Mason v. Mason

2017 Ohio 5787

• Court: Ohio Court of Appeals
• Decided: July 10, 2017
• Docket: 2016CA00209
• Status: Published

Opinion

[Cite as Mason v. Mason, 2017-Ohio-5787.]

COURT OF APPEALS STARK COUNTY, OHIO FIFTH APPELLATE DISTRICT

JUDGES: SCOTT A. MASON, ET AL : Hon. W. Scott Gwin, P.J. : Hon. William B. Hoffman, J. Plaintiffs-Appellees : Hon. John W. Wise, J. : -vs- : : Case No. 2016CA00208 KATHLEEN M. MASON, ET AL : : Defendants-Appellants : OPINION

CHARACTER OF PROCEEDING: Civil appeal from the Stark County Court of Common Pleas, Case No. 2016CV01193

JUDGMENT: Affirmed

DATE OF JUDGMENT ENTRY: July 10, 2010

APPEARANCES:

For Plaintiffs-Appellees For Defendants-Appellants

ROBERT HANSEMAN BRIAN SULLIVAN Sebaly, Shillito & Dyer Reminger Co., LPA 1900 Kettering Tower 101 West Prospect Avenue 40 North Main Street Suite 1400 Dayton, OH 45423 Cleveland, OH 44115 [Cite as Mason v. Mason, 2017-Ohio-5787.]

Gwin, P.J.

{¶1} Appellants appeal the November 1, 2016 judgment entry of the Stark

County Common Pleas Court denying their motion to compel arbitration and stay pending

arbitration.

Facts & Procedural History

{¶2} Appellee Scott Mason (“Scott”) is the son of appellant Elizabeth Martin

(“Elizabeth”) and the brother of appellant Kathleen Mason (“Kathleen”). R.B. Mason is

Scott’s father. Appellee Robin Mason is Scott’s daughter. On June 15, 2016, appellees

filed a first amended complaint against Kathleen Mason, Elizabeth Martin, MarRon

Management Corporation, LLC, Mason Family Investments, LLC, and BK Management,

LLC.

{¶3} Appellees alleged the following counts: breach of fiduciary duty against

Kathleen and Elizabeth; breach of fiduciary duty against MarRon Management

Corporation; breach of fiduciary duty against Mason Family Investments; negligence

against Kathleen and Elizabeth; gross negligence against Kathleen and Elizabeth;

conversion against all defendants; breach of contract against Kathleen and Elizabeth for

violation of the MarRon Management Operating Agreement; breach of contract against

Kathleen for violation of the Mason Family Investments Operating Agreement; fraud

against all defendants; civil conspiracy against all defendants; tortious interference with

a business relationship against Kathleen, Elizabeth, and BK Management, LLC; and a

declaratory judgment count requesting all agreements between BK Management and the

other defendants be declared void. Stark County, Case No. 2016CA00208 3

{¶4} All of the defendants filed an answer to the complaint on August 5, 2016

and asserted as a defense that the claims were barred by contract provisions, including

{¶5} The trial court held a pre-trial with the parties on August 11, 2016, and set

various dates in the case, including mediation.

{¶6} On October 7, 2016, appellants filed a motion to compel arbitration and stay

the proceedings pending arbitration. Appellants sought to compel arbitration of all claims.

Appellants argued arbitration was mandatory due to the arbitration provision in the

MarRon Management Corporation’s Operating Agreement and the three-step alternative

resolution procedure set forth in the Limited Partnership Agreement for MarRon

Properties. Appellees filed a memorandum in opposition on October 24, 2016. On

November 1, 2016, the trial court issued a judgment entry denying appellants’ motion to

compel arbitration.

{¶7} Appellants appeal the November 1, 2016 judgment entry of the Stark

County Court of Common Pleas and assign the following as error:

{¶8} “I. THE TRIAL COURT INCORRECTLY DENIED DEFENDANTS’ MOTION

TO COMPEL ARBITRATION AND TO STAY PROCEEDINGS PENDING

ARBITRATION.”

{¶9} In general, an appellate court reviews a trial court’s decision to grant or deny

a motion to compel arbitration under the abuse of discretion standard of review. Simmons

v. Extendicare Health Services, Inc., 5th Dist. Delaware No. 15 CAE 12 0095, 2016-Ohio-

4831. However, the issue of whether a controversy is arbitrable under an arbitration

provision of a contract is a question for law for the court to decide; therefore, the standard Stark County, Case No. 2016CA00208 4

of review on those issues is de novo. Id. When the validity of an arbitration agreement

is in question, the determination involves a mixed question of law and fact. Id.

{¶10} Appellees first argue appellants waived the right to compel arbitration by

participating in a pre-trial conference and filing pleadings before filing their motion. We

disagree.

{¶11} When considering the totality of the circumstances of whether a party

waived the right to compel arbitration, a court may be guided by the following factors: (1)

whether the party seeking arbitration invoked the jurisdiction of the court by filing a

complaint, counterclaim, or third-party complaint without asking for a stay of the

proceedings; (2) the delay, if any, by the party seeking arbitration to request a stay of the

judicial proceedings, or an order compelling arbitration; (3) the extent to which the party

seeking arbitration has participated in the litigation, including a determination of the status

of discovery, dispositive motions, and the trial date; and (4) whether the nonmoving party

would be prejudiced by the moving party’s prior inconsistent actions. Stoner v. Salon

Lofts, LLC, 10th Dist. Franklin No. 13AP-437, 2014-Ohio-796.

{¶12} In this case, appellants raised the issue of arbitration in their answer, but

they did not immediately request a stay. However, appellants made their request

approximately five months before the discovery cutoff date, before any dispositive

motions were filed, over six months before the trial date, and before any depositions or

written discovery responses were conducted or filed. Further, they did not file a

counterclaim or third-party complaint. Upon review of the totality of the circumstances,

we find appellants did not waive their right to compel arbitration. Stark County, Case No. 2016CA00208 5

{¶13} In support of their argument to compel arbitration, appellants cite the Limited

Partnership Agreement of MarRon Properties, which contains a three-step alternative

dispute resolution procedure, the last of which is mandatory arbitration. However,

MarRon Properties is not a party to this case, as appellees have asserted no claims

against them. Thus, we find the Limited Partnership Agreement‘s alternative dispute

resolution inapplicable to the claims in this case.

{¶14} Appellants contend that all the claims against them should be sent to

arbitration because they arise out of the same set of facts as the claims related to MarRon

Management Corporation and they are intertwined. Further, that appellees cannot avoid

arbitration by casting contract claims as tort claims. While we agree that parties cannot

avoid arbitration by casting contract claims as tort claims, we also recognize that a tort

claim does not become contractual simply because an element of proof may relate to a

contract. Jankovsky v. Grana-Morris, 2nd Dist. Miami No. 2000-CA-62, 2001 WL

1018337 (Sept. 7, 2001).

{¶15} As to the intertwined claims theory, the Sixth Circuit held that arbitration

may be compelled due to “the close relationship between the entities involved, as well as

the relationship of the alleged wrongs to the nonsignatory’s obligations and duties in the

contract * * * and the fact that claims were intimately founded in and intertwined with the

underlying obligations.” Thompson-CSF, S.A. v. American Arbitration Assn., 64 F.3d 773

(6th Cir. 1995); see also Trinity Health System v. MDX Corp., 180 Ohio App.3d 815,

2009-Ohio-417, 907 N.E.2d 746 (7th Dist.). However, the Sixth Circuit also limited this

alternate theory to situations where a non-signatory tries to bind a signatory to arbitration,

not the reverse, i.e., where a signatory tries to bind a non-signatory. Id. Here, appellants Stark County, Case No. 2016CA00208 6

are signatories attempting to bind non-signatory appellees and thus the “intertwined”

estoppel theory does not apply.

{¶16} Accordingly, the only claims that are arguably within the arbitration

agreement are the claims against MarRon Management Corporation directly and the

breach of contract claim against Kathleen and Elizabeth for breach of the MarRon

Management Corporation Operating Agreement. We have consistently held that, if there

are arbitrable and non-arbitrable claims, the entire proceeding must be stayed until the

issues subject to arbitration are resolved. Litman v. HCR Manorcare, Inc., 5th Dist. Stark

No. 2014CA00224, 2015-Ohio-2637; Garber v. Buckeye Chrysler-Jeep-Dodge of Shelby,

5th Dist. Richland No. 2007-CA-0121, 2008-Ohio-3553. Thus, we must determine

whether the remaining claims are arbitrable.

{¶17} The Ohio Supreme Court has recognized Ohio’s public policy favoring

arbitration. Taylor Bldg. Corp. of America v. Benfield, 117 Ohio St.3d 352, 884 N.E.2d 12

(1998). However, arbitration is a matter of contract and, despite the strong policy in its

favor, a party cannot be compelled to arbitrate any dispute that he has not agreed to

submit. Grady v. Winchester Place Nursing & Rehab. Center, 5th Dist. Fairfield No. 08

CA 59, 2009-Ohio-3660; Neofores v. Brandddirect Marketing, Inc., 5th Dist. Richland No.

02-CA-0012, 2002-Ohio-4841; Council of Smaller Enterprises v. Gates, McDonald & Co.,

80 Ohio St.3d 661, 687 N.E.2d 1352 (1998). While arbitration is encouraged as a form

of dispute resolution, the policy favoring arbitration does not trump the constitutional right

to seek redress in court. Peters v. Columbus Steel Castings Co., 115 Ohio St.3d 134,

2007-Ohio-4787, 873 N.E.2d 1258. Stark County, Case No. 2016CA00208 7

{¶18} It is undisputed that appellees did not sign the MarRon Management

Corporation Operating Agreement. Scott’s father, R.B. Mason, did sign the Operating

Agreement, as did Elizabeth Martin. Appellants contend the mandatory arbitration

provision contained in the MarRon Management Corporation’s Operating Agreement

binds appellees to arbitration upon appellants’ request and, even though appellees did

not sign the agreement, they are bound by the theory of estoppel.

{¶19} The MarRon Management Corporation’s Operating agreement provides

“any dispute, controversy, or claim arising out of or connection with this Agreement or any

breach or alleged breach hereof shall, upon the request of any party involved, be

submitted to, and settled by, arbitration.” Further, that “[s]ubject to the limits of

transferability contained herein, this Agreement shall be binding upon and inure to the

benefit of the parties hereto and their respective heirs, executors, administrators,

successors, and assigns.”

{¶20} Under the estoppel theory, a party who knowingly accepts the benefits of

an agreement is estopped from denying a corresponding obligation to arbitrate.

Jankovsky v. Grana-Morris, 2nd Dist. Miami No. 2000-CA-62, 2001 WL 1018337 (Sept.

7, 2001). An indirect benefit is not enough; instead the party must directly benefit. Id.

However, when a non-signatory is bringing their own claims, not the claims of the

signatory through which they are allegedly bound, the non-signatory is not bound by the

terms of the agreement. See Peters v. Columbus Steel Castings Co., 115 Ohio St.3d

134, 2007-Ohio-4787, 873 N.E.2d 1258 (finding where decedent signed the agreement,

he agreed to arbitrate his claims against the company, whether he brought these claims

during his life or after his death and thus the provision binding his “heir, successors, and Stark County, Case No. 2016CA00208 8

assigns” applied to these actions, but finding the decedent could not bind his beneficiaries

to arbitration because their claims accrued independently for injuries they personally

suffered); McFarren v. Emeritus at Canton, 5th Dist. Stark No. 2013CA00040, 2013-Ohio-

3900; Richmond Health Facilities v. Nichols, 811 F.3d 192 (6th Cir. 2016). In this case,

appellees are not seeking to bring claims of their father after his death, but are bringing

their own claims for injuries they personally suffered.

{¶21} Further, we decline to extend the estoppel theory in this case where

appellants have denied appellees are heirs of R.B. Mason and repeatedly denied that

either they (appellants), or appellees, have a legal interest in MarRon Management,

whose operating agreement they are attempting to enforce against appellees, either as a

party, owner, or member. In their answer, appellants: deny MarRon Management has

four members; deny Elizabeth, Kathleen, Scott, and David are members of MarRon

Management, deny Scott is a member of MarRon Management (¶ 9), deny Scott owns

interest in MarRon Properties (¶ 9), deny Robin is a partner of MarRon Properties (¶ 10);

deny Kathleen is a member of MarRon Management (¶ 11); deny Kathleen owns interest

in MarRon Properties (¶ 11); deny Elizabeth is a managing member in MarRon

Management (¶ 12); deny that on or about April 23, 2012, R.B. Mason died and

bequeathed his 50% interest in MarRon Management to his three children, Scott,

Kathleen, and David, in equal shares as successors-in-interest (¶ 16); deny they are co-

members of MarRon Management (¶ 48); deny they are co-members with Scott and

Kathleen of MarRon Management (¶ 60, 61, 67, 73), deny Scott is a member of MarRon

Management (¶ 105); and deny Kathleen and Elizabeth have knowledge of appellants’

business relationships with MarRon Management (¶ 106). Stark County, Case No. 2016CA00208 9

{¶22} While a court may not rule on the potential merits of an underlying claim

when deciding whether the parties have agreed to submit a particular claim to arbitration

pursuant to Council of Smaller Enterprises v. Gates, McDonald & Co., 80 Ohio St.3d 661,

687 N.E.2d 1352 (1998), “an analysis of whether a dispute falls within the scope of an

arbitration agreement should logically follow the initial determination whether the parties

ever entered into an agreement in the first place.” Trinity Health System v. MDX Corp.,

180 Ohio App.3d 815, 2009-Ohio-417, 907 N.E.2d 746 (7th Dist.).

{¶23} Upon review, we find the trial court did not err in denying appellants’ motion

to compel arbitration. Appellants’ assignment of error is overruled. The November 10,

2016 judgment entry of the Stark County Court of Common Pleas is affirmed.

By Gwin, P.J.,

Hoffman, J., and

Wise, John, J., concur