Title: State ex rel. CNG Financial Corp. v. Nadel

State: ohio

Issuer: Ohio Supreme Court

Document:

[Cite as State ex rel. CNG Financial Corp. v. Nadel, 111 Ohio St.3d 149, 2006-Ohio-5344.] 
 
 
THE STATE EX REL. CNG FINANCIAL CORPORATION, APPELLANT, v. NADEL, 
JUDGE, ET AL., APPELLEES. 
[Cite as State ex rel. CNG Financial Corp. v. Nadel,  
111 Ohio St.3d 149, 2006-Ohio-5344.] 
Contract to arbitrate dispute—Denial of writs of prohibition and procedendo to 
compel judge to rule on motion to compel arbitration before motion for 
preliminary injunction. 
(No. 2006-0730 ─ Submitted September 20, 2006 ─ Decided November 1, 2006.) 
APPEAL from the Court of Appeals for Hamilton County,  
No. C-060115. 
__________________ 
 
Per Curiam. 
{¶ 1} This is an appeal from a judgment dismissing a complaint for a 
writ of prohibition to prevent a common pleas court judge from proceeding on a 
motion for preliminary injunction in an action for declaratory and injunctive relief 
and to compel the judge to refer the dispute to arbitration and for a writ of 
procedendo to require the judge to immediately decide a motion to compel 
arbitration of the dispute and stay the common pleas court proceedings.  We 
affirm. 
Close-Corporation and Option Agreements 
{¶ 2} Appellant, CNG Financial Corporation (“CNG”), is a closely held 
S corporation1 that has four shareholders:  appellee Allen L. Davis (“Davis”), his 
two sons, Jared and David, and David Rosenberg.  CNG is governed by a 
December 27, 2002 close-corporation agreement between the original 
                                                 
1.  “S corporation” is defined in the Internal Revenue Code at Section 1361, Title 26, U.S.Code. 
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shareholders: Allen, Jared, and David Davis.  The agreement provides for binding 
arbitration if any of the original shareholders disputes “any matter arising out of 
or relating to” the agreement. 
{¶ 3} As purportedly part of a divorce settlement between Davis and his 
then wife, CNG redeemed company shares from her and assumed her obligation 
under her grant of an option to Davis to purchase the shares.  To effectuate the 
option, CNG and Davis entered into an “amended and restated option agreement,” 
which became effective on December 27, 2002, the same date as the close-
corporation agreement. 
{¶ 4} Under the option agreement, Davis could make a “cashless 
exercise” to receive, without additional consideration, a certain portion of the 
shares then subject to the option. 
{¶ 5} In August 2004, Davis exercised his cashless option and received 
$37 million worth of CNG stock.  CNG treated the value of the CNG stock 
received by Davis as his compensatory income, which would be taxable to Davis. 
Declaratory and Injunctive Relief 
{¶ 6} Davis opposed the characterization of the stock transfer as income 
to him.  On February 22, 2005, Davis filed a complaint for declaratory and 
injunctive relief in the Hamilton County Court of Common Pleas.  Davis 
requested a declaratory judgment finding that “the cashless option was a part of a 
division of marital property [from his divorce], determines the number of shares 
of CNG that * * * Davis is entitled to receive by his exercise of the cashless 
option, and determines the identity of the shareholders of CNG entitled to vote 
and receive dividends on December 31, 2003, and thereafter, and the number of 
shares controlled by each of the identified shareholders”; an injunction “requiring 
CNG to take the appropriate action to comply with the declaratory judgments 
issued by the Court”; and an “award consisting of specific performance and an 
award of compensatory, restitution and punitive damages to * * * Allen Davis 
January Term, 2006 
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sustained as a result of * * * CNG’s wrongdoing in an amount to be proven at 
trial.”  Davis also requested a “preliminary injunction to enjoin CNG from 
scheduling and holding shareholders’ meetings; issuing shares of common stock 
and other securities; and destroying records and documents related to CNG’s 
characterization of * * * Davis’ exercise of a cashless option pursuant to the 
Amended and Restated Option Agreement, dated December, 2002 and documents 
related to the identity of CNG shareholders.” 
{¶ 7} On March 10, 2005, before any proceedings could begin in the 
common pleas court, CNG removed the case to a federal district court.  On April 
4, 2005, the federal court granted Davis’s motion for a temporary restraining 
order and enjoined CNG from conducting any shareholders’ meetings, issuing 
debt instruments or equity securities, or declaring and paying any dividends.  On 
April 26, 2005, the federal court concluded that the case presented no federal 
question and remanded the case to the common pleas court. 
{¶ 8} On May 5, 2005, CNG filed a motion to compel arbitration and 
stay proceedings in the common pleas court case.  CNG argued that Davis’s 
claims arose out of the close-corporation agreement and that they were thus 
subject to that agreement’s binding-arbitration clause.  On May 6, 2005, the 
common pleas court issued a temporary restraining order that, like the one 
previously issued by the federal district court, enjoined CNG from holding 
shareholder meetings, issuing debt instruments or equity securities, and paying 
dividends. 
{¶ 9} A hearing on Davis’s request for a preliminary injunction began on 
May 13, 2005, but has been continued for various reasons several times since that 
date.  At one time, Davis and CNG had agreed to a temporary, one-month “stand 
still” agreement permitting the preliminary-injunction motion to proceed. 
{¶ 10} On July 8, 2005, Davis filed a memorandum in opposition to 
CNG’s motion to compel arbitration and stay proceedings.  Davis argued that the 
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court should defer ruling on CNG’s arbitration request until it has ruled on his 
motion for a preliminary injunction.  Davis further claimed that the parties’ option 
agreement did not require them to arbitrate their dispute.  On July 19, 2005, 
appellee Judge Norbert Nadel of the common pleas court, who presides over 
Davis’s case, specified that he would consider other motions, e.g., CNG’s motion 
to compel arbitration and stay proceedings, after he heard and decided the 
preliminary-injunction motion. 
Prohibition and Procedendo 
{¶ 11} On February 3, 2006, CNG filed a complaint in the Court of 
Appeals for Hamilton County demanding (1) a writ of prohibition to direct Judge 
Nadel to terminate the common pleas court case instituted by Davis and submit 
the dispute to arbitration and (2) a writ of procedendo directing Judge Nadel to 
forthwith decide CNG’s motion to compel arbitration and to terminate further 
proceedings in the underlying case until he has ruled on the motion.  The court of 
appeals granted Davis’s motion to intervene in the case, and he filed a 
memorandum in opposition to CNG’s motion for a peremptory writ.  Judge Nadel 
filed a motion to dismiss CNG’s complaint.  On March 23, 2006, the court of 
appeals granted Judge Nadel’s motion and dismissed CNG’s complaint for 
extraordinary relief. 
{¶ 12} This cause is now before the court upon CNG’s appeal as of right. 
{¶ 13} CNG asserts that the court of appeals erred in dismissing its 
prohibition and procedendo claims.  The court’s Civ.R. 12(B)(6) dismissal of 
CNG’s complaint for failure to state a claim upon which relief can be granted is 
proper if, after presuming the truth of all factual allegations of the complaint and 
making all reasonable inferences in CNG’s favor, it appears beyond doubt that 
CNG can prove no set of facts entitling it to the requested extraordinary relief in 
prohibition and procedendo.  See, e.g., State ex rel. Buck v. Maloney, 102 Ohio 
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St.3d 250, 2004-Ohio-2590, 809 N.E.2d 20, ¶ 6.  With this standard guiding our 
analysis, we next consider CNG’s claims. 
Prohibition 
{¶ 14} Prohibition will not issue if the party seeking the writ has an 
adequate remedy in the ordinary course of law.  State ex rel. Ahmed v. Costine, 
103 Ohio St.3d 166, 2004-Ohio-4756, 814 N.E.2d 865, ¶ 4.  In the absence of a 
patent and unambiguous lack of jurisdiction, a court having general subject-matter 
jurisdiction can determine its own jurisdiction, and a party challenging that 
jurisdiction has an adequate remedy by appeal.  Dzina v. Celebrezze, 108 Ohio 
St.3d 385, 2006-Ohio-1195, 843 N.E.2d 1202, ¶ 12. 
{¶ 15} Judge Nadel does not patently and unambiguously lack jurisdiction 
to proceed to determine Davis’s request for a preliminary injunction.  Judge Nadel 
and the common pleas court have basic statutory jurisdiction over actions for 
injunction and declaratory judgment.  R.C. 2727.03 and 2721.02; State ex rel. 
Blackwell v. Crawford, 106 Ohio St.3d 447, 2005-Ohio-5124, 835 N.E.2d 1232, ¶ 
22. 
{¶ 16} Moreover, there is precedent cited by appellees that appears to 
support Judge Nadel’s decision to hear and determine Davis’s motion for a 
preliminary injunction before determining CNG’s motion to compel arbitration.  
“When a trial court is faced with a motion to stay pending arbitration and a 
motion for a preliminary injunction, the motion for a preliminary injunction 
should be heard first.”  Dunkelman v. Cincinnati Bengals, Inc., 158 Ohio App.3d 
604, 2004-Ohio-6425, 821 N.E.2d 198, ¶ 44; Yudin v. Knight Industries Corp. 
(1996), 109 Ohio App.3d 437, 439, 672 N.E.2d 265 (“while a trial court may stay 
proceedings pending arbitration, it may not stay proceedings on a motion for a 
preliminary injunction pending arbitration”). 
{¶ 17} Other courts have reached comparable conclusions.  See, e.g., 
Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kramer (N.D.Ohio 1992), 816 
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F.Supp. 1242, 1245, and cases cited therein (“the Court agrees that the great 
weight of [federal] circuit authority favors consideration of [preliminary] 
injunctive relief in this type of a controversy even though a motion for stay of 
proceedings pending arbitration has been filed”); Danieli & C. Officine 
Meccaniche S.p.A. v. Morgan Constr. Co. (D.Mass.2002), 190 F.Supp.2d 148, 
154 (“Notwithstanding the arbitrability of the parties’ dispute, the Court has the 
authority to grant preliminary injunctive relief to preserve the status quo pending 
arbitration provided the prerequisites for injunctive relief are met”). 
{¶ 18} Finally, even if, as CNG asserts, these cases are distinguishable 
based on the peculiar facts alleged here, it is not altogether clear whether Davis’s 
claims in the underlying case are necessarily subject to the arbitration clause of 
the parties’ close-corporation agreement.  In this regard, Davis asserted in the 
underlying action that his claims emanate from the option agreement, which does 
not contain an arbitration clause, and that the prerequisites specified in the 
arbitration clause of the parties’ close-corporation agreement, i.e., the designation 
of a committee to initially attempt to resolve the dispute, never occurred so as to 
warrant CNG’s relief requested in its complaint that the matter be referred to the 
American Arbitration Association.  We express no opinion on the ultimate 
arbitrability of the underlying case or the possible merit of Davis’s claims because 
our review is limited to a determination of whether Judge Nadel patently and 
unambiguously lacks jurisdiction to proceed on Davis’s motion for preliminary 
injunction.  State ex rel. Douglas v. Burlew, 106 Ohio St.3d 180, 2005-Ohio-
4382, 833 N.E.2d 293, ¶ 16; see, also, State ex rel. United Auto., Aerospace & 
Agricultural Implement Workers of Am. v. Bur. of Workers’ Comp., 108 Ohio 
St.3d 432, 2006-Ohio-1327, 844 N.E.2d 335, ¶ 60 (court will not indulge in 
advisory opinions). 
{¶ 19} Therefore, because Judge Nadel does not patently and 
unambiguously lack jurisdiction to proceed on the motion for preliminary 
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injunction in the underlying case for declaratory and injunctive relief, CNG has an 
adequate legal remedy by way of appeal from any final order issued by the 
common pleas court.  Consequently, CNG’s prohibition claim lacks merit.  See, 
e.g., State ex rel. Tilford v. Crush (1988), 39 Ohio St.3d 174, 529 N.E.2d 1245 
(prohibition claim to prevent trial court from enforcing preliminary injunction 
properly dismissed because court had jurisdiction to issue preliminary injunction, 
and relator had adequate remedy by appeal); Community First Bank & Trust v. 
Dafoe, 108 Ohio St.3d 472, 2006-Ohio-1503, 844 N.E.2d 825, ¶ 23 (amendment 
to R.C. 2505.02 makes orders on certain provisional remedies, like preliminary 
injunctions, appealable).  Any errors in Judge Nadel’s decisions in the underlying 
case would be mere errors in the exercise of jurisdiction rather than errors 
establishing the lack of subject-matter jurisdiction; these errors are not remediable 
by extraordinary writ.  See, e.g., Alspaugh v. Boulder Cty. Dist. Court (1976), 190 
Colo. 282, 545 P.2d 1362 (writ of prohibition to challenge the trial court’s 
decision not to compel arbitration denied because any error in the court’s 
determination that the parties had waived the right to arbitration could be 
corrected on appeal). 
Procedendo 
{¶ 20} “A writ of procedendo is appropriate when a court has either 
refused to render a judgment or has unnecessarily delayed proceeding to 
judgment.”  State ex rel. Weiss v. Hoover (1999), 84 Ohio St.3d 530, 532, 705 
N.E.2d 1227. 
{¶ 21} In this case, Judge Nadel has not refused to render a judgment.  He 
has merely ruled that he will decide Davis’s motion for preliminary injunction 
before he determines CNG’s motion to compel arbitration and stay the 
proceedings. 
{¶ 22} Furthermore, Judge Nadel’s actions do not constitute unnecessary 
or undue delay.  As specified previously, his decision is arguably supported by 
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precedent.  See, e.g., Dunkelman, 158 Ohio App.3d 604, 2004-Ohio-6425, 821 
N.E.2d 198, ¶ 44.  In addition, the issues raised in the underlying proceeding are 
arguably complex; CNG has stated that discovery has resulted in the production 
of nearly 40,000 documents.  See Chokel v. Celebrezze (Dec. 19, 2000), 
Cuyahoga App. No. 78355, 2000 WL 1900332, * 2 (“The failure to rule on the 
motions is not an unnecessary delay, but the result of the complexity of the case, 
in which the parties have raised multiple issues”).  Further, CNG contributed to at 
least some of the alleged delay by its unsuccessful attempt to remove the 
underlying case to federal court and by certain continuances agreed to by CNG or 
necessitated by its counsel’s schedule.  Finally, Judge Nadel is statutorily required 
to give priority to certain criminal matters.  R.C. 2938.03. 
{¶ 23} Therefore, Judge Nadel has neither refused to render a judgment 
nor unnecessarily delayed in proceeding to judgment by waiting until he has 
decided the preliminary-injunction motion before determining CNG’s motion to 
compel arbitration.  This case is thus distinguishable from the case that CNG 
primarily cites in support of its claimed error.  Cf. State ex rel. R.W. Sidley, Inc. v. 
Crawford, 100 Ohio St.3d 113, 2003-Ohio-5101, 796 N.E.2d 929, ¶ 22-24 (court 
of appeals erred in denying writs of procedendo and prohibition to compel judge 
to enter judgment confirming arbitration award and to prevent him from staying 
journalization of the judgment because under R.C. 2711.12, the judge had a clear 
legal duty to enter judgment upon his order and patently and unambiguously 
lacked jurisdiction to stay journalization of judgment).  CNG is thus not entitled 
to the requested writ of procedendo. 
Conclusion 
{¶ 24} Based on the foregoing, the court of appeals did not err in denying 
CNG’s complaint.  It appears beyond doubt that CNG is not entitled to the 
requested extraordinary relief in prohibition and procedendo.  Accordingly, we 
affirm the judgment of the court of appeals. 
January Term, 2006 
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Judgment affirmed. 
 
MOYER, C.J., RESNICK, PFEIFER, LUNDBERG STRATTON, O’CONNOR, 
O’DONNELL and LANZINGER, JJ., concur. 
__________________ 
 
Dinsmore & Shohl, L.L.P., Mark A. Vander Laan, and George H. Vincent; 
Squire, Sanders & Dempsey, L.L.P., Mark J. Ruehlmann, and Pierre H. Bergeron, 
for appellant. 
 
Joseph T. Deters, Hamilton County Prosecuting Attorney, Christian J. 
Schaefer, and Jerome A. Kunkel, Assistant Prosecuting Attorneys, for appellee 
Judge Norbert Nadel. 
 
Waite, Schneider, Bayless & Chesley Co., L.P.A., Stanley M. Chesley, 
James R. Cummins, Paul M. De Marco, and Terrence L. Goodman, for appellee 
Allen L. Davis. 
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