Ohio Council 8 v. Marion

2016 Ohio 1144

• Court: Ohio Court of Appeals
• Decided: March 21, 2016
• Docket: 9-15-31
• Status: Published

Opinion

[Cite as Ohio Council 8 v. Marion, 2016-Ohio-1144.]

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

OHIO COUNCIL 8, ET AL.,

PLAINTIFFS-APPELLEES, CASE NO. 9-15-31

v.

CITY OF MARION, OPINION

DEFENDANT-APPELLANT.

Appeal from Marion County Common Pleas Court Trial Court No. 15-CV-0007

Judgment Reversed and Cause Remanded

Date of Decision: March 21, 2016

APPEARANCES:

Mark D. Russell for Appellant

Michael D. Batchelder for Appellees Case No. 9-15-31

ROGERS, J.

{¶1} Defendant-Appellant, the city of Marion (“the City”), appeals the

judgment of the Court of Common Pleas of Marion County, which denied its

motion for summary judgment and granted Plaintiffs-Appellees’, Ohio Council 8

and Local 1158 (“Appellees”), motion for summary judgment. For the reasons

that follow, we reverse the ruling of the trial court.

{¶2} On January 6, 2015, the Appellees filed an application and motion to

compel arbitration in the Court of Common Pleas of Marion County. The

Appellees named the City as the defendant. In their motion, the Appellees alleged

that they entered into a collective bargaining agreement (“CBA”) with the City.

The CBA contained a four-step procedure to follow in the event of a grievance.

The Appellees stated that the City breached the CBA when it imposed a

“Healthcare Fee” on all bargaining unit employees. The Appellees alleged that

they followed all the procedures and were entitled to have this dispute decided

through arbitration. The Appellees attached several exhibits to their motion,

including a copy of the CBA.

{¶3} Appellees filed a motion for summary judgment on February 10,

2015. The City filed a motion to dismiss on February 10, 2015. On February 19,

2015, the City filed its motion contra to the Appellees’ motion for summary

-2- Case No. 9-15-31

judgment as well as its memorandum in support of its motion to dismiss.

Appellees filed their response to the City’s motion to dismiss on March 2, 2015.

{¶4} The trial court denied both Appellees’ motion for summary judgment

and the City’s motion to dismiss on March 18, 2015. The trial court granted both

parties leave to file any other dispositive motions until June 5, 2015.

{¶5} On June 5, 2015, the Appellees filed their second motion for summary

judgment. Attached to the Appellees’ motion were joint stipulations filed by both

parties. Two of the parties’ joint stipulations were

6. Whether or not the monies charged to the employee are a health care fee or a tax is a material fact.

***

10. It is not disputed the power to levy taxes is with the Federal, State and Local governments and the [CBA] does not provide employees any benefit related in any way to the reallocation, pick up or any shifting of paying applicable taxes from the employee to the employer.

(Docket No. 15 Ex. A., p. 1-2). In their motion, the Appellees argued that their

grievance with the City was subject to arbitration because a reasonable

interpretation of the CBA was that the “Healthcare Fee” fell under the City’s

responsibility pursuant to Article 18 of the CBA.

{¶6} The City filed its motion contra to the Appellees’ motion for summary

judgment on June 18, 2015. In its motion, the City argued that the grievance was

not subject to arbitration because the “Healthcare Fee” was a tax. Additionally,

-3- Case No. 9-15-31

the City argued that the Appellees’ grievance did not meet the CBA’s definition of

“grievance.”

{¶7} On July 22, 2015, the trial court granted the Appellees’ motion for

summary judgment. In its decision, the court found that the arbitration agreement

in the CBA was generally broad. After reviewing the language of the CBA, the

court concluded that the Appellees had filed a grievance, followed the necessary

procedures, and were entitled to have their grievance decided through arbitration.

{¶8} The City filed this timely appeal, presenting the following

assignments of error for our review.

Assignment of Error No. I

THE TRIAL COURT ERROR [SIC] IN GRANTING APPELLEES [SIC] MOTION FOR SUMMARY JUDGMENT BY ERRANTLY FINDING THE CONTRACTUAL ARBITRATION CLAUSE APPLIES WHEN ONE SIDE SIMPLY “ALLEGES” THERE HAS BEEN A BREACH, MISSAPPLICATION [SIC], OR MISINTERPRETATION OF THE COLLECTIVE BARGAINING AGREEMENT.

Assignment of Error No. II

THE TRIAL COURT ERRED IN GRANTING APPELLEE’S [SIC] MOTION FOR SUMMARY JUDGMENT BY FINDING THE PARTY’S [SIC] COLLECTIVE BARGAINING AGREEMENT CONTAINED A PROVISION WHICH APPLIED TO THE FEDERAL GOVERNMENT’S IMPOSITION OF THE AFFORDABLE CARE ACT’S MANDATED COSTS CREATED UNDER 45 CFR PART 153.

-4- Case No. 9-15-31

{¶9} Due to the nature of the City’s assignments of error, we elect to

address them together.

Assignments of Error Nos. I & II

{¶10} In its first and second assignments of error, the City argues that the

trial court erred when it granted summary judgment in favor of the Appellees. We

agree.

{¶11} An appellate court reviews a summary judgment order de

novo. Hillyer v. State Farm Mut. Auto. Ins. Co., 131 Ohio App.3d 172, 175 (8th

Dist.1999). However, a reviewing court will not reverse an otherwise correct

judgment merely because the lower court utilized different or erroneous reasons as

the basis for its determination. Diamond Wine & Spirits, Inc. v. Dayton

Heidelberg Distrib. Co., Inc., 148 Ohio App.3d 596, 2002-Ohio-3932, ¶ 25 (3d

Dist.), citing State ex rel. Cassels v. Dayton City School Dist. Bd. of Edn., 69 Ohio

St.3d 217, 222 (1994). Summary judgment is appropriate when, looking at the

evidence as a whole: (1) there is no genuine issue as to any material fact, and (2)

the moving party is entitled to judgment as a matter of law. Civ.R. 56(C). In

conducting this analysis the court must determine “that reasonable minds can

come to but one conclusion and that conclusion is adverse to the party against

whom the motion for summary judgment is made, [the nonmoving] party being

entitled to have the evidence or stipulation construed most strongly in the

-5- Case No. 9-15-31

[nonmoving] party’s favor.” Id. If any doubts exist, the issue must be resolved in

favor of the nonmoving party. Murphy v. City of Reynoldsburg, 65 Ohio St.3d

356, 358-359 (1992).

{¶12} The party moving for summary judgment has the initial burden of

producing some evidence which demonstrates the lack of a genuine issue of

material fact. Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996). In doing so, the

moving party is not required to produce any affirmative evidence, but must

identify those portions of the record which affirmatively support his argument. Id.

at 292. The nonmoving party must then rebut with specific facts showing the

existence of a genuine triable issue; he may not rest on the mere allegations or

denials of his pleadings. Id.; Civ.R. 56(E).

{¶13} Arbitration is encouraged as a method of settling disputes. See

Williams v. Aetna Fin. Co., 83 Ohio St.3d 464 (1998).

A presumption favoring arbitration arises when the claim in dispute falls within the scope of the arbitration provision. An arbitration clause in a contract is generally viewed as an expression that the parties agree to arbitrate disagreements within the scope of the arbitration clause, and, with limited exceptions, an arbitration clause is to be upheld just as any other provision in a contract should be respected.

Id. at 471. In this case, we must determine whether the CBA “ ‘creates a duty for

the parties to arbitrate the particular grievance,’ ” which is a question for the trial

court, and not the arbitrator. LeROI Internatl., Inc. v. Gardner Denver Mach.,

-6- Case No. 9-15-31

Inc., 3d Dist. Shelby No. 17-03-20, 2004-Ohio-4163, ¶ 18, citing Council of

Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 666 (1998).

“However, while the general policy is to favor arbitration, that policy should be

denied effect when ‘it may be said with positive assurance that the arbitration

clause is not susceptible of an interpretation that covers the asserted dispute.’ ”

Barhorst, Inc. v. Hanson Pipe & Prods. Ohio, Inc., 169 Ohio App.3d 778, 2006-

Ohio-6858, ¶ 9 (3d Dist.), quoting Gibbons-Grable Co. v. Gilbane Bldg. Co., 34

Ohio App.3d 170, 173 (8th Dist.1986).

{¶14} The United States Supreme Court summarized four general

principles when considering the scope of an arbitration clause. See Gates at 665-

666, quoting AT & T Technologies, Inc. v. Communications Workers of Am., 475

U.S. 643, 648-650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986).

The first principle is that ‘arbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit. * * * This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed to submit such grievances to arbitration.’

The second principle is that ‘the question of arbitrability-whether a[n] * * * agreement creates a duty for the parties to arbitrate the particular grievance-is undeniably an issue for judicial determination. 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.’

The third rule is, ‘in deciding whether the parties have agreed to submit a particular grievance to arbitration, a court is not to rule on the potential merits of the underlying claims.’

-7- Case No. 9-15-31

The fourth principle is that ‘where the contract contains an arbitration clause, 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. Doubts should be resolved in favor of coverage.’

(Quotations omitted.) (Citations omitted.) Gates at 665-666, quoting AT & T

Technologies at 648-650.

{¶15} “When an appellate court reviews a trial court’s decision to stay

judicial proceedings pursuant to the parties’ agreement to enter into arbitration, we

accept the trial court’s ‘findings of fact that are not “clearly erroneous,” ’ but we

review questions of law de novo.” (Citation omitted.) Barhorst at ¶ 10, quoting

LeROI at ¶ 6, citing Lear v. Rusk Inds., Inc., 3d Dist. Hancock No. 5-02-26, 2002-

Ohio-6599, ¶ 8. “In interpreting an arbitration clause, courts must apply the

fundamental principles of Ohio contract law.” LeROI at ¶ 7, citing Benjamin v.

Pipoly, 155 Ohio App.3d 171, 2003-Ohio-5666, ¶ 31-34. Words in a contract

must “be given their ordinary meaning unless manifest absurdity results, or unless

some other meaning is clearly evidenced from the face or overall contents of the

instrument.” Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (1978),

paragraph two of the syllabus, superseded by statute on other grounds as stated in

Great Invest. Properties, L.L.C. v. Bentley, 3d Dist. Marion No. 9-09-36, 2010-

Ohio-981, ¶ 14. “If a contract is clear and unambiguous, then its interpretation is a

-8- Case No. 9-15-31

matter of law and there is no issue of fact to be determined.” Inland Refuse

Transfer Co. v. Browning-Ferris Industries of Ohio, Inc., 15 Ohio St.3d 321, 322

(1984).

{¶16} In its first assignment of error, the City argues that the trial court

erred by finding that the arbitration clause is triggered when the Appellees make

an allegation that there has been a breach, misapplication, or misinterpretation of

the CBA. Upon review of the CBA, the trial court did not err in its finding.

{¶17} In Article 7 of the CBA, entitled Grievance and Arbitration

Procedure, the parties agreed to what would trigger arbitration. Section 1(A)

states, “The term ‘grievance’ means that the [Appellees are] alleging there has

been a breach, misapplication, or misinterpretation of this Agreement.”

(Emphasis added.) (Docket No. 1 Ex. A, p. 9). Thus, the plain language of the

CBA states that all Appellees had to do was allege that a breach, misapplication,

or misinterpretation had occurred.

{¶18} The City suggests that the plain language of the CBA requires that

there actually be a breach, misapplication, or misinterpretation of the CBA before

going to arbitration. In addition to the reasoning stated supra, if we were to accept

the City’s interpretation, then the Appellees would never get to arbitrate anything

because a trial court would decide the ultimate issue as to whether there was a

breach, misapplication, or misinterpretation. Therefore, the trial court did not err

-9- Case No. 9-15-31

by finding that the Appellees’ grievance constituted a “grievance” under the

CBA’s definition.

{¶19} Accordingly, the City’s first assignment of error is overruled.

{¶20} In its second assignment of error, the City argues that the trial court

erred by finding that there was a reasonable interpretation of the arbitration clause

that covered the dispute. We agree.

{¶21} This case turns on the issue of whether or not the “Healthcare Fee” is

categorized as a tax. In the joint stipulations, both parties agree that whether the

“Healthcare Fee” is a fee or a tax is a material fact. Further, both parties agree that

the CBA does not cover taxes. Specifically, the CBA “does not provide

employees any benefit related in any way to the reallocation, pick up or any

shifting of paying applicable taxes from the employee to the employer.” (Docket

No. 15 Ex. A, p. 2). Thus, if the “Healthcare Fee” is categorized as a tax, then

there is no interpretation of the CBA that would cover the Appellees’ claim.

{¶22} Specifically, the “Healthcare Fee” is a payment made by either health

insurance issuers or group health plans to fund the transitional reinsurance

program, which is part of the Patient Protection and Affordable Care Act of 2010

(“ACA”). 42 U.S.C. 18061(b)(1)(A). The ACA provides that the revenues

generated from these payments are estimated to be $25 billion. State of Ohio, et

al. v. United States, et al., S.D.Ohio No. 2:15-cv-321, 2016 WL 51226, *3 (Jan. 5,

-10- Case No. 9-15-31

2016) (“State of Ohio”), appeal filed on Feb. 4, 2016. $20 billion directly funds

the reinsurance program, while the remaining $5 billion is deposited into the

general fund of the United States Treasury. Id.

{¶23} In State of Ohio, which is the only case that has dealt substantively

with the reinsurance program, there was no dispute about whether the payment

required under the reinsurance program was a tax. Rather, the issue in State of

Ohio was whether the reinsurance program portion of the ACA applied to

government-operated group health plans. Id. at *2. The district court found in the

affirmative. Id. at *36. Importantly, “the State conceded that the Transitional

Reinsurance Program imposes a nondiscriminatory tax.” Id. at *34. Although this

opinion is not binding upon this court, it is nonetheless heavily persuasive on the

issue.

{¶24} Black’s Law Dictionary defines a “tax” as “[a] charge, usu.

monetary, imposed by the government on persons, entities, transactions, or

property to yield public revenue.” Black’s Law Dictionary 1685 (10th Ed.2014).

It is also defined as “a usu. pecuniary charge imposed by legislative or other

public authority upon persons or property for public purposes.” Webster’s Third

New International Dictionary 2345 (2002).

{¶25} Given the definition of a “tax,” there is no other possible conclusion

to draw other than the payment required under the reinsurance program is a tax.

-11- Case No. 9-15-31

The payments are imposed by the federal government, are required to be paid by

two types of entities (issuers and group health plans), and are used to generate

public revenue (fund the reinsurance program and deposit funds into the federal

treasury).

{¶26} Since the “Healthcare Fee” is a tax, the next question is whether this

type of tax is covered under the CBA. This seemingly difficult question is

actually easy in this case. Pursuant to their joint stipulations, both parties agree

that the CBA does not cover disputes involving taxes. Thus, there was no genuine

issue of material fact, however the Appellees were not entitled to judgment on the

issue of arbitration as a matter of law. Thus, the trial court erred by granting the

Appellees’ motion for summary judgment and denying the City’s motion contra.

{¶27} Accordingly, we sustain the City’s second assignment of error.

{¶28} Having found error prejudicial to the appellant, in some of the

particulars assigned and argued, we reverse the judgment of the trial court and

remand the matter for proceedings consistent with this opinion.

PRESTON and WILLAMOWSKI, J.J., concur.

/jlr

-12-