Title: Ignazio v. Clear Channel Broadcasting, Inc.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as Ignazio v. Clear Channel Broadcasting, Inc., 113 Ohio St.3d 276, 2007-Ohio-1947.] 
 
 
IGNAZIO, APPELLEE, v. CLEAR CHANNEL BROADCASTING, INC., ET AL., 
APPELLANTS. 
[Cite as Ignazio v. Clear Channel Broadcasting, Inc., 
 113 Ohio St.3d 276, 2007-Ohio-1947.] 
Arbitration agreements — Severability — Judicial review — Waiver. 
(No. 2006-0190 — Submitted January 24, 2007 — Decided May 9, 2007.) 
APPEAL from the Court of Appeals for Mahoning County,  
No. 04 MA 261, 165 Ohio App.3d 32, 2005-Ohio-6783. 
__________________ 
 
LUNDBERG STRATTON, J. 
{¶ 1} The issue before us is whether a clause in an arbitration agreement 
that provides for greater judicial review of an award than is permitted under R.C. 
Chapter 2711 renders the entire agreement unenforceable, or whether the 
offensive clause may be severed and the remainder of the agreement enforced. 
{¶ 2} Because of the express severability clause in the agreement, Ohio’s 
strong public policy in favor of arbitration, and the fact that the offensive 
provision does not fundamentally alter the otherwise valid and enforceable 
provisions of the agreement, we conclude that the offending provision may be 
severed and the remainder of the agreement enforced.  Consequently, we reverse 
the judgment of the court of appeals and reinstate the decision of the trial court. 
{¶ 3} Appellants, Clear Channel Worldwide and Clear Channel 
Broadcasting, Inc. (collectively, “Clear Channel”), became appellee Diane 
Ignazio’s employer through an acquisition in 1999.  As a condition of Ignazio’s 
continued employment, she entered into an arbitration agreement with Clear 
Channel in which the parties waived their right to sue for any claim covered by 
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the agreement and agreed to submit the dispute for final and binding resolution by 
a “private, impartial arbitrator.”  Section 10B of the agreement also provides:  
{¶ 4} “Either party may bring an action in a court of competent 
jurisdiction to compel arbitration under this Agreement and to enforce an 
arbitration award.  A party opposing enforcement of an award may bring a 
separate action in any court of competent jurisdiction to set aside the award, 
where the standard of review will be the same as that applied by an appellate 
court reviewing a decision of a trial court sitting without a jury.” 
{¶ 5} After Ignazio’s employment was terminated on October 7, 2003, 
she filed this action against Clear Channel and several supervisors.  She asserted 
claims of age and sex discrimination, retaliation, and wrongful termination of 
employment in violation of public policy.  
{¶ 6} Clear Channel and the supervisors filed a motion to dismiss the 
complaint, or in the alternative, to stay the action pending arbitration. They 
alleged that Ignazio’s claims fell within the arbitration agreement.  The trial court 
granted the defendants’ motion to stay the proceedings. 
{¶ 7} Ignazio appealed.  The court of appeals determined that Section 
10B of the arbitration agreement provides for greater judicial review than is 
permitted under R.C. Chapter 2711 and concluded that any arbitration award 
would not be final and binding.  Therefore, under the law set forth in Schaefer v. 
Allstate Ins. Co. (1992), 63 Ohio St.3d 708, 590 N.E.2d 1242, an agreement that 
did not provide for a final and binding decision could not be classified as an 
arbitration agreement.  The court refused to sever the offending clause and instead 
reversed the judgment and remanded the cause with instructions to permit the 
plaintiff to proceed with her lawsuit. 
{¶ 8} The cause is before this court upon the acceptance of a 
discretionary appeal.  109 Ohio St.3d 1455, 2006-Ohio-2226, 847 N.E.2d 5. 
January Term, 2007 
3 
{¶ 9} The narrow issue before us is whether the offending clause renders 
the entire agreement unenforceable or whether it may be severed and the 
remainder of the agreement enforced. 
{¶ 10} The court of appeals cited Schaefer as authority that the entire 
agreement was unenforceable because Section 10B qualified the finality of the 
arbitrator’s decision and authorized a review beyond the scope of Ohio’s 
arbitration laws.  R.C. Chapter 2711, entitled “Arbitration,” allows courts to 
modify or vacate an arbitrator’s decision under only limited circumstances.  See 
R.C. 2711.10 and 2711.11.  But Schaefer involved an arbitration agreement 
between an insured and an insurer that contained a provision that was alleged to 
be unconscionable.  A majority of the court refused to enforce the entire contract.  
Schaefer, however, made no reference to a severability clause.  Consequently, 
Schaefer is factually distinguishable.  In addition, Schaefer was a plurality 
opinion, and therefore, the proposition that an arbitration agreement is 
unenforceable merely because the parties have contracted for an unconventional 
standard of review is not the holding of the court. 
{¶ 11} Nevertheless, for purposes of this appeal, the parties do not dispute 
that the second sentence in Section 10B provides for a standard of review that is 
not permitted under Ohio’s arbitration laws.  We must decide whether the 
sentence in Section 10B is fundamental to the overall meaning of the agreement, 
or whether it may be severed so that the remainder of the agreement may be given 
effect.  Whether a part of a contract may be severed from the remainder “depends 
generally upon the intention of the parties, and this must be ascertained by the 
ordinary rules of construction.”  Huntington & Finke Co. v. Lake Erie Lumber & 
Supply Co. (1924), 109 Ohio St. 488, 2 Ohio Law Abs. 197, 143 N.E. 132, 
syllabus. 
{¶ 12} The arbitration agreement in this case expressly provides, “Should 
any provision of this Agreement be found to be unenforceable, such portion will 
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be severed from the Agreement and the remaining portions shall remain in full 
force and effect.”  We presume the intent of the parties from the language 
employed in the contract.  In re All Kelley & Ferraro Asbestos Cases, 104 Ohio 
St.3d 605, 2004-Ohio-7104, 821 N.E.2d 159, ¶ 29.  Clearly, the parties 
contemplated and provided for severing a provision that was unenforceable and 
giving effect to the remaining provisions. 
{¶ 13} Ignazio contends that Section 10B transformed the agreement into 
one that requires only nonbinding alternative dispute resolution.  She argues that 
severing is not a proper remedy because it would fundamentally alter the nature of 
the entire contract from a nonbinding arbitration process into binding arbitration, 
a condition to which she had not agreed.  According to Ignazio, the broad 
authority for judicial review of the arbitrator’s decision countermands the 
agreement’s references to final and binding arbitration, so severing this provision 
would rewrite the agreement from nonbinding dispute resolution to binding 
arbitration. 
{¶ 14} We disagree.  The plain language of the agreement evidences that 
the parties intended to arbitrate their disputes to a final and binding resolution.  
The agreement is entitled “Arbitration Agreement.”  It contains numerous 
references to the finality of the arbitrator’s decision, providing, “[e]mployees give 
up their right to sue the Company, and the Company is giving up its right to sue 
employees in court.”  The parties agreed that “any legal claim or dispute * * * 
will be submitted solely to a private, impartial arbitrator * * * for a final and 
binding decision.”  It also states that the arbitrator’s decision “shall then be final 
and conclusive upon the parties.” 
{¶ 15} We are not persuaded by Ignazio’s argument that this one sentence 
transforms the entire agreement from binding arbitration into a nonbinding 
process.  Section 10B conforms to Ohio’s statutory review process for arbitration 
awards, see R.C. 2711.10 and 2711.11, except for the portion of one sentence that 
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refers to the “standard of review * * * applied by an appellate court.”  It would be 
inconsistent to infer from that single phrase that the parties intended all references 
to the finality of the arbitration process to actually mean the opposite.  We do not 
read that phrase to negate the parties’ intent to arbitrate. 
{¶ 16} Severing only the second sentence of Section 10B will not modify 
or alter the remainder of the provision for enforcing an arbitration award.  The 
agreement still requires the parties to arbitrate disputes.  Severing does not modify 
or change the terms of the agreement for demanding and conducting the 
arbitration process.  The agreement continues to provide a means of enforcement 
in that “[e]ither party may bring an action in any court of competent jurisdiction 
to compel arbitration under this Agreement and to enforce an arbitration award.”  
R.C. 2711.09, 2711.10, and 2711.11 permit a party to challenge the arbitration 
agreement in certain circumstances.  If the phrase is severed, the only difference 
will be that a party may not seek to have a court review the award using the same 
standard of review as an appellate court.  Therefore, this single phrase in one 
sentence of a multipage agreement does not alter the fundamental nature of the 
agreement. 
{¶ 17} We hold that the second sentence of Section 10B that provides for 
an expanded judicial review is not an essential term of the agreement to arbitrate.  
The agreement provides that the offending portion of the sentence may be 
severed.  Severing does not alter the fundamental nature of the parties’ agreement;  
the essence of the agreement to arbitrate remains. 
{¶ 18} Furthermore, severing the offending provision and enforcing the 
remainder of the agreement is consistent with this state’s strong public policy in 
favor of arbitration.  The law favors and encourages arbitration as a means of 
resolving disputes.  Brennan v. Brennan (1955), 164 Ohio St. 29, 57 O.O. 71, 128 
N.E.2d 89, paragraph one of the syllabus.  There is a strong presumption in favor 
of arbitration, and any doubts should be resolved in its favor.  Id. 
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{¶ 19} Ignazio also argued that Clear Channel did not raise the issue of 
severability in the courts below, therefore the argument is waived.  But the 
interpretation of a contract is a matter of law that we review de novo.  Nationwide 
Mut. Fire Ins. Co. v. Guman Bros. Farm (1995), 73 Ohio St.3d 107, 108, 652 
N.E.2d 684.  In performing this review, we conclude that the parties clearly 
incorporated a severance clause into their agreement and that the arbitration 
agreement is enforceable.  Consequently, Ignazio’s argument for waiver fails. 
{¶ 20} Therefore, we hold that the offending provision in this agreement 
does not fundamentally alter the otherwise valid and enforceable provisions of the 
agreement.  Based on the express severability clause and Ohio’s strong public 
policy in favor of arbitration of disputes, the second sentence of Section 10B is 
severed from the agreement, and the remaining provisions of the agreement are to 
be given full force and effect.  Following arbitration, the parties may seek to 
confirm, vacate, or modify the award in court or otherwise challenge the process 
as provided by law.  See R.C. 2711.09, 2711.10, and 2711.1l. 
{¶ 21} Therefore, we reverse the judgment of the court of appeals and 
reinstate the decision of the trial court. 
Judgment reversed. 
 
MOYER, C.J., O’CONNOR, O’DONNELL, LANZINGER and CUPP, JJ., concur. 
 
PFEIFER, J., dissents. 
__________________ 
 
PFEIFER, J., dissenting. 
{¶ 22} It is hard to imagine the severing of a contract term being more 
transformative of a contract than the one the majority separates from the 
agreement at issue.  The agreement Ignazio signed gave her complete access to 
judicial review of the arbitrator’s decision.  Under that agreement, if Ignazio were 
to want her day in court, she would get it.  A judge would determine whether the 
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arbitrator’s legal analysis was correct and could even find, under the facts of the 
case, that the arbitrator had abused his or her discretion. 
{¶ 23} Under this court’s transformation of the contract, Ignazio is limited 
to a review by a trial court only under the extremely narrow circumstances 
described in R.C. 2711.10 and 2711.11, such as misconduct or clerical errors by 
the arbitrator.  Ignazio enjoys a constitutional right, pursuant to Section 16, 
Article I of the Ohio Constitution, to access the courts and to “have remedy by 
due course of law.”  Under the original agreement, she did not give up that 
entitlement.  The majority treats as insignificant the fact that it takes that right 
away from her. 
__________________ 
 
Green, Haines & Sgambati Co., L.P.A., Ira Mirkin, and Charles  W. 
Oldfield, for appellee. 
 
Frost Brown Todd, L.L.C., Thomas V. Williams, Christine Robek, and 
Matthew C. Blickensderfer, for appellants. 
 
Gittes & Schulte and Kathaleen B. Schulte; and Tate & Renner and 
Richard R. Renner, urging affirmance for amicus curiae Ohio Employment 
Lawyers Association. 
 
Jones Day, Matthew W. Lampe, Chad A. Readler, and Wednesday G. 
Forest, urging reversal for amicus curiae Ohio Chamber of Commerce. 
 
Squire, Sanders & Dempsey, L.L.P., William A. Nolan, and Johnathan E. 
Sullivan; and Ulmer & Berne, L.L.P., and Barton A. Bixenstine, urging reversal 
for amicus curiae Ohio Management Lawyers’ Association. 
______________________