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

2021 Ohio 942

• Court: Ohio Court of Appeals
• Decided: March 25, 2021
• Docket: 109594
• Status: Published

Opinion

[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