Russell v. RAC Natl. Prod. Serv., L.L.C.

2014 Ohio 3392

• Court: Ohio Court of Appeals
• Decided: July 31, 2014
• Docket: 14CA17
• Status: Published

Opinion

[Cite as Russell v. RAC Natl. Prod. Serv., L.L.C., 2014-Ohio-3392.]

IN THE COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT WASHINGTON COUNTY

Traci L. Russell, et. al., : Case No. 14CA17

Plaintiffs-Appellees, : DECISION AND JUDGMENT ENTRY v. :

RAC National Product Service, LLC, :

Defendant-Appellant. : RELEASED: 7/31/2014

______________________________________________________________________

APPEARANCES:

David W. Orlandini & Gary C. Safir, Davis & Young, Westerville, Ohio for Appellant.

James R. Leach, Parkersburg, West Virginia for Appellees.

_____________________________________________________________________________

HOOVER, A.J.,

{¶1} After reviewing the notice of appeal filed in this matter, we issued an order

directing Appellant RAC National Product Service to file a memorandum addressing

whether the entry appealed from is a final appealable order. RAC National filed a

memorandum arguing that the May 12, 2014 order appealed from denies its motion for a

stay pending arbitration pursuant to R.C. 2711.02 and therefore is appealable under R.C.

2711.02(C). Appellees argue that the May 12, 2014 order is a nullity because it is a denial

of RAC National’s motion to reconsider the trial court’s final appealable January 10, 2014

order denying RAC National’s motion to compel arbitration. After reviewing the

memoranda and the relevant law, we find that the order appealed from is not a final

appealable order and the appeal is hereby DISMISSED. Washington App. No. 14CA17 2

I.

{¶2} In May, 2013, the Russells filed a complaint against RAC National. In

November, 2013, RAC National filed a motion to dismiss coupled with a motion to compel

arbitration. The portion of the motion seeking a dismissal of the complaint was based on

Civ.R. 12(B)(1) and (6). The portion of the motion seeking to compel arbitration was made

pursuant to the Federal Arbitration Act, 9 U.S.C. Section 4 and the Ohio Arbitration Act,

R.C. 2711.03. On January 10, 2014, the trial court issued a decision in which it found that

there was no valid arbitration agreement between the parties and, therefore, no basis to

dismiss the complaint under Civ.R. 12(B)(1) or (6). The order denied both motions. Russell

v. RAC National Product Service, LLC, Case No. 13TR164, Decision, (Jan. 10, 2014).

{¶3} RAC National did not appeal the January 10, 2014 order that found that no

valid arbitration agreement existed. Instead, in February, 2014, RAC National filed a

“Defendant’s Motion to Reconsider” in which it asked the trial court to “reconsider its ruling,

dismiss this matter and submit the matter to binding arbitration.” It also made an

alternative request to stay the proceedings, though it did not specifically reference R.C.

2711.02 in the motion. It stated, “In the alternative, Defendant requests that the

proceedings be stayed until the arbitration proceedings are complete.” On May 12, 2014,

the trial court issued an order denying RAC National’s motion to reconsider, and stated in

part:

Based upon the reasons specifically stated in this Court’s Decision filed on January 10, 2014 denying Defendant’s Motion to Dismiss and Compel Arbitration; Plaintiff’s written responses to both Defendant’s Motion to Dismiss and Motion to Reconsider and the authority cited therein; the arguments placed upon the record during the hearing, including but not limited to the lack of evidence of mutual agreement to the terms of the Lease-Purchase Agreement and Arbitration Agreement as reflected in the lack of evidence that the Plaintiff Traci Russell read and understood the terms of the Lease-Purchase Agreement and Arbitration Agreement, which Washington App. No. 14CA17 3

is essential to the formation of any contract, the Court hereby ORDERS that the Defendant’s Motion to Reconsider be DENIED.

The trial court also denied RAC National’s alternative request for a stay: “In addition, this

Court ORDERS that the Defendant’s request that this matter be stayed until the arbitration

proceedings are completed is also DENIED.” Russell v. RAC National Product Service,

LLC, Case No. 13-TR-164, Order Denying Defendant’s Motion to Reconsider (May 12,

2014).

{¶4} RAC National appeals the May 12, 2014 order denying the motion to

reconsider and denying the request to stay the proceedings.

II.

{¶5} Appellate courts in Ohio have jurisdiction to review the final orders or

judgments of inferior courts within their district. Section 3(B)(2), Article IV of the Ohio

Constitution; R.C. 2501.02. A final appealable order is defined in R.C. 2505.02 and the

relevant provisions for this case are:

(B) An order is a final order that may be reviewed, affirmed, modified, or reversed, with or without retrial, when it is one of the following:

(2) An order that affects a substantial right made in a special proceeding or upon a summary application in an action after judgment; . . . .

{¶6} If a judgment is not final and appealable, then an appellate court has no

jurisdiction to review the matter and must dismiss the appeal. Production Credit Assn. v. th Hedges, 87 Ohio App.3d 207, 210 at fn. 2 (4 Dist. 1993); Kouns v. Pemberton, 84 Ohio

App. 3d 499, 501 (4th Dist. 1992). To determine whether the May 12, 2014 order is a final

appealable order, we must first determine whether the January 10, 2014 order is a final

appealable order.

{¶7} RAC National argues that the January 10, 2014 order that denied its motion Washington App. No. 14CA17 4

to compel arbitration was not a final appealable order because it also contained an order

denying a motion to dismiss under Civ.R. 12(B)(1) and (6). RAC National argues that

because an order denying a motion to dismiss based upon an arbitration provision is not a

final appealable order, the January 10, 2014 order was not appealable.

{¶8} An order denying a motion to dismiss based upon an arbitration provision is th not a final appealable order. John R. Davis Trust 8/12/05 v. Beggs, 10 Dist. Franklin App.

No. 08AP-432, 2008-Ohio-6311(order denying motion to dismiss based on arbitration

clauses in agreement was not a final appealable order); Taylor v. Norfolk Southern th Railway Co., 8 Dist. Cuyahoga App. No. 85699, 2005-Ohio-4576. Dismissal is not an

option provided in R.C. 2711.01 et seq. However, the trial court’s order was not limited to

the motion motion to dismiss; it also addressed RAC National’s motion to compel

arbitration under R.C. 2711.03. The January 10, 2014 order determined that no valid

arbitration agreement existed between the parties and denied the motion to compel

arbitration under R.C. 2711.03.

{¶9} The Ohio Arbitration Act, R.C. Chapter 2711, provides different arbitration

enforcement mechanisms. A party may seek direct enforcement of such agreements

through an order to compel arbitration under R.C. 2711.03, or indirect enforcement

through an order staying proceedings under R.C. 2711.02. These are separate and

distinct procedures. Brumm v. McDonald & Co. Securities, Inc., 78 Ohio App.3d 96, 603

N.E.2d 1141 (4th Dist. 2002) citing 6 Ohio Jurisprudence 3d (1978) 40, Arbitration &

Award, Section 39; see also Maestle v. Best Buy Co., 100 Ohio St.3d 330, 2003-Ohio-

6465, 800 N.E.2d 7 (“A party seeking to enforce an arbitration provision may choose to

move for a stay under R.C. 2711.02, or to petition for an order for the parties to proceed to

arbitration under R.C. 2711.03, or to seek orders under both statutes.”). Washington App. No. 14CA17 5

{¶10} Although proceedings under R.C. 2711.02 and R.C. 2711.03 are separate

and distinct, both require the court to determine whether the very existence of an

arbitration agreement is at issue. Under R.C. 2711.02, governing proceedings to stay, the

court must be “satisfied that the issue involved in the action is referable to arbitration

under an agreement in writing for arbitration . . . .” R.C. 2711.02(B). Under R.C. 2711.03,

governing proceedings to compel, if the court finds that there is an issue with the making

of the arbitration agreement, it proceeds summarily with a trial on the issue and either

party has the right to a jury trial. Richie’s Food Distributor, Inc. v. Refrigerated Construction

Services, 4th Dist. Pike App. No. 02CA683, 2002-Ohio-3763; Chrysler Fin. Servs. V.

Henderson, 4th Dist. Athens App. No. 11CA4, 2011-Ohio-6813 (trial court was not

required to hold an oral or evidentiary hearing regarding auto purchaser's motion to

compel arbitration, in action brought against them by financial services company alleging

breach of retail installment contract, absent a specific request for an oral hearing); Liese v. th Kent State Univ., 11 Dist. Portage App. No. 2003-P-0033, 2004-Ohio-5322 (trial court

can make a determination concerning the applicability of an arbitration agreement through

summary judgment proceedings and a party may waive its rights to a hearing and trial

under R.C. 2711.03). Under both statutory provisions, the court must determine that a

valid enforceable arbitration agreement exists before determining the appropriate relief to

grant.

{¶11} By its terms, R.C. 2711.03 applies where there has been a petition for an

order to compel the parties to proceed to arbitration. RAC National’s motion to compel

arbitration was expressly made pursuant to R.C. 2711.03 and did not seek a stay of the

proceedings under R.C. 2711.02. The trial court’s January 10, 2014 order denying the

motion to compel arbitration expressly determined that there was no valid arbitration Washington App. No. 14CA17 6

agreement between the parties. If the January 10, 2014 order is a final appealable order,

then the trial court could not entertain motions for reconsideration on the issue of whether

there was a valid arbitration agreement between the parties, because “[t]he Ohio Rules of

Civil Procedure do not prescribe motions for reconsideration after a final judgment in the

trial court.” Pitts v. Ohio Dept. of Transp., 67 Ohio St.2d 378, 21 O.O.3d 238, 423 N.E.2d th 1105 (1981); see also Tedeshi v.Atrium Ctrs., 8 Dist. Cuyahoga App. No. 97647 LLC,

2012-Ohio- 2929 (motion for a reconsideration of a stay granted pursuant to R.C. 2711.02

was a nullity).

{¶12} The Russells argue that the January 10, 2014 order is a final appealable

order under R.C. 2711.02(C). However, R.C. 2711.02(C) governs “an order under division

(B) of this section that grants or denies a stay of a trial of any action pending arbitration”

and refers back to section R.C. 2711.02(B) which governs applications for a stay. It does

not address orders arising out of proceedings set forth in R.C. 2711.03. We note that while

the federal statute, 9 U.S.C. Section 16(a)(1)(B), expressly states that an order denying a

petition to compel arbitration made under 9 U.S.C Section 4 is appealable, Ohio’s version

does not include a similar provision. See R.C. 2711.15 (“An appeal may be taken from an

order confirming, modifying, correcting, or vacating an award made in an arbitration

proceeding or from judgment entered upon an award”).

{¶13} Instead, the trial court’s January 10, 2014 order made pursuant to R.C.

2711.03 is a final appealable order under R.C. 2505.02(B)(2) as one that “affects a

substantial right made in a special proceeding.” R.C. 2505.02(A)(1) defines a substantial

right as “a right that the United States Constitution, the Ohio Constitution, a statute, the

common law, or a rule of procedure entitles a person to enforce or protect.” The Ohio

Arbitration Act gives persons the right to enforce arbitration agreements and provides a Washington App. No. 14CA17 7

variety of proceedings in furtherance of this right. As for the right to compel arbitration,

R.C. 2711.03(B) goes so far as to provide a jury trial, if demanded, to determine the issue

when the making of an arbitration agreement is in issue. If the jury finds that no agreement

for arbitration was made, then the court dismisses the petition to compel arbitration. In this

case, the trial court, rather than a jury, made the determination that no valid arbitration

agreement exists between the parties. This decision affected a substantial right of RAC

National when it determined that it would not be entitled to arbitrate this dispute.

{¶14} We also find that the proceedings set forth in R.C. 2711.03 are special

proceedings under R.C. 2505.01(A)(2), which defines “special proceeding” as “an action or

proceeding that is specially created by statute and that prior to 1853 was not denoted as

an action at law or a suit in equity.” The proceedings set forth in R.C. 2711.03 are special

proceedings because they were created by the Ohio Arbitration Act, R.C. 2711.01 et seq.

in 1953. See generally, Worldwide Asset Purchasing, LLC v. Easterling, 186 Ohio App.3d

478, 2009-Ohio-6196, 928 N.E.2d 1148 (10th Dist.)(discussing the history of the Federal

Arbitration Act and the Ohio Arbitration Act); Geiger v. Morgan Stanley DW, Inc., 10th Dist.

Franklin App. No. 09AP-608, 2010-Ohio-2850 (“[a]rbitration actions qualify as special

proceedings because arbitration was not recognized at common law or equity, and was

legislatively provided for in R.C. Chapter 2711.”) quoting Kelm v. Kelm, 93 Ohio App.3d th 686, 691, 639 N.E.2d 842 (10 Dist. 1994), citing Stewart v. Midwestern Indemn. Co., 45

Ohio St.3d 124, 128, 543 N.E.2d 1200 (1989)(Douglas, J., dissenting); FIA Card Servs.,

N.A. v. Wood, 7th Dist. Jefferson App. No. 08-JE-13, 2009-Ohio-1513; Binn v. Sterling

Jewelers, Inc., 9th Dist. Summit App. No. 24522, 2009-Ohio-3359; Shopsmith

Woodworking Promotions, Inc. v. American Woodworking Academy, Inc., 2nd Dist.

Montgomery App. No. 15268, 1995 WL 614355 (Oct. 18, 1995). Washington App. No. 14CA17 8

{¶15} Thus, we find that the January 10, 2014 order, which determined that there

was no valid arbitration agreement between the parties under R.C. 2711.03, is a final

appealable order under R.C.2505.02(B)(2) as one that affects a substantial right in a

special proceeding. Here, the trial court should have denied RAC National’s motion to

reconsider on the ground that the motion was a nullity. The trial court’s May 12, 2014

order purporting to reconsider the validity of the arbitration agreement was a nullity. “Once

an appealable or final judgment in a case has been journalized, it cannot be modified by

that court except as provided under Civ.R. 50(B) (motion notwithstanding the verdict),

Civ.R. 59 (motion for a new trial), or Civ.R. 60(B) (motion for relief from judgment).” Pitts v.

Ohio Dept. of Transp., 67 Ohio St.2d 378, 380, 423 N.E.2d 1105 (1981)(Any order

purporting to reconsider a final judgment absent one of the prescribed avenues is a

nullity); Green Tree Servicing, L.L.C. v. Kramer, 193 Ohio App.3d 140, 2011-Ohio-1408 nd (2 Dist.).

{¶16} We agree that an order denying a stay under R.C. 2711.02 is a final

appealable order, but here RAC National had already sought direct enforcement of the

arbitration agreement under R.C. 2711.03 and had received a final appealable order in

which the trial court determined that there was no valid enforceable arbitration agreement.

RAC National could not then ask the trial court to reconsider its determination of the issue

for the purposes of a second, indirect bite of the apple under R.C. 2711.02. Although

proceedings under R.C. 2711.02 and R.C. 2711.03 are separate and distinct, the

existence of a valid arbitration agreement is foundational to both. Richie’s Food

Distributor, Inc., supra; see also Church v. Fleishour Homes, Inc., 172 Ohio App.3d 205, th 2007-Ohio-1806, 874 N.E.2d 795 (5 Dist.).

{¶17} We find that once the trial court made a determination that there was no Washington App. No. 14CA17 9

valid enforceable arbitration agreement under 2711.03, that determination was a final

appealable order. The May 12, 2014 order was a nullity.

III.

{¶18} We conclude that the May 12, 2014 order denying appellant’s motion to

reconsider its decision denying a motion to compel arbitration under R.C. 2711.03 that

included a denial of appellant’s motion to stay the proceedings under R.C. 2711.02, is a

nullity and is not a final appealable order. Therefore, we hereby DISMISS this appeal.

{¶19} The clerk shall serve a copy of this order on all counsel of record at their last

known addresses.

APPEAL DISMISSED. COSTS TO APPELLANT. IT IS SO ORDERED.

McFarland, J., concurs.

Harsha, J., dissenting:

{¶20} Because the statutes provide “separate and distinct” avenues, and the

parties can seek orders under both statutes, see Maestle, supra, I believe RAC can

appeal the May 12, 2014 order under R.C. 2711.02(C). But it cannot prevail because of

collateral estoppel arising from the trial court’s January 10, 2014 determination that no

valid arbitration agreement exists.

FOR THE COURT

________________________________ Marie Hoover Administrative Judge