfer of

the Subject Shares and the effect that any such transfer would have on the proxies

granted to Martin and Carl. Under the RISAP, if Natalie desired to transfer any of

the Subject Shares that she owned to any person other than Martin, Carl, or another

of her descendants, Natalie was required to furnish Martin and Carl with a notice of

her intention to transfer. (Id.). After receiving such notice, Martin and Carl would

have 30 days to exercise a right of first refusal, under which Martin and Carl were

entitled to purchase the Subject Shares “on a pro rata basis in proportion to the

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respective number of Subject Shares over which [they] [held] an irrevocable proxy

pursuant to [the RISAP].” (Id.). In the event that Martin and Carl did not elect to

purchase the Subject Shares, Natalie could proceed to transfer the Subject Shares as

intended, provided that “any such transferee w[ould] succeed to all of the rights and

obligations of [Natalie] [under the RISAP] with respect to the Subject Shares, and

no such transfer of Subject Shares [could] be effected unless the transferee * * *

executed and delivered to [Martin, Carl, and Natalie] an agreement to be bound by

all of the terms and provisions [of the RISAP].” (Id.). However, the RISAP

provided that “[n]otwithstanding anything * * * to the contrary, [Natalie] [could]

transfer Subject Shares to any Family Member or other descendant of [Natalie]

without complying [with the notice and right-of-first-refusal provisions]. Upon the

transfer of any Subject Shares to any Family Member, such shares w[ould] cease to

constitute Subject Shares for purposes of [the RISAP].” (Id.). Martin and Carl were

each defined in the RISAP as a “Family Member” and collectively as “Family

Members.” (Id.).

{¶5} Finally, the RISAP contained an arbitration clause. Under this

provision, Martin, Carl, and Natalie “agree[d] that any and all disputes, claims or

controversies arising out of or relating to [the RISAP] that are not resolved by * * *

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mutual agreement shall be submitted to final and binding arbitration before JAMS

* * *.”1 (Doc. No. 1, Ex. B).

{¶6} In May 2005, after Martin, Carl, and Natalie had entered into the

RISAP, Natalie created the “Natalie A. Hughes 2005 Trust” (the “Trust”), which

she amended several times, including on July 8, 2017. (See Doc. No. 17, Ex. C). In

the document creating the Trust (the “Trust Agreement”), Natalie was designated as

the original trustee. (Id.). The Trust Agreement specified that if Natalie ceased to

act as trustee, Martin and Carl would proceed to act as successor co-trustees. (Id.).

Moreover, the Trust Agreement provided that “[i]f either Carl or Martin is unable,

fails, or ceases to act as trustee, then the other shall act as sole trustee without the

execution of any further instrument.” (Id.).

{¶7} At some point, a substantial portion of Natalie’s Fahey interests was

transferred to the Trust. (See Doc. No. 1, Exs. D, F). The Trust Agreement

contained a provision directing how these interests were to be distributed, which

provided, in relevant part:

This provision governs the disposition of all my rights and interests in

[Fahey], * * * shares of common stock owned by me or for my benefit

and any shares of [Fahey] common stock which I hold the option to

1 Although now known only as JAMS, at its founding, JAMS was an acronym for Judicial Arbitration and Mediation Services, Inc. JAMS, What does JAMS stand for?, https://www.jamsadr.com/about-the-jams- name/ (accessed October 5, 2020).

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acquire and/or vote (collectively “Fahey Bank Interests”). All my

Fahey Bank Interests are subject to the terms and conditions of [the

RISAP] * * *, which contains restrictions on the transferability of my

Fahey Bank Interests.

For purposes of administering the disposition of my Fahey Bank

Interests hereunder, my intention and desire is Carl, Martin[,] and

[Natalie’s predeceased son, Paul Hughes’s] collective descendants

each receive one-third of my Fahey Bank Interests * * *.

* * * [T]he Trustee shall distribute one-third of my Fahey Bank

Interests to each of Carl and Martin and shall continue to hold the

remaining one third of my Fahey Bank Interests in trust for the benefit

of [Paul Hughes’s children] * * *. Effective as of my date of death,

for purposes of clarification, I desire and intend that the one-third

shares of my Fahey Bank Interests distributable to Carl and Martin no

longer constitute “Subject Shares” as that term is defined in the

[RISAP].

(Doc. No. 17, Ex. C). Finally, like the RISAP, the Trust Agreement contained an

arbitration clause. (Id.).

{¶8} Natalie died on July 13, 2017. (Doc. No. 1, Ex. D). Thereafter,

pursuant to the terms of the Trust Agreement, Martin and Carl began serving as co-

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trustees. (See id.). However, disputes soon arose between Martin, Carl, and other

interested parties concerning the administration of the Trust and the distribution of

Trust property. (See id.). Among other claims, it was alleged that Carl violated his

fiduciary duties by delaying the distribution of Fahey stock to the beneficiaries of

the Trust in contravention of Natalie’s wishes. (See id.). As dictated by the terms

of the Trust Agreement, this matter and others were submitted to binding arbitration.

(Id.). On October 25, 2018, the trust arbitrator issued his decision, in which he

concluded that Carl’s failure to advance the administration of the Trust constituted

a material breach of trust. (Id.). As a result, the trust arbitrator ordered that Carl be

suspended as co-trustee of the Trust for 90 days, effective November 1, 2018, and

that “Martin * * * serve as sole trustee with full power and authority” during the

duration of Carl’s suspension. (Id.).

{¶9} Shortly thereafter, on November 19, 2018, the 2018 annual Fahey

shareholder meeting was held. (Doc. No. 1, Exs. E, F). At the meeting, Martin and

his associates voted to appoint three inspectors of elections. (See Doc. No. 1); (See

Doc. No. 8, Ex. D). Martin claimed that he himself controlled a majority of the

voting rights present at the meeting and that, along with the votes of his supporters,

there was a clear majority in favor of appointing his preferred inspectors of

elections. (See Doc. No. 1); (See Doc. No. 8, Ex. D). Yet, Carl and Fahey refused

to recognize the inspectors that Martin and his faction of shareholders voted to

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appoint. (See Doc. No. 1); (See Doc. No. 8, Ex. D). Instead, Carl and his allied

shareholders moved to proceed with an inspector of elections they had appointed

prior to the meeting. (See Doc. No. 1, Ex. F); (See Doc. No. 8, Ex. D). Moreover,

despite Martin’s objections and his demand that the meeting be adjourned, Carl and

his faction of shareholders continued to conduct bank business. (See Doc. No. 1,

Ex. F); (See Doc. No. 8, Ex. D). According to Martin, at the shareholder meeting,

there was no record taken of the number of shares present or of who could vote the

shares, and the results of the elections were not announced. (Doc. No. 1).

{¶10} As a result of Carl’s attempt to install his own preferred inspector of

elections and his continuation of Fahey business over Martin’s objections and

requests for adjournment, Martin filed a complaint requesting that the trial court

issue a temporary restraining order (“TRO”) and an injunction against Fahey and its

chief operating officer. (See Doc. No. 1, Exs. E, F). Carl was not named as a

defendant in the action, and although Carl attempted to intervene, he was

unsuccessful. (See Doc. No. 1); (See Doc. No. 8, Exs. A, B). However, Martin

contends that Carl “direct[ed] [Fahey’s] litigation positions as [Fahey’s] then-

President and CEO, and ha[d] his personal counsel present through the proceedings

* * *.” (Doc. No. 1). On November 20, 2018, the trial court granted Martin’s

request for a TRO, finding that “allowing certification of the results of an annual

meeting of shareholders when it is doubtful that a proper inspector of elections has

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been appointed, and the denial of access to corporate records, amounts to

suppression of shareholder rights and irreparable harm.” (Doc. No. 1, Ex. E).

Accordingly, the trial court ordered that the election results from the 2018 annual

shareholder meeting not be certified until further court order, that the 2018 annual

shareholder meeting be held in adjournment until further court order, and that Fahey

immediately produce certain records requested by Martin. (Id.). Nevertheless, on

December 2, 2018, the inspector of elections appointed by Carl and his associates

certified the election results from the 2018 annual shareholder meeting. (Doc. No.

1, Ex. F).

{¶11} On December 3, 2018, the trial court held a hearing on Martin’s

request for a preliminary injunction. (Id.). On December 20, 2018, the trial court

granted Martin’s request and issued a preliminary injunction. (Id.). The trial court

observed that Martin’s claim for injunctive relief was based on his assertion that the

annual meeting should have been adjourned until there was a determination whether

there were sufficient votes to pass his motion to appoint his preferred inspectors.

(Id.). The trial court also noted Martin’s contention that he “had sufficient votes

directly, as trustee [of trusts other than the Trust], and by proxy, to constitute a

majority of shareholder votes at the meeting, and that he had the authority to vote

4,389 shares as trustee for [the Trust], pursuant to [the trust] arbitrator’s decision

issued on October 25, 2018.” (Id.).

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{¶12} The trial court agreed with Martin. The trial court stated that under

normal circumstances, the RISAP enabled Martin and Carl to each vote one-half of

the Fahey shares held in the Trust. (Id.). However, it found that “things were not

normal as of the time of the November 19, 2018 annual meeting, as Carl * * * was

suspended as trustee of the Trust on the date of the annual meeting pursuant to the

[trust] arbitrator’s decision.” (Id.). The trial court concluded that “[a]s a result of

the [trust arbitrator’s] decision, Carl * * * was under a legal disability from voting

the Subject Shares under the RISAP proxy agreement.” (Id.). Furthermore, the trial

court concluded that “[w]ith Carl * * * being under incapacity to vote the Subject

Shares, under the provisions of * * * the RISAP, Martin * * * was granted the

authority under the RISAP to vote all of the Subject Shares of the [Trust].” (Id.).

{¶13} Having concluded that Martin had the right to vote all of the shares of

Fahey stock held in the Trust on the date of the 2018 annual meeting, the trial court

further held that Martin would have controlled a majority of the votes at the 2018

annual meeting and that, consequently, the inspector appointed by Carl’s faction did

not correctly count the number of votes that Martin was authorized to cast at the

2018 annual meeting. (Doc. No. 1, Ex. F). As a result, the trial court vacated the

December 2, 2018 certification of the results of the 2018 annual meeting, ordered

that the 2018 annual meeting be held in adjournment and rescheduled, and ordered

that, at the rescheduled meeting, a majority of shareholders present and entitled to

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vote appoint three inspectors of elections before proceeding to conduct ordinary

business. (Id.).

{¶14} The rescheduled 2018 annual meeting was held on January 10, 2019.

At the meeting, Martin succeeded in voting all of the Fahey shares held in the Trust.

(See Doc. No. 1, Ex. A). The shareholders elected new directors, and Martin became

the President of Fahey. (See Doc. No. 1, Ex. C). On January 15, 2019, Martin

voluntarily dismissed the injunction action. (See Doc. No. 8, Ex. C).

{¶15} While Martin and Carl were arbitrating their Trust disputes and

litigating the handling of the 2018 annual shareholder meeting, a second arbitration

between Martin and Carl was slowly moving forward. On February 2, 2018, Martin

submitted a demand for JAMS arbitration in accordance with the terms of the

RISAP. (Doc. No. 17, Ex. A). Martin demanded arbitration “to determine the

voting rights regarding certain shares of stock (including options and proxies

relating to stock) in the Fahey Banking Company under the [RISAP] * * *.” (Id.).

Later, Martin clarified that the dispute arose after Carl “apparently caused the

improper voting” of the Subject Shares and “caused Fahey * * * to prevent the

shareholders from knowing how the shares were voted.” (Doc. No. 17, Ex. B).

Martin sought “a declaration that [certain shares] [were] Subject Shares under the

[RISAP] and that [he] and Carl [were] each entitled to vote half of these shares.”

(Id.). After the trial court issued the preliminary injunction, Carl “filed an

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‘emergency motion’ with the JAMS arbitrator * * * demand[ing] declaratory relief

about the allocation of voting rights under the RISAP.” (Doc. No. 1). Specifically,

Carl sought “a declaration * * * that all of the shares in [Fahey] transferred into [the

Trust] are subject to the terms of the RISAP thereby granting Martin fifty percent

of the voting rights to such shares and Carl fifty percent of the voting rights to such

shares * * *.” (Doc. No. 1, Ex. A).

{¶16} The JAMS arbitrator issued his decision on September 5, 2019. (Id.).

First, the JAMS arbitrator observed that Martin “alleged that both he and * * * Carl

had signed the RISAP in their ‘individual capacities’” and found that a reading of

the RISAP “confirms this fact.” (Id.). In addition, the JAMS arbitrator noted both

the trial court’s determination that “because Carl was suspended from his duties as

a trustee of [the Trust], he was thus somehow under an incapacity to exercise his

voting rights under the RISAP” and the fact that Carl was not a party to the

injunction action “despite an application (ultimately unsuccessful) to intervene.”

(Id.).

{¶17} After laying out this background information, the JAMS arbitrator

made the following findings:

The determination of the [trial court] in the case to which * * * Carl *

* * was not a party was simply in error. As * * * Martin * * * himself

alleged at the beginning of this arbitration, equal voting rights to his

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mother’s shares of stock in [Fahey] were granted to him and his

brother in their individual capacities by virtue of the 2004 RISAP.

Those voting rights were assigned to and thus owned by both Martin

and Carl in their individual capacities as of January 15, 2004. Any

subsequent transfer of the shares by Natalie * * * into the [Trust]

would have meant that the shares so transferred were “stripped” of

their voting rights by virtue of the 2004 RISAP. Indeed, a July 8, 2017

Amendment and Restatement of the Trust * * * expressly states that

all of her interests in Fahey Bank stock “are subject to the terms and

conditions of the [2004 RISAP].” Carl’s status as a temporarily

suspended trustee of [the Trust] had nothing whatsoever to do with his

rights under the 2004 RISAP to vote half of his mother’s shares as he

wished. The [trial court] clearly conflated the issue of ownership of

the shares by the Trust (stripped as they were of their voting rights in

2004) with the separately assigned voting rights which were

individually owned by Martin and Carl and not in any way assets of

the Trust. Carl’s suspension as a trustee was simply irrelevant to the

issue of his voting rights.

Even if the language of the 2017 Amendment and Restatement of the

[Trust] wasn’t clear and unambiguous, which it patently is, Martin’s

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current opposition to [Carl’s] application would violate the principal

[sic] of judicial estoppel.

(Id.). Furthermore, the JAMS arbitrator addressed Martin’s argument that “any

transfer of Fahey Bank stock out of [the Trust] effects a removal of such transferred

stock from the voting rights provisions of the RISAP which allocates the voting

rights 50 percent to him and 50 percent to his brother.” (Id.). The JAMS arbitrator

concluded:

This argument misconstrues the plain language of the RISAP. * * *

[T]he RISAP permitted Natalie to transfer shares “to any Family

Member” (Family Member having been previously defined as Carl

and Martin) or other descendant of Natalie without complying with a

right of first refusal to purchase the shares [previously] granted to Carl

and Martin * * *. In the event of such a transfer, the shares would no

longer constitute “Subject Shares” governed by the voting rights

provisions of the RISAP. * * * However, any remaining Fahey Bank

stock owned by Natalie became a trust asset upon her death and any

subsequent transfers of such stock out of the trust after her death

simply do not constitute transfers by her under * * * the RISAP.

Stated differently, any stock transferred out of the Trust would still be

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subject to the voting rights restriction of the RISAP, something which,

as aforesaid, the Trust itself expressly recognized.

{¶18} Based on these findings and conclusions, the JAMS arbitrator issued

the following award:

(1) The voting rights as to all shares in [Fahey], now held or

previously held, by [the Trust] are controlled by the terms of the

[RISAP], which grants Martin * * * 50 percent and Carl * * * 50

percent (plus one, in the event of an uneven number of such shares)

of such voting rights;

(2) The voting rights established under the RISAP were not and

cannot be impacted by Carl’s temporary suspension as a co-trustee of

the [Trust];

(3) That only a direct transfer of shares from Natalie * * * during

her life to Carl, Martin, or any of her descendants is sufficient to

remove said shares from the “Subject Shares” designation under the

RISAP[.]

(Doc. No. 1, Ex. A).

{¶19} On September 20, 2019, Martin filed a “Complaint and Petition to

Vacate Arbitration Award and for Injunctive Relief,” in which he sought an order

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vacating the JAMS arbitrator’s award.2 (Doc. No. 1). Martin argued that the JAMS

arbitrator exceeded his authority by “overturn[ing] an explicit decision from [the

trial court]” and “tr[ying] to impose his own interpretation of a document never

within the scope of his authority—i.e., he interpreted the [Trust Agreement].” (Id.).

On October 4, 2019, Carl filed a memorandum in opposition to Martin’s motion.

(Doc. No. 8). On November 25, 2019, Martin filed a reply brief in support of his

motion. (Doc. No. 17). In his reply brief, Martin put forward the additional

argument that the JAMS arbitrator’s award should be vacated because the JAMS

arbitrator misapplied the doctrine of judicial estoppel. (See id.). On December 10,

2019, the trial court dismissed Martin’s motion with prejudice. (Doc. No. 18). The

trial court concluded that its earlier ruling in the injunction action “did not foreclose

Carl from seeking a determination of rights through the JAMS arbitrator.” (Id.). It

also held that because the “arbitrator’s finding can be found squarely in the RISAP”

and the JAMS arbitrator was “just applying clear law,” the JAMS arbitrator did “not

exceed[] his authority in this matter.” (Id.). However, the trial court did not make

any findings responsive to Martin’s argument that the JAMS arbitrator misapplied

the doctrine of judicial estoppel. (See id.).

2 The same day, Carl filed a separate application to confirm the JAMS arbitrator’s award in the Franklin County Court of Common Pleas. (Appellant’s Brief at 2); (Appellee’s Brief at 6). On December 17, 2019, the Franklin County court, relying on the trial court’s ruling to dismiss Martin’s motion to vacate the JAMS arbitrator’s award, granted Carl’s application to confirm the award. (Appellant’s Brief at 2); (Appellee’s Brief at 6). An appeal from that decision is currently pending before the Tenth District Court of Appeals. (Appellant’s Brief at 2); (Appellee’s Brief at 6).

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{¶20} On December 18, 2019, Martin filed a notice of appeal. (Doc. No.

20). He raises one assignment of error for our review.

Assignment of Error

The trial court below erred in denying Martin’s application to vacate the JAMS award.

{¶21} In his assignment of error, Martin argues that the trial court erred by

dismissing his motion to vacate the JAMS arbitrator’s award. Martin argues that

there are two independent grounds supporting vacation of the JAMS arbitrator’s

award. First, Martin contends that the JAMS arbitrator’s award should be vacated

because “[t]he arbitrator exceeded his authority by making findings as to the Trust

Agreement—a document over which he lacked authority to arbitrate disputes—

which led him to effectively overrule a decision by an Ohio court.” (Appellant’s

Brief at 7). In addition, Martin maintains that the JAMS arbitrator’s award should

be vacated because “[t]he arbitrator manifestly misapplied the law of judicial

estoppel.” (Id.).

{¶22} “[W]hen 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.” Portage Cty. Bd. of Dev. Disabilities v. Portage Cty. Educators’ Assn. for

Dev. Disabilities, 153 Ohio St.3d 219, 2018-Ohio-1590, ¶ 26. “[H]owever, * * *

our review is not a de novo review of the merits of the dispute as presented to the

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arbitrator.” Adams Cty./Ohio Valley Local School v. OAPSE/AFSCME, Local 572,

4th Dist. Adams No. 16CA1034, 2017-Ohio-6929, ¶ 18, citing Jackson Cty. Sheriff

v. Fraternal Order of Police Ohio Labor Council, Inc., 4th Dist. Jackson No.

02CA15, 2004-Ohio-3535, ¶ 19-20. Instead, we review a trial court’s decision

whether to vacate an arbitration award “de novo to see whether any of the statutory

grounds for vacating [the] award exist.” Id.

{¶23} The statutory grounds for vacating an arbitrator’s award are contained

in R.C. 2711.10.3 As relevant here, R.C. 2711.10 provides that “the court of

common pleas shall make an order vacating the award upon the application of any

party to the arbitration if * * * [t]he arbitrators exceeded their powers * * *.” R.C.

2711.10(D). “‘[T]he question whether an arbitrator has exceeded his authority is a

question of law.’” Portage Cty. at ¶ 25, quoting Green v. Ameritech Corp., 200 F.3d

967, 974 (6th Cir.2000).

{¶24} “Once an arbitrator has made an award, it cannot be easily overturned

* * *.” Fraternal Order of Police Capital City Lodge No. 9 v. Reynoldsburg, 10th

Dist. Franklin Nos. 12AP-451 and 12AP-452, 2013-Ohio-1057, ¶ 23, citing Queen

3 Throughout the trial court proceedings, Martin asserted that vacation of the JAMS arbitrator’s award is also warranted under R.C. 2711.11. (E.g., Doc. No. 17). Martin makes the same assertion on appeal. (Appellant’s Brief at 7-8). However, R.C. 2711.11 provides only that a court “shall make an order modifying or correcting the award” if any one of three conditions is found to exist. (Emphasis added.) R.C. 2711.11. By its terms, R.C. 2711.11 does not allow for the vacation of an arbitrator’s award on the basis of any of the grounds listed therein. In his trial court filings and in his appellate briefs, Martin never requests that the JAMS arbitrator’s award be modified or corrected in any respect. Rather, Martin requests only that the JAMS arbitrator’s award be vacated. (Doc. Nos. 1, 17); (Appellant’s Brief at 16). Accordingly, we limit our analysis to R.C. 2711.10, which supplies the sole statutory grounds for vacating an arbitrator’s award.

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City Lodge No. 69, Fraternal Order of Police v. Cincinnati, 63 Ohio St.3d 403, 407

(1992); see Cedar Fair, L.P. v. Falfas, 140 Ohio St.3d 447, 2014-Ohio-3943, ¶ 5

(“[T]he statutory authority of courts to vacate an arbitrator’s award is extremely

limited.”). “Reviewing courts cannot review claims of factual or legal error with

respect to the exercise of an arbitrator’s powers.” Summit Cty. Sheriff v. Fraternal

Order of Police, 9th Dist. Summit No. 28019, 2017-Ohio-72, ¶ 8, citing Martins

Ferry City School Dist. Bd. of Edn. v. Ohio Assn. of Pub. School Emps., 7th Dist.

Belmont No. 12 BE 15, 2013-Ohio-2954, ¶ 18. “‘“As long as the arbitrator is even

arguably construing or applying the contract and acting within the scope of his

authority, that a court is convinced he committed serious error does not suffice to

overturn his decision.”’” Id., quoting Summit Cty. Bd. of Mental Retardation &

Dev. Disabilities v. Am. Fed. of State, Cty. & Mun. Emps., 39 Ohio App.3d 175, 176

(9th Dist.1988), quoting United Paperworkers Internatl. Union, AFL-CIO v. Misco,

Inc., 484 U.S. 29, 38, 108 S.Ct. 364 (1987); Cedar Fair at ¶ 6, quoting Stolt-Nielsen,

S.A. v. AnimalFeeds Internatl. Corp., 559 U.S. 662, 671, 130 S.Ct. 1758 (2010).

“Generally, if the arbitrator’s award is based on the language and requirements of

the agreement, the arbitrator has not exceeded his powers.” Northwest State

Community College v. Northwest State Community College Edn. Assn. OEA/NEA,

3d Dist. Henry No. 7-16-11, 2016-Ohio-8393, ¶ 33, citing Bd. of Trustees of Miami

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Twp. v. Fraternal Order of Police, Ohio Labor Council, Inc., 81 Ohio St.3d 269,

273 (1998).

{¶25} Yet, arbitrators do not possess boundless authority to interpret and

enforce the parties’ contract. Because “[t]he authority of an arbitrator to interpret

and enforce a contract is drawn from the contract itself, * * * ‘an arbitrator’s

authority is limited to that granted him by the contracting parties * * *.’” Cedar

Fair at ¶ 5, quoting Goodyear Tire & Rubber Co. v. Local Union No. 200, United

Rubber, Cork, Linoleum & Plastic Workers of Am., 42 Ohio St.2d 516, 519 (1975).

“‘“[A]n arbitrator is confined to interpretation and application of the [contract]; he

does not sit to dispense his own brand of industrial justice.”’” Id. at ¶ 7, quoting

Ohio Office of Collective Bargaining v. Ohio Civil Serv. Emps. Assn., Local 11,

AFSCME, AFL-CIO, 59 Ohio St.3d 177, 180 (1991), quoting United Steelworkers

of Am. v. Ent. Wheel & Car Corp., 363 U.S. 593, 597, 80 S.Ct. 1358 (1960).

{¶26} Though an arbitrator’s authority is frequently expansive, he exceeds it

“‘if the award does not draw its essence from the * * * agreement.’” Adams

Cty./Ohio Valley Local School, 2017-Ohio-6929, at ¶ 20, quoting Reynoldsburg at

¶ 23, citing Queen City Lodge No. 69 at 406. “An arbitrator’s award draws its

essence from a[n] * * * agreement ‘when there is a rational nexus between the

agreement and the award, and where the award is not arbitrary, capricious, or

unlawful.’” Id., quoting Reynoldsburg at ¶ 23, citing Mahoning Cty. Bd. of Mental

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Retardation & Dev. Disabilities v. Mahoning Cty. TMR Edn. Assn., 22 Ohio St.3d

80 (1986), paragraph one of the syllabus. Stated differently, “[a]n arbitrator’s award

draws its essence from an agreement when (1) the award does not conflict with the

express terms of the agreement and (2) the award has rational support or can be

rationally derived from the terms of the agreement.” Northwest State at ¶ 33, citing

Ohio Civil Serv. Emps. Assn., Local 11 at syllabus. “Once it is determined that the

arbitrator’s award draws its essence from the * * * agreement and is not unlawful,

arbitrary or capricious, a reviewing court’s inquiry for purposes of vacating an

arbitrator’s award pursuant to R.C. 2711.10(D) is at an end.” Bd. of Edn. of the

Findlay City School Dist. v. Findlay Edn. Assn., 49 Ohio St.3d 129 (1990),

paragraph two of the syllabus.

{¶27} As stated above, Martin advances two arguments for why the JAMS

arbitrator’s award should be vacated. We begin with Martin’s first argument,

namely, that the JAMS arbitrator exceeded his authority by interpreting the Trust

Agreement, a document he had no power to interpret, in a way that conflicts with a

prior decision of the trial court. Martin notes that under the terms of the RISAP, the

JAMS arbitrator “had the authority to interpret the RISAP—and only the RISAP.”

(Appellant’s Brief at 8). Martin maintains, however, that the JAMS arbitrator

“decided that he had the extraordinary power to interpret the Trust Agreement” and

that the only way the JAMS arbitrator could reach some of his conclusions was by

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“interpreting the Trust Agreement and determining which shares the Trust

Agreement left subject to the RISAP.” (Id. at 9-10). Martin finds evidence for his

claim that the JAMS arbitrator “relied on the Trust Agreement” in the JAMS

arbitrator’s “opin[ion] on whether ‘the language of the [Trust Agreement]’ was

ambiguous” and in other references to the Trust Agreement throughout the JAMS

arbitrator’s decision. (Id. at 10); (Appellant’s Reply Brief at 4).

{¶28} Martin is at least correct that, throughout his decision, the JAMS

arbitrator repeatedly referred to the Trust Agreement, quoted some of the language

contained in the Trust Agreement, and commented on the clarity of the language in

the Trust Agreement. For example, the JAMS arbitrator quoted the Trust

Agreement for the proposition that all of Natalie’s interests in Fahey were subject

to the terms and conditions of the RISAP. (Doc. No. 1, Ex. A). Furthermore, the

JAMS arbitrator opined that the terms of the Trust Agreement were “patently”

“clear and unambiguous” and that the Trust Agreement “expressly recognized” that

“any stock transferred out of the [Trust] would still be subject to the voting rights

restriction of the RISAP.” (Id.).

{¶29} Nevertheless, we disagree with Martin’s contention that these

references signal that the JAMS arbitrator improperly interpreted the Trust

Agreement, and we further disagree with Martin that the outcome reached by the

JAMS arbitrator was possible only if the JAMS arbitrator construed the RISAP

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together with the Trust Agreement. While we stop short of saying that the JAMS

arbitrator’s references to and opinions about the Trust Agreement were entirely

appropriate, upon reading the JAMS arbitrator’s decision as a whole, it is clear that

the award was not derived from the JAMS arbitrator’s interpretation and application

of the terms of the Trust Agreement. Instead, the JAMS arbitrator’s award was

based on his personal interpretation and application of the RISAP; his citations to

the Trust Agreement simply served to reinforce conclusions he drew by interpreting

the RISAP independently from the Trust Agreement.

{¶30} One excerpt from the award, quoted in full above, is illustrative on this

point. This passage reads, “Any subsequent transfer of the shares by Natalie * * *

into the [Trust] would have meant that the shares so transferred were ‘stripped’ of

their voting rights by virtue of the 2004 RISAP. Indeed, a July 8, 2017 Amendment

and Restatement of the Trust * * * expressly states that all of her interests in Fahey

Bank stock ‘are subject to the terms and conditions of the [2004 RISAP].’” (Doc.

No. 1, Ex. A). In the first sentence, the JAMS arbitrator relied on the terms of the

RISAP to determine how Natalie’s transfer of shares to the Trust affected the voting

rights established under the RISAP, and the subsequent quotation from the Trust

Agreement in the second sentence was offered only to bolster that conclusion.

Hence, this passage supports that, insofar as the JAMS arbitrator looked to the Trust

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Agreement, he did so only to confirm what he had already concluded from the

RISAP itself.

{¶31} This conclusion can also be drawn from the section of the award in

which the JAMS arbitrator stated that the Trust Agreement “expressly recognized”

that any shares of Fahey stock transferred out of the Trust would still be subject to

the RISAP. Immediately prior to making this comment about the Trust Agreement,

the JAMS arbitrator engaged in a construction and application of the RISAP, which

he concluded by stating that “any subsequent transfers of [Fahey] stock out of the

[Trust] after [Natalie’s] death simply do not constitute transfers by her under

paragraph 3(b) of the RISAP” that would remove such shares from the voting rights

provisions of the RISAP. (Id.). Again, the JAMS arbitrator referred to the Trust

Agreement only after he separately interpreted and applied the RISAP.

{¶32} Moreover, contrary to Martin’s assertion, we do not believe that we

can infer that the JAMS arbitrator was interpreting the Trust Agreement from his

statement that the Trust Agreement was “clear and unambiguous.” A statement that

the terms of a document are clear and unambiguous cuts against an inference that

the statement-maker interpreted the document because there is no need to interpret

unambiguous language. Regardless, when the JAMS arbitrator commented that the

language of the Trust Agreement was clear and unambiguous, he was plainly

referring to the part of the Trust Agreement providing that Natalie’s Fahey interests

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were “subject to the terms and conditions of the [2004 RISAP],” which, again, was

not the linchpin of the JAMS arbitrator’s award. (See id.).

{¶33} Finally, we find further evidence for the conclusion that the JAMS

arbitrator was not interpreting the Trust Agreement or construing the RISAP and

Trust Agreement together in the JAMS arbitrator’s apparent disregard of the term

of the Trust Agreement providing that “[e]ffective as of [the date of Natalie’s death],

* * * the one-third shares of * * * Fahey Bank Interests distributable to Carl and

Martin no longer constitute ‘Subject Shares’ as that term is defined in the [RISAP].”

(Doc. No. 17, Ex. C). Martin argues that the JAMS arbitrator “analyzed [this]

provision, decided that it did not apply to the shares at issue, and made rulings based

on that finding.” (Appellant’s Reply Brief at 3). He also contends that the JAMS

arbitrator ignored that provision’s “plain language.” (Id.). Yet, contrary to Martin’s

assertion, we believe that had the JAMS arbitrator given this language the effect

urged by Martin, the JAMS arbitrator would have been doing precisely the thing

about which Martin complains—jointly construing the RISAP and the Trust

Agreement. The RISAP itself contained a provision defining “Subject Shares,” a

provision addressing whether transferred shares and the recipient of such shares

would be bound by the RISAP, and a provision specifying which transfers would

operate to remove shares from the terms of the RISAP. (See Doc. No. 1, Ex. B).

That is, the RISAP identified which Fahey shares were Subject Shares and the

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conditions under which shares would cease to be Subject Shares. Applying the

Trust Agreement in the manner suggested by Martin would have required the JAMS

arbitrator to conclude that a provision of the Trust Agreement executed by Natalie,

a document Martin insists the JAMS arbitrator had no power to interpret or apply,

validly modified the terms of a contract entered into between Natalie, Martin, and

Carl. The JAMS arbitrator’s decision reflects that he avoided conflating the RISAP

and the Trust Agreement by deciding what the RISAP required without reference to

any potential modifications contained in the Trust Agreement.

{¶34} Having concluded that the JAMS arbitrator’s references to the Trust

Agreement do not supply a basis for finding that he exceeded his authority, we must

now consider the second facet of Martin’s first argument—to wit, that the JAMS

arbitrator exceeded his authority by “overrul[ing] the decision of a sitting Ohio

Marion County judge.” (Appellant’s Brief at 9). Martin contends that the JAMS

arbitrator’s award conflicts with the trial court’s ruling in the injunction action that

“Carl’s suspension as a trustee was a legal incapacity which meant that * * * Carl

could not vote his half of the shares” at the 2018 annual shareholder meeting. (Id.

at 11). He maintains that the JAMS arbitrator exceeded his authority because he

nullified and “reversed [the trial court’s decision] by retroactively reinstating Carl’s

voting rights * * *.” (Id.).

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{¶35} We are not persuaded. In his decision, the JAMS arbitrator did not

purport to have the authority to overrule any decision of the trial court. Nor did he

claim to overrule the trial court’s ruling. Rather, the JAMS arbitrator expressed his

disagreement with the trial court’s interpretation and application of the RISAP—the

very agreement the JAMS arbitrator was empowered to interpret and apply.

Furthermore, as Martin had voluntarily dismissed the injunction action by the time

the JAMS arbitrator issued his decision, the trial court’s ruling in that action was no

longer in force. See Albrecht v. Albrecht, 11th Dist. Trumbull No. 2017-T-0064,

2018-Ohio-4664, ¶ 19 (“[W]here * * * the underlying action has been dismissed

‘without prejudice,’ a temporary order imposed therein no longer has any effect.”);

Klosterman v. Turnkey-Ohio, L.L.C., 10th Dist. Franklin No. 10AP-162, 2010-

Ohio-3620, ¶ 12 (“[A] voluntary dismissal without prejudice under Civ.R. 41(A)

renders the parties as if no suit had ever been filed. * * * Where the dismissal applies

to all defendants, it renders a prior interlocutory ruling a nullity.”). Thus, because

Martin’s dismissal of the injunction action rendered the trial court’s preliminary-

injunction ruling a nullity, there was no ruling for the JAMS arbitrator to overrule

or reverse.4 Finally, given that Carl was not a party to the injunction action, that

4 By holding that Martin’s voluntary dismissal of the injunction action means that there was no existing trial court judgment or ruling for the JAMS arbitrator to overrule or reverse, we do not simultaneously hold that the voluntary dismissal nullified actions taken pursuant to the trial court’s preliminary-injunction ruling, i.e., the counting of votes and the conduct of the elections at the rescheduled 2018 annual shareholder meeting. There is some reason to believe that these actions remain valid despite Martin’s dismissal of the injunction action. See Bartlett v. SunAmerica Life Ins. Co., 6th Dist. Lucas No. L-09-1124, 2010-Ohio-1884, ¶ 3-5, 16 (in a divorce action where husband was temporarily enjoined from removing his wife as the beneficiary of

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Martin voluntarily dismissed the injunction action, and that the trial court’s rulings

were made in the context of a preliminary injunction, we doubt that it would have

been appropriate for the JAMS arbitrator to uncritically follow the trial court’s

rulings in the injunction action. See Gessler v. Madigan, 41 Ohio App.2d 76, 79

(3d Dist.1974) (“[A]n order made granting or denying a preliminary injunction is

not conclusive on the issues raised with respect to the granting of the preliminary

injunction, or on any of the issues pertaining to the merits of the action.”);

Giambrone v. Spalding & Evenflo Co., Inc., 2d Dist. Miami No. 96CA08, 1997 WL

189465, *5 (Apr. 18, 1997) (noting that, generally, a voluntarily “dismissed action

cannot serve to bar a later action on the grounds of res judicata, collateral estoppel,

or law of the [case].”). Accordingly, we cannot conclude that the JAMS arbitrator

exceeded his authority simply by issuing an award that conflicts in some respects

with the trial court’s rulings in the injunction action.

{¶36} Although we have rejected the premises of Martin’s first argument, we

must still determine whether the JAMS arbitrator’s award “draws its essence” from

the RISAP. In doing so, we emphasize that we are not deciding whether the JAMS

his insurance policies and retirement accounts but proceeded to change the beneficiary designations, subsequent voluntary dismissal of divorce action by husband did not legitimize the beneficiary change because change was made while there was a valid court order in effect prohibiting the change). However, we see no reason why the JAMS arbitrator’s authority to interpret and apply the RISAP should be limited by the fact that the 2018 annual meeting was conducted and concluded in accordance with an interpretation and application of the RISAP contained in a now-inoperative ruling. Ultimately, the status of the conduct and results of the rescheduled 2018 annual shareholder meeting is not now before this court for review, and we expressly decline to make any rulings with respect to that issue. A determination of the effect of the JAMS arbitrator’s decision, which did not claim to uphold or overturn the results of the annual meeting, and Martin’s dismissal of the injunction action on the annual meeting is properly left to future proceedings.

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arbitrator correctly interpreted the RISAP and applied it to the circumstances of this

case. As long as the JAMS arbitrator arguably interpreted and applied the terms of

the RISAP, Martin and Carl must tolerate even serious errors in the JAMS

arbitrator’s award.

{¶37} With that in mind , we conclude that, irrespective of whether the JAMS

arbitrator’s interpretation and application of the RISAP was objectively correct, the

JAMS arbitrator’s award can be rationally derived from the terms of the RISAP. As

indicated above, among other things, the RISAP contained terms (1) controlling

whether a recipient of Subject Shares transferred by Natalie would be bound by the

terms of the RISAP, including the voting rights provisions, and (2) specifying when

a transfer would result in shares ceasing to be Subject Shares. In addition, the

capacities in which Martin and Carl signed the RISAP, i.e., in their individual

capacities or in their representative capacities as co-trustees of the Trust, can be

gleaned from the terms of the RISAP. Since the JAMS arbitrator’s award was based

on his determination of the capacities in which Martin and Carl signed the RISAP,

his determination of whether the RISAP dictated that the Subject Shares transferred

to the Trust remain subject to the terms of the RISAP, and his determination of

whether a transfer of shares out of the Trust would be a type of transfer capable of

terminating the “Subject Share” designation under the RISAP, there is some rational

nexus between the JAMS arbitrator’s award and the RISAP. Accordingly, as the

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JAMS arbitrator’s award draws its essence from the RISAP, the trial court did not

err by determining that the JAMS arbitrator did not exceed his powers or by

dismissing Martin’s motion to vacate.

{¶38} In his second argument for vacating the JAMS arbitrator’s award,

Martin argues that the award should be vacated because the JAMS arbitrator

misapplied the doctrine of judicial estoppel. However, as Carl notes in his appellate

brief, “the JAMS arbitrator * * * cited the doctrine [of judicial estoppel] as an

additional and alternative ground (on top of [the RISAP’s] plain language) [to]

support[] his decision.” (Appellee’s Brief at 19). Having already concluded that

the JAMS arbitrator’s award can be rationally derived from the terms of the RISAP,

we agree with Carl that “the doctrine of judicial estoppel need not even be

considered * * *.” (Id.).

{¶39} Martin’s assignment of error is overruled.

{¶40} Having found no error prejudicial to the appellant herein in the

particulars assigned and argued, we affirm the judgment of the trial court.

SHAW, P.J. and ZIMMERMAN, J., concur.

/jlr

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