Case Title: Taylor v. Ernst & Young, L.L.P.

Citation: 2011-Ohio-5262

Docket Number: 2010-1324

State: ohio

Court: Ohio Supreme Court

Date: 2011-10-18T00:00:00Z

Document:
[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Taylor v. Ernst & Young, L.L.P., Slip Opinion No. 2011-Ohio-5262.] 
 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
SLIP OPINION NO. 2011-OHIO-5262 
TAYLOR, SUPT., APPELLEE, v. ERNST & YOUNG, L.L.P., APPELLANT. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Taylor v. Ernst & Young, L.L.P.,  
Slip Opinion No. 2011-Ohio-5262.] 
Insurance—Liquidation of insolvent insurance company—Superintendent of 
insurance as liquidator not bound by insurer’s arbitration agreement. 
(No. 2010-1324—Submitted May 25, 2011—Decided October 18, 2011.) 
APPEAL from the Court of Appeals for Franklin County, No. 09-AP-949, 
189 Ohio App.3d 60, 2010-Ohio-2731. 
__________________ 
SYLLABUS OF THE COURT 
1.  The Ohio superintendent of insurance, in her capacity as the liquidator of an 
insolvent insurer, is not a mere successor in interest of an insolvent 
insurer. 
2.  The Ohio superintendent of insurance, as liquidator of an insolvent insurance 
company, is not bound by an agreement to arbitrate that was entered into 
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by the insolvent insurer when her claims do not arise from the contract 
containing the arbitration clause. 
3.  An insurance company does not have the authority to bind the liquidator of the 
company to arbitrate preference or fraudulent-transfer claims.   
__________________ 
O’CONNOR, C.J. 
{¶ 1} This appeal involves the question of whether the superintendent of 
insurance, in her capacity as the liquidator of an insolvent insurer, is bound by an 
agreement to arbitrate that was entered into by an insolvent insurer in cases in 
which the liquidator does not disavow the contract that contains the arbitration 
clause.  For the reasons explained below, we hold that the liquidator is not bound 
by the insolvent insurer’s agreement when the liquidator’s claims do not arise 
from the contract that contains the arbitration provision.  Accordingly, we affirm 
the judgment of the court of appeals but in part for different reasons, as explained 
below. 
I.  RELEVANT BACKGROUND 
{¶ 2} For purposes of this appeal, the facts are as stated in the complaint 
and the motion to dismiss.  Ernst & Young (“E&Y”), an independent accounting 
firm, provided auditing services to American Chambers Life Insurance Company 
(“ACLIC”) for the year ending December 31, 1998.  The audit was undertaken 
pursuant to an engagement letter signed by E&Y and ACLIC1 that contained an 
arbitration clause.  On February 25, 1999, E&Y submitted a report to the Ohio 
Department of Insurance (“ODI”) that certified that it had conducted the audit in 
accordance with generally accepted auditing standards and that ACLIC’s financial 
statements presented fairly, in all material respects, ACLIC’s financial position. 
                                                 
1  The engagement letter was actually signed by the president of ACLIC’s parent company, United 
Chambers Administrators, Inc. on behalf of it and ACLIC, “collectively, the Company.”  The 
liquidator accepts that for all relevant purposes, ACLIC is a signatory of the letter.    
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{¶ 3} On March 13, 2000, the superintendent filed an action in the 
Franklin County Common Pleas Court that sought, at first, to place ACLIC in 
rehabilitation.  On May 8, 2000, the court issued a final liquidation order based on 
ACLIC’s insolvency.  During the liquidation proceedings, the liquidator entered 
into a tolling agreement with E&Y whereby each side agreed to toll the time for 
filing causes of action and claims against the other side until one year from May 
2, 2002. 
{¶ 4} On April 30, 2003, the liquidator filed this action in the Franklin 
County Common Pleas Court against E&Y.2  The liquidator alleged two claims 
against E&Y.  In one claim, she alleged that E&Y “negligently failed to perform 
its duties as the independent certified public accountant retained to conduct the 
audit of ACLIC’s December 31, 1998, Annual Statement, thus breaching the 
duties owed.”  Specifically, the liquidator alleged that E&Y failed to conduct its 
audit according to generally accepted auditing standards and failed to discover or 
disclose material misstatements in ACLIC’s financial statements, such as 
understatement of loss reserves, overstatement of receivables, unrecorded 
liabilities, and investments that exceeded the allowable amounts.  That breach, she 
alleged, allowed ACLIC’s financial condition to go undetected and, consequently, 
allowed it to continue transacting business, causing harm to ACLIC, its 
policyholders and creditors, and the public. 
{¶ 5} In another claim, the liquidator alleged that E&Y received 
preferential or fraudulent payments of more than $25,000.  Specifically, she 
alleged that E&Y received a sum of money from ACLIC after March 13, 1999, 
when ACLIC was insolvent, and that E&Y refused to return the money, 
notwithstanding the liquidator’s demand for it.  Consequently, the liquidator 
                                                 
2  The suit also named a law firm, Foley & Lardner, and an attorney, Michael H. Woolever, as 
defendants.  Only the claims against E&Y are relevant to this discussion; no other defendant is a 
party to this appeal.   
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alleged, E&Y had obtained a greater percentage of its debt than other creditors of 
the same class would receive in the distribution of ACLIC’s estate. 
{¶ 6} On July 15, 2003, E&Y moved to dismiss the complaint or to stay 
the proceedings and compel arbitration based on the arbitration clause contained 
in the engagement letter.  The trial court denied the motion, and E&Y appealed.  
The Tenth District affirmed.  Hudson v. Ernst & Young, L.L.P., 189 Ohio App.3d 
60, 2010-Ohio-2731, 937 N.E.2d 585, at ¶ 39.3  That court held that because the 
liquidator had not signed the arbitration agreement, there was a presumption 
against arbitration.  Id. at ¶ 16.  It then held that the presumption could never be 
overcome because the General Assembly did not contemplate liquidation 
proceedings being turned over to private arbitrators.  Id. at ¶ 18.  In other words, 
the Tenth District held that there is an irreconcilable conflict between the Ohio 
Liquidation Act and the Ohio Arbitration Act and that the Liquidation Act 
prevails. Id. 
{¶ 7} This court accepted E&Y’s discretionary appeal, which sets forth 
two propositions of law: (1) “An insurance liquidator that does not disavow a 
contract entered into by an insurer is bound by an arbitration provision in that 
contract, which must be enforced pursuant to Ohio’s statutory code and strong 
policy favoring arbitration,” and (2) “A tolling agreement that preserves ‘all 
defenses’ as of its effective date preserves an arbitration defense that existed on 
the effective date.”  We address each proposition in turn.   
{¶ 8} Although the liquidator did not agree to arbitrate any claims and is 
not a signatory to the engagement letter that contains the arbitration provision, 
E&Y nonetheless argues that the liquidator is bound by the arbitration clause for 
three reasons.  First, E&Y asserts that the liquidator stands in the shoes of the 
insolvent insurer.  In the alternative, E&Y contends that because the liquidator is 
                                                 
3 Mary Jo Hudson was a predecessor in office of appellee, Mary Taylor. 
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asserting claims that are based on and arise out of the contract that contains the 
arbitration clause, she is bound by the arbitration provisions.  Finally, E&Y 
argues that the Liquidation Act does not permit the liquidator to disavow the 
arbitration clause while enforcing the balance of the contract. 
{¶ 9} The liquidator rebuts each assertion.  First, she denies that she stands 
in the shoes of the insolvent insurer.  Rather, she stands in a unique public-
protection role.  Second, she argues that she is not asserting claims that are based 
on or arise out of the contract but, rather, that she is bringing claims that arise 
from both her statutory powers and certain financial statements and audit 
certifications filed in the public record by ACLIC and E&Y.  Therefore, she 
argues, her disavowal powers are not implicated.  Finally, in the alternative she 
asserts that there is an irreconcilable conflict between the Liquidation Act and the 
Arbitration Act and that the Liquidation Act must prevail.  We proceed with the 
analysis of E&Y’s arguments and begin our discussion with an overview of the 
Ohio Liquidation Act. 
II.  ANALYSIS 
A.  The Ohio Liquidation Act 
{¶ 10} The Insurers Supervision, Rehabilitation, and Liquidation Act (the 
“Liquidation Act”), codified in R.C. Chapter 3903, “confer[s] upon the 
Superintendent and a trial court broad discretionary and equitable powers relating 
to the supervision, rehabilitation and liquidation of insurance companies.”  Fabe 
v. Prompt Fin., Inc. (1994), 69 Ohio St.3d 268, 273, 631 N.E.2d 614.  Through 
the Liquidation Act, the General Assembly established “a comprehensive 
framework governing the liquidation of insurance companies operating in Ohio,” 
Hudson v. Petrosurance, Inc., 127 Ohio St.3d 54, 2010-Ohio-4505, 936 N.E.2d 
481, ¶ 16, through which the liquidator is empowered “to protect the rights of 
insureds, policyholders, creditors, and the public generally.”  Fabe, 69 Ohio St.3d 
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at 275.  R.C. 3903.02(D).  We must liberally construe the Liquidation Act to 
effectuate that purpose.  R.C. 3903.02(C). 
{¶ 11} The Liquidation Act grants the superintendent three levels of 
oversight of the insurance industry apart from her usual regulatory powers.  First, 
R.C. 3903.09 confers on the superintendent power to identify and supervise a 
potentially troubled insurer by requiring it to get her permission before engaging 
in certain business transactions, such as disposing of assets or investing funds.  
Second, R.C. 3903.12 grants the superintendent the power, with the court’s 
permission, to attempt to rehabilitate an insurer in such a poor financial condition 
that its further transaction of business would be financially hazardous to its 
policyholders, creditors, or the public.  Third, R.C. 3903.16(A) and 3903.17 grant 
the superintendent the power, with the court’s permission, to liquidate an insurer 
if, for example, it is insolvent.  When the superintendent believes that an 
insurance company is insolvent, she may file a complaint for liquidation.  R.C. 
3903.17(B).  When issued, a final order for liquidation appoints the 
superintendent as liquidator and directs her to use her broad, statutory powers to 
marshal assets of the insolvent insurer in the liquidation court and to administer 
the assets under the general supervision of that court.  R.C. 3903.18(A).  To that 
end, the liquidator maximizes the insolvent insurer’s estate; she then reviews, 
prioritizes, and pays claims to the extent possible.  Benjamin v. Pipoly, 155 Ohio 
App.3d 171, 2003-Ohio-5666, 800 N.E.2d 50, ¶ 28; R.C. 3903.42.   
{¶ 12} R.C. 3903.21 contains a nonexclusive list of the powers given to 
the liquidator to accomplish these tasks.  Among other things, she may “[c]onduct 
public and private sales of the property of the insurer,” R.C. 3903.21(A)(7); 
“[e]nter into such contracts as are necessary to carry out the order to liquidate, and 
* * * affirm or disavow any contracts to which the insurer is a party,” R.C. 
3903.21(A)(11); and sell, encumber, or otherwise dispose of the insurer’s 
property, R.C. 3903.21(A)(9).  In addition to 23 enumerated powers set forth in 
January Term, 2011 
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the act, the liquidator has authority to do whatever is “necessary or appropriate for 
the accomplishment of or in the aid of the purpose of liquidation.”  R.C. 
3903.21(B).  Indeed, as other courts recognize, this statutory scheme is 
“abounding in features designed to vest within the liquidator broad and largely 
unfettered powers, under the supervision of the courts, to maximize the assets 
available to her in discharging her duties to claimants, shareholders, and creditors 
of the insolvent insurance company.”  Pipoly at ¶ 28.   
{¶ 13} In contrast to the liquidator’s broad powers, creditors have limited 
rights to file claims against the insurer’s estate.  R.C. 3903.24(A) and 3903.35 
through 3903.44.  With the issuance of a liquidation order, claims of creditors 
against the insolvent insurer are extinguished by operation of law and replaced by 
a right to seek redress in the liquidation court.  Id.  Those claims must be filed by 
a date specified by the liquidator, regardless of the underlying statute of limitation 
that would have applied if the claimant had sued the insurer in ordinary litigation.  
R.C. 3903.22(B) and 3903.36. 
{¶ 14} Subject to judicial review, the liquidator investigates, values, and 
approves or denies claims filed against the estate.  See, e.g., Covington v. Am. 
Chambers Life Ins. Co., 150 Ohio App.3d 119, 2002-Ohio-6165, 779 N.E.2d 833, 
¶ 26.  She then sorts the payable claims according to nine statutory classes.  R.C. 
3903.42(A) through (I).  The Liquidation Act establishes priority among the 
classes and prescribes that each claimant of the first class be paid in full before 
the claimants of the second class are paid at all, and so on.  R.C. 3903.42.  Finally, 
the statutory scheme provides for setoff when the estate has a cause of action 
against a claimant.  R.C. 3903.30. 
{¶ 15} The General Assembly designed the Liquidation Act to be 
centralized in order to enhance efficiency.  R.C. 3903.02(D)(3).  The general rule 
is that all liquidation actions brought pursuant to R.C. 3903.01 to 3903.59 “shall 
be brought in the court of common pleas of Franklin county” (the “liquidation 
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court”).  R.C. 3903.04(E).  While the Liquidation Act itself contains a reiteration 
that the liquidation court has jurisdiction over preference claims, R.C. 
3903.28(G), and liquidation complaints, R.C. 3903.04(B), elsewhere it sets forth 
limited exceptions under which the liquidator may select a forum other than the 
liquidation court.  R.C. 3903.21(A)(6) (establishing that as part of her power to 
collect debts of the insolvent insurer, the liquidator may “[i]nstitute timely action 
in other jurisdictions”), R.C. 3903.21(A)(12) (establishing that the liquidator has 
the power to “[c]ontinue to prosecute or commence * * * any and all suits and 
other legal proceedings, in this state or elsewhere”), and R.C. 3903.41(A)(2) 
(establishing that the court has the power to put the question of a security’s value 
to arbitration). 
{¶ 16} The liquidator’s power of forum selection stands in sharp contrast 
to the creditors’ limited right to file suits in the liquidation court only.  R.C. 
3903.24(A) (establishing that upon the issuance of a liquidation order, “no civil 
action shall be commenced against the insurer or liquidator, whether in this state 
or elsewhere, nor shall any such existing action be maintained or further 
prosecuted”).  In short, when allowed, forum selection belongs to the liquidator, 
and the liquidator alone. 
{¶ 17} Here, E&Y seeks to remove the entire action filed by the liquidator 
in the liquidation court to arbitration.  We turn our discussion to the arbitration 
law, which E&Y relies upon in support of its position. 
B.  The Ohio Arbitration Act 
{¶ 18} The Ohio Arbitration Act (“OAA”) provides:  “A provision in any 
written contract * * * to settle by arbitration a controversy that subsequently 
arises out of the contract * * * shall be valid, irrevocable, and enforceable, except 
upon grounds that exist at law or in equity for the revocation of any contract.”  
R.C. 2711.01(A).  The language of the OAA tracks the language of the Federal 
Arbitration Act (“FAA”), which provides: “[A] contract evidencing a transaction 
January Term, 2011 
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involving commerce to settle by arbitration a controversy thereafter arising out of 
such contract * * * shall be valid, irrevocable, and enforceable, save upon such 
grounds as exist at law or in equity for the revocation of any contract.”  Section 2, 
Article 9, U.S.Code.  The OAA expresses Ohio’s strong public policy favoring 
arbitration, which is consistent with federal law supporting arbitration.  Taylor 
Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 
12, ¶ 26, fn. 1. 
{¶ 19} The FAA was enacted in 1925 “ ‘to reverse the longstanding 
judicial hostility to arbitration agreements that had existed at English common 
law and had been adopted by American courts, and to place arbitrations 
agreements upon the same footing as other contracts.’ ” Equal Emp. Opportunity 
Comm. v. Waffle House (2002), 534 U.S. 279, 289, 122 S.Ct. 754, 151 L.Ed.2d 
755, quoting Gilmer v. Interstate/Johnson Lane Corp. (1991), 500 U.S. 20, 24, 
111 S.Ct. 1647, 114 L.Ed.2d 26.  The purpose was “ ‘to make arbitration 
agreements as enforceable as other contracts, but not more so.’ ”  Id. at 294, 
quoting Prime Paint Corp. v. Flood & Conklin Mfg. Co (1967), 388 U.S. 395, 
404, 87 S.Ct. 1801, 18 L.Ed.2d 1270, fn. 12.  Therefore, the FAA “ ‘does not 
require parties to arbitrate when they have not agreed to do so.’ ”  Id. at 293, 
quoting Volt Information Sciences, Inc. v. Bd. of Trustees of Leland Stanford 
Junior Univ. (1989), 489 U.S. 468, 478, 109 S.Ct. 1248, 103 L.Ed.2d 488; see 
also id. at 294 (holding that the FAA is, at its core, a policy of enforcing 
contractual arrangements). 
{¶ 20} Consistently, this court has held: “ ‘ “[A]rbitration is a matter of 
contract and a party cannot be required to submit to arbitration any dispute which 
[it] 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.’ ”  Council of Smaller Ents. v. 
Gates, McDonald & Co. (1998), 80 Ohio St.3d 661, 665, 687 N.E.2d 1352, 
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quoting AT&T Technologies, Inc. v. Communications Workers of Am. (1986), 475 
U.S. 643, 648-649, 106 S.Ct. 1415, 89 L.Ed.2d 648, quoting United Steel Workers 
of Am. v. Warrior & Gulf Navigation Co. (1960), 363 U.S. 574, 582, 80 S.Ct. 
1347, 4 L.Ed.2d 1409. Accordingly, when deciding motions to compel arbitration, 
the proper focus is whether the parties actually agreed to arbitrate the issue, i.e., 
the scope of the arbitration clause, not the general policies of the arbitration 
statutes.  Waffle House, 534 U.S. at 294.  It follows that although any ambiguities 
in the language of a contract containing an arbitration provision should be 
resolved in favor of arbitration, the courts must not “override the clear intent of 
the parties, or reach a result inconsistent with the plain text of the contract, simply 
because the policy favoring arbitration is implicated.”  Id. 
{¶ 21} For these reasons, Ohio courts recognize a presumption in favor of 
arbitration when a claim falls within the scope of an arbitration provision.  
Williams v. Aetna Fin. Co. (1998), 83 Ohio St.3d 464, 471, 700 N.E.2d 859.  But 
significantly, there is a counterweighing presumption against arbitration when a 
party seeks to invoke an arbitration provision against a nonsignatory.  Council of 
Smaller Ents., 80 Ohio St.3d at 667, citing First Options of Chicago, Inc. v. 
Kaplan (1995), 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985.  In the latter 
instance, “there is serious doubt that the party resisting arbitration has empowered 
the arbitrator to decide anything * * *.”  Id. 
C.  The Liquidator Is Not Bound by the Arbitration Clause 
1.  The liquidator does not stand in the shoes of an insolvent insurer, 
but in a public-protection role 
{¶ 22} We first address E&Y’s argument that the liquidator is bound by 
the arbitration agreement, like a signatory, because she stands in the shoes of a 
signatory, ACLIC.  We hold that the liquidator does not stand in the shoes as a 
mere successor in interest of the insolvent insurer.  Consequently, she is not 
January Term, 2011 
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bound to arbitration agreements entered into by the insolvent insurer as if she 
were the signatory insurer. 
{¶ 23} Our holding is in accord with the United States Supreme Court’s 
jurisprudence on arbitration.  See, e.g., Waffle House, 534 U.S. at 294, 122 S.Ct. 
754, 151 L.Ed.2d 755 (holding that the Equal Employment Opportunity 
Commission is not bound by an arbitration agreement between an employer and 
employee).  In Waffle House, the Equal Employment Opportunity Commission 
(“EEOC”) filed an enforcement action against Waffle House based on alleged 
unlawful employment practices relating to the discharge of an employee who had 
health problems.  Id. at 283.  When the employee applied for the job, he signed a 
standard Waffle House application that contained an agreement to arbitrate any 
disputes or claims that might develop regarding his potential future employment.  
Id. at 282-283.  He was hired, fired, and filed a timely charge of discrimination 
with the EEOC—but did not seek arbitration. 
{¶ 24} In its suit, the EEOC sought injunctive relief to “ ‘eradicate the 
effects of [the employer’s] past and present unlawful employment practices’ ” and 
also sought victim-specific relief for the employee, including back pay, 
reinstatement, compensatory damages, and punitive damages.  Id. at 283-284.  
Waffle House moved to compel arbitration based on the arbitration agreement 
between it and the employee. 
{¶ 25} The court initially noted that the federal circuits that had dealt with 
the issue had come to conflicting conclusions.  The Sixth Circuit was among the 
circuits that had addressed the issue and decided that an employee’s agreement to 
arbitrate does not affect the EEOC’s independent statutory authority to pursue an 
enforcement action, even for victim-specific relief.  Id. at 285, citing EEOC v. 
Frank’s Nursery & Crafts, Inc. (C.A.6., 1999), 177 F.3d 448.  The court agreed 
with the Sixth Circuit and held that the arbitration agreement between the 
employee and the employer did not bind the EEOC for the simple reason that the 
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EEOC was not a party to the agreement.  Id. at 294.  In so holding, it rejected the 
argument that the EEOC stands in the shoes of aggrieved employees, reasoning 
that “the statute specifically grants the EEOC exclusive authority over the choice 
of forum and the prayer for relief once a charge has been filed.”  Id. at 297-298.  
The court further explained that it had previously recognized several situations in 
which the EEOC does not stand in the employee’s shoes when it held that the 
EEOC does not have to comply with statutes of limitations or certain civil rules.  
Finally, the court explained that although the employee’s actions are relevant in 
the application of the principles of res judicata, mootness, and mitigation, that 
relevancy does not “render the EEOC a proxy for the employee.”  Id. at 298. 
{¶ 26} Similarly, the characteristics of the liquidator’s public-protection 
role confirm that she does not stand in the shoes of the insolvent insurer.  The 
liquidator, like the EEOC, has the exclusive choice of forum (when there is a 
choice). R.C. 3903.21(A)(6)(a), 3903.21(A)(12), and 3903.41(A)(2).  She 
similarly enjoys the sole discretion to pursue or forgo claims that is independent 
of the shareholders’ desires and subject instead to judicial approval.  R.C. 
3903.21(A)(12).  Finally, the ordinary statutes of limitations do not apply in the 
liquidation context to the liquidator or to the estate’s creditors.  R.C. 3903.24(B), 
3903.22(B), and 3903.36.  The fact that any judgments in favor of the liquidator 
accrue to the benefit of insureds, policyholders, and creditors means that the 
liquidator’s unique role is one of public protection, and one that is even more so 
than the EEOC’s.  We therefore reject E&Y’s argument that she is bound by an 
insolvent insured’s act of signing the arbitration agreement. 
{¶ 27} In doing so, we also reject E&Y’s argument that Shearson/Am. 
Express, Inc. v. McMahon (1987), 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185, 
justifies the opposite result.  In Shearson, two private parties entered into an 
arbitration agreement.  One signatory sued the other for alleged violations of the 
federal Securities Exchange Act and the Racketeer Influenced and Corrupt 
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Organizations Act.  The Security Exchange Act provided for exclusive 
jurisdiction in the federal district courts over claims brought under it.  Section 27, 
Title 15, U.S.Code.  The United States Supreme Court held that the exclusive 
jurisdictional provisions did not preclude arbitration.  Id. at 227. 
{¶ 28} In contrast to Waffle House, as well as this case, Shearson involved 
signatories of an arbitration agreement.  A material fact in Waffle House was that 
the EEOC was not a signatory to the arbitration agreement.  Waffle House, 534 
U.S. at 294, 122 S.Ct. 754, 151 L.Ed.2d 755 (“It goes without saying that a 
contract cannot bind a nonparty.  Accordingly, the proarbitration policy goals of 
the FAA do not require the agency to relinquish its statutory authority if it has not 
agreed to do so”).  Therefore, Shearson is inapposite. 
{¶ 29} E&Y also relies on Benjamin v. Ernst & Young, 167 Ohio App.3d 
350, 2006-Ohio-2739, 855 N.E.2d 128.  The dispute in Benjamin was part of this 
ongoing litigation between E&Y and the liquidator.  Id. at ¶ 1.  The Tenth District 
decided Benjamin while E&Y’s motion to compel arbitration (at issue in this 
case) was pending before the Franklin County Common Pleas Court.  It is of 
limited persuasive value here given its posture.  Moreover, Benjamin undermines, 
rather than supports, E&Y’s arguments.  Benjamin is the result of a motion filed 
by a law firm, Foley & Lardner, and one of its attorneys, Michael J. Woolever 
(collectively, “Foley”), that sought to remove the case to the Ohio Court of 
Claims.  Id. at ¶ 1.  Foley asserted counterclaims against the superintendent based 
on her alleged failure “to act to protect the policyholders, creditors, and the 
public,” thereby causing the injuries for which the liquidator was seeking to 
recover from E&Y and Foley.  Id. at ¶ 5.  The Court of Claims held that the 
counterclaims “were not asserted against the superintendent in her capacity as 
liquidator of ACLIC, but, rather, were asserted against the superintendent in her 
regulatory capacity * * * based on actions that allegedly occurred [before] the 
liquidation of ACLIC.”  Id. at ¶ 7.  Therefore, the Court of Claims granted the 
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liquidator’s motion to dismiss the counterclaims because “[a] counterclaim may 
only be asserted against an opposing party and only against that party in the 
capacity in which that party sued.”  Id., citing Quintus v. McClure (1987), 41 
Ohio App.3d 402, 536 N.E.2d 22.  As a result, the Court of Claims remanded the 
case to the Franklin County Common Pleas Court.  Id. at ¶ 2.  E&Y appealed the 
decision of the Court of Claims.4  Id. 
{¶ 30} In affirming, the Tenth District explained that the “superintendent 
as liquidator is a separate entity from the superintendent as regulator.”  Id. at ¶ 19.  
In attempting to make the distinction, that court stated that the superintendent as 
liquidator “stands in the shoes of the insolvent insurer.”  Id. at ¶ 18.  Nonetheless, 
it more fully explained: “Any benefits received from a judgment or settlement in 
an action initiated by the liquidator accrue to the sole benefit of the members, 
shareholders, policyholders, and creditors of the insured, not to the state of Ohio.”  
Id. 
{¶ 31} E&Y’s argument in this case is fatally flawed for the same reason 
that Foley’s failed in Benjamin—that is, its argument that the liquidator is, in 
essence, ACLIC, is inconsistent with the nature of the liquidator’s claims.  Any 
assertion that the liquidator is a mere successor in interest who is bringing breach-
of-contract claims on behalf of ACLIC ignores the fact that the superintendent did 
not bring this suit on behalf of ACLIC and its shareholders but, rather, in her 
capacity as liquidator of ACLIC for the protection of “the rights of insureds, 
policyholders, creditors, and the public generally.”  Fabe v. Prompt Fin., Inc., 69 
Ohio St.3d 268, 275, 631 N.E.2d 614. 
{¶ 32} Notwithstanding E&Y’s claim to the contrary, this case presents a 
garden-variety attempt to enforce an arbitration clause against a nonsignatory. 
                                                 
4  Foley ended up partially settling the liquidator’s claims against it and, consequently, did not 
pursue its appeal of the Court of Claims decision.  Benjamin, 167 Ohio App.3d 250, 2006-Ohio-
2739, 855 N.E.2d 128, at ¶ 2-4.   
January Term, 2011 
15 
 
Therefore, there is a presumption against arbitration in this case.  See Council of 
Smaller Enterprises, 80 Ohio St.3d at 667, 687 N.E.2d 1352.  Because that 
presumption applies here, we must respect it absent a showing to the contrary. 
2.  The liquidator’s claims do not arise from the engagement letter 
{¶ 33} E&Y’s asserts that the arbitration agreement is enforceable against 
the liquidator because her claims “relate to” the subject matter of the engagement 
letter.  This is not the applicable test.5  The test is whether the liquidator, a 
nonsignatory, has asserted claims that arise from the contract containing the 
arbitration clause.  See, e.g., Gerig v. Kahn, 95 Ohio St.3d 478, 2002-Ohio-2581, 
769 N.E.2d 381, ¶ 19.  Consistent with our precedent, we conclude that the 
presumption against arbitration is not overcome, because neither of the 
liquidator’s claims arises from the engagement letter that contained the arbitration 
provision.  See id. at ¶ 19; see also Henderson v. Lawyers Title Ins. Corp., 108 
Ohio St.3d 265, 2006-Ohio-906, 843 N.E.2d 152, ¶ 42; Peters v. Columbus Steel 
Castings Co., 115 Ohio St.3d 134, 2007-Ohio-4787, 873 N.E.2d 1258, at ¶ 6.  
Because the liquidator’s claims differ in nature, we address each in turn. 
a.  The malpractice claim 
{¶ 34} The liquidator’s first claim alleged that E&Y failed to conduct its 
audit of ACLIC in accordance with generally accepted auditing standards as 
required and, consequently, material misstatements in ACLIC’s financial 
statements went undisclosed or undetected.  This malpractice claim does not arise 
from the engagement letter for two related reasons.  First, the malpractice claim 
plainly does not seek a declaration of a signatory’s rights and obligations under 
the engagement letter.  See Gerig, 95 Ohio St.3d 478, 2002-Ohio-2581, 769 
                                                 
5  The test that E&Y urges the court to apply is the test for signatories, based on the broad 
language of this specific arbitration agreement.  It provides that all claims “related to” the services 
covered in the engagement letter shall be arbitrated.   If one signatory were attempting to enforce 
the arbitration clause against the other signatory, the court would look to the contract language and 
determine whether the parties agreed to arbitrate the relevant dispute.  That is not, however, the 
test for a nonsignatory.           
SUPREME COURT OF OHIO 
16 
 
N.E.2d 381, at ¶ 19.  Second, the malpractice claim arises independently of the 
engagement letter because it arises from the powers given to the liquidator by the 
General Assembly together with the allegedly false or misleading audit report 
E&Y filed with ODI.  See Henderson at ¶ 42. 
{¶ 35} In Gerig, this court addressed whether an issue of insurance 
coverage was subject to arbitration in accordance with an agreement between a 
physician and a hospital.  While under the care of a physician, Dawn Gerig gave 
birth to twins at St. Vincent Mercy Medical Center.  At the time of the deliveries, 
the physician was working at the hospital under an affiliation agreement that 
required the hospital to insure him against medical-malpractice claims.  The 
Gerigs filed suit against the physician and alleged that he caused birth defects to 
one of the twins by malpractice during the delivery.  At the time the suit was filed, 
the hospital provided malpractice insurance to the physician through an insurance 
company with liability limits up to $4 million.  In addition, the hospital funded a 
self-insurance plan to pay malpractice claims.  Id. at ¶ 1–2. 
{¶ 36} Thereafter, the insurance company became insolvent and was 
forced into liquidation.  The Ohio Insurance Guaranty Association (“OIGA”) 
became involved in the case to pay any covered claims brought by consumers 
against the insolvent insurance company, pursuant to R.C. Chapter 3955. 
{¶ 37} Because the statutory limit for OIGA claims was $300,000 and 
because OIGA pays claims only after a claimant has exhausted her rights under 
all other insurance policies, the Gerigs, the physician, and OIGA sought judicial 
clarification on the issue of insurance coverage, in light of the insurance 
company’s insolvency.  Id. at ¶ 3–6.  The Gerigs and the physician sought a 
declaration that by virtue of the affiliation agreement, the hospital was responsible 
for any judgment up to $4 million.  The OIGA sought a declaration that by virtue 
of the affiliation agreement, the hospital was required to pay any judgment to the 
Gerigs under its self-insurance fund and that consequently, OIGA was not 
January Term, 2011 
17 
 
obligated to pay any damages unless the Gerigs exhausted that fund.  The hospital 
moved the trial court to stay the proceedings and to compel arbitration in the 
medical-malpractice case and “also sought an order compelling arbitration of the 
dispute regarding whether St. Vincent [was] legally required, pursuant to the 
agreement, to insure [the physician] through its self-insurance plan.”  Id. at ¶ 7.  
The physician, who was the only other signatory to the affiliation agreement, did 
not oppose the hospital’s motion. 
{¶ 38} In deciding the issue, we first noted that the Gerigs and OIGA 
sought a declaration of the hospital’s rights and obligations to the physician under 
the affiliation agreement.  Id. at ¶ 12.  By the same token, they did not have a 
direct dispute with the hospital.  We then held that it would be inequitable to 
allow them to avoid arbitration while simultaneously seeking a substantive benefit 
of the contract that contained the arbitration clause.  Accordingly, based on the 
principle of equitable estoppel, we found the arbitration agreement to be 
enforceable against the interested nonsignatories.  Id. at ¶ 19. 
{¶ 39} In this case, the liquidator is not seeking a declaration of E&Y’s 
obligations to ACLIC.  Notably, the liquidator’s claim did not request or require 
the court to interpret the engagement letter to determine E&Y’s obligations to 
ACLIC.  The complaint alleges the following: 
{¶ 40} (1) Pursuant to R.C. 3901.04, 3901.041, 3901.042, and 3905.29 
and Ohio Adm.Code 3901-1-50, ACLIC had a duty to file its financial statements 
with ODI, including the financial statement for the year ending December 31, 
1998. 
{¶ 41} (2) Pursuant to Ohio Adm.Code 3901-1-50(E)(1), ACLIC was 
required to register with ODI the name of its certified public accountant retained 
to audit its financial statements, and ACLIC registered E&Y as its auditor. 
SUPREME COURT OF OHIO 
18 
 
{¶ 42} (3) Pursuant to Ohio Adm.Code 3901-1-50(H), E&Y had a duty to 
conduct its audit in a manner conforming to generally accepted auditing 
standards. 
{¶ 43} (4) Pursuant to Ohio Adm.Code 3901-1-50(I), E&Y had a duty to 
inform ACLIC if it detected any material misstatements in the financial report. 
{¶ 44} Additionally, the liquidator alleges that E&Y represented in its 
certification that was filed with ODI that it conducted the audit in accordance with 
generally accepted auditing standards but that E&Y did not, in fact, conduct its 
audit in accordance with those standards and, therefore, failed to discover or 
disclose material misstatements in the financial statements.  As a result, the 
liquidator alleges, even though ACLIC was already insolvent, the superintendent, 
ACLIC’s creditors, and the public did not know it.  This claim plainly arises from 
statutory duties and certifications filed in public record by ACLIC and E&Y.  In 
no form does the liquidator seek judicial interpretation of the engagement letter. 
{¶ 45}  Further, unlike the nonsignatories in Gerig, the liquidator has a 
direct dispute with E&Y—that is, she claims that ACLIC’s policyholders, 
creditors, and the public, as well as ODI itself, relied on and were misled by the 
audit report that E&Y prepared and filed with ODI.  Consequently, she alleges, 
the superintendent was hindered in exercising a greater level of oversight sooner 
and E&Y thereby caused harm to policyholders, creditors, and the public by 
aiding ACLIC in continuing to transact business.  By its nature, this is a dispute 
between E&Y and the liquidator on behalf of the estate’s creditors.  Therefore, 
Gerig is materially different from this case and does not compel the result sought 
by E&Y. 
{¶ 46} This matter is guided by our ruling in Henderson, 108 Ohio St.3d 
265, 2006-Ohio-906, 843 N.E.2d 152.  In Henderson, customers of a title 
insurance company, Lawyers Title, filed a class-action complaint against it for its 
alleged failure to give them (and other policyholders) a 40 percent reissue credit 
January Term, 2011 
19 
 
that they were entitled to receive under the applicable rate schedule filed by 
Lawyers Title with ODI.  The named plaintiffs, the Hendersons, bought certain 
property in May 1999 and sold other property to the Johnsons in August 1999.  At 
each transaction, the buyers and sellers split the cost of title insurance; Lawyers 
Title provided the insurance for both deals.  Although the Hendersons and the 
Johnsons split the cost of the second insurance policy, it insured record title in the 
purchaser of the property, the Johnsons. 
{¶ 47} Lawyers Title sought to compel the Hendersons to arbitrate based 
on an arbitration clause contained in the insurance policy that it issued to the 
Johnsons.  Id. at ¶ 5.  We upheld the lower courts’ denial of Lawyers Title’s 
motion on two bases, stating, “The holding in Gerig applies when a nonparty is 
‘seeking a declaration of the signatories’ rights and obligations under the 
contract.’ ”  (Emphasis added in Henderson.) Id. at ¶ 42, quoting Gerig, 95 Ohio 
St.3d 478, 2002-Ohio-2581, 769 N.E.2d 381, ¶ 19.  We reasoned that “the sellers’ 
alleged rights with regard to a reissue credit exist independently of the purchasers’ 
rights and obligations under the policy because the sellers are not parties to the 
insurance contract and their rights arise instead from the terms of the insurer’s 
rate schedule [that was filed with ODI].”  Id. 
{¶ 48} It is difficult to imagine a fact pattern that fits more neatly into the 
Henderson rule than the one presented here.  The liquidator’s claims arise from 
the harm that she alleges was caused by E&Y’s filing of its certification of 
ACLIC’s financial statement.  Once the liquidator discovered that ACLIC was 
already insolvent when it filed financial statements that represented that it was 
solvent, the liquidator could trace the alleged harm to E&Y via the public filings 
and certifications, without reference to the engagement letter.  Therefore, the 
claims do not arise from the engagement letter wherein E&Y agreed to provide 
the accounting services in conformance with the standards that the codes 
independently required it to observe. 
SUPREME COURT OF OHIO 
20 
 
{¶ 49} For all of these reasons, the malpractice claim does not arise from 
the engagement letter that contains the arbitration provision, and therefore, the 
liquidator is not bound by it. 
b.  The preference claim 
{¶ 50} The liquidator’s second claim alleged that ACLIC transferred 
money to E&Y after it became insolvent and did so either to improperly favor 
E&Y or to defraud other creditors.  Because preference and fraudulent-transfer 
claims arise only by virtue of statute and arise only in favor of the liquidator, they 
cannot as a matter of law arise from a contract entered into by an insolvent 
insurer.  Therefore, E&Y may not enforce the arbitration clause against the 
liquidator’s preference claims, because ACLIC did not have authority to bind the 
liquidator to arbitrate those claims.  See Peters v. Columbus Steel Castings Co., 
115 Ohio St.3d 134, 2007-Ohio-4787, 873 N.E.2d 1258, at ¶ 6. 
{¶ 51} In Peters, an employee entered into a contract with his employer 
that required him to arbitrate any legal claims “regarding [his] employment.”  Id. 
at ¶ 2.  By its express terms, the arbitration provision purported to apply to the 
employee’s “heirs, beneficiaries, successors, and assigns.”  Id.  The employee was 
fatally injured at work.  Thereafter, his estate brought a survival action, as well as 
a wrongful-death action.  Based on the arbitration provision of the employment 
agreement, the employer sought to compel arbitration of both claims.  In 
response, the estate dismissed the survival claim and proceeded solely on the 
wrongful-death claim.  The court of appeals affirmed the trial court’s denial of the 
motion to dismiss for arbitration, and we upheld that decision.  Id. at ¶ 6. 
{¶ 52} In so holding, we explained that even though the claims are 
brought by the same nominal party, a survival action is brought to compensate for 
injuries a decedent sustained before death but that a wrongful-death action is 
brought on behalf of the decedent’s beneficiaries for their damages arising from 
that death.  Id. at ¶ 11.  We further explained that there is no common-law 
January Term, 2011 
21 
 
wrongful-death action—only statutory rights that spring to life after a wrongful 
death.  Id.  at ¶ 9.  With this understanding, we applied the principle that “only 
signatories to an arbitration agreement are bound by its terms” and, accordingly, 
held that “ ‘[i]njured persons may release their own claims; they cannot, however, 
release claims that are not yet in existence and that accrue in favor of persons 
other than themselves.’ ”  Id. at ¶ 7 and 15, quoting Thompson, 70 Ohio St.3d at 
183,  637 N.E.2d 917.  The employee, therefore, “could not restrict his 
beneficiaries to arbitration of their wrongful-death claims, because he held no 
right to those claims; they accrued independently to his beneficiaries for the 
injuries they personally suffered as a result of the death.”  Id. at ¶ 19. 
{¶ 53} Likewise, an insurance company does not have the authority to 
bind the liquidator to arbitrate preference or fraudulent-transfer claims, which are 
purely statutory claims that spring to life in favor of the liquidator only upon the 
issuance of a liquidation order.  R.C. 3903.26.  The very nature of the preference 
claim suggests this result.  It would be illogical to allow an insolvent insurer to 
bind the liquidator to arbitrate her preference claims when such claims exist only 
when there is an allegation that the insolvent insurer did something improper by 
transferring the money in the first place.  See R.C. 3903.26(A) (“Every transfer 
made * * * by an insurer within one year prior to the filing of a successful 
complaint for rehabilitation or liquidation * * * is fraudulent as to then existing 
and future creditors if made or incurred without fair consideration, or with actual 
intent to hinder, delay, or defraud either existing or future creditors”).  Therefore, 
the liquidator’s preference claims cannot, as a matter of law, be subject to an 
arbitration agreement entered into by an insolvent insurer. 
c.  Conclusion 
{¶ 54} The liquidator’s malpractice and preference claims are not subject 
to arbitration based on the agreement entered into by E&Y and ACLIC.  
Therefore, E&Y’s third argument that the liquidator cannot disavow part of a 
SUPREME COURT OF OHIO 
22 
 
contract is moot.  Likewise, we do not reach the liquidator’s argument that an 
irreconcilable conflict exists between the Ohio Liquidation Act and the Ohio 
Arbitration Act.  The Tenth District did not analyze whether the liquidator’s 
claims arise from the engagement letter.  Instead, it relied on another case in 
which it concluded that “ ‘compelling arbitration against the will of the liquidator 
will always interfere with the liquidator’s powers and will always adversely affect 
the insolvent insurer’s assets.’  (Emphasis sic.)”  Hudson v. Ernst & Young, 189 
Ohio App.3d 60, 2010-Ohio-2731, 937 N.E.2d 585, at ¶ 20, quoting Pipoly, 155 
Ohio App.3d 171, 2003-Ohio-5666, 800 N.E.2d 50, at ¶ 45.  In Pipoly, the Tenth 
District held that the liquidator was not bound to an arbitration agreement in an 
employment contract that was entered into by the insurer and its employees, 
because her claims did not arise from the employment contract.  Nonetheless, that 
court went on to hold that conflicts, when they did arise, would always be 
irreconcilable and arbitration agreements of the insolvent insurer’s can never be 
enforced against the liquidator.  But we are required by the General Assembly to 
construe potentially conflicting statutes so that effect is given to both.  R.C. 1.51.  
We have done so. 
D.  The Tolling Agreement Did Not Preserve the Right to Compel Arbitration 
{¶ 55} E&Y’s second proposition can be disposed of in short order.  E&Y 
contends that the tolling agreement preserved its right to compel arbitration under 
now-overruled Tenth District case law.  In the tolling agreement, E&Y agreed that 
for a period of one year from the effective date, May 2, 2002, the liquidator “may 
forbear and postpone the filing, commencement and prosecution of any and all 
claims or causes of action it may have against E&Y: (a) arising out of accounting 
or auditing services provided by E&Y to ACLIC; or (b) arising out of transfers of 
monies or other property from ACLIC to E&Y during the period from March 13, 
1999 to March 13, 2000.”  The liquidator also agreed that E&Y could likewise 
“forbear and postpone the filing, commencement and prosecution of any and all 
January Term, 2011 
23 
 
claims, causes of action or counterclaims it may have against ACLIC: (a) arising 
out of accounting or auditing services provided by E&Y to ACLIC; or (b) arising 
out of transfers of monies or other property from ACLIC to E&Y during the 
period from March 13, 1999 to March 13, 2000.”  The parties agreed that any 
lawsuit brought within the tolling period would not be deemed time-barred if the 
lawsuit or claim would not be deemed time-barred on the effective date.  The 
parties further agreed that the liquidator “may otherwise assert, as defenses to any 
lawsuit or claim E&Y may file against ACLIC, all defenses that ACLIC has as of 
the Effective Date, including but not limited to the statute of limitations,” and that 
E&Y “may otherwise assert, as defenses to any lawsuit or claim the liquidator 
may file against E&Y, all defenses that E&Y has as of the Effective Date, 
including but not limited to the statute of limitations.” 
{¶ 56} “The general rule is that a decision of a court of supreme 
jurisdiction overruling a former decision is retrospective in its operation, and the 
effect is not that the former was bad law, but that it never was the law.”  Peerless 
Elec. Co. v. Bowers (1955), 164 Ohio St. 209, 210, 57 O.O. 411, 129 N.E.2d 467.  
The tolling agreement simply gave each side additional time to file claims against 
the other and preserved each side’s right to defend against those claims. 
III. CONCLUSION 
{¶ 57} For all of these reasons, the judgment of the court of appeals is 
affirmed, and this cause is remanded to the common pleas court. 
Judgment affirmed  
and cause remanded. 
 
PFEIFER, LUNDBERG STRATTON, LANZINGER, and MCGEE BROWN, JJ., 
concur. 
 
O’DONNELL and CUPP, JJ., concur in part and dissent in part. 
__________________ 
 
 
SUPREME COURT OF OHIO 
24 
 
 
O’DONNELL, J., concurring in part and dissenting in part. 
{¶ 58} The majority has determined that the liquidator is not bound by the 
arbitration clause contained in the engagement letter between Ernst & Young 
(“E&Y”) and American Chambers Life Insurance Company (“ACLIC”), because 
the liquidator does not stand in the shoes of the insolvent insurer and the claims 
asserted by the liquidator do not arise from the engagement letter. 
{¶ 59} I concur in the majority’s opinion to the extent that the liquidator 
cannot be compelled to arbitrate the preference claim, but because I find that the 
liquidator stands in the shoes of the insolvent insurer and that the claim alleging 
that E&Y breached its duties arises from the engagement letter, I respectfully 
dissent as to that portion of the opinion. 
Facts and Procedural History 
{¶ 60} In November 1998, E&Y and ACLIC entered into an agreement for 
E&Y to provide auditing services to ACLIC in exchange for an estimated 
$46,000.  The engagement letter, which memorialized the agreement, stated that 
E&Y would “audit and report on the consolidated financial statements” of ACLIC 
and provide an “opinion on the fairness, in all material respects, of the 
presentation of the financial statements in conformity with generally accepted 
accounting principles or those prescribed or permitted by the Ohio Insurance 
Department, respectively.”  It also contained a provision that required the 
arbitration of “[a]ny controversy or claim arising out of or relating to the services 
covered by this letter.” 
{¶ 61} According to the complaint, the superintendent of insurance filed 
an action in the Franklin County Court of Common Pleas in March 2000, seeking 
to place ACLIC in rehabilitation pursuant to R.C. 3903.13.  In May 2000, the 
court found ACLIC to be insolvent and issued a final order of liquidation and 
appointment of a liquidator. 
January Term, 2011 
25 
 
{¶ 62} On April 30, 2003, the superintendent of insurance, as liquidator of 
ACLIC, filed suit against E&Y, alleging that it had “failed to properly audit 
ACLIC’s financial statements for the year ending December 31, 1998, in 
accordance with generally accepted auditing standards, and failed to detect 
material misstatements in those financial statements.”  The complaint stated two 
claims against E&Y.  The first claim alleged, “E&Y negligently failed to perform 
its duties as the independent certified public accountant retained to conduct the 
audit of ACLIC’s December 31, 1998, Annual Statement, thus breaching the 
duties owed.  * * * As a direct and proximate result of E&Y’s breach of its duties, 
ACLIC as well as its policyholders, creditors and the public suffered substantial 
harm and injury.”  The second claim alleged that E&Y received preferential or 
fraudulent payments of more than $25,000, which the liquidator asserted the right 
to recover pursuant to R.C. 3903.28(A) or 3903.26. 
{¶ 63} E&Y moved to dismiss or stay the proceedings and compel 
arbitration based on the arbitration provision in the engagement letter.  The 
liquidator opposed E&Y’s motion, asserting that because the claims arose from 
E&Y’s breach of its duties pursuant to Ohio law and not the engagement letter, 
arbitration could not be compelled.  The trial court denied E&Y’s motion, and the 
court of appeals affirmed. 
Law and Analysis 
{¶ 64} In Hudson v. Petrosurance, 127 Ohio St.3d 54, 2010-Ohio-4505, 
936 N.E.2d 481, ¶ 16, this court recognized, “The Liquidation Act sets forth a 
comprehensive framework governing the liquidation of insurance companies 
operating in Ohio.  The purpose of the act is to protect the interests of insureds, 
claimants, creditors, and the public generally, and the provisions of the act are to 
be liberally construed to effectuate this purpose.  See R.C. 3903.02(C) and (D).”  
{¶ 65} If the superintendent of insurance determines that an insurer has 
become insolvent, R.C. 3903.17 authorizes the superintendent to file a complaint 
SUPREME COURT OF OHIO 
26 
 
in the court of common pleas for an order of liquidation.  Upon the court's 
issuance of such an order, the superintendent, acting as liquidator, takes 
possession of the assets of the insurer and is “vested by operation of law with the 
title to all of the property, contracts, and rights of action and all of the books and 
records of the insurer ordered liquidated, wherever located, as of the entry of the 
final order of liquidation.”  R.C. 3903.18(A). 
{¶ 66} The statutory powers of the liquidator are enumerated in R.C. 
3903.21 and include the authority to “[e]nter into such contracts as are necessary 
to carry out the order to liquidate, and to affirm or disavow any contracts to which 
the insurer is a party.”  R.C. 3903.21(A)(11).  The statute also enables the 
liquidator to “prosecute and to commence in the name of the insurer or in his own 
name any and all suits and other legal proceedings, in this state or elsewhere,” 
and, upon dissolution pursuant to R.C. 3903.20, “apply to any court in this state or 
elsewhere for leave to substitute himself for the insurer as plaintiff.”  R.C. 
3903.12(A)(12).  The statute further authorizes the liquidator to “[p]rosecute any 
action which may exist in behalf of the creditors, members, policyholders, or 
shareholders of the insurer against any officer of the insurer or any other person.”  
R.C. 3903.21(A)(13). 
{¶ 67} By taking possession of and title to the assets and contracts of the 
insolvent insurer, the liquidator succeeds to the insurer’s property and interests 
and is, therefore, in privity with the insolvent insurer.  Cf. Morris v. Jones (1947), 
329 U.S. 545, 550, 67 S.Ct. 451, 91 L.Ed. 488 (“Nor is there any lack of privity 
between Chicago Lloyds and the Illinois liquidator.  There is no difference in the 
cause of action, whether Chicago Lloyds or the liquidator is sued” [citations 
omitted]); Whitehead v. Gen. Tel. Co. (1969), 20 Ohio St.2d 108, 49 O.O.2d 435, 
254 N.E.2d 10, paragraph four of the syllabus, overruled on other grounds, Grava 
v. Parkman Twp. (1995), 73 Ohio St.3d 379, 653 N.E.2d 226, (“Generally, a 
January Term, 2011 
27 
 
person is in privity with another if he succeeds to an estate or an interest formerly 
held by another”). 
{¶ 68} When a liquidator prosecutes or commences an action on behalf of 
the insolvent insurer or its creditors, members, policyholders, or shareholders, 
seeking to recover their assets or protect or enforce their rights, the liquidator 
stands in the shoes of the insolvent insurer.  E.g., Hudson v. Petrosurance, 10th 
Dist. No. 08AP-1030, 2009-Ohio-4307, ¶ 39, and cases cited therein; Bennett v. 
Liberty Natl. Fire Ins. Co. (C.A.9 1992), 968 F.2d 969, 972; Costle v. Fremont 
Indemn. Co. (D.Vt.1993), 839 F.Supp. 265, 272; Foster v. Monsour Med. Found. 
(Pa.Commw.1995), 667 A.2d 18, 20; Reider v. Arthur Anderson, L.L.P. 
(Conn.Super.2001), 47 Conn.Supp. 202, 205, 784 A.2d 464. 
The first claim against E&Y 
{¶ 69} The liquidator’s first claim alleges that E&Y negligently rendered 
auditing services, breaching the duties it owed to ACLIC.  The engagement letter 
contractually obligated E&Y to render auditing services to ACLIC and set forth 
E&Y’s responsibilities and duties.  The arbitration provision contained in the 
engagement letter required the parties to arbitrate “[a]ny controversy or claim 
arising out of or relating to the services covered by this letter.”  The liquidator, 
however, asserts that this claim does not arise out of the engagement letter but, 
rather, that it arises out of E&Y’s failure to perform its obligations as required by 
Ohio law. 
{¶ 70} In Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 
Ohio St.3d 185, 2006-Ohio-657, 842 N.E.2d 488, ¶ 18, this court held that a 
provision that mandates the arbitration of claims or controversies “arising out of 
or relating to” the contract is considered a broad clause, encompassing any 
dispute arising out of the business relationship.  We further explained, 
“Arbitration is not limited to claims alleging a breach of contract, and creative 
pleading of claims as something other than contractual cannot overcome a broad 
SUPREME COURT OF OHIO 
28 
 
arbitration provision.  The overarching issue is whether the parties agreed to 
arbitrate the issue.”  Id. at ¶ 19. 
{¶ 71} Here, the liquidator is a successor in interest to, and in privity with, 
ACLIC and is therefore bound by ACLIC’s agreement with E&Y.  This is the 
type of claim that ACLIC could directly pursue if it were not in liquidation.  By 
prosecuting such a claim, the liquidator stands in ACLIC’s shoes and is bound by 
its agreement to arbitrate.  Cf. Reider, 47 Conn.Supp. at 205, 784 A.2d 464 
(liquidator stands in the shoes of the insolvent insurer when prosecuting a claim 
the insurer could have pursued were it not in liquidation).  The arbitration 
provision contained in the engagement letter is a broad clause, and this claim 
involves an issue that falls within its scope.  Accordingly, the liquidator is bound 
by ACLIC’s agreement to arbitrate. 
{¶ 72} E&Y rendered auditing services to ACLIC only by virtue of its 
agreement with ACLIC, and the liquidator’s claim alleging that E&Y negligently 
performed its duties necessarily implicates the engagement letter.  The liquidator 
attempts to create distance from the engagement letter by asserting that this claim 
arose from E&Y’s breach of its duties pursuant to Ohio law.  The duties imposed 
by Ohio law, however, are the same duties set forth in the engagement letter.  
And, as asserted, the claim merely alleges that E&Y breached its duties; it does 
not identify the predicate source of those duties, let alone rule out the engagement 
letter as being that source. 
{¶ 73} The plain language of R.C. 3903.21(A)(11) permits the liquidator 
to disavow contracts as a whole, not provisions of a contract.  See Fed. Deposit 
Ins. Co. v. Ernst & Young, L.L.P. (N.D.Ill.2003), 256 F.Supp.2d 798, 805 
(construing an analogous federal statute that permits a receiver to repudiate "any 
contract or lease" to allow only the repudiation of a contract as a whole and not 
“those provisions of a contract with which [the receiver] is dissatisfied”).  Thus, 
the liquidator cannot prosecute an action for breach of contract or one involving a 
January Term, 2011 
29 
 
contract on the authority conferred in R.C. 3903.21(A)(12) or (13) and yet seek to 
escape arbitration by disavowing an arbitration provision contained in that 
contract pursuant to R.C. 3903.21(A)(11).  Cf. Bennett, 968 F.2d 969; Hays & Co. 
v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (C.A.3 1989), 885 F.2d 1149; 
Costle, 839 F.Supp. at 272 (“if a liquidator seeks to enforce an insolvent 
company's rights under a contract, she must also suffer that company's contractual 
liabilities”); Koken v. Cologne Reinsurance, Ltd. (D.C.Pa.1999), 34 F.Supp.2d 
240; Foster v. Philadelphia Mfrs. (1991), 140 Pa.Commw. 186, 592 A.2d 131. 
{¶ 74} Because this is a case in which the liquidator brought suit on behalf 
of an insolvent insurer and its creditors, shareholders, and policyholders against a 
third party for its alleged failure to perform auditing services rendered pursuant to 
a contract, the liquidator necessarily  stands in the shoes of the insolvent insurer 
and cannot assert a claim that arises from and is intertwined with a contract while 
at the same time disavowing a provision in that contract requiring arbitration. 
{¶ 75} The majority determines that the liquidator does not stand in the 
shoes of the insolvent insurer as a successor in interest and is not bound by the 
arbitration provision, relying primarily on Equal Emp. Opportunity Comm. v. 
Waffle House (2002), 534 U.S. 279, 122 S.Ct. 754, 151 L.Ed.2d 755, to support 
its determination.  The question in Waffle House involved “whether an agreement 
between an employer and an employee to arbitrate employment-related disputes 
bars the Equal Employment Opportunity Commission (EEOC) from pursuing 
victim-specific judicial relief, such as backpay, reinstatement, and damages, in an 
enforcement action alleging that the employer has violated Title I of the 
Americans with Disabilities Act of 1990 (ADA), 104 Stat. 328, 42 U.S.C. § 
12101 et seq. (1994 ed. and Supp. V).”  Id. at 282.  The court held that the 
employee’s agreement to arbitrate did not bind the EEOC from exercising the 
enforcement authority granted it by Congress, and the “provisions of Title VII 
defining the EEOC’s authority” served as the predicate for its decision.  Id. at 
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285-286.  The court explained that “[t]o hold otherwise would undermine the 
detailed enforcement scheme created by Congress [for the EEOC] * * * .”  Id. at 
296. 
{¶ 76} The majority’s reliance on Waffle House is misplaced because it is 
readily distinguishable.  While on its face the case involves the same issues, i.e., 
whether a nonsignatory to an arbitration agreement can be compelled to arbitrate, 
the decision in Waffle House turned on the complex federal statutory framework 
of the EEOC, which is not analogous to the statutory scheme and purpose of R.C. 
Chapter 3903.  In addition, nothing in Waffle House indicates that its holding 
applies outside the scope of employment disputes involving the EEOC.  For these 
reasons, Waffle House cannot be considered as having precedential value 
regarding the issue before this court.  Cf. Webster v. Fall (1925), 266 U.S. 507, 
511, 45 S.Ct. 148, 69 L.Ed. 411 ("Questions which merely lurk in the record, 
neither brought to the attention of the court nor ruled upon, are not to be 
considered as having been so decided as to constitute precedents"). 
{¶ 77} Moreover, in rejecting Waffle House’s argument that the EEOC 
stood in the shoes of the employee, the court noted that the EEOC did not sue in a 
wholly derivative capacity.  Unlike the EEOC, however, the liquidator, as 
established by the allegations in the complaint, brought suit against E&Y in a 
derivative capacity; the first paragraph of the complaint provides, “As the 
Liquidator of ACLIC, the Superintendent is empowered, pursuant to Sections 
3903.21(A)(12) and (13) of the Ohio Revised Code, to commence and/or 
prosecute actions on behalf of its creditors, shareholders and/or policyholders.”  
(Emphasis added.)  Additionally, the liquidator alleged that jurisdiction and venue 
were proper because the claims “against each defendant arise from that 
defendant’s transaction of business in this state, contracting to supply services in 
this State, causing tortious injury by an act or omission in this state, and/or 
causing tortious injury in this state by an act or omission outside this state.”  Thus, 
January Term, 2011 
31 
 
the allegations in the complaint, coupled with the role of the liquidator pursuant to 
R.C. Chapter 3903, further distinguish this case from Waffle House. 
{¶ 78} Even if the liquidator did not stand in ACLIC’s shoes, the 
liquidator is still bound to arbitrate this claim.  The majority determines that this 
claim does not arise from the engagement letter because it does not seek a 
declaration of ACLIC’s rights and obligations under the engagement letter, and it 
arises from the liquidator’s statutory duties, which exist independently of the 
engagement letter.  As previously explained, however, the duties imposed by 
Ohio law that E&Y allegedly failed to perform are the same as those set forth in 
the engagement letter, and whether cast in tort or contract, the issue is one that 
falls within the broad scope of the arbitration provision.  It also bears repeating 
that the claim alleges that ACLIC “retained” E&Y to conduct its audit and that 
retention occurred only because of the engagement letter.  Moreover, although the 
liquidator may be empowered by statute to assert this claim, the basis for the 
claim is E&Y’s alleged negligence, which arose from the services it rendered 
pursuant to the engagement letter.  In fact, the complaint alleges the foregoing to 
establish venue and jurisdiction.  Thus, because this claim arises from the 
engagement letter, the arbitration provision is enforceable against the liquidator. 
{¶ 79} Accordingly, I would hold that the liquidator is bound by the 
engagement letter to arbitrate this claim because the liquidator, as a successor in 
interest to ACLIC, stands in its shoes, the claim is one that ACLIC could itself 
prosecute were it not in liquidation, and it arises from the engagement letter.  
Additionally, equitable-estoppel considerations also operate to compel arbitration 
of this claim. 
The second claim against E&Y 
{¶ 80} This claim seeks to recover the fee paid by ACLIC to E&Y for the 
auditing services rendered.  And unlike the first claim asserted by the liquidator 
against E&Y, this claim is expressly premised upon R.C. 3903.28(A) and 
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3903.26.  The majority correctly concludes that preference claims arise only by 
virtue of statute and can be asserted only by the liquidator.  Courts from other 
jurisdictions are in accord with that view.  See, e.g., Grode v. Mut. Fire, Marine 
& Inland Ins. Co. (C.A.3 1993), 8 F.3d 953; Pine Top Ins. Co. v. Republic W. Ins. 
Co. (N.D.Ill.1990), 123 B.R. 277, 285; Hays & Co., 885 F.2d at 155 
(nonsignatory liquidator could be compelled to arbitrate claims that were 
derivative of the debtor but not a fraudulent-transfer claim brought on behalf of 
the debtor’s creditors); Amcomp Preferred Ins. Co. v. Koken (Fla.App.2005), 916 
So.2d 986 (liquidator not compelled to arbitrate claim to recover preferential 
payments).  Accordingly, I concur in the majority’s decision that the liquidator 
cannot be compelled to arbitrate this claim. 
Conclusion 
{¶ 81} Based on the foregoing, it is my position that the liquidator is 
bound by the arbitration provision to arbitrate the claim alleging that E&Y 
breached its duties but cannot be compelled to arbitrate the preference claim.  
Accordingly, I would affirm in part and reverse in part the judgment of the court 
of appeals and remand the matter, ordering the case stayed pending arbitration of 
the liquidator’s first claim against E&Y. 
 
CUPP, J., concurs in the foregoing opinion. 
__________________ 
 
Michael DeWine, Attorney General, Alexandra T. Schimmer, Chief 
Deputy Solicitor General, Stephen P. Carney, Deputy Solicitor, and Thaddeus H. 
Driscoll, Assistant Solicitor; and Kegler, Brown, Hill, & Ritter Co., L.P.A., and 
Melvin D. Weinstein, for appellee. 
Squire, Sanders & Dempsey, L.L.P., John R. Gall, and Aneca E. Lasley; 
and Mayer Brown, L.L.P., Stanley J. Parzen, and James C. Schroeder, for 
appellant. 
______________________