Wetli v. Bugbee & Conkle, L.L.P.

2015 Ohio 4213

• Court: Ohio Court of Appeals
• Decided: October 6, 2015
• Docket: L-15-1009
• Status: Published

Opinion

[Cite as Wetli v. Bugbee & Conkle, L.L.P., 2015-Ohio-4213.]

IN THE COURT OF APPEALS OF OHIO SIXTH APPELLATE DISTRICT LUCAS COUNTY

John F. Wetli Court of Appeals No. L-15-1009

Appellant Trial Court No. CI0201204952

v.

Bugbee and Conkle, LLP, et al. DECISION AND JUDGMENT

Appellees Decided: October 6, 2015

*****

James F. Nooney, for appellant.

Cary Rodman Cooper, for appellees.

YARBROUGH, P.J.

I. Introduction

{¶ 1} Appellant, John Wetli, appeals the judgment of the Lucas County Court of

Common Pleas, denying his cross-motion for partial summary judgment and appellees’,

Bugbee and Conkle, LLP, Gregory Denny, Tybo Wilhelms, Robert Solt, III, and Robert King, first and second motions for summary judgment, and staying this action pending

arbitration.

A. Facts and Procedural Background

{¶ 2} The underlying facts in this appeal are undisputed. In December 2007,

appellant, a practicing attorney and former partner of the Toledo law firm of Bugbee and

Conkle, LLP, entered into a “Third Amended and Restated Limited Liability Partnership

Agreement” (hereinafter referred to as the “partnership agreement”) with the individual

appellees herein, all of whom are also partners at Bugbee and Conkle, LLP. Under the

terms of the partnership agreement, each of the five partners owned a 20 percent interest

in the property of the law firm. Further, the partnership agreement provides that a partner

wishing to retire from the practice of law is entitled to a payment of $100,000 as “full

settlement and satisfaction of such [retiring] Partner’s interest in Partnership Property.”

The term “retirement” is defined as “the permanent cessation from the practice of law.”

{¶ 3} Subsequent to the execution of the aforementioned partnership agreement,

conflicts arose between appellant and the other partners. Eventually, the partners

provided appellant with an ultimatum to retire, withdraw from the firm, or face expulsion

from the firm. Consequently, appellant sent a letter to the partners on September 2, 2010,

indicating that he would be retiring from the firm effective December 2, 2010, and

requesting payment of $100,000 as satisfaction of his interest in partnership property

pursuant to the terms of the partnership agreement. In his letter, appellant expressed

concern over his “forced retirement” and the enforceability of those provisions within the

2. partnership agreement that required him to permanently cease practicing law in order to

receive the $100,000 payment for his interest in partnership property. Specifically,

appellant contended that this restriction was unenforceable as an unlawful restriction on

his ability to earn a living and a violation of his clients’ rights to continued representation

by counsel of their choice.

{¶ 4} Appellant reiterated the foregoing concerns in a subsequent letter dated

September 17, 2010. Because the partners refused to pay appellant for his interest in

partnership property on account of his continued practice of law, appellant demanded

arbitration pursuant to paragraph 10 of the partnership agreement.

{¶ 5} Thereafter, the matter proceeded to arbitration for the resolution of a number

of issues, including, inter alia, whether appellant voluntarily retired or was forced to do

so and whether the restriction requiring appellant to cease practicing law in order to

receive his payout for his interest in partnership property was enforceable.

{¶ 6} In his decision, the arbitrator determined that appellant freely chose to retire

rather than withdraw from the firm or be expelled by the other partners. Regarding

appellant’s contention that he was forced to retire, the arbitrator concluded that “the

history of discussions and the exchanges between the parties does not support any

determination that he was compelled to do so.” Concerning the enforceability of the

partnership agreement provisions requiring appellant to cease practicing law in order to

receive the $100,000 payout for his interest in partnership property, the arbitrator stated:

3. The language conditioning the $100,000.00 payment on the

permanent cessation from the practice of law improperly restricts a

lawyer’s ability to practice law after termination of the partner relationship.

It also improperly prohibits a client from choosing a lawyer of the client’s

choice. * * * As a result, the provision requiring the permanent cessation

from the practice of law cannot be enforced without violating rule 5.6 of the

Ohio Rules of Professional Conduct. The provision is invalid and

unenforceable.

The arbitrator went on to examine the severability of the unenforceable language from

the remaining retirement provisions within the partnership agreement.1 He ultimately

found that the retirement provisions including the provision entitling retiring partners to a

$100,000 payout for their interest in partnership property, were unenforceable in their

entirety, reasoning that “[t]here is no way to excise the offending language while still

retaining the retirement option when the retirement option is expressly conditioned on the

permanent cessation from the practice of law.”

{¶ 7} Thereafter, on December 20, 2011, appellant filed an “application for order

confirming arbitration award and entering judgment thereon.” On January 24, 2012, the

trial court confirmed the arbitrator’s decision. Following the confirmation of the

arbitrator’s award, appellant sent a letter to the remaining partners, demanding payment

for his interest in the partnership pursuant to R.C. 1776.54. Having received no such

1 The partnership agreement does not contain a severability clause.

4. payment over the five months that followed, appellant filed his complaint in this case,

seeking judicial determination of the buyout price of his interest in the partnership as of

December 2, 2010, and an award against appellees in that amount.

{¶ 8} Two months after the complaint was filed, appellees filed an answer, in

which they asserted that appellant’s statutory claims for the payment of his partnership

interest were barred by res judicata and collateral estoppel. Alternatively, appellees

alleged that appellant’s claims were subject to mandatory, binding arbitration under

Section 10 of the partnership agreement. Thus, in the event the trial court found that the

claims were not barred by res judicata and collateral estoppel, appellees insisted that the

matter should be referred to arbitration.

{¶ 9} Thereafter, on November 13, 2012, appellees filed their motion for summary

judgment, arguing that appellant’s statutory claims in the present case could have and

should have been raised in the prior action involving the enforceability of the retirement

clauses within the partnership agreement. Thus, appellees reasoned that appellant’s

action was barred by the doctrine of res judicata.

{¶ 10} In response to appellees’ motion for summary judgment, appellant, on

December 11, 2012, filed his memorandum in opposition along with his own motion for

partial summary judgment. In his motion for partial summary judgment, appellant argued

that he was entitled to a valuation of his 20 percent ownership interest in Bugbee and

Conkle, LLP under R.C. 1776.54, and a judgment ordering appellees to pay him the

estimated amount of the buyout price of his interest in the firm, together with interest,

5. attorney’s fees, and the fees and expenses of appraisers and other experts. Appellant also

sought an order requiring appellees to provide him with a statement of partnership assets

and liabilities as of the date of his retirement, along with a current balance sheet and

income statement. In his memorandum in support of his motion for partial summary

judgment and in opposition to appellees’ motion for summary judgment, appellant argued

that his statutory claims were not barred by res judicata because they were not, and could

not have been, raised in the prior arbitration.

{¶ 11} Subsequent to the filing of appellant’s motion for partial summary

judgment, appellees filed another motion for summary judgment, this time arguing that

they were entitled to judgment because appellant’s claims were not timely filed within

the applicable one-year statute of limitations under R.C. 1776.54(I)(1). Appellant

responded by asserting that his statutory claims were timely filed within two months of

the judicial confirmation of the arbitrator’s decision striking the retirement provisions

from the partnership agreement. According to appellant, the statutory claims could not

have been asserted before the retirement provisions were deemed unenforceable since the

Uniform Partnership Act only serves as a set of default rules that are triggered when the

partnership agreement is silent on a particular issue.

{¶ 12} On December 22, 2014, the trial court issued its decision on appellant’s

motion for partial summary judgment and appellees’ first and second motions for

summary judgment. In its decision, the court found that the doctrine of res judicata was

inapplicable. The court reasoned that appellant could not have brought his statutory

6. claim in the prior litigation because his contractual claim was his sole remedy. The court

noted that the Uniform Partnership Act only governs disputes where the partnership

agreement does not otherwise control. Because the partnership agreement contained a

provision governing appellant’s buyout, the trial court found that appellant could not

assert his statutory claim until that provision was deemed unenforceable. Thus, the court

denied appellees’ first motion for summary judgment.

{¶ 13} In addition to the foregoing, the trial court examined whether appellant’s

statutory claims, along with appellees’ defenses to those claims, were subject to the

arbitration provisions contained in the partnership agreement. The court found that the

claims and defenses were subject to arbitration, stating:

[Appellant’s] statutory claim is subject to the arbitration clause

contained in the Agreement because it is a controversy related to his rights

under the partnership relationship and cannot be maintained without

reference to the Agreement. * * * In order to determine the merits of

[appellant’s] claim and calculate any amount owed to him, the Court would

have to determine the value of the Partnership assets, which would include

the Partnership Property. See R.C. 1776.54(B)(1)(a). The record evidence

shows that Paragraph 1 of the Agreement * * * defines Partnership

Property.

***

7. Accordingly, to calculate the buyout price of any amount owed to

[appellant] following his retirement, the Court would necessarily need to

look to the Agreement to define the Partnership’s assets and determine their

value at the time of [appellant’s] disassociation.

{¶ 14} Having found that the remaining issues were subject to arbitration under

the partnership agreement, the trial court denied appellant’s motion for partial summary

judgment and appellees’ second motion for summary judgment, and ordered the case

stayed pending completion of arbitration proceedings. Thereafter, appellant filed his

timely notice of appeal.

B. Assignment of Error

{¶ 15} On appeal, appellant assigns the following error for our review:

THE TRIAL COURT ERRED IN REFERRING APPELLANT’S

(WETLI’S) STATUTORY RIGHT TO A BUYOUT OF HIS INTEREST

IN PARTNERSHIP PROPERTY, AND APPELLEES’ (THE FIRM’S)

TIME LIMITATION DEFENSE THERETO TO ARBITRATION, AND

IN FAILING TO ENTER PARTIAL SUMMARY JUDGMENT

ESTABLISHING WETLI’S STATUTORY RIGHT TO A BUYOUT OF

HIS INTEREST IN PARTNERSHIP PROPERTY AND DIRECTING

THE FIRM’S PAYMENT TO WETLI OF THE FIRM’S ESTIMATE OF

THE BUYOUT PRICE PLUS INTEREST.

8. II. Analysis

{¶ 16} In appellant’s sole assignment of error, he argues that the trial court erred

in denying his motion for partial summary judgment and staying the case pending

arbitration. Appellant advances several arguments in support of his contention that the

trial court erroneously denied his motion for partial summary judgment. However, we

note that the trial court’s reluctance to examine the merits of appellant’s claims

concerning the buyout of his partnership interest stemmed from its finding that such

claims are subject to arbitration under paragraph 10 of the partnership agreement. The

United States Supreme Court has previously held that, “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.” AT&T Technologies, Inc. v. Communications

Workers of Am., 475 U.S. 643, 650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Thus, we

must determine whether appellant’s claims are subject to arbitration prior to examining

the merits of those claims.

{¶ 17} We review the question of whether, as a matter of law, a particular claim is

subject to arbitration under a de novo standard of review. Hussein v. Hafner &

Shugarman Ents., 176 Ohio App.3d 127, 2008-Ohio-1791, 890 N.E.2d 356, ¶ 23; see

also Rippe & Kingston Co., PSC v. Kruse, 1st Dist. Hamilton No. C-130587, 2014-Ohio-

2428, ¶ 20 (“Whether a controversy is arbitrable under a contract requires the court to

invoke principles of contract interpretation, and thus presents a question of law, which we

review de novo.”). Because arbitration is a matter of contract, a party may only be forced

9. to arbitrate a dispute that it has agreed to submit to arbitration. Taylor v. Ernst & Young,

LLP, 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203, ¶ 20. Nevertheless, a

presumption in favor of arbitration applies to claims that are within the scope of an

arbitration provision. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464, 471, 700 N.E.2d

859 (1998).

{¶ 18} In the case sub judice, the partnership agreement contains the following

arbitration provision:

10. Arbitration.

If any controversy or difference shall arise between the parties

hereto with respect to the interpretation or effect of this agreement, or the

rights, obligations or liabilities of the parties hereunder, or otherwise, then

each and every such controversy or difference shall be submitted to and

settled by arbitration in accordance with the Arbitration Rules of the Toledo

Bar Association’s Alternate Dispute Resolution Program then in effect, or

if not then in effect, pursuant to Chapter 2711 (Arbitration) of the Ohio

Revised Code.

{¶ 19} Here, appellant argues that the parties to the partnership agreement could

not have intended to arbitrate his statutory claims under R.C. 1776.54, since such claims

were superseded by the retirement provisions in the agreement that have since been

deemed unenforceable. Thus, appellant concludes that he “cannot be required to arbitrate

10. disputes which neither he nor the Firm specifically agreed to, anticipated or intended to

submit to arbitration at the time they entered into the [partnership agreement].”

{¶ 20} “When courts interpret the meaning of disputed contractual provisions,

they must presume the intent of the parties is reflected in the language drafted into the

agreement.” Brinkman v. State Farm Mut. Auto. Ins. Co., 6th Dist. Lucas No. L-05-1224,

2006-Ohio-727, ¶ 12, citing Kelly v. Medical Life Ins. Co., 31 Ohio St.3d 130, 509

N.E.2d 411 (1987), paragraph one of the syllabus. “A contract, such as an arbitration

agreement, that is clear and unambiguous, requires no real interpretation or construction

and will be given the effect called for by the plain language of the contract.” Locum

Med. Group, L.L.C. v. VJC Med., L.L.C., 8th Dist. Cuyahoga No. 102512, 2015-Ohio-

3037, ¶ 11, citing Aultman Hosp. Assn. v. Community Mut. Ins. Co., 46 Ohio St.3d 51,

55, 544 N.E.2d 920 (1989).

{¶ 21} In examining whether an arbitration provision encompasses statutory

claims, we must first consider whether the provision itself or the statute at issue contains

limitations as to arbitrability. Academy of Medicine of Cincinnati v. Aetna Health, Inc.,

108 Ohio St.3d 185, 2006-Ohio-657, 842 N.E.2d 488, ¶ 17. If the parties expressly

removed statutory claims from the scope of the arbitration provision, or the General

Assembly “evinced an intention to preclude a waiver of judicial remedies for the

statutory rights” created by the Uniform Partnership Act, appellant’s claims would fall

outside the scope of the arbitration agreement. Id., citing Mitsubishi Motors Corp. v.

Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S.Ct. 3346, 87 L.Ed.2d 444

11. (1985). However, the parties in this case did not remove statutory claims from the scope

of the agreement, and the Uniform Partnership Act does not preclude a waiver of judicial

remedies for the rights it creates. Thus, we must look to the language of the arbitration

provision to determine whether it limits itself to certain aspects of the partnership

agreement.

“To determine whether the claims asserted in the complaint fall

within the scope of an arbitration clause, the Court must ‘classify the

particular clause as either broad or narrow.’ Louis Dreyfus Negoce S.A. v.

Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d Cir.2001). An

arbitration clause that contains the phrase ‘any claim or controversy arising

out of or relating to the agreement’ is considered ‘the paradigm of a broad

clause.’ Collins & Aikman Prods. Co. v. Bldg. Sys. Inc., 58 F.3d 16, 20 (2d

Cir.1995).” Academy of Medicine of Cincinnati at ¶ 18, quoting ADR/JB,

Corp. v. MCY III, Inc. (E.D.N.Y.2004), 299 F.Supp.2d 110, 114.

{¶ 22} Upon examination, we find that the arbitration clause in this case is broad

in its scope. Indeed, the clause applies to “each and every” controversy arising between

the parties, including those concerning the rights, obligations or liabilities of the parties

on matters arising out of the partnership agreement, or otherwise. This provision is clear

and unambiguous. Under its plain language, all disputes between the parties that arise

under the partnership agreement are subject to arbitration. Further, we agree with the

trial court’s conclusion that the litigation of appellant’s statutory claims under the

12. Uniform Partnership Act will necessarily implicate provisions in the partnership

agreement. Under R.C. 1776.03(A), the partnership agreement “governs relations among

the partners and between the partners and the partnership. To the extent the partnership

agreement does not otherwise provide, this chapter governs relations among the partners

and between the partners and the partnership.” (Emphasis added.) Here, appellant seeks

the buyout of his interest in the partnership under R.C. 1776.54. In order to calculate the

amount owed to appellant, the value of the partnership assets must first be determined.

R.C. 1776.54(B)(1)(a). In turn, whether a particular asset is a partnership asset is set

forth in the partnership agreement, which defines partnership property. Thus, in order to

identify and value appellant’s interest in partnership property, the property itself must

first be identified, which will require the application of the definition of partnership

property found within the partnership agreement.

{¶ 23} In light of the breadth of the arbitration provision at issue in this case, we

find that the trial court did not err when it concluded that the claims raised in this case are

subject to arbitration. Having concluded that appellant’s claims are subject to arbitration

under the partnership agreement, we do not reach appellant’s remaining arguments

concerning the merits of his claims. See AT&T Technologies, Inc., supra, 475 U.S. at

650, 106 S.Ct. 1415, 89 L.Ed.2d 648 (“[I]n 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.”).

{¶ 24} Accordingly, appellant’s sole assignment of error is not well-taken.

13. III. Conclusion

{¶ 25} Based on the foregoing, the judgment of the Lucas County Court of

Common Pleas is affirmed. Costs are hereby assessed to appellant in accordance with

App.R. 24.

Judgment affirmed.

A certified copy of this entry shall constitute the mandate pursuant to App.R. 27. See also 6th Dist.Loc.App.R. 4.

Mark L. Pietrykowski, J. _______________________________ JUDGE Thomas J. Osowik, J. _______________________________ Stephen A. Yarbrough, P.J. JUDGE CONCUR. _______________________________ JUDGE

This decision is subject to further editing by the Supreme Court of Ohio’s Reporter of Decisions. Parties interested in viewing the final reported version are advised to visit the Ohio Supreme Court’s web site at: http://www.sconet.state.oh.us/rod/newpdf/?source=6.

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