Case Title: Williams v. Aetna Fin. Co.

Citation: 1998-Ohio-294

Docket Number: 19971670

State: ohio

Court: Ohio Supreme Court

Date: 1998-11-04T00:00:00Z

Document:
WILLIAMS, APPELLEE, v. AETNA FINANCE COMPANY, D.B.A. ITT FINANCIAL 
SERVICES, APPELLANT. 
[Cite as Williams v. Aetna Fin. Co. (1998), 83 Ohio St.3d 464.] 
Commercial transactions — Home equity loan from finance company used to 
fund home improvement repairs — Consumer stops making payments on 
loan when work not completed — Arbitration provision in loan agreement 
unenforceable, when — Recovery against finance company under theory of 
civil conspiracy upheld, when. 
(No. 97-1670 — Submitted May 26, 1998 — Decided November 4, 1998.) 
APPEAL from the Court of Appeals for Hamilton County, Nos. C-960234 and C-
960255. 
 
In late November 1989, Christopher Blair came to the home of plaintiff-
appellee Mildred Williams and had a short conversation with her.  Blair told 
Williams that he had noticed that her house was in need of some repairs.  Williams 
responded that she was aware repairs were needed, but that she was unable to get a 
loan to get the work done.  Williams, a sixty-six-year-old widow, was alone in her 
home at the time, and did not allow Blair to enter.  He told her he would return 
later to speak to her again. 
 
Blair was a pitchman who attempted to convince homeowners to have work 
done on their houses.  He did not do the work himself, but contracted it out to 
others.  At the time he solicited Williams to have her house worked on, Blair was 
doing business as Homestead Construction Company. 
 
Blair returned to Williams’s house again in either late November or in early 
December.  Her grandsons were present at the time, so Williams allowed Blair to 
enter her home.  Blair showed her pictures of what her house could look like with 
 
 
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repairs done to the exterior.  Williams, who was interested in what Blair had to 
say, told him she also needed repairs done on the interior of the house. 
 
Blair was seeking business in Williams’s neighborhood because he knew 
that there were a lot of elderly people in the area who had owned their homes for a 
long time, so that many were free of mortgages.  He did not know that Williams 
owned her home free of a mortgage until he talked to her.  Once he found out from 
her that she had built up equity in her house, he was interested in doing business 
with her.  Blair told Williams he could get her a loan to finance the improvements 
to her house, even though she again told him she had been unable to get a loan in 
the past to get the needed repairs done. 
 
Williams signed a contract dated December 1, 1989 with Blair, to have 
work done on both the interior and exterior of her house, for $11,500.  On either 
December 5 or December 6, an employee of Blair transported Williams to the 
Loveland, Ohio branch office of defendant-appellant Aetna Finance Company, 
d.b.a. ITT Financial Services (“ITT”), to obtain a loan to finance the home repairs.  
Even though another branch office was closer to Williams’s home, she was taken 
to the Loveland branch because Blair frequently referred prospective loan 
applicants to that branch.  The branch manager at Loveland, Tom Scholl, had 
contacted Blair in early 1988 seeking referrals of loan customers.  Blair had been 
designated an approved “referral source” by ITT, a special status that allowed loan 
customers referred by Blair to receive preferential handling of their loans based on 
the fact that they dealt with Blair. 
 
At her first visit to the ITT Loveland office, Williams agreed to the first of 
two loan contracts she would make with ITT.  She borrowed $3,769.95 at an 
annual interest rate of 27.4 percent.  The loan was secured by Williams’s 
television set and stereo, with the total value of those two items listed as $650.  
 
 
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Williams also turned over the title to her 1980 Buick automobile as security on the 
loan.  ITT charged her a total of $155 for a loan origination fee and a recording 
fee.  She was also sold insurance on her television set and stereo, as well as life 
insurance, for a total of $164.80.  Williams was to pay $125 per month for a four-
year period on the loan. 
 
The loan proceeds from this first loan were paid to Williams in two checks, 
both made payable to her.  One check, for $450.15, was for Williams’s personal 
use.  The other check, for $3,000, was to be a down payment on the remodeling 
work.  At the ITT office, Williams signed that check over to Blair and gave it to 
Blair’s employee who had transported her there. 
 
On December 13, 1989, another of Blair’s employees brought Williams to 
the Loveland branch office to do the paperwork to get a larger loan to finance the 
work on her house.  This loan was designed as a debt consolidation loan, and was 
secured by a mortgage on Williams’s real estate.  Williams signed a $12,936.64 
promissory note at an annual interest rate of 17.81 percent, to be repaid at $190 
per month over fifteen years.  ITT charged her $1,034.93 for a loan origination fee 
and points, and also charged Williams $25 for a commitment letter.  Williams was 
charged a total of $417 for the recording fee, title insurance, title search, and 
appraisal. 
 
Some of the loan proceeds were to be used to pay off Williams’s first loan.  
The proceeds were also to be used to pay off Williams’s outstanding credit card 
debts of $3,326.04 to Visa, L.S. Ayres, and Sears.  The remainder of the proceeds 
was meant to finance the improvements to her home.  Williams did not receive any 
of the proceeds at this time. 
 
On December 19, 1989, Williams was again transported to ITT’s Loveland 
office by employees of Blair.  At that time, the second loan was finalized.  As a 
 
 
4
result, the earlier loan was paid off and Williams received the proceeds of the 
second loan, as set up on December 13, in five checks.  Four checks, made jointly 
payable to Williams and the credit card companies, were used to pay off those 
debts.  Another check, for $4,492.12, was made payable to Williams.  Williams 
endorsed that check at the ITT Loveland office, and gave it to one of Blair’s 
employees. 
 
At the time these loans were made, Williams’s income was either $420 or 
$430 per month.  She was making monthly payments of more than $190 per month 
on credit card bills and other debts prior to signing the loan agreements with ITT. 
 
After Blair received payments from Williams via the ITT checks she signed 
over to him, workers came to her house in late December 1989 and early January 
1990 and did some work on the house.  However, the workers did only a small 
part of the work that Williams had agreed with Blair would be done.  The work 
done was not what Williams wanted, and most of the work was never done at all.  
After starting the work, the workers did not return to finish it.  Williams attempted 
to call Blair numerous times to inquire about the failure of the workers to do the 
job to her satisfaction, but he never answered her inquiries. 
 
Williams made two payments on her loan with ITT, and then stopped 
making payments when it became evident to her that the work would not be 
finished.  In April 1990, she filed suit in the Court of Common Pleas of Hamilton 
County against, inter alios, Christopher Blair, d.b.a. Homestead Construction 
Company, and ITT.  Williams claimed violations of the Ohio Consumer Sales 
Practices Act (“CSPA”) and Ohio Home Solicitation Sales Act (“HSSA”), breach 
of contract, and civil conspiracy.  She sought compensatory damages, attorney 
fees, costs, and punitive damages.  Blair, who eventually went bankrupt, was never 
 
 
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served with the complaint.  ITT was the only defendant served and became the 
only defendant against whom recovery was sought. 
 
ITT filed a motion with the trial court to compel arbitration pursuant to the 
arbitration clause contained in the loan agreement Williams signed with ITT, and 
to stay the trial court proceedings pending arbitration.  The loan agreement 
contained a broad arbitration clause providing that any dispute between Williams 
and ITT, “other than judicial foreclosures and cancellations regarding real estate 
security,  * * * shall be resolved by binding arbitration.” 
 
Williams opposed ITT’s motion primarily on equity grounds, claiming that 
the arbitration provision was unconscionable, deceptive, and unfair, and therefore 
unenforceable.  The trial court, in a judgment entered on August 13, 1990, denied 
the motion to compel arbitration without giving a reason for the denial.  ITT 
appealed to the Court of Appeals for Hamilton County, which affirmed the trial 
court’s ruling, finding that Williams’s “complaint challenges the existence of a 
contract between the parties and, therefore, the arbitration clause in the loan 
agreement may not be enforced until the question of the existence of the contract 
is resolved.”  Williams v. Aetna Fin. Co. (Aug. 9, 1991), Hamilton App. No. C-
900663, unreported, 1991 WL 433751. 
 
ITT appealed the judgment of the court of appeals to this court, which 
allowed the discretionary appeal.  Williams v. Aetna Fin. Co. (1991), 62 Ohio 
St.3d 1484, 581 N.E.2d 1390.  After full briefing and oral argument, this court 
dismissed the appeal as having been improvidently allowed.  (1992), 65 Ohio 
St.3d 1203, 602 N.E.2d 246. 
 
On February 26, 1993, ITT moved the trial court for an evidentiary hearing 
regarding the validity and enforceability of the arbitration provision.  The trial 
court denied the motion, finding that its earlier decision denying arbitration had 
 
 
6
been affirmed on appeal, and that the motion was repetitious of ITT’s earlier 
motion to compel arbitration. 
 
A week after the court of appeals’ decision upholding the trial court’s denial 
of the motion to compel arbitration, Williams amended her complaint to allege that 
she was a victim of a scheme of fraudulent misrepresentation.  ITT interposed a 
counterclaim against Williams for her failure to pay on the promissory note.  After 
the trial court denied several pretrial motions by ITT, including a motion for 
summary judgment, the case proceeded to a jury trial. 
 
Williams’s principal claim at trial was that Blair and ITT collaborated in a 
scheme to defraud unsuspecting, unsophisticated homeowners, particularly 
preying on elderly African-Americans, such as Williams, in certain specific low-
income neighborhoods.  Williams alleged that Blair did not really intend that the 
work contracted for by these homeowners would be done, and contended that ITT 
was an integral part of Blair’s schemes by supplying the loan money to the 
homeowners who entered into contracts with Blair, so that Blair would receive the 
proceeds of the loans.  Williams claimed that ITT benefited by making high-
interest, low-risk, secured loans and exploited the unsuspecting homeowners, 
while ITT knew that the work contracted for with Blair would never be done.  To 
support her claims, Williams presented the testimony of other homeowners, who 
explained their dealings with Blair and ITT.  Testimony was also elicited from 
Blair and from former employees of ITT by Williams to sustain her position. 
 
Williams presented her situation as typical of the scheme Blair pitched to 
the homeowners, put on testimony to support her argument that she was targeted 
by ITT and Blair, and urged through the witnesses presented that she and other 
homeowners had been victimized by ITT’s two-step loan process, whereby ITT 
first made a small personal loan and then shortly after replaced it with a second 
 
 
7
large home equity loan, generating extra closing costs and fees.  Williams 
presented circumstantial evidence in an attempt to have the jury draw inferences 
built on her allegations that ITT made the loan to her with the knowledge that her 
monthly income was insufficient to make the monthly payments required, and that 
ITT may have planned to foreclose if she did not make the payments. 
 
Williams also presented several witnesses who testified that ITT employees 
were accepting payments directly from Blair to cover loan payments not being 
made by his home improvement customers whose work was not being done, to 
show that ITT employees were aware that the work Blair had solicited was not 
being completed.  Several witnesses testified to the close relationship Blair had 
with several ITT loan officers, including the branch manager at the ITT Loveland 
branch where Williams obtained her loans.  Testimony also was presented that the 
term “Blair loan” had taken on a special meaning at several ITT offices prior to the 
time Williams dealt with ITT, to indicate the peculiar type of problem loans being 
made to Blair’s customers.  In addition, an attorney who represented some 
dissatisfied customers of Blair testified that he had filed a lawsuit against Blair 
and ITT, among others, in August 1989, and had won a default judgment. 
 
ITT’s principal defense throughout the trial was that Blair was not ITT’s 
agent and that the alleged frauds committed by Blair should not be attributed to 
ITT.  ITT further argued that the home improvement contracts entered into by the 
homeowners with Blair were separate transactions from the loan agreements 
signed by the loan applicants and ITT.  ITT pointed out that Williams had agreed 
to accept the loans after full disclosure of the interest rates and payment schedules.  
ITT also in essence urged that the loans would have been approved by ITT even if 
Blair had not referred the applicants, and that ITT’s loan practices with regard to 
 
 
8
the loan applicants referred by Blair, including Williams, were no different from 
its practices with other customers of ITT. 
 
At the conclusion of the trial, the jury found in favor of Williams on her 
claims and awarded her $15,000 in compensatory damages and $1.5 million in 
punitive damages, and found her entitled to attorney fees.  In answering 
interrogatories, the jury specifically found that (1) ITT participated in a conspiracy 
that damaged Williams, (2) ITT violated the Ohio Consumer Sales Practices Act 
and thereby damaged Williams, (3) ITT engaged in a fraud that damaged 
Williams, (4) ITT breached a contract with Williams, and (5) Williams did not 
breach a contract with ITT.  The jury also found in favor of ITT on its 
counterclaim, and awarded ITT $3,326.04 (the precise amount of credit card debt 
paid off by Williams using proceeds from her home equity loan from ITT). 
 
After trial, the trial court denied ITT’s motions for judgment 
notwithstanding the verdict, for an order overturning the results of the trial and 
compelling arbitration, and for a new trial, and entered judgment on the jury’s 
verdict.1  On Williams’s application for attorney fees, the trial court awarded 
$56,230. 
 
ITT appealed to the Court of Appeals for Hamilton County, and Williams 
cross-appealed.  That court affirmed the judgment of the trial court on the jury’s 
verdict.  The determinations of the court of appeals relevant to our consideration 
here were as follows:  (1) The arbitration clause should not now be enforced after 
a full trial had been held, because to do so would be a “colossal waste of 
resources,” and ITT was not “materially prejudiced” by the denial of its motions to 
compel arbitration; (2) the trial court erred in allowing Williams to pursue a theory 
of recovery against ITT based on an agency relationship between Blair and ITT 
because Blair was not ITT’s agent as a matter of law, but ITT was properly found 
 
 
9
liable to Williams on a civil conspiracy theory, and enough evidence was 
presented to the jury to sustain the verdict in favor of Williams on that ground; (3) 
the trial court did not err in submitting Williams’s claims for violations of Ohio’s 
CSPA and HSSA to the jury; and (4) the punitive damages awarded against ITT 
were not so excessive that the award violated due process.  ITT has appealed the 
judgment of the court of appeals upholding the jury’s damage awards to this court. 
 
The court of appeals reversed on the two issues Williams cross-appealed on, 
one dealing with the way the trial court entered judgment on the jury’s verdict to 
start the running of postjudgment interest, and the other concerning the trial 
court’s award of attorney fees.  The court of appeals ordered that postjudgment 
interest should begin to run on an earlier date than had been ordered by the trial 
court, and also remanded to the trial court for a new determination of attorney 
fees.  ITT has not appealed the rulings on Williams’s cross-appeal to this court. 
 
The cause is now before this court pursuant to the allowance of a 
discretionary appeal. 
__________________ 
 
William H. Blessing, for appellee. 
 
Dinsmore & Shohl, Mark A. Vander Laan, M. Gabrielle Hils, Jeffrey R. 
Schaefer and Anthony J. Celebrezze, Jr., for appellant. 
 
Dreher, Langer & Tomkies, L.L.P., Darrell L. Dreher and Jeffrey D. 
Quayle, urging reversal for amici curiae, Ohio Consumer Finance Association and 
Ohio Bankers Association. 
__________________ 
 
ALICE ROBIE RESNICK, J.  This appeal presents four principal issues for 
our review:  (1) whether the trial court properly denied ITT’s motion to compel 
arbitration; (2) the propriety of the grounds for Williams’s recovery against ITT, 
 
 
10
under a theory of civil conspiracy, upheld by the court of appeals; (3) whether ITT 
was found derivatively liable for punitive damages based on a third party’s 
violations of the CSPA and HSSA; and (4) whether punitive damages were 
improperly assessed, and whether the amount of punitive damages awarded is so 
excessive that a due process violation occurred.  For the following reasons, after a 
comprehensive review of the record, we affirm the judgment of the court of 
appeals on each issue. 
I 
Arbitration 
 
ITT argues in its fourth proposition of law that the broad arbitration 
provision in the loan agreement for the home equity loan Williams signed with 
ITT should have been enforced, and that this case should never have proceeded to 
trial.  Furthermore, ITT takes issue with the court of appeals’ determination that 
ITT was not “materially prejudiced” by the trial court’s refusal to compel 
arbitration.  The court of appeals found no prejudice, stating that ITT got the “real 
thing” (a trial) and also that “[a]rbitration is merely a substitute for litigation.” 
 
ITT cites a long line of Ohio and federal cases, including cases decided by 
this court and by the United States Supreme Court, to support its arguments 
regarding a strong policy in favor of enforcement of arbitration clauses in written 
agreements.  See, e.g., Prima Paint Corp. v. Flood & Conklin Mfg. Co. (1967), 
388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270; Allied-Bruce Terminix Cos., Inc. v. 
Dobson (1995), 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753. 
 
We agree with ITT that this court’s precedents do indicate that arbitration is 
encouraged as a method to settle disputes.  See, e.g., ABM Farms, Inc. v. Woods 
(1998), 81 Ohio St.3d 498, 692 N.E.2d 574; Council of Smaller Enterprises v. 
Gates, McDonald & Co. (1998), 80 Ohio St.3d 661, 687 N.E.2d 1352; Schaefer v. 
 
 
11
Allstate Ins. Co. (1992), 63 Ohio St.3d 708, 711-712, 590 N.E.2d 1242, 1245.  A 
presumption favoring arbitration arises when the claim in dispute falls within the 
scope of the arbitration provision.  An arbitration clause in a contract is generally 
viewed as an expression that the parties agree to arbitrate disagreements within the 
scope of the arbitration clause, and, with limited exceptions, an arbitration clause 
is to be upheld just as any other provision in a contract should be respected.  See 
Council of Smaller Enterprises, 80 Ohio St.3d at 668, 687 N.E.2d at 1357. 
 
R.C. 2711.01(A) provides that a provision in a written contract such as is at 
issue in the present case “to settle by arbitration a controversy that subsequently 
arises out of the contract, or out of the refusal to perform the whole or any part 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.” 
 
We have carefully examined the record, and we acknowledge, as the court 
of appeals did, that nowhere in the record did the trial court make a specific 
determination that the arbitration clause was unenforceable on equitable grounds, 
such as unconscionability.  The trial court merely found the arbitration clause 
invalid, but gave no reason for the finding of invalidity.  The record reveals that, 
given the procedural history of this case on the arbitration issue, the trial court 
may have been somewhat confused on what effect the resolution of the appeal on 
that issue by the court of appeals (left untouched by this court’s decision to 
dismiss the further appeal) had on subsequent proceedings on remand. 
 
This court’s precedents, as well as the directives of the United States 
Supreme Court, call into question some of the conclusions reached by the court of 
appeals regarding the enforceability of the arbitration provision at issue.  
Nevertheless, while not necessarily agreeing with all of the statements made by the 
court of appeals in support of its ultimate conclusion upholding the ruling of the 
 
 
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trial court regarding arbitration, we do agree with that ultimate conclusion on this 
issue. 
 
The record in this case clearly would support a finding that the arbitration 
clause violated principles of equity, given all of the attendant facts and 
circumstances.  Williams filed an affidavit in the trial court regarding the 
arbitration clause’s inclusion in the loan agreement, to support her challenge to the 
specific validity of the arbitration clause.  After taking into account both the 
procedural and substantive progress of this case, we find that the complete record 
compels the conclusion that the trial court, while not specifically declaring the 
arbitration agreement to be invalid (i.e., because the arbitration clause itself was 
unconscionable), did in essence make that determination. 
 
The trial court was entitled initially to view the arbitration clause at issue 
with some skepticism.  In the situation presented here, the arbitration clause, 
contained in a consumer credit agreement with some aspects of an adhesion 
contract, necessarily engenders more reservations than an arbitration clause in a 
different setting, such as in a collective bargaining agreement, a commercial 
contract between two businesses, or a brokerage agreement.  See, generally, 1 
Domke on Commercial Arbitration (Rev.Ed.1997) 17-18, Section 5.09.  When the 
further complete situation of this case is taken into account, i.e., Williams’s 
evidence regarding the conspiracy between ITT and Blair as the fundamental 
reason for her entering into the loan agreement in the first place, and also the 
questionable conditions under which the dispute would be submitted to arbitration 
as revealed in the record, there is further support for the invalidity of the 
arbitration clause. 
 
A virtually identical arbitration clause was challenged as unenforceable in 
Patterson v. ITT Consumer Fin. Corp. (Cal.App.1993), 14 Cal.App.4th 1659, 18 
 
 
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Cal.Rptr.2d 563.  In Patterson the court considered whether the loan agreement 
was an adhesion contract on facts virtually the same in all relevant respects to the 
loan agreement at issue in the case sub judice, and determined that it was 
“indisputable that the contract was one of adhesion.”  14 Cal.App.4th at 1664, 18 
Cal.Rptr.2d at 566. 
 
The court examined the one-sided rules establishing the prerequisites to 
achieving an arbitration hearing, and also considered that a consumer was required 
by the rules to prepay a substantial amount of fees as a condition precedent to 
arbitration.  The court concluded, “The likely effect of these procedures is to deny 
a borrower against whom a claim has been brought any opportunity to a hearing, 
much less a hearing held where the contract was signed, unless the borrower has 
considerable legal expertise or the money to hire a lawyer and/or prepay 
substantial hearing fees.   * * *  In a dispute over a loan of $2,000 it would 
scarcely make sense to spend a minimum of $850 just to obtain a participatory 
hearing.”  Id. at 1666, 18 Cal.Rptr.2d at 566. 
 
The Patterson court held that this arbitration provision was unconscionable, 
and thus unenforceable:  “The contractual risk of a dispute resolution process 
which is weighted heavily against the borrower being able to obtain a hearing 
seems particularly unreasonable in light of the much greater bargaining power of 
ITT and its reluctance to disclose even the mechanics of [the] arbitration until it 
makes an arbitration claim.”  Id. at 1666, 18 Cal.Rptr.2d at 567. 
 
The parallels between the Patterson case and the case before us are striking.  
Patterson involved small consumer loans made by ITT on preprinted forms similar 
to the form signed by Williams, with a virtually identically worded arbitration 
clause.  Consequently, based on the specific circumstances present here, we 
determine that the trial court’s decision denying ITT’s motion to compel 
 
 
14
arbitration was tantamount to a finding that the agreement to arbitrate was invalid, 
and further that the arbitration provision was unconscionable.  We determine that 
any presumption in favor of arbitration was overcome based on the entire record of 
this case.  Furthermore, we believe that the presumption in favor of arbitration 
should be substantially weaker in a case such as this, when there are strong 
indications that the contract at issue is an adhesion contract, and the arbitration 
clause itself appears to be adhesive in nature.  In this situation, there arises 
considerable doubt that any true agreement ever existed to submit disputes to 
arbitration. 
 
We recognize that the failure of the trial court to make a specific 
determination of unconscionability on the record made ITT’s appeal more difficult 
to frame.  However, we determine that this case properly proceeded to trial, and 
we find no merit in ITT’s fourth proposition of law. 
II 
Civil Conspiracy 
 
At the court of appeals, ITT challenged the theories of recovery relied upon 
by Williams at trial.  The court of appeals sustained ITT’s arguments in part, 
finding that Blair was not acting as an agent of ITT, as a matter of law, when he 
induced Williams to contract with him to do the improvements on her home.  We 
agree with the court of appeals that no agency relationship between Blair and ITT 
was shown.  However, while finding that the jury’s verdict could not be sustained 
on agency grounds, the court of appeals further upheld the jury verdict against ITT 
based on Williams’s additional claim that ITT participated in a civil conspiracy 
against her.  The jury, in its answer to interrogatory number one, specifically 
found that ITT participated in a conspiracy that damaged Williams. 
 
 
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In upholding the jury’s verdict against ITT, the court of appeals determined 
that ITT violated a duty to disclose (arising in the “special circumstances” of this 
case) to Williams based on ITT’s knowledge of the fraudulent activities of Blair, 
as asserted by Williams at trial.  The court of appeals held that this fraudulent 
concealment of material information by ITT was ITT’s contribution to the civil 
conspiracy perpetrated by Blair and ITT on Williams, and that this concealment 
justified the jury’s verdict against ITT. 
 
In its first proposition of law, ITT takes issue with the court of appeals’ 
determination that a duty to disclose owed to Williams, based on special 
circumstances, was violated by ITT.  ITT urges that the relationship of a borrower 
to a lending institution is not a fiduciary relationship, that there is no duty to 
speak, and that the “special circumstances” exception to this rule adopted by the 
court of appeals is “so vague and standardless as to be unworkable.”  See, e.g., 
Blon v. Bank One, Akron, N.A. (1988), 35 Ohio St.3d 98, 519 N.E.2d 363, 
paragraph two of the syllabus (“A creditor and consumer stand at arm’s length in 
negotiating the terms and conditions of a consumer loan and, absent an 
understanding by both parties that a special trust and confidence has been reposed 
in the creditor, the creditor has no duty to disclose to the consumer the existence 
and details” regarding aspects of the transaction.); Ed Schory & Sons, Inc. v. 
Francis (1996), 75 Ohio St.3d 433, 442, 662 N.E.2d 1074, 1081 (a fiduciary 
relationship between a debtor and a creditor may be created out of an informal 
relationship only when both parties understand the existence of a special trust or 
confidence). 
 
We do not view this case the same way the court of appeals did.  Although 
we affirm the judgment of the court of appeals that, on the facts of this case, the 
jury verdict against ITT can be upheld for ITT’s role in a civil conspiracy with 
 
 
16
Blair against Williams, we disagree with the reliance by the court of appeals on the 
“special circumstances” exception to the general rule of no duty to disclose. 
 
Consequently, we disagree with the analysis of the court of appeals.  
Because our analysis differs from that of the court of appeals, we do not approach 
the resolution of ITT’s first proposition of law in the manner the issue is presented 
by ITT, but instead explain why ITT’s contentions regarding a duty to disclose are 
not relevant to our consideration. 
 
The tort of civil conspiracy is “ ‘a malicious combination of two or more 
persons to injure another in person or property, in a way not competent for one 
alone, resulting in actual damages.’ ”  Kenty v. Transamerica Premium Ins. Co. 
(1995), 72 Ohio St.3d 415, 419, 650 N.E.2d 863, 866, quoting LeFort v. Century 
21-Maitland Realty Co. (1987), 32 Ohio St.3d 121, 126, 512 N.E.2d 640, 645; 
Gosden v. Louis (1996), 116 Ohio App.3d 195, 219, 687 N.E.2d 481, 496; Minarik 
v. Nagy (1963), 8 Ohio App.2d 194, 196, 93 Ohio Law Abs. 166, 168, 26 O.O.2d 
359, 360, 193 N.E.2d 280, 281.  See 16 American Jurisprudence 2d (1998), 
Conspiracy, Sections 50-73.  For a thorough analysis of the elements of civil 
conspiracy and an explanation of how the tort subtly differs from the related 
aiding and abetting theory of liability, see, generally, Halberstam v. Welch 
(C.A.D.C.1983), 705 F.2d 472. 
 
An underlying unlawful act is required before a civil conspiracy claim can 
succeed.  Gosden, 116 Ohio App.3d at 219, 687 N.E.2d at 496; Minarik, 8 Ohio 
App.2d at 195, 93 Ohio Law Abs. at 168, 26 O.O.2d at 360, 193 N.E.2d at 281.  
The malice involved in the tort is “that state of mind under which a person does a 
wrongful act purposely, without a reasonable or lawful excuse, to the injury of 
another.”  Pickle v. Swinehart (1960), 170 Ohio St. 441, 443, 11 O.O.2d 199, 200, 
166 N.E.2d 227, 229; Gosden, 116 Ohio App.3d at 219, 687 N.E.2d at 496. 
 
 
17
 
Fraud is 
 
“ ‘(a) a representation or, where there is a duty to disclose, concealment of a 
fact, 
 
“ ‘(b) which is material to the transaction at hand, 
 
“ ‘(c) made falsely, with knowledge of its falsity, or with such utter 
disregard and recklessness as to whether it is true or false that knowledge may be 
inferred, 
 
“ ‘(d) with the intent of misleading another into relying upon it, 
 
“ ‘(e) justifiable reliance upon the representation or concealment, and 
 
“ ‘(f) a resulting injury proximately caused by the reliance.’ ”  Cohen v. 
Lamko, Inc. (1984), 10 Ohio St.3d 167, 169, 10 OBR 500, 502, 462 N.E.2d 407, 
409, quoting Friedland v. Lipman (1980), 68 Ohio App.2d 255, 22 O.O.3d 422, 
429 N.E.2d 456, paragraph one of the syllabus.  See, also, Burr v. Stark Cty. Bd. of 
Commrs. (1986), 23 Ohio St.3d 69, 23 OBR 200, 491 N.E.2d 1101, paragraph two 
of the syllabus; Russ v. TRW, Inc. (1991), 59 Ohio St.3d 42, 49, 570 N.E.2d 1076, 
1083. 
 
The court of appeals found that there was no testimony in the record that 
would justify a finding that any ITT representative misrepresented a fact material 
to the loan agreement to Williams, and so proceeded to consider whether ITT 
representatives had concealed a material fact from Williams under element (a) of 
Cohen set out above.  The court of appeals based its reasoning upon the 
consideration that, although Blair referred Williams to ITT, ITT did an 
independent evaluation of her creditworthiness before issuing her the loan. 
 
We disagree with this specific part of the court of appeals’ analysis.  If ITT 
and Blair did engage in a conspiracy to defraud Williams, as Williams alleged, 
then, as a consequence of the existence of the conspiracy, the finding could be 
 
 
18
upheld that ITT representatives engaged in fraud against Williams.  In a 
conspiracy, the acts of coconspirators are attributable to each other.  See Prosser & 
Keeton on Torts (5 Ed.1984) 323, Section 46 (“All those who, in pursuance of a 
common plan or design to commit a tortious act, actively take part in it, or further 
it by cooperation or request, or who lend aid or encouragement to the wrongdoer, 
or ratify and adopt the wrongdoer’s act done for their benefit, are equally liable.”  
[Footnotes omitted.]). 
 
After a comprehensive review of the record, we determine that the jury 
reasonably determined on the sum total of the evidence presented that employees 
of ITT conspired with Blair to defraud Williams, with resulting damages to her.  
ITT can be held liable for the intentional torts of its employee loan officers 
committed within the scope of their employment.  Osborne v. Lyles (1992), 63 
Ohio St.3d 326, 329, 587 N.E.2d 825, 828-829; Byrd v. Faber (1991), 57 Ohio 
St.3d 56, 58, 565 N.E.2d 584, 587.  ITT’s role in the conspiracy was to allow Blair 
to have access to loan money that was necessary to further his fraudulent actions 
against customers such as Williams.  Thus, ITT employees themselves 
affirmatively committed fraud by the very acts of making the loans to Williams 
and others. 
 
In particular, the testimony of former ITT branch manager and regional 
manager Jeffrey Stires supported Williams’s claims that ITT employees conspired 
with Blair.  Stires testified that Blair’s financial problems were well known among 
ITT employees for a significant time before the loan was made to Williams, and 
that the term “Blair loan” had developed a specific, highly negative connotation 
among employees of ITT.  In addition, Stires and others testified to the close 
relationship between Blair and ITT’s employees. 
 
 
19
 
Because we find that the record provides ample support for the jury’s 
verdict, we disagree with the court of appeals’ discussion regarding ITT’s 
violation of a duty to disclose relevant information to Williams.  The imposition of 
liability on ITT on a civil conspiracy theory of recovery is sustainable without a 
need to rely on the analysis set forth by the court of appeals.  We therefore do not 
address the specific arguments made by ITT and amici curiae on the ramifications 
of the court of appeals’ holding on the disclosure issue, and sustain the jury’s 
verdict that ITT and Blair conspired to commit a fraud that damaged Williams. 
III 
Punitive Damages 
 
ITT challenges the award of punitive damages against it on several fronts.  
ITT claims that it should not be derivatively liable for punitive damages based on 
Blair’s violations of the CSPA and HSAA.  ITT also argues that punitive damages 
should never have been awarded based on any of the other theories presented at 
trial, or based on a violation of the duty to disclose which the court of appeals 
relied on in upholding compensatory damages based on civil conspiracy.  
Furthermore, ITT argues that the amount of punitive damages awarded was 
grossly excessive. 
A. 
CSPA/HSSA liability as support for punitive damages 
 
In the trial court and in the court of appeals, ITT argued that, because it is a 
dealer in intangibles, its loan contract with Williams was not a “consumer 
transaction” per R.C. 1345.01, so that the CSPA, R.C. 1345.01 et seq., did not 
apply to it.  See, also, R.C. 5725.01.  ITT also argued that the HSSA, R.C. 1345.21 
et seq., did not apply.  Williams opposed ITT’s claims in this regard by arguing 
that ITT did more than merely make an arm’s-length loan to Williams.  Williams 
contended that ITT was sufficiently intertwined with Blair in dealing with 
 
 
20
Williams that ITT, by virtue of its relationship with Blair, could be found liable 
under the CSPA and HSSA. 
 
The court of appeals found no need to address ITT’s arguments on the 
grounds raised by ITT, determining that due to the Federal Trade Commission’s 
“holder rule” set forth in Section 433.2(a), Title 16, C.F.R., Williams could sue 
ITT derivatively for Blair’s violations of the CSPA and HSSA.  In this situation, 
ITT is being held accountable not as a financial institution, but instead as a holder 
of a consumer credit contract.  See Milchen v. Bob Morris Pontiac-GMC Truck 
(1996), 113 Ohio App.3d 190, 195, 680 N.E.2d 698, 701-702 (because the 
consumer is blameless when the seller fails to deliver the promised performance of 
goods or services purchased on credit, the Federal Trade Commission believed it 
was equitable to reallocate the cost of seller misconduct from the debtor to the 
creditor); Ambre v. Joe Madden Ford (N.D.Ill.1995), 881 F.Supp. 1182, 1184-
1185. 
 
The document signed by Williams to acquire the loan from ITT included the 
following language, pursuant to Section 433.2(a), Title 16, C.F.R.: 
“NOTICE 
 
“ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS 
SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD 
ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED 
PURSUANT HERETO OR WITH THE PROCEEDS HEREOF.  RECOVERY 
HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID 
BY THE DEBTOR HEREUNDER.” 
 
As we understand ITT’s third proposition of law, ITT no longer argues that 
it was improperly subjected to liability under the CSPA and HSSA.  ITT now 
argues that it could not be found derivatively liable for punitive damages based on 
 
 
21
the CSPA and HSSA, but at most could be found liable only for Williams’s actual 
damages caused by Blair, with those damages limited to an absolute maximum of 
the “amounts paid by the debtor” thereunder – the $11,500 Williams paid to Blair 
for the work never completed.  ITT contends that the court of appeals was 
mistaken in utilizing the “FTC holder rule” to sustain the punitive damages award.  
In support, ITT cites Hardeman v. Wheels, Inc. (1988), 56 Ohio App.3d 142, 565 
N.E.2d 849, in which the court found that, because liability imposed derivatively 
against a lender under the FTC holder rule is not based on the lender’s own 
misconduct, and because punitive damages are assessed to punish conscious 
wrongdoing, an award of treble damages under R.C. 1345.09 against a culpable 
party may not be imposed derivatively under Section 433.2, Title 16, C.F.R. 
 
We disagree with ITT’s interpretation that the court of appeals sustained the 
punitive damages award based on ITT’s derivative liability under the CSPA and 
HSSA.  Rather, our reading of the court of appeals’ opinion convinces us that the 
court of appeals sustained the punitive damages award based on a civil conspiracy 
between Blair and ITT to defraud Williams.  We concur in the determination of 
the court of appeals that the award is sustainable on that basis, and therefore, we 
find no merit in ITT’s third proposition of law. 
B. 
Other support for punitive damages award 
 
As one part of its second proposition of law, ITT argues that it is unfair to 
subject it to liability for punitive damages when the court of appeals upheld the 
punitive damages based upon ITT’s violation of a duty to disclose that was only 
first recognized in the court of appeals’ opinion.  The further argument made by 
ITT is that ITT should not have been found liable for punitive damages on a 
theory of liability never submitted to the jury.  As we have explained above, we 
disagree with the court of appeals’ conclusion that ITT’s violation of a duty to 
 
 
22
disclose was the basis for upholding liability against ITT for civil conspiracy.  
Therefore, we determine that ITT was not found liable for punitive damages based 
on the violation of an unanticipated duty to disclose, and that ITT was found liable 
based on a theory submitted to the jury.  We do not further address ITT’s argument 
in this regard. 
 
ITT also challenges the award of punitive damages by reiterating one of its 
earlier arguments opposing the imposition of liability for compensatory damages 
in this case, which is that the case went to the jury primarily on Williams’s claim 
that Blair was an agent of ITT, so that the jury awarded punitive damages against 
ITT primarily for actions attributable solely to Blair.  As explained above, we 
agree with the court of appeals’ ultimate conclusion that, even though Blair was 
not ITT’s agent, the jury’s finding that ITT was liable for compensatory damages 
should be upheld due to ITT’s role in a civil conspiracy against Blair.  For the 
same reasons that compensatory damages are supportable against ITT, punitive 
damages are also supported. 
C. 
Excessiveness of punitive damages award 
 
As another component of its second proposition of law, ITT, citing BMW of 
N. Am., Inc. v. Gore (1996), 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809, 
contends that the punitive damage award of $1.5 million is grossly excessive.  In 
BMW, the United States Supreme Court found that a $2 million punitive damages 
award was sufficiently excessive under the facts of that case that the award 
violated the Due Process Clause of the Fourteenth Amendment to the United 
States Constitution. 
 
In BMW, the court followed three guideposts, or indicia, of excessiveness to 
evaluate whether the punitive damages award violated due process.  The three 
indicia are (1) the degree of reprehensibility of the defendant’s conduct, (2) the 
 
 
23
disparity between the harm or potential harm to the plaintiff and the amount of the 
punitive damages, and (3) the difference between the amount of punitive damages 
awarded and the civil or criminal sanctions available to be imposed for similar 
misconduct.  See 517 U.S. at 574-575, 116 S.Ct. at 1598-1599, 134 L.Ed.2d at 
826. 
 
We observe that the court in BMW appeared to tailor its decision very much 
to the specific facts of that case, with the three guideposts followed because they 
lent themselves well to the facts at hand.  The court appeared to reject a 
categorical approach, with the result that the list of guideposts probably is not 
exhaustive, so that other factors likely will be relevant in the appropriate case.  
Furthermore, it would appear that when one of the guideposts is particularly 
relevant, a lesser reliance on the other guideposts may be justified.  We question 
whether most defendants who challenge punitive damages based on the indicia 
discussed in BMW will be successful, given the statement in the concurring 
opinion in BMW to the effect that that justice viewed BMW as an “unusual case” in 
which the facts justified a conclusion that the punitive damages violated due 
process sufficient to overcome the “strong presumption of validity” attaching 
when a punitive damages award is not suspect on other grounds.  BMW, 517 U.S. 
at 597, 116 S.Ct. at 1609, 134 L.Ed.2d at 840 (Breyer, J., joined by O’Connor and 
Souter, JJ., concurring). 
 
The court of appeals below analyzed the punitive damages award under the 
BMW guideposts, found that the amount awarded was not so excessive as to 
violate due process, and deferred to the judgment of the jury. 
 
We generally agree with the court of appeals’ consideration of the BMW 
factors here, and we likewise determine that the punitive damages awarded did not 
violate due process.  We observe that there is ample evidence in the record that 
 
 
24
ITT engaged in wrongful conduct sufficient to merit an award of punitive 
damages.  Furthermore, as the jury’s responses to the interrogatories (along with 
the size of the punitive damages award) conclusively indicate, the jury accepted 
Williams’s position on the key questions of fact, and rejected ITT’s position.  
Thus, we must agree with the court of appeals that the jury’s verdict is entitled to 
deference.  Because the jury found ITT’s conduct to be sufficiently reprehensible, 
consideration of the first guidepost of BMW yields the conclusion that due process 
was not violated in this case.  Likewise, consideration of the other two guideposts 
also results in the conclusion that due process was not violated. 
 
“The purpose of punitive damages is not to compensate a plaintiff, but to 
punish and deter certain conduct.”  Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 
Ohio St.3d 638, 651, 635 N.E.2d 331, 343; see, also, Preston v. Murty (1987), 32 
Ohio St.3d 334, 512 N.E.2d 1174.  The amount of punitive damages awarded may 
be excessive when it is determined to have been the product of passion and 
prejudice.  See Villella v. Waikem Motors, Inc. (1989), 45 Ohio St.3d 36, 39, 543 
N.E.2d 464, 468.  If the punitive damages award is not the result of passion and 
prejudice, and not the result of legal error, it is generally not within the province of 
a reviewing court to substitute its view for that of the jury.  See id. at 40, 543 
N.E.2d at 469.  See, also, id. at 43-44, 543 N.E.2d at 471-472 (H. Brown, J., 
concurring).  Since the punitive damages awarded in this case were not the result 
of passion and prejudice, and not the result of legal error, we uphold the jury’s 
punitive damage award. 
IV 
Conclusion 
 
In conclusion, we find that this case properly proceeded to trial, that ITT 
was properly found liable for its part in an alleged civil conspiracy against 
 
 
25
Williams, and that the amount of punitive damages awarded is not so excessive as 
to violate due process based on all the facts and circumstances in the record.  The 
judgment of the court of appeals is affirmed. 
Judgment affirmed. 
 
DOUGLAS, F.E. SWEENEY and PFEIFER, JJ., concur. 
 
MOYER, C.J., and COOK, J., concur in part and dissent in part. 
 
LUNDBERG STRATTON, J., concurs in part and dissents in part. 
FOOTNOTE: 
1. 
When the trial court ruled on these motions, it took the opportunity to “point 
out” the following observations: 
 
“1)  ITT appointed Chris Blair as its ‘dealer’ and this appointment was made 
in writing. 
 
“2)  ITT knew that Blair was securing customers for ITT by soliciting 
elderly, low income customers for home improvements. 
 
“3)  Long before Mildred Williams was solicited, ITT knew that Blair was 
not doing the home improvement work for which he was paid. 
 
“4)  ITT targeted Mildred Williams’ home before Blair made his first 
contact with her. 
 
“5)  The evidence showed that ITT participated in a collaboration with Blair 
to enter this home improvement scheme against Mildred Williams. 
 
“6)  ITT received and retained the fruits of Blair’s activities when it retained 
the car title and retained the mortgage on Mrs. Williams’ home – its benefits from 
Blair’s activities. 
 
“7)  ITT retained these benefits with full knowledge of what Blair was 
doing and what he was not doing. 
 
 
26
 
“8)  The evidence clearly supported a judgment on fraud, conspiracy[,] the 
OSCPA violations, and breach of contract. 
 
“9)  The evidence also supported a jury’s finding of the $15,000 in 
compensatory damages, reduced by the $3,326.04 which plaintiff asserted was 
used to pay off Mrs. Williams’ pre-existing credit card obligations.” 
 
We note that ITT vigorously opposed some of the factual assertions made 
by Williams implicated in the above points, that the jury’s answers to 
interrogatories do not definitively indicate the jury’s conclusions on several of the 
points, and that some of the points listed therefore appear to be the trial judge’s 
personal conclusions based on the evidence presented. 
__________________ 
 
COOK, J., concurring in part and dissenting in part.  I agree with the 
majority that Williams minimally supported her civil conspiracy claim at trial and 
that the jury’s finding of liability against ITT on that issue should stand.  Based on 
the state of the record in this case, however, I cannot agree with the majority on 
the arbitration issue or with its analysis of the punitive damages issue. 
Arbitration 
 
I respectfully disagree with the majority’s conclusion regarding the 
conscionability of the arbitration clause.  Until today’s decision, no court has 
found the arbitration clause between ITT and Williams to be unconscionable.  As 
acknowledged by both the majority and the appellate court in this case, the trial 
court never resolved the issue of whether the arbitration clause was valid, much 
less whether the arbitration clause was unconscionable. The reason for the lack of 
such a finding is that the parties never litigated this issue due to the odd procedural 
history of this case.  The plaintiff never sought to prove the arbitration clause 
unconscionable; she thought she had prevailed on that issue. 
 
 
27
 
Much of the majority’s unconscionability analysis focuses on analogies 
between this case and Patterson v. ITT Consumer Fin. Corp. (Cal.App.1993), 14 
Cal.App.4th 1659, 18 Cal.Rptr.2d 563 — a case where a California appellate court 
found a similar agreement to arbitrate disputes between a plaintiff and ITT before 
the National Arbitration Forum (“NAF”) unconscionable.  There are several 
reasons, however, to distinguish Patterson and enforce the arbitration provision in 
this case. 
 
As evidenced by R.C. Chapter 2711, there exists a strong legislative policy 
in Ohio favoring arbitration.  The same policy preference is stated in federal 
arbitration laws, which were specifically incorporated into the contract between 
Williams and ITT by reference.  Section 2, Title 9, U.S.Code.  Furthermore, the 
General Assembly has done nothing to limit that policy preference to commercial 
transactions.  See R.C. Chapters 1321, 1322, 1345 and 1349. 
 
Though state and federal legislation favors enforcement of agreements to 
arbitrate, both R.C. 2711.01(A) and Section 2, Title 9, U.S.Code permit a court to 
invalidate an arbitration agreement on equitable or legal grounds that would cause 
any agreement to be revocable.  One such ground is unconscionability.  “ 
‘Unconscionability has generally been recognized to include an absence of 
meaningful choice on the part of one of the parties together with contract terms 
which are unreasonably favorable to the other party.’  Williams v. Walker-Thomas 
Furniture Co.  (C.A.D.C.1965), 350 F.2d 445, 449.” Lake Ridge Academy v. 
Carney (1993), 66 Ohio St.3d 376, 383, 613 N.E.2d 183, 189.  Accordingly, 
unconscionability has two prongs: a procedural prong, dealing with the parties’ 
relation and the making of the contract, and a substantive prong, dealing with the 
terms of the contract itself.  Both prongs must be met to invalidate an arbitration 
provision. 
 
 
28
 
In explaining the analogies between this case and Patterson, the majority 
appears to stress the disparity of bargaining power between the parties and 
arbitration costs as reasons for nullifying the agreement to arbitrate as 
unconscionable.  These factors, however, if by themselves deemed to render 
arbitration provisions of a contract unconscionable, could potentially invalidate a 
large percentage of arbitration agreements in consumer transactions. 
 
The disparity of bargaining power between Williams and ITT would be one 
factor tending to prove that the contract was procedurally unconscionable.  A 
finding of procedural unconscionability, or that the contract is one of adhesion, 
however, requires more.  “Black’s Law Dictionary (5 Ed.1979) 38, defines a 
contract of adhesion as a ‘[s]tandardized contract form offered to consumers of 
goods and services on essentially “take it or leave it” basis without affording 
consumer realistic opportunity to bargain and under such conditions that consumer 
cannot obtain desired product or services except by acquiescing in form contract.  
* * *’ ”  Sekeres v. Arbaugh (1987), 31 Ohio St.3d 24, 31, 31 OBR 75, 81, 508 
N.E.2d 941, 946-947 (H. Brown, J., dissenting), citing Wheeler v. St. Joseph Hosp. 
(1976), 63 Cal.App.3d 345, 356, 133 Cal.Rptr. 775, 783;  Std. Oil Co. of 
California v. Perkins  (C.A.9, 1965), 347 F.2d 379, 383. See, also, Nottingdale 
Homeowners’ Assn., Inc. v. Darby (1987), 33 Ohio St.3d 32, 37, 514 N.E.2d 702, 
707, fn. 7. 
 
In the present case, Williams did not demonstrate that she would have been 
unable to obtain a loan from other sources.  In fact, part of her civil conspiracy 
argument is that ITT targeted her for a loan because of the substantial amount of 
equity that she had built up in her house. 
 
There is no evidence in the record that the arbitration clause was concealed 
or misrepresented to Williams.  In fact, the record reveals that Williams did read 
 
 
29
the contract and understood after she read the contract that she had three days to 
cancel. 
 
Additionally, there are differences between this case and Patterson relating 
to substantive unconscionability. The Patterson court remarked that “arbitration 
per se may be within the reasonable expectations of most consumers,” but noted 
that some of the terms of the particular contract, when combined with the NAF’s  
procedural rules, were oppressive to the consumer.  Patterson v. ITT Consumer 
Fin. Corp., 14 Cal.App.4th at 1665, 18 Cal.Rptr.2d at 566.  The court concluded 
that the arbitration clause at issue was worded so that it could mislead a reasonable 
reader to believe that he or she had in fact agreed to arbitration in Minnesota.  That 
is not true in our case, where the arbitration clause states in bold print: 
 
“You and ITT Financial Services agree that, other than judicial foreclosures 
and cancellations regarding real estate security, any dispute, past, present, or 
future, between us or claim by either against the other or any agent or affiliate of 
the other, whether related to your loan, products you purchase through ITT 
Financial Services, or otherwise, shall be resolved by binding arbitration in 
accordance with the arbitration rules of the National Arbitration Forum, 
Minneapolis, Minnesota, and judgment upon any award by the arbitrator may be 
entered in any court having jurisdiction over claims of the amount of the award.  
We agree that the transactions between us are in interstate commerce and this 
agreement shall be subject to 9 USC §1-14, as amended.” 
 
In turn, Rule 14 of the NAF Code of Procedure mandates that “[a]ll 
Participatory Hearing Sessions shall be held in the Federal Judicial District where 
the Arbitration Agreement was executed.”  Accordingly, there is nothing in the 
contract language under consideration to lead a reasonable consumer to believe 
that he or she would have to arbitrate the dispute in Minnesota. 
 
 
30
 
The Patterson court also appears to have considered it important that the 
case was one that involved a small claim, but, because of the arbitration clause, the 
consumers therein would be forced to spend a minimum of $850 on a dispute over 
a $2,000 loan.  Additionally, part of the Patterson court’s concern that the likely 
effect of the NAF procedures would be “to deny a borrower against whom a claim 
has been brought any opportunity to a hearing, much less a hearing held where the 
contract was signed, unless the borrower had considerable legal expertise or the 
money to hire a lawyer and/or prepay substantial hearing fees” may relate to the 
fact that absent the arbitration agreement, a proper venue for the claims involved 
would have been small claims court.  (Emphasis added.)  Id. 18 Cal.Rptr.2d at 566. 
Those concerns are not present in this case, where the plaintiff initiated the action 
seeking substantial compensatory and punitive damages and was at all times 
represented by an attorney. 
 
Finally, the majority’s reference to “evidence regarding the conspiracy 
between ITT and Blair as a fundamental reason for her entering into the loan 
agreement in the first place” does not support its conclusion that the case was 
properly withheld from arbitration.  As is apparent from the majority opinion, the 
unlawful act underlying the civil conspiracy claim was fraud.  Moreover, 
according to the majority, that fraud relates to either Blair’s fraudulent inducement 
of Williams to contract with him for the home repairs or ITT’s “acts of making the 
loans to Williams and others.”  There is neither evidence nor a finding by any 
court that ITT fraudulently induced Williams into agreeing to arbitrate her 
disputes, an issue separate from the fraud issue.  Accordingly, those factual issues 
were proper subjects for arbitration, and did not provide the trial court a reason to 
withhold the case from arbitration.  ABM Farms, Inc. v. Woods (1998), 81 Ohio 
St.3d 498, 692 N.E.2d 574, syllabus; Williams v. Aetna Fin. Co. (1992), 65 Ohio 
 
 
31
St.3d 1203, 602 N.E.2d 246 (Wright, J., dissenting).  Labeling acts of fraud as 
“unconscionable” should not support the circumventing of this court’s unanimous 
decision in ABM Farms. 
 
It would be unfortunate if the breadth of  today’s decision works toward the 
wholesale invalidation of arbitration clauses in consumer transactions — a policy 
decision that, if made at all, should be made by the General Assembly. 
Punitive Damages 
 
I  disagree with the way that the majority analyzes the punitive damages 
issue, but nevertheless agree with its ultimate conclusion.  As recognized by the 
majority, BMW of N. Am., Inc. v. Gore (1996), 517 U.S. 559, 116 S.Ct. 1589, 134 
L.Ed.2d 809, sets out three guideposts for evaluating whether a punitive damages 
award is grossly excessive and therefore violative of due process.  Those 
guideposts are (1) the degree of reprehensibility of the defendant’s conduct, (2) the 
disparity between the harm or potential harm suffered by the plaintiffs and their 
punitive damages award, and (3) the difference between this remedy and the civil 
or criminal penalties authorized or imposed in comparable cases. Id. at 574-575, 
116 S.Ct. at 1598-1599, 134 L.Ed.2d at 826. 
 
In addressing the first guidepost — the degree of reprehensibility of the 
defendant’s conduct — the majority cites the jury’s interrogatories and the size of 
the punitive damages award itself as demonstrating that ITT’s conduct was 
sufficiently reprehensible to justify the large punitive damages award.  That  
reasoning could be said to be circular and begs the true question related to the first 
BMW guidepost — which is whether, from a legally objective standpoint, the 
defendant’s conduct was so reprehensible that it tends to justify the jury’s award. 
 
While Justice Breyer’s concurrence in BMW states that a “strong 
presumption of validity” should attach to a punitive damages award, his 
 
 
32
concurrence does not support this majority’s analysis.  Id. at 586-587, 116 S.Ct. at 
1604, 134 L.Ed.2d at 833.  Justice Breyer’s concurrence specifically noted that a 
jury’s punitive damages award should be checked against legal standards “that 
provide ‘reasonable constraints’ within which ‘discretion is exercised,’ that assure 
‘meaningful and adequate review by the trial court whenever a jury has fixed the 
punitive damages,’ and permit ‘appellate review [that] makes certain that the 
punitive damages are reasonable in their amount and  rational in light of their 
purpose to punish what has occurred and to deter its repetition’ Pacific Mut. Life 
Ins. Co. v. Haslip (1991), 499 U.S. 1, 20-21, 111 S.Ct. 1032, 1045, 113 L.Ed.2d 1, 
21-22.  See also id., at 18, 111 S.Ct. at 1043, 113 L.Ed.2d at 20 (‘[U]nlimited jury 
discretion — or unlimited judicial discretion for that matter — in the fixing of 
punitive damages may invite extreme results that jar one’s constitutional 
sensibilities’).”  Id. at 587, 116 S.Ct. at 1605, 134 L.Ed.2d at 833-834.  
Accordingly, it is the court’s duty to independently evaluate the jury’s award in 
relation to the BMW guideposts.  Deference to the jury’s award does not replace 
the court’s independent function in reviewing whether a punitive damages award 
is violative of due process. 
 
Without explanation, the majority also states that “consideration of the other 
two [BMW] guideposts also results in a conclusion that due process was not 
violated.”  Thus, the majority does not explain its conclusion that a punitive 
damages award one hundred times the amount of actual damages bears a 
reasonable relationship to harm that resulted or that was likely to result from ITT’s 
actions.  The BMW court found a five-hundred-to-one ratio grossly excessive and 
further suggested that even a thirty-five-to-one ratio would weigh in favor of 
finding the punitive damages award grossly excessive.  Id. at 582, 116 S.Ct. at 
1602, 134 L.Ed.2d at 830, fn. 35.  The Haslip court concluded that a punitive 
 
 
33
damages award four times the amount of compensatory damages “might be close 
to the line,” but did not “cross the line into the area of constitutional impropriety.” 
Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. at 23-24, 111 S.Ct. at 1045, 113 
L.Ed.2d at 23.  And, calculating the potential harm to the victim if the tortious 
activity had succeeded, the court relied upon a ten-to-one ratio of punitive 
damages to potential harm in determining that punitive damages were not grossly 
excessive in TXO Production Corp. v. Alliance Resources Corp. (1993), 509 U.S. 
443, 462, 113 S.Ct. 2711, 2722, 125 L.Ed.2d 366, 382.  Considering the federal 
precedent, the second BMW factor would also appear to require deeper due 
process analysis than is apparent from the majority opinion. 
 
Ultimately, I agree with the majority’s conclusion that punitive damages are 
not so grossly excessive in this case that they violate due process.  Relying on 
circumstances supporting the jury’s finding of a civil conspiracy and Ohio’s civil 
and criminal penalties for fraud, I find that this high ratio of actual damages to 
punitive damages passes constitutional muster.  My differences with the majority 
in interpreting what BMW requires are purely theoretical.  Nevertheless, I think it 
important to properly interpret the BMW guideposts as set forth by the United 
States Supreme Court, because our interpretation may make a difference in future 
cases. 
 
MOYER, C.J., concurs in the foregoing opinion. 
__________________ 
 
LUNDBERG STRATTON, J., concurring in part and dissenting in part.  I 
respectfully dissent from the majority’s decision on arbitration and join in Justice 
Cook’s dissenting opinion on the arbitration issue only.  However, on all 
remaining issues, I join the majority.